It's often difficult for Americans to keep a perspective on what is for them a low priority concern at best - development aid to the world's poorer countries.
But as Congress takes up the 1998 foreign aid appropriations bill this month, it's a good time to address escapist assumptions that permeate the debate and cause us to focus elsewhere in meeting our global responsibilities.
First, many Americans assume that we are major players in the world's aid programs, and that our generosity to poor nations has contributed significantly to our public debt. In fact, we contribute the smallest percentage of our gross national product to foreign aid of any of the world's industrial nations. For us, foreign aid is less than 1 percent of our federal budget. Large amounts of the US Agency for International Development's money goes to countries where we have special strategic, political, or military concerns. USAID's two largest contributions go to Israel ($3 billion) and to Egypt ($2 billion). The Egyptian contribution is conditioned only on Egypt talking to Israel. Second, most Americans also assume that we are major contributors to poor countries through such multilateral agencies as the World Bank, the IMF, and the various continental regional development banks. As a former president of the World Bank, I find it hard to overstate the remarkable benefits the US receives from the World Bank. As the largest shareholder at the bank, the US has tremendous leverage at minimal cost, influencing loans to countries in whose markets we have more than a modest interest, such as Mexico. We, and all other bank member countries, contribute capital primarily by guaranteeing loans to the developing world. Bonds based on these guarantees are issued to fund the loans, which pay interest high enough to cover the costs of running the bank, to protect against bad debts, and to generate $1 billion in profits a year. A third assumption held by many Americans is that foreign aid may no longer be necessary because of the great surges of developed-world private investment in the economies of the developing world, and because of the growth of trade between them. Multinational corporations are now investing in developing markets an average of four times the official foreign aid going to those countries. Trade now has twice the impact on development that foreign aid does. So do we need foreign aid at all? Yes, because investment and sophisticated economic activity do not occur in a state of nature; they require infrastructure. In our country we assume that the private sector does almost all development and job creation. But we take for granted roads, railroads, port facilities, readily available energy distribution systems, and most of all, schools able to provide an appropriately trained labor force. None of these prerequisites to development can be taken for granted in an underdeveloped country. …