With the fall of the Soviet Union in 1991, U.S. foreign aid programs faced a deep crisis. Senators like Patrick Leahy proclaimed that American aid had lost its purpose and vision and that its connection to foreign policy goals was tenuous at best. This transitional period has provided an opportunity for business groups, among others, to call for a more traditional use of aid: to provide markets for U.S. exports, a sentiment that also led to the 1992 signing of the North American Free Trade Agreement (NAFTA) between the United States, Canada, and Mexico. The NAFTA negotiations were a direct result of Mexico having moved away from more traditional patterns of Third World development, including import substitution and high tariffs, toward a more open market in the 1980s. Such economic openness was touted by foreign aid officials as the best means to improve the plight of the Third World.
The post–Cold War reassessment of aid also brought sharp budget cuts, and by 1997 USAID had lost twenty-four foreign missions and one-third of its staff from a peak in the early 1990s. While traditional in-country development did not disappear, the new emphasis on globalization helped create an agenda of transnational issues, or problems that affect a community of nations, often in a specific region. In 1993, the Clinton administration established the Task Force to Reform AID and the International Affairs Budget, which offered a number of broad-based initiatives reflecting the new transnational perspective on foreign aid such as preventing the spread of disease, environmental destruction, and drug trafficking, and addressing concerns such as child survival, migration, population growth, and the promotion of democracy. The task force's Wharton Report became part of the administration's Peace, Prosperity, and Democracy Act proposal, which called for making foreign assistance more amenable to "emerging international realities"— thus challenging the more narrowly construed national security premises of the venerable Foreign Assistance Act of 1961. This effort did not succeed. Senate Foreign Relations Committee Chairman Jesse Helms decided in 1994 that cuts to foreign aid were more important than an ambitious retooling: "We must stop this stupid business of giving away the taxpayers' money willy-nilly." However, some revamping was unavoidable; the world had changed. To assist the former socialist states, in 1994 Congress enacted the Freedom Support Act and the Support for East European Democracies Act. USAID accordingly set up its Center for Democracy and Governance and an Office of Transition Initiatives. Sixteen Eastern European and former Soviet Union countries were targeted for assistance ranging from election financing to media advice. As a result of such initiatives, in 1996 the United States was giving aid to more countries (130) than it did in 1985. Still, traditional priorities did not disappear; while more countries were now getting development aid, it was a small total compared to the security aid that went to the two nations of Israel and Egypt.
The 1990s were also a decade of close reexamination of foreign aid in the international giving arena. The United Nations Development Program issued a study in 1996 that noted that in the 1980s, 100 countries, or 1.6 billion people, had experienced economic decline—despite enormous amounts of global aid. Most of these countries had lower average incomes in 1990 than in 1980, and almost half had smaller incomes than in 1970. The few who seemed to be holding their own were civil servants, whose salaries totaled 20 percent of Zambia's GNP, for instance.
Foreign aid's role in forestalling crises looked dubious too. Much U.S. aid, for example, had gone to so-called "collapsed states," meaning states that have fallen apart due to mismanagement, corruption, civil war, or oppressive leadership, including Somalia, Liberia, Zaire, Rwanda, Sierra Leone, and Sudan. And where states survived, it became difficult to argue that such aid did not have distorting effects on local economies. In 1995, for example, such funds accounted for 46 percent of Lesotho's government expenditures; 77 percent of Ghana's, 97 percent of Malawi's, and an unbelievable 101.4 percent of Madagascar's. In the 1990s, recognition of this fact and its contribution to corrupt practices led the United States to cut off bilateral aid to fifty countries. Washington later replaced some of this aid with assistance designated for humanitarian purposes. The AIDS epidemic in Africa, which by 2001 had created 11 million orphans, was a major impetus behind this new agenda.
In 2000, Congress allocated $715 million to child survival programs that promote maternal and child health and provide vaccines, oral rehydration therapy, and education. Nongovernmental organizations (NGOs) like the Global Alliance for Vaccines and Immunization, backed by corporate constituents including the International Federation of Pharmaceutical Manufacturers Associations, have played a leading role in administering these programs. In 1995, in fact, NGOs registered with USAID spent $4.2 billion on overseas programs, and fourteen of them raised more than $100 million in cash and kind, including government food and freight assistance. These ranged from the giant CARE, with a total of $460 million, to Project Hope with $120 million. The NGO projects were often both simple and innovative. Project HOPE, for instance, used USAID funds to work with tea plantations in Malawi to provide health care for women and children.
Another priority was the promotion of democratic politics in the so-called Second World of former socialist countries. In Serbia, U.S. aid supported resistance movements like Otpor, whose activism helped bring about the ouster of the dictator Slobodan Milosevic. Aid administrators were also tying their works to new transnational priorities. The Clinton administration's Climate Change Initiative, for example, assisted forty-four countries in lowering greenhouse gas emissions. In addition, growing sensitivity to local economies prompted the United States to begin to send farmers along with food supplies in the Food for Peace Program. More than five thousand were sent abroad in the 1990s. Perhaps the largest priority as far as spending was concerned were peacekeeping efforts. These included the well-established programs in the Middle East as well as newer initiatives in the Balkans and in Northern Ireland.
The USAID Development Assistance request from Congress for 2001 illustrated the new global priorities, with $234 million for economic growth, $12 million for human capacity development, $92 million to support democratic participation, $225.7 million for the environment, and $385 million for population programs and protecting human health. The increase in spending on child survival, which rose from $650 million to $724 million between 1998 and 2000, was notable, as was the rise in the International Fund for Ireland (that is, Northern Ireland), which rose from $2.4 billion to $2.7 billion, and the Assistance to Independent States, which rose from $770 million to $836 million. The new emphasis on such programs as child health, which over-shadowed development aid, highlighted a continuing debate among the foreign aid establishment as to the relative merits of relief initiatives versus developmental ones.
U.S. economic assistance in the early twenty-first century came through many channels. For example, the Development Assistance program was a mammoth account that included such programs as the Narcotics Control Program of the Department of State, the Development Fund for Africa, Economic Support Funds, Support for East European Democracy, Food for Peace, the InterAmerican Foundation, and the Peace Corps. In addition, many U.S. cabinet agencies, like the Departments of Transportation and Commerce, also provided their own aid and technical assistance programs in such countries as Egypt, Kazakhstan, Russia, South Africa, and Ukraine.