Hoover Daily Report

Reinventing Foreign Aid in the National Interest

Monday, October 21, 2002

September 11 brought home to Americans the need for a relentless global assault on terrorist networks and lawless regimes. But our national security also requires a global assault on poverty and development failure. Stagnant and failing states not only breed and harbor terrorism but also generate and spread civil wars, drug trafficking, organized crime, environmental catastrophe, infectious diseases, and refugee flows.

These diverse security threats spring from the failure of scores of countries in Africa, Asia, Latin America, and the Middle East to achieve vigorous, sustainable, and broadly distributed development. The threat to global order does not come from poverty alone. It comes from states that do not function well in the public interest. And it stems from the frustration and humiliation of people who see their countries stagnate in corruption and injustice while Europe and America prosper.

Countries need help to develop, but the past approach—providing tens of billions of dollars in aid with no clear standards of performance—has not worked. Although aid has helped to improve health and living standards, it has failed to get at the root of underdevelopment. The core obstacle to economic development is not a lack of resources. It is bad—corrupt, abusive, wasteful, unaccountable—governance. The key to generating development and building a more enduringly secure world is improving the way countries are governed.

This key insight is now leading the Bush administration to reinvent foreign aid. This past March, President George W. Bush proposed the first significant increase in U.S. development assistance in a decade. The increased funds will go into a special Millennium Challenge Account, to be allocated to a limited number of countries that demonstrate a commitment to political and economic standards of good governance. President Bush proposes to provide $5 billion in additional funding by 2006 (a 50 percent increase over current development assistance).

A report that will soon be released by the U.S. Agency for International Development (USAID) goes further, seeing promoting effective democratic governance as central to fostering economic development. Hence, it proposes clearly linking foreign assistance to serious governmental reforms that will contain corruption and abuse of power. Where governments are truly rotten, the report suggests channeling assistance primarily through nongovernmental sources, working with other bilateral aid donors and multilateral aid agencies to establish clear governance standards for aid and coordinating pressure on bad, recalcitrant governments. Furthermore, it proposes to spend a larger portion of U.S. foreign aid on democracy and governance priorities: controlling corruption, institutionalizing the rule of law, invigorating political parties, and strengthening civil society.

This is the beginning of a new "tough love" approach to foreign aid. If we fund these initiatives adequately while holding to serious standards of governance, and if we pursue in other realms of our foreign policy the same commitment to promoting democracy and improving governance, we can turn the corner on poverty and hopelessness in the world, which would be a huge contribution to our national security.