The Privatization of Foreign Aid: Reassessing National Largesse

Carol C. Adelman

From Foreign Affairs, November/December 2003

Article preview: first 500 of 2,313 words total.

Summary:  Critics have long derided the U.S. government for stinginess in international giving. But such charges miss the point. Today, it is private funds that make the difference in poor countries, and here the United States leads the pack.

Carol C. Adelman was Assistant Administrator at the Agency for International Development from 1988 to 1993 and is currently a Senior Fellow at the Hudson Institute in Washington, D.C.

Foreign aid has returned to the center of U.S. foreign policy. In the decade after World War II, U.S. government dollars helped rebuild Europe and Asia and contain Soviet influence. In the decade after the collapse of the Soviet Union, aid helped newly democratic states recover from the miseries of communism. Today, a third wave of foreign aid is starting to foster development and democracy, particularly in the Middle East, and to stem the onset of pandemics in the developing world.

But even as Washington reemphasizes the importance of aid, critics, from journalists and academics to former presidents, ritually blast the United States for being stingy. President George W. Bush's pledge to increase aid 50 percent by 2006 -- the biggest boost since the Marshall Plan was launched in 1948 -- and new legislation devoting an additional $15 billion to fight aids, tuberculosis, and malaria have done little to stave off such attacks. Critics -- noting that the United States, despite giving the greatest absolute amount, comes in last among industrialized nations in terms of aid as a percentage of national income -- have tagged it the most miserly of nations.

What such criticism fails to take into account is the new landscape of foreign aid. Current measures of a nation's largesse only count funds doled out by the government, thus ignoring the primary way in which Americans help others abroad: through the private sector. In the last decade, U.S. government aid has been far outstripped by private donations -- from foundations, private voluntary organizations (PVOS), corporations, universities, religious groups, and individuals giving directly to needy family members abroad. There is no comprehensive measure of how much Americans donate overseas, but a conservative estimate, based on surveys and voluntary reporting, puts annual private giving around $35 billion. Even this low-ball figure is more than three and a half times the amount of official development assistance (ODA) given out in a year by the U.S. government. In the third wave of foreign aid, it is private money that is making the difference.

THE ODA FALLACY

The claim of American stinginess results from the common misperception that ODA, dubbed the "donor performance measure," is the true, and only, measure of generosity abroad. In 1958, the World Council of Churches called on developed nations to devote one percent of national income to international development. The Organization for Economic Cooperation and Development (OECD) later adopted a target of 0.7 percent and now publishes an annual report ranking donors in terms of ODA as a percentage of GNP.

Since the ranking began, however, the only countries that have ever managed to achieve the "0.7 percent solution" are Denmark, Luxembourg, Norway, and the Netherlands. And like many such targets, this one bears no relation to the quality or impact of a donor's aid. The OECD has finally admitted not only that the chances of meeting the 0.7 percent goal are virtually nil, but also that developing countries could not absorb that much official aid ...

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