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Political Will, Not US Aid, Fosters Foreign Development

Article excerpt

IN response to years of criticism of the United States foreign-aid program, Congress has significantly reduced the budget for development assistance. It is also considering a bill to abolish the US Agency for International Development (AID). In an era of budget-slashing, opponents of foreign aid argue that the $12.3 billion appropriated for fiscal year 1994 is largely wasted on developing countries. Aid proponents insist that foreign development assistance is both beneficial and a necessary cost of global leadership.

Have the hundreds of billions of dollars spent by the US in foreign aid over the past 40 years actually helped poor nations to develop economically and socially? In most cases, the answer is unfortunately no. With notable exceptions such as Botswana, aid recipients in Africa remain largely mired in poverty and political instability. Aid is also not the magic ingredient to open new export markets for US products. Studies show that the burgeoning Latin American markets are the result of new free-enterprise governments and aggressive American exporters instead of more than $30 billion given in development assistance.

Ironically, some of the fastest-growing economies in the world today are those such as China and Vietnam, which have been cut off from US aid for many years. In Eastern Europe, the most dynamic economies are those that have received relatively little assistance.

A prime example is the small former Yugoslav republic of Slovenia. Following independence in 1991, the Slovenian government requested US help in two areas: reforming the financial and banking sector and privatizing key industries. Slovenia received only $2.8 million from AID in 1994 to support these economic-restructuring activities. Today, it has the highest per capita gross domestic product of all former "socialist" republics in Eastern Europe (nearly twice that of the Czech Republic). Slovenia's GDP grew more than 5 percent last year and the country enjoyed a healthy current-account surplus of $2.6 billion. Earlier this year, London's respected Economist magazine rated Slovenia as having "the brightest medium-term prospects among the countries of Eastern Europe and the former Soviet Union."

This is in marked contrast to Russia, which received the bulk of US aid to the region in 1994. The $2 billion committed to Russia was described by the majority and minority leaders of the US House of Representatives as "simply inadequate in its strategy, its intensity, and its implementation." AID has admitted that its Russian program "lacks focus" and acknowledges that most of the funds appropriated actually go to US consultants rather than to the Russian people: the most common complaint of AID's recipients everywhere. …