Foreign aid as America’s soft power

After the Second World War the global emphasis partially shifted from hard to soft power in the international system.

Traditionally, nation-states did practice spending considerable financial resources on creating conducive environment in other nation-states but this policy was institutionalised as part of the soft power principle after the emergence of a globalised world that was the outcome of some of the bloodiest of conflicts in human history.

After the war was over in 1945 America did not seek war reparations from humbled axis powers and their associated countries but the Soviet Union did demand reparations from the vanquished countries held under its sway.

Consequently, allocating and disbursing financial aid became part of the national monetary policy and in American context it was institutionalised through American Agency for International Development popularly known as USAID.

Foreign aid remains a small percentage of the overall US budget compelling many quarters to urge for expansion in American international aid commitments. Modern US aid originated in Cold War geopolitics: the Marshall Plan to rebuild Europe was designed to blunt the influence of rising Communist political forces on the continent. National security concerns have continued to drive American assistance policy aiming to provide stability in conflicted regions, bolster allies, promote democracy, or contribute to counter-terrorism and law enforcement efforts abroad.

Other objectives, related to but separate from US national security, also drive assistance including humanitarian relief efforts to respond directly to acute disasters, poverty reduction, health care, and other development programmes.

Despite being part and parcel of official budgetary plan, foreign aid has often been a contentious subject in donor nations and public debates on this issue never ceases. It was quite obvious therefore that a born-again nationalist like Trump would raise this issue with renewed vigour and accordingly his 2019 blueprint for budget called for deep cuts to foreign assistance programmes, raising pointed questions about the role the United States should play around the world.

Despite intermittent debates on the issue there has long been broad bipartisan agreement in US governance circles on the moral and strategic significance of foreign aid.

The US felt particularly obliged to increase aid levels after the 9/11 attacks, with policymakers seeing global economic development as a way to promote US national security.

The current foreign aid system was created by the 1961 Foreign Assistance Act which attempted to streamline the government’s efforts to provide assistance around the world.

The statute defines aid as “the unilateral transfers of US resources by the US Government to or for the benefit of foreign entities.”

The remit of such resources not only includes goods and funding but also technical assistance, educational programming, and other services.

Recipients include foreign governments, including foreign militaries and security forces, as well as local businesses and charitable groups, international organisations such as the United Nations, and other non-governmental organisations (NGOs).

Owing to disparate funding methods exact estimates may vary but it is mentioned that in 2020 US Foreign aid including military and security assistance came to a total spending of nearly $52 billion accounting for roughly 1.3 per cent of the federal budget.

While disbursing aid, American policy seeks to achieve its aims through a diverse array of programmes. Almost 38% is termed as long-term development aid providing ongoing funding for projects to promote broad-based economic growth and general prosperity in the world’s poorest countries. More than half of this goes to bilateral global health programmes supporting government health-care systems.

About 15 per cent of this goes to multilateral institutions such as the World Bank and the
UN Development Program.

Another large chunk of about 35% is given as military and security aid going toward helping allies purchase US military equipment, training foreign military personnel, and funding peacekeeping missions. A smaller slice goes to non-military security assistance including counternarcotics programmes in Afghanistan, Colombia, Peru, and elsewhere, as well as non-proliferation and counter-terrorism efforts.

Humanitarian aid takes 16% of the total assistance and is spent to alleviate hort-term humanitarian crises, such as those resulting from famine, earthquakes, war, failed states, or other natural or man-made disasters. This includes State Department and Defense Department disaster relief efforts, as well as purchases of US agricultural goods and funding for organisations such as the International Red Cross and the UN High Commissioner for Refugees. 11% money dubbed as political aid is intended to support political stability, free market economic reforms and democratic institutions.

American foreign aid is managed by a complex system run by twenty federal agencies overseeing either funding or implementing foreign aid policy. The 1961 Foreign Assistance Act created the US government’s primary aid organisation, the USAID.

The agency administers the bulk of US development and humanitarian aid, managing over $20 billion in funds and employing more than nine thousand staff around the world. USAID is a semi-independent agency, operating under the policy guidance of the president, the State Department and the National Security Council.

It receives its funding through the State Department budget.

The Department of Defense plays a major role as the agency primarily responsible for implementing traditional military aid, though the State Department also funds and influences many security assistance programs and the Department of Health and Human Services implements many health-related programmes.

The Treasury Department helps manage funding of global financial institutions, as well as programmes for debt relief and economic reforms in poor countries.

There are also a plethora of other agencies and autonomous organisations, including the Millennium Challenge Corporation, the Peace Corps and African Development Foundation involved in aid work.

The United States is by far the largest single foreign donor. It outspends the next largest, the United Kingdom, by more than $10 billion a year; Germany, France, and Japan follow. As a per cent of GDP, however, US aid spending ranks near the bottom of all developed countries.

It accounts for 0.17 per cent of GDP, twentieth out of twenty eight countries measured by the Organization for Economic Cooperation and Development (OECD).

Sweden, Norway, Luxembourg, Denmark, the Netherlands, and the United Kingdom all spend more than 0.7 per cent of GDP on foreign aid, which is the target set by the United Nations.

Many recognised socio-economic observers have criticised various aspects of the global foreign aid system as ineffective or counterproductive as that development aid is dominated by top-down planners and bureaucrats with little accountability and that there is scant evidence that aid boosts a country’s long-term growth.

Linking aid to counter-terrorism efforts is also criticised particularly the military aid that has the potential to bolster repressive regimes. To combat that, Congress has passed legislation barring US aid to military units that were found to have violated human rights.

It is argued that aid gives a lifeline to corrupt governments, insulating them from the political pressures that would create a better functioning state. Some analysts, and many in US Congress, have criticised US aid as wasteful spending as USAID has little to show for much of its spending and that the aid structure established by the 1961 foreign assistance law is increasingly dysfunctional.

Many influential personalities counter that health initiatives in particular have saved millions of lives and successes and have increased political stability and expanded economic opportunity. It is argued that aid is beneficial and what is needed is restructuring to improve performance. Many military leaders are also outspoken supporters of foreign aid and advocated for continued aid funding calling it critical in preventing conflict and reducing the need to put American forces in harm’s way.

The oft-repeated argument in favour of continuing foreign aid is that it is essential to maintain US position as global leader and superpower.