Despite such successes, disillusionment arising from the deepening commitment in Southeast Asia led many Americans across the political spectrum to disparage foreign aid, and for the first time such criticisms were heard at the highest levels of the U.S. government. For much of the post–World War II period, the policymaking establishment held foreign assistance as sacrosanct in American politics and diplomacy and often oversold its virtues to a skeptical public and Congress. Democratic and Republican administrations outbid each other in extending aid programs; liberal and conservative members of Congress joined in bipartisan voting on aid appropriations, even as individual members grumbled; and labor, management, religious, and educational groups all voiced approval of foreign aid. Yet the interventionist consensus articulated in the Truman Doctrine and Point Four, and widely supported for two decades, foundered in Vietnam. Arguments that for twenty years had given the greatest urgency and immediacy to the cause of foreign aid—including the threat of communism, the need for continued access to vital raw materials, the economic benefits to be gained through increased trade, and the political dividends to be reaped in terms of peace and democracy—lost much of their force, at least temporarily. At the deepest point in U.S. involvement in the Third World, many Americans began to question the rationale for any involvement.
Thus, by 1970, Washington had dropped its commitment in Africa to ten countries, and in 1971 and 1972 the Senate refused to fund foreign assistance at all, although a year-end catchall resolution covered the budgets. Antiwar legislators joined members of Congress who opposed government waste in tightening the reins on USAID, as the agency became subject to heightened congressional oversight that gave legislators veto power over even the smallest items. Despite considerable public and congressional debate over the objectives and techniques of foreign aid programs—particularly from conservatives in both parties who objected to what Representative Otto Passman called "the greatest give-away in history"—Congress decided to keep foreign aid in the 1970s, although revising its aims significantly.
Meanwhile, Third World nations were also becoming increasingly critical of the existing system of aid distribution. Rejecting reform proposals of the foreign aid establishment such as those contained in the Rockefeller Report (1969), which urged the United States to widen its use of private investment, skills, and other initiatives, these nonaligned nations proposed a new international economic order, which Jeremy Brecher and Tim Costello note called for "the regulation of global market forces in the interest of the development process" through a program of subsidies and other supports for exports. Critics of the proposal like Nicholas Eberstadt, however, claimed that it was simply an attempt to "disassembl[e] the liberal international economic order … augmenting instead the capacity of states and the authority of their leaders to plan their local economies" at Western expense.
In the self-critical angst that characterized the late Vietnam era, the United States was only too willing to shed its old shibboleths about capitalism's virtues. Under the U.S. Foreign Assistance Act of 1973 and the Mutual Development and Cooperation Act, also passed that year, the liberal capitalist model for Third World progress and its associated large-scale development projects came under withering criticism. The mantra of the 1973 reforms, known as "New Directions," became the goal of meeting "basic human needs." USAID focused on programs that assisted in the provision of food, medicine, and housing, especially in rural areas, rather than more grandiose infrastructure projects. The act's categories of assistance grants and development loans were replaced with "functional categories aimed at specific problems such as agriculture, family planning, and education," an organizational structure that has largely remained. The new program in some ways resembled the technical assistance efforts of the early 1950s, but in keeping with the move away from liberal capitalist tenets, the U.S. effort emphasized instead top-down government "development planning" as the best tool to foster Third World growth. Unfortunately, this was often "planning without facts"—especially when Texas-style cattle raising proved untenable in sub-Saharan Africa. The World Bank, meanwhile, participated in a $2.4 billion investment in African agriculture in the 1970s, largely for vast state farms and irrigation programs, with dismal results. In a 1994 article, James Bovard attributed these failures to inappropriate technology as well as "soil unsuitability." By the 1980s, food output in Africa had fallen 20 percent from twenty years earlier. Governments' zeal for complex technologies in place of simple and workable changes, coupled with widespread political corruption, was largely responsible for the disasters in Africa.
In the 1970s, the United States increasingly turned to the World Bank and similar agencies as a favored instrument for dispensing aid, a process called multilateralization. Ostensibly, multilateral aid diluted the pressure that bilateral aid placed on recipient countries, although these agencies' funds came with their own chafing leash. During Robert McNamara's tenure at the bank (1970–1981), its lending rate increased thirteen times, from $883 million to $12 billion. This aid was not always helpful to the people of the Third World. In his article, Bovard quotes a former executive director of the International Monetary Fund, who charged that such "unseemly" lending only ratcheted up Third World politicians' control over their own people, assisting the repressive collectivization programs of such leaders as Julius Nyerere of Tanzania in the early 1970s and the brutal social engineering of the Vietnamese government later in that decade.