Foreign Aid

Katherine A. S. Sibley

The United States government first recognized the usefulness of foreign aid as a tool of diplomacy in World War II. Such a program, policymakers believed, would fulfill three goals: it would furnish humanitarian assistance to needy peoples, it would promote liberal capitalist models of development in other countries, and it would enhance national security. The U.S. commitment to foreign aid since has amounted to well over $1 trillion in current dollars—not counting hundreds of billions more donated through the International Monetary Fund, World Bank, and other multilateral agencies. Always a controversial program, foreign assistance drew its broadest support in the early Cold War era. At that time, the effort to undermine communism permeated all other aid considerations, including the plight of the poor, the expansion of democracy abroad, and U.S. economic goals that might be served by foreign assistance, such as stimulating private investment and opening up markets to American products. All of these objectives, however, generated wide support from members of Congress, ranging from those whose chief focus was U.S. security to those who were most interested in developing the Third World.

In the Vietnam era, however, the consensus of support began to unravel. Like the war itself, foreign aid programs were variously attacked as imperialistic, paternalistic, harmful, wasteful, or just plain useless. (Indeed, these imperialistic attributes of aid had contributed to the United States's own birth—without the assistance of the empires of France and Spain, the nascent republic would hardly have survived.) Although American foreign aid has changed its emphasis frequently since the Vietnam era in response to such criticisms, the flow has never stopped and has continued to generate calumny from all sides of the political spectrum. Notwithstanding these attacks, foreign aid has undoubtedly racked up some solid achievements. Third World residents have experienced great advances in their standard of living since the 1960s. The eradication of smallpox, the halving of poverty, the doubling of literacy from 35 to 70 percent, and the sharp rise in life expectancy from forty-one to sixty-three years, are evidence of this. Unfortunately, such improvements have not headed off a broadening economic gap between the rich and poor nations. For instance, Africa's average annual income in adjusted dollars in the 1990s was about the same as it had been in the 1960s, approximately a dollar a day. There, too, the AIDS epidemic has proved as devastating as smallpox. The great ambitions of President John F. Kennedy for foreign aid (see sidebar) were not met in the 1960s "decade of development," nor have they been realized since.

During the Cold War era, bilateral assistance (on a government-to-government level, including that channeled via nongovernmental organizations) broke down in unadjusted dollars to $139 billion in military and economic assistance to the Middle East and South Asia, $70 billion to East Asia, $48 billion to Europe, $29 billion to Latin America, and $23 billion to Africa. In the 1990s, both the demise of the Soviet Union, whose influence U.S. foreign aid was long designed to check, as well as the spectacular economic growth of such former aid recipients as South Korea, led the United States to adopt new targets. Indeed, as Secretary of State Madeleine Albright declared in 1999, "traditional notions of 'foreign aid' have become virtually obsolete." The 1997 State Department strategic plan outlined the following goals for foreign aid: creating "institutions that support democracy, free enterprise, the rule of law and a strengthened civil society"; providing humanitarian aid; and "protecting the United States from such specific global threats as unchecked population growth, disease, the loss of biodiversity, global warming, and narcotics trafficking." At the turn of the twenty-first century, U.S. funds were defending peace in Kosovo, East Timor, and the Middle East, dismantling Soviet nuclear weapons, disarming drug dealers in Central America, democratizing Nigeria, and developing the armies of America's erstwhile enemies, the former socialist countries. Yet, as Albright herself acknowledged in 2000, the programs continued to support very traditional aims, such as "promoting U.S. exports, spurring overseas development and helping other countries to achieve viable market economies"—in other words, expanding the adoption of liberal capitalist norms of development. While recipient countries have certainly changed, the United States continued to spend about the same amount as it had at the end of the Cold War, utilizing Cold War foreign aid instruments like the Foreign Assistance Act and the Agency for International Development. According to the State Department, in 2000 the United States spent $16.5 billion on foreign operations, ranging from the Peace Corps ($244 million) to the foreign Military Training Program ($4.8 billion).


Baldwin, David. Economic Development and American Foreign Policy, 1943–1962. Chicago, 1966. A valuable discussion of the political aspects of American policies of economic development.

Bandow, Doug. "Foreign Aid: Help or Hindrance." Cato Policy Analysis No. 273, 25 April 1997. A strong critique of U.S. foreign aid policies.

Ben-David, Dan, and L. Alan Winters, "Trade, Income Disparity and Poverty." World Trade Organization Special Study No. 5. 1999.

Bill, James A. The Eagle and the Lion: The Tragedy of Iranian-American Relations. New Haven, Conn., 1988. A critical look at a controversial relationship.

Boone, Peter, and Jean-Paul Faguet. "Multilateral Aid, Politics and Poverty: Past Failures and Future Challenges." In Richard Grant and Jan Nijman, eds. The Global Crisis in Foreign Aid. Syracuse, N.Y., 1998.

Bovard, James. "The World Bank and the Impoverishment of Nations." In Doug Bandow, ed. Perpetuating Poverty: The World Bank, the IMF, and the Developing World. Washington, D.C., 1994.

Brecher, Jeremy, and Tim Costello. Global Village or Global Pillage: Economic Reconstruction from the Bottom Up. Boston, 1994. The authors strongly critique globalization and argue for greater assistance to the Third World.

Eberstadt, Nicholas. Foreign Aid and American Purpose. Washington, D.C., 1988. A powerfully argued critique of foreign aid that suggests American values are missing from the foreign aid calculus.

Edkins, Jenny. Whose Hunger? Concepts of Famine, Practices of Aid. Minneapolis, 2000. A study of responses to famine, heavily influenced by postmodern theoretical approaches.

Feis, Herbert. Foreign Aid and Foreign Policy. New York, 1964. A strong defense of foreign aid reflecting the ethos of the early 1960s.

Finger, J. Michael. "The High Cost of Trade Protectionism to the Third World." In Doug Bandow, ed. Perpetuating Poverty: The World Bank, the IMF, and the Developing World. Washington, D.C., 1994.

Hancock, Graham. Lords of Poverty: The Power, Prestige, and Corruption of the International Aid Business. New York, 1989. A highly critical analysis of international aid agencies and their results.

Hogan, Michael. The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947–1952. New York, 1987. Still the most comprehensive overview of the program.

Hunt, Michael. Ideology and U.S. Foreign Policy. New Haven, Conn., 1987. A well-researched critique of the ideological roots of U.S. diplomacy.

Kamath, Shyam J. "Foreign Aid and India's Leviathan State." In Doug Bandow, ed. Perpetuating Poverty: The World Bank, the IMF, and the Developing World. Washington, D.C., 1994.

LaFeber, Walter. The American Age: United States Foreign Policy at Home and Abroad Since 1750. New York, 1989. A useful and highly readable survey.

Lancaster, Carol. Aid for Africa: So Much to Do, So Little Done. Chicago, 1999. A highly useful, comprehensible, and even-handed survey.

——. "Redesigning Foreign Aid." Foreign Affairs 79 (September-October 2000): 74–88.

Landes, David. The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor. New York, 1998. An innovative study of deep-rooted causes of poverty and wealth.

Lipumba, Nguyuru. "Policy Reforms for Economic Development in Tanzania." In Stephen K. Commins, ed. Africa's Development Challenges and the World Bank: Hard Questions, Costly Choices. Boulder, Colo., 1988.

Montgomery, John D. The Politics of Foreign Aid: American Experience in Southeast Asia. New York, 1962. A supportive analysis of foreign aid, based on the author's study of the American program in Vietnam.

Mosley, Paul. Foreign Aid: Its Defense and Reform. Lexington, Ky., 1987. An optimistic analysis of foreign aid.

Nijman, Jan. "United States Foreign Aid: Crisis? What Crisis?" In Richard Grant and Jan Nijman, eds. The Global Crisis in Foreign Aid. Syracuse, 1998.

Pach, Chester J., Jr. "Military Assistance and American Foreign Policy: The Role of Congress." In Michael Barnhart, ed. Congress and United States Foreign Policy. Albany, N.Y., 1987. An important study of congressional attempts and effectiveness in influencing foreign military aid.

——. Arming the Free World: The Origins of the United States Military Assistance Program, 1945–1950. Chapel Hill, N.C., 1991. Excellent study of the formative years of this program.

Smillie, Ian, and Henny Helmich, eds. Stakeholders: Government-NGO Partnerships for International Development. London, 1999.

Stohl, Rachel. "Middle East Remains Attractive Market for U.S. Arms." In Center for Defense Information Weekly Defense Monitor 4, no. 7 (17 February 2000).

Stokke, Olav. "Foreign Aid: What Now?" In Olav Stokke, ed. Foreign Aid Towards the Year 2000: Experiences and Challenges. London, 1996.

Streeter, Stephen M. Managing the Counterrevolution: The United States and Guatemala, 1954–1961. Athens, Ohio, 2000. Argues that the Eisenhower administration intervened in Guatemala to protect U.S. interests against Third World nationalism more than in response to a communist threat.

United Nations Development Programme. Human Development Report 1996. New York, 1996.

U.S. Department of State, Agency for International Development. U.S. Overseas Loans and Grants and Assistance from International Organizations. Washington, D.C., 1990.

U.S. House of Representatives, 87th Congress, 2d session. Foreign Assistance Act of 1962, Hearings Before the Committee on Foreign Affairs, on a Draft Bill to Amend Further the Foreign Assistance Act of 1961, as Amended, and for other Purposes. Washington, D.C., 1962.

See also Containment ; Economic Policy and Theory ; Globalization ; International Monetary Fund and World Bank ; Tariff Policy .

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