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
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
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
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. …