developing countries

In these dark days of an ever-widening political divide, it is nice to know there is still something on which Republicans and Democrats can agree: foreign aid. Both sides are against it. John Sides, writing in his “The Monkey Cage”  blog, cites a YouGov poll conducted in early March of this year, in which a sample of Republican primary voters and a sample of all voters agreed that foreign aid is the budget item they would most like to cut. Okay, it was 90% of the Republicans and only 73% of all voters, but in the sample of all voters no other item came even close to 50%, while among Republicans, the environment, housing, and unemployment benefits – no surprise there – were the only other items that got more than a 50% share.







These numbers are unsurprising in light of another poll  conducted last November, in which respondents, asked “Just based on what you know, please tell me your hunch about what percentage of the federal budget goesto foreign aid,” gave an average response of 27%. When asked what they thought an appropriate percentage would be, the mean answer was 13%. When told that we spend much, much less than this on foreign aid, most people said it still should be cut.

Not that cutting foreign aid would have the slightest effect on the deficit. In an excellent analysis of the cuts the Romney-Ryan budget – which would cap Federal spending at 20% of GDP and maintain defense spending at 4% of GDP – would require, Richard Kogan and Paul Ven de Water of the Center on Budget and Policy Priorities demonstrate that “if policymakers repealed [Obamacare] and exempted Social Security from cuts, as Romney has suggested, and cut Medicare, Medicaid, and all other entitlement and discretionary programs by the same percentage to meet Romney’s overall spending cap and defense spending target, then they would have to cut nondefense programs other than Social Security by 22 percent in 2016 and 34 percent in 2022 If they exempted Medicare from cuts for this period, the cuts in other programs would have to be even more dramatic — 32 percent in 2016 and 53 percent in 2022.”

It’s not easy to make sense of the Federal budget for foreign assistance (try it yourself and see what numbers you come up with ) but 2012 commitments amount to about $35 billion, less than one percent of the total budget of $3.8 trillion, and barely a third of that amount consists of the kind of humanitarian, public health, and economic development assistance most people think of when they think of foreign aid. The big-ticket items include:

  • Roughly $10.4 billion in foreign military and security assistance – things like fighting terrorism abroad, military training, underwriting foreign arms purchases, the war on drugs, and the annual payments of $3 billion to Israel and $1.3 billion to Egypt (the price we continue to pay for the Camp David accords);
  • $8.1 billion on global health and child survival programs;
  • The $5.8 billion Economic Support Fund, which gives direct grants to foreign governments for them to spend on infrastructure and development projects (thus freeing up funds to buy U.S. arms); and,
  • About $4.1 billion on economic and agricultural development.

Except for Ron Paul supporters, most Republicans and not a few Democrats would resist cutting foreign military assistance and our annual subsidy to Israel. Indeed, to judge by his recent pronouncements on the subject, Mitt Romney would be more than happy to increase support to Israel, though it might come out of Egypt’s share.

A Romney-Ryan budget would probably keep all or most of the $10.4 billion for security-related foreign assistance and the $5.8 billion Economic Support Fund (at least those portions most directly linked to arms procurement) and take an axe to the aggregate $12.2 billion health, child survival, and economic and agricultural development budgets, which in the context of the overall budget are hardly more than a rounding error.

Dana Millbank, writing in The Washington Post, tells us that Rep. Darrell Issa, Republican chairman of the House Oversight and Government Reform Committee, called a hearing earlier this week to probe the security lapses that led to the recent deaths of Ambassador Christopher Stevens and three other Americans in Benghazi, Libya.

“The purpose of the pre-election hearing, presumably, is to embarrass the administration for inadequate diplomatic security. But Issa seems unaware of the irony that diplomatic security is inadequate partly because of budget cuts forced by his fellow Republicans in Congress…House Republicans cut the [Obama] administration’s request for embassy security funding by $128 million in fiscal 2011 and $331 million in fiscal 2012. Ryan, Issa and other House Republicans voted for an amendment in 2009 to cut $1.2 billion from State operations, including funds for 300 more diplomatic security positions. Under Ryan’s budget, non-defense discretionary spending, which includes State Department funding, would be slashed nearly 20 percent in 2014, which would translate to more than $400 million in additional cuts to embassy security.”

Romney has criticized the Obama Administration for trying to “lead from behind” in situations like Libya and Syria, and says he wants the United States to lead from the front, “using the full spectrum of our soft power to encourage liberty and opportunity for those who have for too long known only corruption and oppression,” in the words of his September 30 op-ed piece in The Wall Street Journal. What is soft power, if not effective diplomacy and assistance in – to use Mr. Romney’s own words again – “promoting human rights, free markets and the rule of law?” Much of the development assistance provided by he U.S. Government and U.S. Government-supported institutions such as the World Bank promotes precisely these values.

Cutting foreign assistance and State Department budgets sends a very different message. Since the proposed diplomacy and foreign aid budget cuts are so insignificant in fiscal terms they must have been chosen for their symbolic value, effectively consigning emerging and transition countries to the international equivalent of Mr. Romney’s famous 47 percent: food stamp and welfare recipients and miscellaneous moochers he is not going to worry about.

There are certainly ways to improve foreign assistance, which could involve reducing or eliminating aid to some current beneficiary countries, but which would equally involve innovative new approaches to the problems of poverty, disease, climate, and growth, which could end up costing less, more, or about the same amount as we currently spend.

Lord Leverhulme, the founder of Lever Brothers – now Unilever –  is reputed to have said, “I know half my advertising isn’t working, I just don’t know which half.” Foreign aid is a bit like that. As much as half, but not all, of it is wasted, and if we could figure out which half to chuck out and which to keep we, together with the recipients, would be all the better for it. But just as Lever Brothers kept on advertising and, presumably, wasting half of what it spent, eliminating the foreign aid budget or cutting it in half is a lousy idea.



Andy Serwer writes today on the Fortune magazine website an article entitled “Can Jordan Build on its Relative Success?” Even the title is a give-away of modest expectations: “relative success”? The article lists some of Jordan’s undeniable achievements over the past seven or eight years: free trade agreements with the U.S. and the European Union that have caused exports to soar, some measure of macroeconomic stability, continued GDP growth even in the current economic crisis, improvements in education and health care, and reform and liberalization of several key areas of the economy. Having spent quite a lot of time working in Jordan, I agree with Mr. Serwer’s assessment of Jordan as the most secure and pleasant place to live in the neighborhood – in which he includes Egypt, Saudi Arabia, Iraq, Syria, Lebanon, and Israel – though Beirut’s nightlife and the topless sunbathers in Tel Aviv outshine any of Jordan’s more sedate attractions. But it is easy to overstate the case. [click to continue…]



The last several weeks have been busy. I am not even over jet lag from my two-week trip to Indonesia and Thailand, from which I returned last Sunday, and I leave tomorrow morning for Senegal. Naturally, I would rather think about my contribution to the world’s economy than about my ever-expanding carbon footprint. At least I am not traveling around the world to attend conferences on climate change, which would be a touch too absurd even for my tastes.

I spoke to quite a few business and government people in both Indonesia and Thailand, and it seems clear to me that Asia will lead the world out of recession. Thailand has been suffering a political crisis for several years now, marked by a military coup, rioting, the takeover by demonstrators of the country’s main airport, and the abrupt dismissal of two Prime Ministers, but its economy seems to sail on, unperturbed. The nation’s factories are humming, building cars and auto parts, microprocessors, and all kinds of industrial equipment and consumer goods, and potential investors are lining up at the gates, determined not to miss the next big thing. [click to continue…]



I am currently doing a fair bit of work analyzing and writing about public-private partnerships and their contribution to economic development.  Partnerships are active in a wide range of economic development initiatives all over the globe, from health to education to small farmer productivity, and usually involve some level of private sector contribution to a project designed or supported by a public or multilateral entity.  These are not the same kinds of infrastructure partnerships that blend huge public and private investment to build roads, dams, ports, and power stations.  Instead, they tend to be smaller scale, are often community based, and sometimes go by the name of “social enterprise” or “sustainable business.” The idea is that private companies or foundations (sometimes connected with a company, or perhaps set up by billionaire, semi-retired tech entrepreneurs) invest in projects that promise to help impoverished people and communities, but are aligned with and sometimes can even further a company’s core business.  In the midst of the current economic crisis, many people have assumed that this kind of investment, often considered merely a type of corporate philanthropy (wrongly so, in my view), will dry up.  I think, though, that there are several compelling reasons why companies and foundations may find it in their enlightened self-interest to continue to make such investments, direct or in-kind, in spite of the current climate. [click to continue…]



I have been in Minsk, the capital of Belarus, the past few days, working on a World Bank Group assignment to help improve the investment climate.  Minsk is a European-looking city with wide boulevards, grand neoclassical buildings, and a fairly prosperous air, most people fairly well-fed and well-dressed.  The streets are clean and free of crime, and there are none of the gangs of drunken youth or ominous clusters of mafiosi up to no good that I remember from previous trips to other parts of the former Soviet Union,   A fairly normal place, you’d think.

But Belarus  has a serious image problem. [click to continue…]