Foreign Aid - Globalization's impact on foreign aid

Many of the new priorities reflected a growing recognition of the ongoing process of globalization, which has flourished since the breakdown of rigid trading blocs in the former communist world, as well as the embrace of free trade by Third World nations such as Mexico and South Korea. As noted, it has also brought new attention to transnational issues such as environmental destruction, infectious disease, and terrorism. Globalization has certainly greatly accelerated international communication and trade. It has, for instance, allowed U.S. exports to Central America to double since 1992 to almost $10 billion annually. The process has won a wide following in U.S. foreign aid circles; in 1989 a study conducted by USAID pointed to a seven-point annual growth rate difference between the most and least open economies. In 2000, the World Trade Organization (WTO), an international body that promotes free trade and supports developing countries with technical assistance training, published a paper by Dan Ben-David and L. Alan Winters that argues that poor countries engaged in free trade are able to lift their living standards. The authors cite the experience of South Korea, whose economy jumped 700 percent since the 1960s. In a similar study of eighty countries over four decades, the World Bank agreed that economic openness is linked to higher living standards and growth. The rise of globalization has thus been used by foreign aid administrators to make the case for liberal capitalist models of development, and has undermined the 1970s ethic of direct government-togovernment economic transfers to the Third World. As a result, while USAID did not abandon its development projects, it began to tailor them more closely to market results. Yet the U.S. support for just such policies, as exemplified in its leading role in the agencies that promote globalization such as the World Bank, International Monetary Fund, and World Trade Organization, has opened it to criticism that it is forcing them onto Third World nations who would prefer a different path to development.

The 1999 World Trade Organization summit in Seattle, Washington, vividly revealed the wide opposition to globalization, drawing a huge force of protesters from both poor countries and wealthy ones. Many of the protesters would agree with the arguments of Jeremy Brecher and Tim Costello, who have asserted that the WTO "work[s] hand-in-hand with the IMF and the World Bank to impose the Corporate Agenda on developing countries." This corporate agenda, they write, seeks "to reduce all barriers to downward leveling of environmental, labor, and social costs" The American Friends Service Committee went so far as to claim that globalization "has undermined basic rights, cultural and community integrity, the environment, and equity … [and] caused economic insecurity." Critics point out that it has also lessened the importance of nations that once could use their resources or strategic locations as bargaining chips for aid, and has helped to create global disasters like the banking crisis in Asia in 1997–1998. Moreover, while some Third World nations like Mexico and Chile were enjoying rebounding economic success from globalization, many were being left behind.

Despite the critics, the process continued apace; in 1998, U.S. exports to the Third World reached $295 billion, showing the increasing importance of these markets to the global economy. Meanwhile, foreign investment in developing nations rose from $70 billion to $118 billion in just two years, 1996–1998. But some globalization supporters have pointed out that Americans and other Westerners could help still further by fully embracing the process themselves and allowing larger quantities of the most impoverished nations' goods to land on their shores. In a 1994 article J. Michael Finger pointed to the stark fact that developed countries' protectionism "reduces developing countries' national income by roughly twice the amount provided by official development assistance."