Foreign Aid

I

Introduction

Foreign Aid, military or economic assistance that one country gives to help another. Many countries give foreign aid, including Japan, Great Britain, and the United States.

Foreign aid can take many forms, including donations of money, goods, services, and technical expertise. Foreign aid can be bilateral, which means it is given by one country to another. It can also be multilateral—that is, given by a group of countries. The term foreign aid is also sometimes used to describe assistance given to a country by a private organization in another country.

Countries give foreign aid for humanitarian reasons and to advance their own foreign policy objectives. Countries provide money, food, and other services to help meet basic human needs such as feeding the poor, and assisting with economic development. Countries also give military and economic aid to provide better security for another country against external threats and to promote a closer working relationship with that country.

The United States became the largest contributor of foreign aid in the world after World War II ended in 1945. However, as a percentage of gross national income (GNI), the amount that the United States contributed declined significantly after the end of the Cold War. Political support for foreign development aid, in particular, has diminished over the years. The terrorist attacks on the United States on September 11, 2001, and the tsunami disaster that struck nations bordering the Indian Ocean in 2004 stimulated some increases in U.S. aid. The rest of this article focuses on foreign aid provided by the United States.

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II

Kinds of U.S. Foreign Aid

The United States gives many different types of bilateral foreign aid. Traditionally, it directs aid to developing countries through projects aimed at agricultural and rural improvements, health care, population planning, child survival assistance, and business enterprise, among other activities. It also gives assistance through an account called the Economic Support Fund (ESF). The ESF directs aid toward countries with particular security needs that are closely tied to American interests. For example, a large share of the ESF goes to two crucial countries in the Middle East—Israel and Egypt—to encourage peace in that region. Further, the United States provides food assistance by supplying agricultural products to developing countries at low prices or for free, and it gives military aid by either selling or donating weapons and other military equipment to foreign countries.

In recent years, foreign aid has also been directed toward several other purposes. It has been a principal vehicle for conducting the war on terrorism, a mechanism for aiding the former states of the Soviet Union, and a way to initiate new programs against acquired immune deficiency syndrome (AIDS) and global famine.

In addition, the United States gives aid through a variety of international organizations, including the United Nations (UN), the World Bank, and several regional development banks (such as the Inter-American Development Bank and the African Development Bank) around the world. The idea behind channeling aid through international organizations is to reduce the degree to which political considerations influence the distribution of aid to needy countries.

III

Distribution of Aid

Several agencies are involved in distributing American foreign aid. The Department of Defense and the Department of State distribute military assistance. The United States Agency for International Development (USAID) distributes most of the government’s development and food assistance, including money from the ESF. The Department of Agriculture also provides food aid. In addition, private voluntary organizations often cooperate with the U.S. government to distribute aid. For example, religious organizations such as Catholic Relief Services, and secular nonprofit organizations such as CARE, often work with the government to provide assistance to people around the world.

The Congress of the United States has criticized USAID for being inefficient and having duplicate functions. Several policymakers have sought to eliminate USAID and incorporate its work into the Department of State. In fact, under a 1999 reorganization plan, USAID lost some of its autonomy, and the Department of State gained greater influence over its direction and operation. In this sense, the degree of political control over foreign assistance has increased.

IV

History

The United States has given foreign aid throughout its history, but the growth of such programs largely occurred after World War II. This growth was a direct response to the emergence of the Cold War, the post-1945 struggle between the United States and the Soviet Union. During the early years of the Cold War, the rationale for foreign aid was primarily political—the United States wanted to stop the spread of communism.

In 1948 the United States launched its first major foreign assistance effort, the European Recovery Program, commonly known as the Marshall Plan. The Marshall Plan was a four-year effort to help rebuild Western Europe after the destruction of World War II and to keep communism from spreading into that area. The United States provided more than $13 billion in aid under the Marshall Plan. Other assistance efforts that followed provided aid more widely to countries the United States viewed as critical to its foreign policy interests.

In the early 1960s U.S. attitudes toward foreign aid began to change. Instead of being primarily political, the rationale used to justify foreign aid widened to include a moral and ethical imperative to help developing countries. In 1961 Congress passed the Foreign Assistance Act, which set up the Agency for International Development. That same year, President John F. Kennedy created the Peace Corps, an organization of volunteers who perform social and humanitarian services overseas. To this day, the foreign aid program follows the same basic rationale established in the early 1960s.

During the Cold War, the United States provided assistance to more than 100 nations. Most of that aid, however, went to about a half dozen countries that were deemed especially important to U.S. interests. Two countries—Egypt and Israel—received about one-third to just under one-half of American foreign aid from the mid-1980s to the mid-1990s. Such aid levels were part of the U.S. effort to promote peace in the Middle East. With the breakup of the Soviet Union, two of America’s former Cold War enemies—Russia and Ukraine—emerged among the top recipients of U.S. foreign aid in the late 1990s and early 21st century.

In the aftermath of the terrorist attacks of September 11, 2001, the focus of American foreign assistance changed once again. Although Israel remained important, American aid recipients, countries facing postwar reconstruction—such as Afghanistan and Iraq—and key partners in the war on terrorism—Pakistan, Jordan, Turkey, Indonesia, and the Philippines—received increasing levels of assistance.

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