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92–188PDF 2004

U.S. FOREIGN ASSISTANCE AFTER SEPTEMBER

11TH: MAJOR CHANGES, COMPETING PURPOSES

AND DIFFERENT STANDARDS—IS THERE AN

OVERALL STRATEGY?

HEARING

BEFORE THE

COMMITTEE ON 

INTERNATIONAL RELATIONS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

FEBRUARY 26, 2004

Serial No. 108–101

Printed for the use of the Committee on International Relations

(

Available via the World Wide Web: http://www.house.gov/international—relations 

(II)

COMMITTEE ON INTERNATIONAL RELATIONS 

HENRY J. HYDE, Illinois, Chairman 

JAMES A. LEACH, Iowa 

DOUG BEREUTER, Nebraska 

CHRISTOPHER H. SMITH, New Jersey, 

Vice Chairman 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

ILEANA ROS-LEHTINEN, Florida 

CASS BALLENGER, North Carolina 

DANA ROHRABACHER, California 

EDWARD R. ROYCE, California 

PETER T. KING, New York 

STEVE CHABOT, Ohio 

AMO HOUGHTON, New York 

JOHN M. MCHUGH, New York 

ROY BLUNT, Missouri 

THOMAS G. TANCREDO, Colorado 

RON PAUL, Texas 

NICK SMITH, Michigan 

JOSEPH R. PITTS, Pennsylvania 

JEFF FLAKE, Arizona 

JO ANN DAVIS, Virginia 

MARK GREEN, Wisconsin 

JERRY WELLER, Illinois 

MIKE PENCE, Indiana 

THADDEUS G. MCCOTTER, Michigan 

KATHERINE HARRIS, Florida 

TOM LANTOS, California 

HOWARD L. BERMAN, California 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

DONALD M. PAYNE, New Jersey 

ROBERT MENENDEZ, New Jersey 

SHERROD BROWN, Ohio 

BRAD SHERMAN, California 

ROBERT WEXLER, Florida 

ELIOT L. ENGEL, New York 

WILLIAM D. DELAHUNT, Massachusetts 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

JOSEPH CROWLEY, New York 

JOSEPH M. HOEFFEL, Pennsylvania 

EARL BLUMENAUER, Oregon 

SHELLEY BERKLEY, Nevada 

GRACE F. NAPOLITANO, California 

ADAM B. SCHIFF, California 

DIANE E. WATSON, California 

ADAM SMITH, Washington 

BETTY MCCOLLUM, Minnesota 

CHRIS BELL, Texas 

THOMAS E. MOONEY, SR., Staff Director/General Counsel 

ROBERT R. KING, Democratic Staff Director 

PETER D.R. SMITH, Professional Staff Member 

LIBERTY DUNN, Staff Associate 

(III)

C O N T E N T S 

Page

WITNESSES 

Steven Radelet, Senior Fellow, Center for Global Development ......................... 10

Helle Dale, Deputy Director, Davis Institute for International Studies, The 

Heritage Foundation (appearing on behalf of Marc Miles, Ph.D., Director, 

Center for International Trade and Economics, The Heritage Foundation) ... 22

Mary E. McClymont, President and Chief Executive Officer, InterAction ......... 42

Lael Brainard, Ph.D., Senior Fellow, The Brookings Institution ........................ 66

Patrick M. Cronin, Ph.D., Senior Vice President and Director of Studies, 

Center for Strategic and International Studies ................................................. 72

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Henry J. Hyde, a Representative in Congress from the State 

of Illinois, and Chairman, Committee on International Relations: Prepared 

statement .............................................................................................................. 3

The Honorable Nick Smith, a Representative in Congress from the State 

of Michigan: Prepared statement ........................................................................ 9

Steven Radelet: Prepared statement ...................................................................... 14

Marc Miles, Ph.D.: Prepared statement ................................................................ 24

Mary E. McClymont: Prepared statement ............................................................. 44

Lael Brainard, Ph.D.: Prepared statement ............................................................ 68

Patrick M. Cronin, Ph.D.: Prepared statement ..................................................... 75

APPENDIX 

Ken Hackett, President, Catholic Relief Services: Prepared statement .............. 103

(1)

U.S. FOREIGN ASSISTANCE AFTER 

SEPTEMBER 11TH: MAJOR CHANGES, 

COMPETING PURPOSES AND DIFFERENT 

STANDARDS—IS THERE AN OVERALL 

STRATEGY? 

THURSDAY, FEBRUARY 26, 2004

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON INTERNATIONAL RELATIONS, 

Washington, DC. 

The Committee met, pursuant to call, at 11:04 a.m. in Room 

2172, Rayburn House Office Building, Hon. Henry Hyde presiding. 

Chairman HYDE. The Committee will come to order. Good morning, and welcome to today’s hearing of the Committee on International Relations. 

Over the coming weeks the Committee will hold a series of oversight hearings on important foreign assistance topics, including the 

new global strategy required by the HIV/AIDS Act of 2003, the implementation of the Millennium Challenge Act, and progress on reconstruction in Afghanistan. 

Today to kick off the series we shall examine overall trends in 

foreign assistance since 2001. 

The terrorist attacks of September 11 resulted in an unprecedented and massive shift in how foreign aid is employed as an element of national security strategy. The amounts, recipients, and 

purposes of foreign aid have changed dramatically between fiscal 

2001 and fiscal 2004. 

For example, since September 11, more than 50 percent of all foreign operations appropriations funding has supported the war on 

terrorism, or has gone for Afghanistan or Iraq war-related purposes. 

In September, 2002, the President issued a new national security 

strategy that declares:

‘‘The United States will use this moment of opportunity to extend the benefits of freedom across the globe. We will actively 

work to bring the hope of democracy, development, free markets, and free trade to every corner of the world.’’

The national security strategy further declares that the terrorist 

attacks taught us that weak states, like Afghanistan, can pose as 

great a danger to our national interest as strong states. Poverty 

does not make poor people into terrorists and murderers; yet poverty, weak institutions, and corruption can make weak states vulnerable to terrorist networks and drug cartels within their borders. 

2

Congress has been supportive of the President’s foreign aid priorities, enacting new legislation and appropriating approximately 

$17.9 billion in fiscal 2002 and fiscal 2003 foreign operations funding, to assist the front-line states, implementing anti-terrorism 

training programs, and addressing the needs of post-conflict Iraq 

and other countries. 

And taking into account a new baseline for foreign assistance in 

2004, as well as a new administration foreign aid initiatives, U.S. 

foreign aid spending is expecting to increase from $15 billion in fiscal 2001 to $25.5 billion by 2008 fiscal year. 

Strategy is defined as ‘‘the science and art of using all the forces 

of a nation to execute approved plans as effectively as possible during peace or war.’’

The United States has a clear national security strategy, as articulated by the President. But the United States does not have a 

strategy for how it employs the resources available for foreign assistance. Some foreign aid, like that to be provided by the New Millennium Challenge Corporation, is performance-based, and requires 

a positive track record on the part of the government of the recipient country. Other aid, like humanitarian assistance, food aid, or 

HIV/AIDS assistance, is provided to developing countries on the 

basis of need to alleviate suffering, or to achieve development objectives without necessarily the expectation of improved performance 

or policy reforms. 

And yet other assistance still is provided by the State Department without development objectives at all. It is not intended to 

benefit a country’s people directly, nor to address specific development problems, and usually is provided without the real expectation of policy reform. 

At times it does seem that U.S. foreign aid is incoherent and 

fragmented. There are increasing numbers of agencies and players 

involved in the provision of foreign assistance, such as the Departments of Education, Labor, and Health and Human Services. 

There are an increasing number of appropriations and authorizing Committees getting involved in foreign aid, as well. And there 

is an ever-expanding list of presidential foreign aid initiatives, 

more than 20 at the last count. 

Today we will hear from a distinguished panel of experts who 

will examine these developments in general, and I hope will address the following questions. 

What are, or should be, the current objectives of U.S. foreign assistance? 

Should all U.S. foreign assistance work in support of the U.S. national security strategy? 

Is there an overall strategy that directs U.S. foreign aid programs? 

Should there be a national foreign assistance strategy? 

Is the United States using foreign aid resources effectively in fiscal 2004? 

Are we able to measure the results of our efforts? 

Why are there standards and requirements for some recipients, 

but not for others? 

Does any overall strategy guide the myriad of presidential foreign assistance initiatives announced since 2001? 

3

And finally, should foreign aid be provided on the basis of need, 

performance, or cooperation? 

I certainly look forward to hearing the testimony of our witnesses 

today. I also look forward to the implementation of the HELP, Help 

Commission Act, authored by our colleague Frank Wolf, which was 

included in Consolidated Appropriations Act of 2004. The HELP 

Commission Act creates a commission to examine some of the same 

questions we are addressing today. The act also includes language 

from HR 4877, from the 107th Congress, the Foreign Aid Impact 

Assessment Act, which requires an analysis of the impact of the 

United States’ economic assistance on economic development of recipient countries, with a discussion of U.S. interests that were 

served by the assistance. 

And now I am pleased to yield to my distinguished colleague and 

friend, Representative Payne, for any opening remarks he may 

wish to make. 

[The prepared statement of Mr. Hyde follows:]

PREPARED STATEMENT OF THE HONORABLE HENRY J. HYDE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF ILLINOIS, AND CHAIRMAN, COMMITTEE ON INTERNATIONAL RELATIONS

Good morning, and welcome to today’s hearing of the Committee on International 

Relations. Over the coming weeks, the Committee will hold a series of oversight 

hearings on important foreign assistance topics, including the new global strategy 

required by the HIV/AIDS Act of 2003, the implementation of the Millennium Challenge Act, and progress on reconstruction in Afghanistan. Today, to kick off the series, we shall examine overall trends in foreign assistance since 2001. 

The terrorist attacks of September 11, 2001, resulted in an unprecedented and 

massive shift in how foreign aid is employed as an element of national security 

strategy. The amounts, recipients, and purposes of foreign aid have changed dramatically between FY2001 and FY2004. For example, since September 11th, more 

than 50 percent of all Foreign Operations appropriations funding has supported the 

war on terrorism or has gone for Afghanistan or Iraq war-related purposes. 

In September 2002, the President issued a new national security strategy that declares ‘‘the United States will use this moment of opportunity to extend the benefits 

of freedom across the globe. We will actively work to bring the hope of democracy, 

development, free markets, and free trade to every corner of the world.’’ The national security strategy further declares that the terrorist attacks ‘‘taught us that 

weak states, like Afghanistan, can pose as great a danger to our national interests 

as strong states. Poverty does not make poor people into terrorists and murderers. 

Yet poverty, weak institutions, and corruption can make weak states vulnerable to 

terrorist networks and drug cartels within their borders.’’

Congress has been supportive of the President’s foreign aid priorities, enacting 

new legislation and appropriating approximately $17.9 billion in FY2002 and 

FY2003 Foreign Operations funding to assist the ‘‘frontline states,’’ implementing 

antiterrorism training programs, and addressing the needs of post-conflict Iraq and 

other countries. And taking into account a new baseline for foreign assistance in 

FY2004 as well as new Administration foreign aid initiatives, U.S. foreign aid 

spending is expected to increase from $15 billion in FY2001 to $25.5 billion by 

FY2008. 

Strategy is defined as ‘‘the science and art of using all the forces of a nation to 

execute approved plans as effectively as possible during peace or war.’’

The United States has a clear national security strategy, as articulated by the 

President. But the United States does not have a strategy for how it employs the 

resources available for foreign assistance. Some foreign aid, like that to be provided 

by the new Millennium Challenge Corporation, is performance-based, and requires 

a positive track record on the part of the government of the recipient country. Other 

aid, like humanitarian assistance, food aid, or HIV/AIDS assistance, is provided to 

developing countries on the basis of need to alleviate suffering or to achieve development objectives, without necessarily the expectation of improved performance or policy reforms. And yet other assistance still is provided by the State Department without development objectives at all: it is not intended to benefit a country’s people diVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00007 Fmt 6633 Sfmt 6621 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
4

rectly, nor to address specific development problems, and is usually provided without the real expectation of policy reform. 

At times, it does seem that U.S. foreign aid is incoherent and fragmented. There 

are an increasing number of agencies and players involved in the provision of foreign assistance, such as the Departments of Education, Labor, and Health and 

Human Services. There are an increasing number of appropriations and authorizing 

committees getting involved in foreign aid as well. And there is an ever-expanding 

list of Presidential foreign aid initiatives—more than twenty at last count. 

Today we will hear from a distinguished panel of experts who will examine these 

developments in general and, I hope, will address the following questions:

• What are, or should be, the current objectives of U.S. foreign assistance?

• Should all U.S. foreign assistance work in support of the U.S. national security strategy?

• Is there an overall strategy that directs U.S. foreign aid programs?

• Should there be a National Foreign Assistance Strategy?

• Is the United States using foreign aid resources effectively in FY2004?

• Are we able to measure the results of our efforts?

• Why are there standards and requirements for some recipients, but not for 

others?

• Does any overall strategy guide the myriad of Presidential foreign assistance 

initiatives announced since 2001? And finally,

• Should foreign aid be provided on the basis of need, performance, or cooperation?

I look forward to hearing the testimony of our witnesses today. 

I also look forward to implementation of the HELP Commission Act, authored by 

my colleague, Frank Wolf, which was included in Consolidated Appropriations Act 

of 2004. The HELP Commission Act creates a commission to examine some of the 

same questions we are addressing today. The Act also includes language from H.R. 

4877 from the 107th Congress, the ‘‘Foreign Aid Impact Assessment Act,’’ which requires an analysis of the impact of United States economic assistance on economic 

development of recipient countries, with a discussion of the United States interests 

that were served by the assistance.

Mr. PAYNE. Thank you very much, Mr. Chairman, for calling this 

very important and timely meeting. And I have been asked by Mr. 

Lantos to sit in for him, and I certainly appreciate his confidence 

in me. 

Mr. Chairman, last May this Committee’s tireless efforts paid off. 

When the President signed the HIV and AIDS bill, solidifying the 

United States’s commitment to halt and reverse the spread of HIV 

and AIDS. It sent a great message around the world, and it was 

a very positive time for the United States in the world community 

for this great initiative. 

While the President has demonstrated his commitment to fully 

fund the U.S. bilateral HIV and AIDS Assistance Program, the 

commitment does not transcend to the Global Fund for HIV and 

AIDS, Malaria, and Tuberculosis, in which he only requested $200 

million for both FY ’04 and FY ’05, compared to the $1 billion authorized by this Committee. In order to help stem the spread of 

this vicious disease, the Administration must demonstrate its commitment to all HIV and AIDS assistance programs, including the 

Global Fund. 

Mr. Chairman, surveys in this country regularly show the public 

thinks that about 20 percent of Federal spending goes for foreign 

aid. However, the actual figure is less than 1 percent. Our chronically low level of foreign aid spending is a national disgrace, in my 

opinion. The United States spends less than 1⁄10 of 1 percent of our 

GDP on foreign development assistance, less than 1⁄10 of 1 percent 

of the gross domestic product. 

5

However, although much lower the GDP is, of course, our 

friends, for example in Denmark, and in Norway, and in the Netherlands, spend proportionately 10 times as much in their countries. 

In Denmark, as a matter of fact, each person spends equivalently 

to $309 on development assistance to poor countries, while in the 

United States each person would equate to $34, which is about a 

10-to-1 ratio. 

So although we are doing more when we look at it in its true 

sense, it does appear that we could do better. This trend must be 

reversed if the United States is to be successful in its foreign policy 

goals. 

Mr. Chairman, this trend can only be reversed by providing more 

key funding to U.S. development priorities. Education, where we 

have done very little, and we have seen Islamic extremist groups 

funding education in developing countries, and having their people 

then spew the hatred toward the United States because we have 

not funded education in decades. 

Health care, family planning, rule of law programs, which are all 

woefully under-funded. 

While it is essential to provide adequate funding for the war on 

terrorism and defense, and I think that there is no one in the Congress who disputes that—we are all for promoting the common defense and making sure that we defeat the evil terror and terrorists 

there—it is just as important, in my opinion, to properly fund core 

development accounts, such as health, education, and food assistance. While fully funding the President’s new initiatives—HIV and 

AIDS, Millennium challenge accounts—it is essential that we must 

not let key development programs suffer at their expense. It is not 

good to rob from Peter to pay Paul, because they are usually brothers, and so they are going to get hurt one way or another. 

And so the Bush Administration should remain just as committed to core development assistance as it is to the new programs, 

which we certainly welcome. 

Mr. Chairman, as you know, last month Congress passed FY ’04 

Omnibus Appropriations legislation, which authorized the Millennium Challenge Account. Much of the authorizing language in the 

Omnibus legislation was conceived of and fought for by this Committee. We can now see whether the MCA will meet its potential 

of revolutionizing the way the United States promotes democracy 

and development abroad. 

It has been and remains a staunch supporter, and I have been 

and I remain a staunch supporter of the MCA. I think it is a new 

approach, I think it is a good approach. 

While I applaud the Administration’s support for this initiative, 

I remain concerned that the Administration will leave core development programs behind, and focus solely on the MCA, thereby jeopardizing these vital programs. We should leave no program behind. 

Mr. Chairman, as the Committee has oversight jurisdiction over 

the MCA and other foreign assistance programs, it is our duty to 

ensure that there is effective coordination between the various 

agencies charged with implementing foreign assistance programs. 

The only chance for these programs to be successful is for there to 

be effective coordination between the implementers of foreign aid 

programs. And one problem with the President’s foreign aid proVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00009 Fmt 6633 Sfmt 6601 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
6

posal is that they lead to fragmentation, and not coherence, as you 

have indicated even in your remarks. 

This country has a long-standing reputation for delivering muchneeded foreign assistance. A good example of our withdrawal of foreign assistance, and probably one of the reasons that we have so 

many empty chairs right here, is because, as we speak, at the same 

time a briefing by the Intelligence Agencies on Haiti is being conducted at another hearing room. And as you know, Haiti is on the 

agenda, on the radar screen for sure, and I’m sure many of our 

Members are there. 

But one of the results of our pulling back of assistance, in my 

opinion, is now the crisis that we see in Haiti. And sometimes, if 

we were able to synchronize our assistance programs, we could 

really aid in preventing destabilization of a country like that which 

is the poorest country in the hemisphere, and should really be one 

of our priorities. If we have to limit priorities, one certainly should 

be our hemisphere. 

We said that we don’t want boat people, and they said we will 

interdict any ship on the high seas. But yet, there is a boat now 

in Miami’s harbor, just about. So once they start coming out, there 

is absolutely no way you are going to be able to prevent people on 

the high seas, the seas that their border is pretty wide and pretty 

broad. And there certainly will be problems. 

And those who are even prevented from coming to the United 

States are going to end up in island nations, who are struggling 

themselves. And they don’t have the Coast Guard to turn them 

around. So what will happen in Jamaica and in Dominica, where 

the banana program has been undercut? How will they even attempt to help these people, when they are struggling themselves? 

So foreign policy implicates a very important—I look forward to 

hearing from our witnesses. 

Thank you, Mr. Chairman. 

Chairman HYDE. Thank you, sir. 

Mr. Rohrbacher. 

Mr. ROHRBACHER. Thank you very much, Mr. Chairman. 

Just a few thoughts with respectful disagreement to Mr. Payne’s 

statement. 

I don’t believe that the United States has anything to apologize 

about in terms of our national assistance to other countries. It certainly is not a national disgrace. 

What quite often happens, when analyzing how much assistance 

the United States is providing other countries, the people making 

the calculations do not add in private contributions, and the contributions from our private sector, which are considerable. And I 

might add, often much more effective than the government-run operations of other countries. 

Having visited several countries and seen how the foreign aid is 

distributed by some of those other governments that were being applauded, the fact is a lot of that foreign aid goes into buying palaces for their bureaucrats to live in in these countries, in these 

third-world countries. And a lot of that money is not effective at 

all in aiding those societies. 

Where the private charity and the American NGOs that we support quite often are very effective. And quite often they are based 

7

on a religious conviction, which is a wonderful motive to helping 

other people, because you believe God wants you to help other people, rather than just being taxed and letting the bureaucratic establishment take care of that benevolence. 

Let me also note that I would like to see the statistics on Haiti. 

It is my memory that Haiti was a priority recipient of United 

States foreign aid by the last Administration. 

And what the trouble is, Mr. Chairman, is that quite often we 

have disassociated the struggle for democracy with the idea of providing assistance. And in Haiti right now, if there is this chaos that 

we see, it probably is traced to a lack of demand for democratic reform, while pursuing an aid program. 

So I would suggest that in the future, that we would look at the 

strings that we need to put on our money when going overseas 

should be based on democratic reform in these third-world countries. 

Finally, Mr. Chairman, I would suggest this. And we are talking 

about priorities or criteria, or what prerequisites we have in terms 

of providing American assistance, financial assistance, or direct foreign aid. I believe we have to take into consideration America’s interest, as well as the interest of Americans. 

I was very pleased that OPIC, for example—and I mentioned this 

earlier, when the Secretary was here—has decided to cut off its 

program in Ethiopia, because there is an American family, which 

happens to reside in my Congressional district—they are a very respected American family—who came here penniless from Ethiopia 

years ago. And because their property, all of their property, had 

been confiscated, and the Ethiopian government, the same Marxist 

dictatorship that killed Haile Selassie, had confiscated their property. 

Now, the new Ethiopian government, which claims to want to return stolen property, refuses to deal with these American citizens. 

OPIC has decided to side with this family. And I would hope that 

when we are providing assistance to foreign governments, that we 

take into consideration how they treat the claims of Americans. 

And if there are rightful claims, property claims, that a government is not recognizing, that we use this as pressure to obtain the 

rights of our citizens. And the Brahimi family in Orange County 

is a good example of that. 

So I’m looking forward to hearing the testimony, and what some 

of the thoughts and prerequisites are of the people who are running our program today. 

Thank you, Mr. Chairman. 

Chairman HYDE. Ms. Napolitano, do you have an opening statement? 

Ms. NAPOLITANO. Thank you, Mr. Chairman. I really did not prepare a statement. But in listening to my colleagues’ remarks about 

the amount of money that we provide for financial assistance and 

Federal aid, and to mention that Denmark has a very generous and 

healthy amount, I just happen to have an intern from Denmark. 

And she was just elated to hear that Denmark is a good supporter 

of financial aid to those countries. 

And in listening to my colleague, Mr. Rohrbacher, it just indicated to me my role when I visit foreign countries. And I look at 

8

what is happening to financial aid from countries such as the 

United States. And whether or not we are really paying attention 

to where that money is going to. Because in certain areas that I 

have been, it certainly does not look as if the money filters down 

to where it is really needed. 

So what is our role? It will be a very interesting aspect to know 

what money we provide to what countries, and what they use it for. 

Unfortunately, I have another hearing. There is all kinds of different things going on. And I will look forward to seeing the testimony in writing, because it is a very critical issue for those of us 

who represent minority districts that feel that if we are going to 

make our money work in those countries, we need to understand 

where that money is going to, and that it is used for democratic 

purposes, rather than for insurgencies and other things that happen. 

Thank you. 

Mr. ROHRBACHER. Would the gentlelady yield for 30 seconds, 

probably 15 seconds? I just want to mention to my colleague that 

there are also voluntary organizations. As a matter of fact, the 

Dutch, the Danish aid group, which is all private money, actually 

almost does as much as the government. And in Sweden and in the 

Netherlands, people contribute, also. 

So I just don’t want you to go around the world saying America 

is the only one where people are philanthropic. 

And secondly, for your information, aid was cut off to Haiti, aids 

and loans, in the year 2000. So they have not gotten any assistance 

for 4 years. 

Thank you. 

Chairman HYDE. Mr. Nick Smith. 

Mr. SMITH. Thank you, Mr. Chairman. Very briefly. Whether it 

is the Millennium Challenge Account, or whether it is HIV/AIDS, 

or whether it is the role of the United States Government being a 

police force for the world against tyrant dictators. Whether it is our 

efforts in South America and Colombia fighting the drug lords, that 

maybe someone could say well, that is justified because drugs are 

coming to the United States. 

But those countries that are dominated in an environment of 

drug lords, are very much oppressed. Our efforts in Afghanistan, 

Iraq, around the world is a huge contribution. In fact, the taxpayers from my district are concerned about the amounts of money 

that are being contributed to foreign aid efforts at a time when 

some of that help is so desperately needed at home. 

You know, year after year it falls on the United States to lead 

the effort to shed light on the egregious human rights violations of 

oppressive regimes, and we are doing that. 

So contrary to the suggestion that we are not doing our share, 

I suggest that the United States has made a great deal of effort 

to try to make this a better world and a better place to live for all 

people. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Smith follows:]

9

PREPARED STATEMENT OF THE HONORABLE NICK SMITH, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MICHIGAN

I want to thank Chairman Hyde for holding this hearing on our changing foreign 

aid policy. I would also like to thank our distinguished witnesses for sharing their 

expertise with us. 

September 11th taught us the dangers of our unfocused foreign policy since the 

end of the Cold War. Those terrible attacks demonstrated that terrorism is a great 

threat to our country, our way of life, and the international system. And when terrorists combine their intentions with the destructive capacities of weapons of mass 

destruction, it is clear that no greater threat exists in today’s world. 

Our policy responses to this new threat have been swift. The 2002 National Security Strategy was our first comprehensive public recognition of the threats that had 

emerged since the fall of the Berlin Wall. The Patriot Act updated our domestic laws 

to allow us to respond to threats at home. President Bush and Secretary Rumsfeld 

have, from day one, pursued a transformation of the military so that we can fight 

the wars of tomorrow. We are beginning to understand how our intelligence apparatus needs to change. We have worked with the UN and our allies to update the 

international financial system to fight terrorism. We are even seeing the stirrings 

of reform at the UN itself, which in many ways dates in structure and concept from 

the end of World War II. In these and other areas, the President has shown extraordinary leadership. 

However, the changes in our diplomatic and foreign aid programs have been primarily reactive. As our attention shifted towards the geographic sources of terrorist 

activity, USAID shifted its operations to the Middle East and Central Asia, substantially scaling down its capacities in Eastern Europe. The highest priority missions 

at USAID are now our reconstruction efforts in both Iraq and Afghanistan. These 

are clearly the correct decisions, but it is less clear how our new aid initiatives relate to them. What do the Millennium Challenge Account and the Global HIV/AIDS 

Initiative have to do with fighting terrorism? 

Simply put, the problem is that we are still operating under the Foreign Assistance Act of 1961, over 40 years ago! The mission of foreign assistance was to 

make—and sometimes buy—friends to fight the spread of International Communism. It may have made sense to prop up corrupt dictators because they were 

our dictators. But does it today? 

We need a comprehensive review of our foreign aid programs taking Secretary 

Rumsfeld’s transformation of the military as a model. Our programs must focus on 

the mission of fighting terrorism, and they must increase their effectiveness. Buying 

the friendship of dictators usually buys the enmity of their populations. How does 

that contribute to the mission? World Bank aid effectiveness studies have found repeatedly that aid works only when the target country’s institutions are up to the 

task. They also show that those countries usually do not need aid to grow their 

economies because of the quality of their institutions. How do our programs measure up on effectiveness? 

Again, I would like to thank the Chairman for holding this series of hearings on 

this topic. We owe it to the American people to get this right. Especially with the 

deficit, every dollar that leaves the Treasury must be well spent. And every dollar 

spent protecting the American people must be spent giving them the best possible 

protection.

Chairman HYDE. Thank you. Mr. Smith, do you have an opening 

statement? 

I would like to welcome Steven Radelet to the Committee today. 

He is a Senior Fellow at the Center for Global Development, and 

served as Deputy Assistant Secretary of the U.S. Treasury for Africa, the Middle East, and Asia, as a Fellow at Harvard’s Institute 

for International Development, and as Director of Harvard’s MacroEconomics program. 

Mr. Radelet holds a Ph.D. and an MPP from Harvard University. 

Welcome. 

Helle Dale is currently the Director of Foreign Policy and Defense Studies at the Heritage Foundation. She holds the position 

of Foreign Affairs columnist for The Washington Times. And prior 

to these positions, she served as Editorial Page Editor of The WashVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00013 Fmt 6633 Sfmt 6601 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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ington Times. She holds an M.A. and B.A. Degrees from the University of Copenhagen. Welcome, Ms. Dale. 

Mary McClymont is the President and Chief Executive Officer of 

InterAction. She previously served at The Ford Foundation as Senior Director of the Peace and Social Justice Program, as well as Director of the Rights and Social Program. She has an L.L.M. in 

International Legal Studies from the American University, Washington College of Law, and a J.D. from Georgetown University Law 

Center. Welcome, Ms. McClymont. 

Lael Brainard presently holds the New Century Chair in International Economics at the Brookings Institution. And prior to this, 

she served as Deputy Assistant to the President and Chair of the 

Deputy Secretary’s Committee on International Economics during 

the Clinton Administration. She holds a Master’s and Doctoral degrees in Economics from Harvard. Welcome, Ms. Brainard. 

And Patrick Cronin currently serves as Senior Vice President 

and Director of Studies at the Center for Strategic and International Studies, previously serving as Assistant Administrator for 

Policy and Program Coordination at the U.S. Agency for International Development, and as the Director of Research and Studies 

at the U.S. Institute for Peace. Mr. Cronin has earned both Master’s and Doctoral Degrees in International Relations from Oxford 

University. Welcome, Mr. Cronin. 

We are honored to have you all up here before the Committee 

today. Please proceed with a 5-minute, give or take, summary of 

your statement. Your full statement will appear in the record. And 

so let us start with Mr. Radelet. 

STATEMENT OF STEVEN RADELET, SENIOR FELLOW, CENTER 

FOR GLOBAL DEVELOPMENT 

Mr. RADELET. Thank you, Mr. Chairman and other Members of 

the Committee. I am honored to be invited to meet with you here 

today. 

In this testimony I would like to make three key points. First, 

the United States needs to develop a strategic vision for foreign assistance that clearly articulates our motivations and objectives, relates those to our foreign policy goals, and develops a range of 

strategies for engaging with different countries around the world. 

Right now that strategic vision does not exist. 

Number two. While some of our programs have been successful, 

overall our current approach to foreign assistance is not adequate 

to meet our foreign policy goals, either in how we deliver it, or in 

the quantity of aid that we deliver. We need to improve both the 

quality and the quantity of foreign aid. 

And number three. The U.S. can take several specific actions 

that would make our foreign assistance programs much more effective in achieving our foreign policy goals. 

Our current foreign assistance programs date back to the early 

days of the cold war. The Foreign Assistance Act was written in 

1961 by the Kennedy Administration, for a different time and a different set of foreign policy priorities. It has grown into a cumbersome and unwieldy document that is nearly 2,000 pages long, 

with 33 different stated goals and 75 different priority areas. It no 

11

longer provides a foundation for a strong foreign assistance program. 

In addition, as was mentioned earlier, our foreign assistance programs are administered by 16 different agencies around the Executive Branch, with little communication and coordination. 

Many of our specific programs remain effective, but as a whole 

they are far less effective than they can be or should be. In my 

view, it is now time, 15 years after the fall of the Berlin Wall and 

more than 2 years after September 11, that we rethink and reorganize our foreign assistance programs. 

The Bush Administration has put foreign assistance back on the 

agenda, and they should be commended for it. The two major programs, the Millennium Challenge Account and the HIV/AIDS initiative, are very promising, and they deserve our strong support. 

But these fall well short of a coherent and consistent foreign assistance strategy. 

Our overall goals and objectives are not clear. We have very narrow country coverage in the two new programs. Each of them will 

reach only about 15 countries. There is no strategy for failed and 

failing states, as we are seeing this week in Haiti, we have seen 

in Liberia, and the absence of strategies in similar countries 

around the world. 

There is no strategy for consolidating political change in emerging and fragile democracies, and there is no vision for coordinating 

and communicating across programs. Indeed, some of the new initiatives could just add to the fragmentation. 

A strong foreign assistance strategy would have four key components. First, it would identify clear goals and objectives, and relate 

those to our foreign policy goals. 

Second, it would establish some operational plans for assistance 

programs in different kinds of recipient countries. 

Third, it should ensure coordination across our foreign assistance 

programs, and integrate these programs with other foreign policy 

tools. 

And fourth, it should summarize the budgetary requirements 

necessary to achieve those goals. 

Let me touch on each of these very briefly. First, why do we need 

a foreign policy program, a strong foreign assistance program? 

National security, number one. Whether it is rebuilding in Iraq 

or Afghanistan or working in fragile states, such as Haiti or Liberia or Sudan, or to meet our other foreign policy goals, such as 

fighting narcotics trafficking in Colombia. 

Second, we need a strong assistance program to promote American values. We share a shared vision for open, more prosperous, 

and democratic societies, a vision that is shared by most people 

around the world. But unfortunately, that vision is under threat. 

The gap between the poorest and the richest countries of the world 

is significantly widening in the last 20 years, breeding resentment 

among people who believe, rightly or wrongly, that the rich have 

rigged the rules against the poor. 

At the same time, a growing number of groups around the world 

promote radical ideologies that suggest that the United States and 

its values are the source of the problem, not the solution. We need 

poor countries to believe in the vision and the values that we 

12

champion, and to believe that they can climb out of poverty and 

achieve prosperity. But they need our help to do it. 

Our third basic reason is humanitarian values. For most Americans, helping the poorest people around the world who live on one 

dollar a day is simply the right thing to do. That is why we need 

a program. 

What, precisely, do we want to achieve? I think all of our foreign 

assistance programs should be geared to meeting at least one of 

four different objectives. They should either enhance our national 

security, they should be promoting economic growth and poverty 

reduction, they should be helping to consolidate political change 

and democracies around the world, or they should be providing humanitarian assistance in crisis programs. All of them should be 

geared to meet at least one of those. 

Now, those goals conflict, and they should be measured differently. We need different approaches to meet those different 

goals, and we need to recognize that sometimes achieving one goal 

means that we are not achieving the others. Programs that are 

aimed at consolidating political change should not be measured in 

terms of their contribution to economic growth. We need to be able 

to measure their effectiveness in different ways. 

A good strategy would lay out operational plans for working in 

different kinds of countries. The Millennium Challenge Account is 

the first step in this direction. It targets countries with good governance that have made a commitment to development. And our 

approach there is going to be to give them much more flexibility 

in how they use the funds, give them more money, and hold them 

accountable for results. It makes a lot of sense in countries with 

good governance, but it is not the right approach for other countries. 

In countries that nearly miss qualifying, you ought to have a 

slightly different approach. Augmenting our standard programs 

with smaller, focused approaches that begin to get them ready for 

the Millennium Challenge Account. And give them a little bit of 

say in how they use the money, but not quite as much in the Millennium Challenge Account. 

A third approach is useful in weaker states: Zambia, Kenya, 

countries like that, that aren’t going to qualify for the Millennium 

Challenge Account any time soon. There we need focused approaches that don’t try to do 10 or 12 things, but try to do two or 

three things, and do them well. We look for opportunities where we 

can be successful, where governments have shown some commitment. We hold them accountable for results, but we are much more 

narrow and give those countries less flexibility. 

Quite a different approach is necessary in failed states. These are 

the most complicated cases, and we need to deal with these on a 

case-by-case basis. In some cases all we can do is provide humanitarian assistance; in other cases, we can look for opportunities to 

help build fledgling institutions. 

The Center for Global Development is actually putting together 

a Commission on Weak States and National Security that will submit its report in May, that will look at the very difficult issues 

around weak and failed states. 

13

But a good strategy should also spell out the budgetary requirements needed to achieve our goals. We have already had some discussion here about the amounts that the United States provides. 

We provide more foreign assistance than anyone else. As a share 

of our national income it is the lowest. And even including private 

charitable donations we rate among the lowest in terms of share 

of GDP. 

But this is not a beauty contest. The important point is that I 

don’t think that our foreign assistance programs are large enough 

to meet our foreign policy goals. 

First and foremost, we haven’t yet turned the tide on the war on 

terrorism, and it is going to take big commitments in the years 

going forward. 

We also are not winning the war for hearts and minds, for a vision of an open, prosperous, and democratic world. We are also not 

winning the war on poverty. We are not winning the war on HIV/

AIDS. Despite the President’s commitment to this, 8,000 Africans 

die every day; that is one every 10 seconds. This is a war that we 

know the technology, we know how to win it, and we are not winning it. 

And Congressman Payne is correct that we need to augment our 

efforts bilaterally with a stronger commitment to the Global Fund. 

So what specific actions can be taken? Let me suggest six things, 

going from very broad to very narrow, that could make our foreign 

assistance programs more effective. 

Mr. ROHRBACHER [presiding]. Excuse me. The Chair will permit 

you to go forward, even though your time is up. 

Mr. RADELET. If my time is up, I will be very brief. 

Mr. ROHRBACHER. No, no. Just be very brief, but I would like to 

hear those points. 

Mr. RADELET. That is fine. I will be very brief with six specific 

things that we could do. 

Number one, we could consolidate our foreign programs under 

one roof, and create a new department for international development. This would be a long-term idea, but it would add to coordination and communications, and I think save taxpayer dollars. The 

United Kingdom did this a few years ago, and it has been very successful. 

Second, we need to rewrite the Foreign Assistance Act. It is over 

40 years old, it is outdated, and it needs to be severely changed to 

give a better foundation. As part of that, it needs to clarify our objectives, it needs to significantly reduce earmarking and tied aid, 

and otherwise clarify the legislation. 

The third thing that we should do is, I believe that Congress 

should insist that each administration put forward a national foreign assistance strategy once each term. Not every year, but once 

each term, in tandem with our national foreign policy strategies 

and national security strategies, that would clarify the roles of foreign aid. 

Fourth, we should clarify the budget. Right now the budget for 

foreign assistance is scattered all over the place, and it is impossible to figure out what we are doing. If we are going to have a 

clear strategy, we need a clear budget. 

14

Fifth, we need to improve monitoring evaluation and manage for 

results. Most of our programs do not manage for performance and 

results, and we need to do that. 

Sixth and finally, we need to refocus and reorient USAID. The 

agency is under a lot of stress because of the implementation of the 

Millennium Challenge Account, and because of the pressures on it 

for rebuilding in Afghanistan and Iraq. We need to make some 

changes in terms of how they are managed, and how Congress 

works with them, in terms of earmarking and tied aid, to make 

their management job a little bit easier. But we need to work hard, 

and not just let the agency fester. 

I think taking these challenges on will not be easy, but I believe 

that there is an important moment now with bipartisan support for 

making our foreign assistance programs more important. And we 

ought to seize that moment moving forward. Thank you very much. 

[The prepared statement of Mr. Radelet follows:]

PREPARED STATEMENT OF STEVEN RADELET, SENIOR FELLOW, CENTER FOR GLOBAL

DEVELOPMENT

Thank you, Chairman Hyde, and other Members of the House Committee on 

International Relations. I commend you for addressing this set of very difficult and 

important issues concerning the role of foreign assistance in U.S. foreign policy. I 

am honored that you have invited me to offer some perspectives on these issues. 

The world has changed dramatically since the end of the Cold War and the dissolution of the Soviet Union. Some traditional challenges have faded, but others 

have risen to take their place. September 11th made us all aware of the very real 

security threats from weak and failings states that can serve as breeding grounds 

for terrorism. Diseases such as HIV/AIDS claim millions of lives each year, exacerbate destabilizing tensions, weaken fragile economies, and threaten our interests 

and those of our friends and allies. The process of globalization has created tremendous opportunities, but at the same time poses significant challenges, particularly 

to those who start from a position of disadvantage. Partly because of these changes, 

new tensions have sprung up between rich and poor countries around the world. 

To address these challenges, the United States requires an integrated foreign policy that promotes our values, enhances our security, and strengthens the global economic system. There are several interlocking components to such a policy, including 

diplomacy, defense, trade, investment, intelligence, and—the subject of our discussion today—a strong and effective foreign assistance strategy. 

Unfortunately, U.S. foreign assistance is a hodge-podge of uncoordinated initiatives from multiple institutions without a coherent guiding strategy. There are too 

many actors, with little clarity on overall objectives and purposes. Many of the 

structures and guiding principles of current programs have their roots in the Cold 

War, and have not evolved in tandem with recent changes in the global environment. Although some of our aid programs are effective—more effective than they are 

often given credit for—it is critically important that we strengthen and refocus our 

overall foreign assistance programs to better match today’s major foreign policy 

goals. A strong foreign assistance policy would clearly identify the motivations for 

and purposes of foreign aid, and would develop the institutional tools necessary to 

deliver aid more effectively. It would more fully integrate foreign assistance into a 

broader foreign policy that recognizes and more strategically links the full array of 

policies at our disposal—including trade, migration, investment, environmental 

stewardship and peacekeeping policies—into a powerful arsenal for engaging with 

countries around the world. 

In this testimony I would like to make three key points:

1. The United States needs to develop a strategic vision for foreign assistance 

that clearly articulates our motivations and objectives and their relationship 

to our foreign policy goals, and includes a range of strategies for engaging 

with different kinds of countries around the world.

2. While some of our programs have been successful, our current approach to 

foreign assistance is not adequate to meet our strategic, economic, political, 

and humanitarian foreign policy objectives, either in terms of the amount of 

funding we provide or, importantly, in how we provide it.

15

3. The U.S. can take several specific actions that would improve the quality of 

our aid administration and would make our foreign assistance much more 

effective in achieving our goals. 

I. MOTIVATIONS: WHY FOREIGN ASSISTANCE MATTERS

To begin with, let me suggest three basic motivations for why we need a strong 

and effective foreign assistance program: 

1. National Security. Foreign assistance is a vital tool for strengthening our national security. It has played a crucial role in the war on terrorism by supporting 

both frontline states and weak states where terrorism might breed. In the last two 

years aid has helped support key allies such as Pakistan and Jordan as well as in 

rebuilding Afghanistan and Iraq. Foreign assistance has also been an important instrument, when used judiciously, as part of our approach in failed states that have 

no functional governments (such as Liberia), failing states that seem dangerously 

headed for collapse (such as Zimbabwe), and key fragile states that could easily implode with potentially serious regional spillover effects (such as Nigeria or Indonesia). Foreign assistance has been central to achieving a range of other security 

goals, such as supporting the Camp David Peace accords that brought an end to 

armed conflict between Egypt and Israel, and in strengthening the states of the 

former Soviet Union. 

2. Promotion of American Values of Openness, Prosperity, Freedom, and 

Democracy. Foreign assistance is a key tool for the United States to lead the world 

in promoting its vision for a more prosperous and democratic world—a vision shared 

by most people around the world. Unfortunately, many people in low-income countries see economic opportunity, escape from poverty and political freedom only as 

distant dreams. The gap between the richest and poorest countries in the world has 

widened considerably during the last 20 years, breeding resentment and anger 

among people who believe—rightly or wrongly—that the rich have rigged the international system in their favor. In addition, an increasing number of groups around 

the world promote radical ideologies that blame the United States and the values 

we and others espouse as the problem, not the solution. The United States needs 

poor countries as well as rich countries to support the values we champion, and to 

believe that they, too, can climb out of poverty and achieve economic and political 

freedom. It is directly in our national interest to help low-income countries achieve 

rapid economic growth, both in terms of expanding markets for our products and 

to enhance global economic and political stability. Ultimately, of course, the key to 

poverty reduction is economic growth, which depends far more on a country’s own 

policies and on world trade and financial systems than on foreign aid. Nevertheless, 

appropriately designed and effectively delivered foreign assistance can be a key tool 

to help countries escape poverty, promote democratic reforms, and build vibrant private sectors to participate in the global economy. 

3. Humanitarian Values. For most Americans, helping the poorest people of the 

world is simply the right thing to do. Relieving human suffering; providing economic 

and educational opportunities; supporting human rights; and promoting a better 

and safer world are all goals that have all been at the core of American foreign policy since the founding of the Republic. Putting aside national security, many Americans believe that the growing gap between the rich and poor is morally unacceptable. These views are behind the protests against the World Trade Organization, the 

IMF, and the World Bank and the drive for greater debt relief for poor countries. 

They are also a key reason for the strong support behind the United States’ new 

Global AIDS Initiative. There is growing support from conservatives and liberals, 

Republicans and Democrats, faith-based groups and others that we must do more 

to fight the ravages of global poverty. 

II. OBJECTIVES: WHAT DO WE WANT TO ACHIEVE?

These three motivations are at the heart of why we want to have an effective foreign aid program. But what, specifically, do we want to achieve? I believe the U.S. 

has four key objectives, each of which is closely related to the motivations I have 

just described. 

1. Enhance our National Security. A key goal should be to help to win the war 

on terrorism, strengthen our security, and make the world a safer place. Foreign 

assistance programs should also support important allies and help achieve our other 

key foreign policy objectives, such as supporting Middle East peace. 

2. Promote Economic Development and Poverty Reduction. We should aim 

to help countries build roads, schools, and clinics; improve the delivery of social 

services; strengthen the private sector; build key institutions for good governance; 

and develop sustainable environmental policies. Ultimately our assistance programs 

16

should be designed to help countries reduce poverty, increase literacy, improve basic 

health, and accelerate economic growth. 

3. Promote Political Stability and Political Development. Some of our assistance programs should be directed at conflict prevention; others should be used 

to build peace in post-conflict situations. In addition, we should continue to strive 

to help build strong democracies around the world, including helping to strengthen 

fragile democracies. 

4. Respond Effectively to Humanitarian Crises. The U.S. needs the capacity 

to respond to humanitarian crises around the world, whether resulting from natural 

disasters, political crises, or other causes. We need to be able to respond quickly and 

effectively in concert with other governments and international organizations. 

Although each of these objectives is central to our foreign policy goals, it is important to note that they differ and at times conflict with one another. This implies 

that we need to formulate different approaches for foreign assistance in different circumstances. It also suggests we need to take great care in assessing the effectiveness of foreign aid—some programs that may have failed to spur economic growth 

may have been very successful in averting humanitarian crises or promoting peace. 

III. NEW INITIATIVES BY THE BUSH ADMINISTRATION

The Bush administration has taken important steps towards elevating the importance of developing countries in our foreign policy dialogue by initiating some dramatic new programs aimed at improving the effectiveness of U.S. foreign aid.

• First, the administration’s National Security Strategy of September 2002 

gives rare prominence to development alongside defense and diplomacy. It 

proclaims that ‘‘We will actively work to bring the hope of democracy, development, free markets, and free trade to every corner of the world.’’ The administration clearly understands that the economic development of low-income countries is directly in our national interest, and that we should help 

support development and poverty reduction around the world, not just in a 

few countries.

• Second, it introduced the Millennium Challenge Account (MCA) as a way to 

provide significant support to a small number of low-income countries with 

good governance and a commitment to strong development policies.

• Third, it introduced the Emergency Plan for AIDS Relief last year to focus 

resources on 15 countries ravaged by this killer disease.

The MCA and the Emergency Plan for AIDS Relief both have great potential. Together they represent an important increase in resources and an attempt to improve 

the way in which foreign aid is delivered. The MCA, in particular, will not only provide more funds, but promises to deliver them in innovative ways that give recipients more responsibility, reduce administrative costs, and focus on achieving results. 

In addition, the administration has proposed something on the order of 15–20 other 

smaller foreign aid initiatives. Some of these are notable and are being implemented, such as the push for the World Bank to provide more of its funds as grants 

and the bilateral program focusing on mother-to-child transmission of HIV. Many, 

however, have simply been promises announced during meetings with various heads 

of state or at international meetings with little or no follow-up. 

IV. FALLING SHORT OF A COHERENT STRATEGY

Although the new programs are welcome, they do not add up to a coherent and 

comprehensive strategy for foreign assistance designed to meet our major foreign 

policy goals in the post-September 11th world. The new programs will reach only 

a relatively small number of countries, and there remain some gaping holes in our 

foreign assistance program. Shortcomings of the current approach include: 

1. Incomplete Country Coverage. The MCA will provide funds to perhaps 15–

20 low-income countries in its early years, and the administration has yet to develop 

any real plans for working with the countries that do not qualify. Surely our national interests expand beyond the limited number of countries that will qualify for 

this important program. On several occasions President Bush has committed the administration to fighting poverty around the world, not just in a few countries. But 

so far the administration has not translated this commitment into a complete set 

of programs sufficient to achieve that goal. 

Similarly, the Emergency Plan for AIDS Relief will focus on 15 countries that 

have some of the highest HIV/AIDS prevalence rates in the world. But it leaves out 

several countries with high prevalence rates (such as Malawi, Swaziland, and Lesotho) and does not increase assistance for the many countries in the world that are 

struggling to contain the epidemic, such as Senegal, India, Russia, Bangladesh, and 

17

Ukraine. Some of these countries are of great strategic interest to the United States, 

and we should be working much harder with them to keep the epidemic under control. In addition, the program maintains, but does not increase, support for research 

into new treatments and a vaccine, even though the latter ultimately is the only 

way to stop this disease. 

2. Lack of Attention to Consolidating Political Change. Moreover, there is 

no strategy to help consolidate democracy and political stability in key states around 

the world, and many are at risk. The lack of strategic thinking has become apparent 

on several occasions. For example, when President Gonzalo Sanchez de Lozada of 

Bolivia visited the White House in November 2002, he requested $150 million to 

support social programs to fight poverty. He feared that without such support, 

major political unrest was inevitable. Despite Bolivia’s solid record of good governance and strong friendship with the US, he was rebuffed, and received just $10 million. As he feared, he was forced out of office 11 months later. The ousting of 

Sanchez, the fourth elected Latin American president to be driven out of office by 

opposition protests in only four years, represents a dramatic setback to U.S. regional 

objectives and is a force for destabilization throughout the Andean region. There are 

many fragile democracies like Bolivia around the world, and the U.S. does not have 

a clear, focused strategy to support them. 

3. No Strategy for Failed and Failing States. Perhaps most strikingly, the administration has yet to develop a strategy for working in failed and failing states. 

Some of these countries present an immediate threat to U.S. security since they can 

become havens for terrorist activity, as evidenced by Sudan, Somalia, and Afghanistan. Others are a less immediate threat, yet are vulnerable to the spread of illicit 

criminal networks, as with the growing flow of narcotics through the Caribbean, the 

trade in conflict diamonds in West Africa, and the explosion of small arms trafficking in Central Asia. 

There are many complex issues involved in working in failed states. Effective crisis diplomacy is our most important tool; a strong, flexible, and capable military response should be the option of last resort. Foreign assistance has an important role 

to play in these environments in mitigating impending conflicts, bringing warring 

parties to the table, and in securing a stable peace and transition. The U.S. government must take seriously the tasks of preparing to engage in these environments 

where appropriate, more effectively linking our military and civilian capacities, and 

identifying the technical skills and expertise needed to prevent already fragile situations from getting worse. 

4. Lack of Coordination Across Programs. U.S. foreign assistance programs 

are scattered across several departments and agencies with little coordination and 

communication. There are at least sixteen U.S. agencies involved in the delivery of 

foreign assistance, including USAID, the State Department, Treasury, HHS, Defense, Agriculture, Peace Corps and several others. The new Millennium Challenge 

Corporation has now been added to the mix, and there is a significant risk that adding the new corporation will further fragment our foreign aid programs and make 

coordination more difficult. It takes a great effort, even for administration insiders, 

to determine all our assistance programs in any given country. There is little coordination or communication across activities, resulting in a lack of clarity of purpose, 

some duplication of efforts, and administrative waste. 

V. TOWARD A MORE COMPREHENSIVE FOREIGN ASSISTANCE STRATEGY

Many of our foreign assistance programs have been successful, either in supporting economic growth, improving health and education, and reducing poverty; or 

in achieving other goals of averting conflict, securing peace, and responding to humanitarian crises. But many others have been ineffective, and there is substantial 

room for improvement. Developing a comprehensive foreign assistance strategy 

should be at the heart of improving our programs. Four basic pieces are required:

• First, the strategy should lay out clearly the motivations and objectives for 

foreign assistance and their relationship to our foreign policy goals.

• Second, it should establish a set of operational plans for assistance programs 

in different kinds of recipient countries.

• Third, it should ensure coordination across our foreign assistance programs 

and integrate these programs with our other policy tools for working with 

low-income countries (e.g., trade, immigration, investment, etc.), as well as for 

better harmonizing our efforts with those of other donors.

• Fourth, it should summarize the budgetary requirements necessary to achieve 

those goals.

18

1 U.S. Foreign Aid: Meeting the Challenges of the Twenty-First Century. http://www.dec.org/

pdf—docs/PDABZ322.pdf 

I have already outlined some of our key motivations and objectives. Let me now 

turn to the importance of establishing a set of operational plans for delivering aid 

effectively in recipient countries. 

Expanding the Toolkit: Different Approaches in Different Countries 

The different objectives we have for foreign assistance, coupled with the reality 

of very diverse circumstances on the ground across recipient countries, call for a set 

of distinct but coordinated operational plans. Our current programs are too close to 

a ‘‘one-size-fits all’’ approach which treats all low-income countries as if they were 

similar in their quality of governance and ability to use aid effectively. We need to 

develop a set of foreign assistance strategies that differ across countries depending 

on their level of poverty, development priorities, quality of governance, vulnerability 

to political uncertainty, and their strategic interests to the United States. A recent 

‘‘White Paper’’ by USAID is perhaps a first step in this direction with some promising ideas, but it is a discussion paper rather than a policy statement, and only 

deals with programs run by USAID.1

Let me suggest five different approaches for delivering our assistance more effectively in different kinds of countries. 

1. MCA Countries. These countries have shown the best governance and the 

strongest commitment to development, and it makes sense to have both high standards for this program and a different way of delivering aid to those that qualify. 

These countries should be given larger amounts of funding and more responsibility 

for setting priorities and choosing the best ways to spend foreign assistance dollars. 

We should be willing to provide funds to these countries to support broad programs 

or directly to their budget. We should expect that they spell out the specific goals 

they are hoping to achieve, many of which should be consistent with the Millennium 

Development Goals, and that they are held accountable for achieving results. Most 

MCA funds should go through the national government, but regional government, 

local governments, NGOs, and certain private entities should be eligible to receive 

funding for promising programs as well. 

2. ‘‘Tier-II’’ Countries. These countries just miss qualifying for the MCA and 

could qualify within two or three years. The MCA authorization allocated 10% of 

MCA funding for these countries, but the administration has yet to lay out a strategy for working with them. These countries should receive more funding than under 

our standard programs, but substantially less than they would under the MCA. But 

we should not simply allocate more money and deliver it in the old standard way. 

This portion of our funding should operate like the MCA: let the governments write 

a proposal for how they would use the funds (but for a much more limited set of 

activities than under the MCA), expect that they describe precise benchmarks for 

monitoring progress, and hold them accountable for achieving results. In other 

words, we should be getting these countries ready for the MCA in a broader sense 

than just making the indicators: they should be designing some of their own programs, be given more flexibility with how they use part of the funds, and be expected to show results. 

3. Countries with Weaker Governance. These countries have a poorer record 

on economic policy and governance and a weaker commitment to poverty reduction, 

but are not failed or failing states. These countries should receive fewer funds than 

countries in the first two groups, and activities should be focused narrowly in areas 

where the government shows strong commitment. For example, if the Ministry of 

Health has a good record of results with aid-funded projects, resources should be 

focused there. Activities in these countries should be directed more toward projects 

than broader programs, and they should be monitored carefully. As in other countries, specific benchmarks for progress should be identified, and countries should be 

held accountable for achieving results. A greater share of resources in these countries should be directed to NGOs and private groups that may be able to deliver 

services more effectively to the poor. 

4. Failed and Failing States. This is the most difficult category. Because of the 

complexities and risks involved, these countries must be dealt with on a case-bycase basis. We should develop strategies for each country, detailing our strategic interests, the range of tools we have to work with them (diplomatic, military, financial, debt relief, market access, etc), and a plan for using these tools together to 

achieve our specific goals. Financial aid should be tightly focused on humanitarian 

relief and providing basic services to the poor. In some countries, no aid should be 

provided at all; where it is, much of it should go through NGOs. Where we can identify key government leaders committed to change, we should be prepared to assist 

19

2The report of the Commission on Weak States and National Security, co-chaired by John 

Porter and Stuart Eizenstat, is due to be released in May 2004. 

in the most basic tasks of state-building: the regeneration of government institutions, support for transparent and accountable police and military services, and 

technical assistance to develop sound economic policies. States emerging from violent conflict face a significant risk of collapse, and it is at that transitional juncture 

that U.S. foreign assistance can play a catalytic role. Programs in failed states require very careful monitoring, regular re-appraisal, flexible responses as initiatives 

begin to work or fail, and a higher tolerance for failure than when working in other 

countries. The complex issues of U.S. policy in weak and failing states are currently 

being examined by a senior bi-partisan Commission at the Center for Global Development.2

5. Humanitarian Relief. We should strengthen our ability to respond effectively 

to humanitarian crises around the world, whether emanating from natural disasters 

or political upheaval. Humanitarian assistance should be provided in addition to, 

not as a substitute for, the development programs described above. Although our 

core relief programs are laudable, we do not invest sufficiently in prevention of humanitarian crises. For example, our food relief efforts in Ethiopia in recent years 

have been substantially larger than our investments in agricultural development. 

We do not make sufficient links between our emergency programs and longer-term 

development. One reason is that the different offices involved in humanitarian relief 

have different procedures and processes both from each other and from those used 

in other long-term development programs. 

Coordination and Integration Across Programs and Policies 

A strong strategy should include a vision for how our many different foreign assistance programs should work together, and how they integrate with other policy 

tools for working with low-income countries. The administration has taken a step 

in this process by forming a coordinator’s office within the State Department for 

HIV/AIDS programs and in establishing a Joint Policy Group between USAID and 

State. Whether these changes ultimately streamline our programs or simply add 

new layers on top of existing efforts remains to be seen. In addition, deeper consideration is needed of the possibility of eliminating programs in some agencies and 

merging the efforts of others. Although these kinds of bureaucratic changes are difficult, they could significantly improve the effectiveness of our programs. 

In addition to thinking about various bilateral strategies, we must consider when 

to provide funding through multilateral organizations rather than bilaterally. While 

working through our own programs allows us to maintain full control, multilateral 

approaches can leverage funds from many sources, provide efficiency gains in administration and oversight, and ease the burden on recipient countries as they deal 

with fewer donors. However, the quality of multilateral agencies varies widely, and 

there are no hard and fast rules about how to allocate funds in bilateral versus multilateral agencies. In addition to providing funding to the multilateral agencies, we 

need to find ways to better integrate our foreign assistance programs with those of 

other donors. Aid recipients are often swamped by the sheer number of different aid 

donors, each with their own requirements for project design, procurement, monitoring and reporting. U.S. foreign assistance programs have the reputation of always insisting on doing things their own way, even if appropriate alternatives are 

available. The U.S. should seriously engage with other donors to find harmonized 

systems that will uphold donor standards while easing the burden on capacity-constrained recipients. 

In developing these approaches, it is important to remember that foreign assistance is only one of the many policy tools that the U.S. has to promote economic, 

social, and political development. Foreign assistance should compliment policies in 

trade, peace-keeping, investment, migration, and environmental stewardship. Our 

foreign assistance will be more effective if it is aligned with these other policy areas, 

and if it is part of a broader global engagement strategy that ensures that the U.S. 

is not giving development assistance with one hand and taking away economic opportunity with the other—such as by subsidizing agricultural or restricting imports 

of textile products from poor countries. 

The Quantity of U.S. Foreign Aid 

The United States provides more foreign assistance than any other country. U.S. 

non-military aid for economic development in the poorest countries of the world—

called ‘‘Official Development Assistance’’ by the Development Assistance Committee 

of the OECD—reached $13 billion in 2002. Aid to richer countries such as Israel 

20

3 Note that these figures are lower than the total amounts in the foreign operations budget, 

since some of those funds do not count as ‘‘official development assistance’’ by the standard 

international definitions. 

pushes the figure higher.3 However, the U.S. provides much less than any other 

donor as a share of our national income. Official Development Assistance from the 

U.S. is the equivalent of 0.13 percent of U.S. GNP—just slightly more than oneeighth of one percent of our total income. The next lowest country on the list—

Italy—provides almost 50% more as a share of its income, about two-tenths of one 

percent. Even if the MCA and Emergency Plan for AIDS Relief are fully funded, the 

U.S. will remain 22nd out of 22 OECD donors in official foreign aid as a share of 

national income. Aid as a share of our national income will still remain far smaller 

than it was between 1975 and the end of the Cold War in 1990, when aid averaged 

over 0.20% of U.S. GNP, about 50% more than the 2002 level. Even adding in upper 

range estimates of private contributions through foundations and charitable organizations, total U.S. foreign aid—public and private—is the equivalent of only about 

0.30 percent of U.S. income, which would move the U.S. up to about 16th place of 

the 22 donors in terms of total foreign aid. 

The total quantity of U.S. foreign aid, of course, is not really the point, nor is 

where we rank relative to other countries. This is not a beauty contest. The real 

problem that these figures highlight is that the current quantities of U.S. foreign aid 

are too small for us to meet our key foreign policy objectives. Consider the following 

examples:

(1) While important progress has been made in the war on terrorism, we have 

not yet fully turned the tide. The Bush administration has provided significant funding for frontline and weak states, but these amounts will have to 

continue and likely increase. For example, Afghanistan is only receiving 1/

20th of the funding that Iraq receives, despite its similar size and much 

greater development needs, and its future prospects remain murky. Pakistan, Indonesia, Turkey and other countries will require significant support 

going forward.

(2) Increasingly, and unfortunately, people around the world look to the U.S. 

with resentment and distrust, rather than as a beacon of hope for prosperity 

and peace. All indications suggest that the tide of global opinion has turned 

against the U.S. in the last two years. Simultaneously, in many countries 

public opinion is also turning against more open trade and globalization. Regardless of whether these views are justified or not, the key point is that 

in many developing countries we are not winning the war for hearts and 

minds to believe in our vision for the world.

(3) The gap between the ‘‘haves’’ and the ‘‘have-nots’’ in the world economy has 

widened substantially during the last 20 years. As many people enjoy greater prosperity, 1.2 billion people are left behind to live on $1 a day or less. 

Approximately 113 million primary-school age children are not in school, a 

fact that does not bode well for future generations. We are not winning the 

fight to reduce global poverty and build a more inclusive world in which 

poor countries can prosper.

(4) HIV/AIDS, tuberculosis, malaria, and diarrheal diseases continue to ravage 

poor countries, and threaten to expand to create major social and economic 

disintegration in key countries such as South Africa, Nigeria, Ethiopia, 

India, China, and Russia. Public health spending in sub-Saharan Africa 

(outside of South Africa) averages just $6 per person per year, and with incomes averaging less than $350 per year, they simply do not have the resources to fight these diseases on their own. Even with the Emergency Plan 

for AIDS Relief, we are losing a war that we possess the technology to prevent, and history and humanity will judge us severely as a result.

In my opinion, and in the opinion of many others, the United States needs to significantly expand the size of its foreign assistance programs beyond the MCA and 

the Emergency Plan for AIDS Relief if we are serious about trying to achieve our 

main foreign policy goals. But not only must we increase the size of the programs, 

we must significantly improve the way we organize and deliver our aid if it is to 

become more effective. 

VI. SOME STEPS FORWARD

Several actions could be taken to improve coordination, clarify objectives, and create a more coherent, effective, and strategic foreign aid program. 

21

1. A New Department? At the broadest level, one possibility would be to create 

a new Department for International Development that would bring under the direction of one Cabinet official all U.S. foreign aid programs. This would not entail an 

expansion in the size of the U.S. bureaucracy, but rather a re-organization across 

existing agencies. This new department (or agency) would incorporate all of USAID 

and the foreign aid programs currently run by State (e.g., the Economic Support 

Fund), Treasury (including U.S. government relationships with the IMF and multilateral development banks), HHS, Agriculture, Defense, and others. This step would 

ensure greater coordination, and would designate one person, reporting to the President, to be responsible for all aid programs. The United Kingdom took this step several years ago, and its foreign aid programs are now considered among the very best 

of the bilateral donors. 

2. Rewrite the Foreign Assistance Act. The Foreign Assistance Act (FAA) of 

1961, which governs most U.S. foreign aid activities, is badly out of date and needs 

to be rewritten. The current amended version of the Act is nearly 2,000 pages long 

and includes a complex web of rules, regulations, and directives. The FAA contains 

a remarkable 33 objectives and 75 priorities for USAID. A new FAA is central to 

clarifying the central objectives and methods of foreign assistance to meet U.S. foreign policy goals in the 21st century. Re-writing the FAA would allow a fundamental redesign of the morass of personnel and procurement regulations and other 

rules that undermine USAID’s effectiveness. In particular, and among other issues, 

a new FAA should aim to:

• Reduce Earmarking. The current foreign aid budget is subject to an astonishing amount of earmarking. Although many earmarks are well intentioned, 

as a whole they severely cripple the ability of the USG to effectively allocate 

funds to the highest priority areas. The result is a misallocation of funds, 

with too much money forced into some areas, and leaving too little for others 

where stronger results are possible.

• Eliminate Tied Aid. ‘‘Tied aid’’ mandates that goods and services can be procured only from the U.S. or the recipient country. Tied aid decreases the effectiveness of foreign aid by forcing the recipient to purchase goods and services 

that may not be the most cost effective available. By some estimates, tying 

aid increases its costs by 15–30%. Our aid programs should aim to support 

innovative development projects and programs using the best expertise available, not to support U.S. contractors. When we add regulations that require 

that funds be directed to particular contractors, we undermine the goal of reducing poverty in recipient countries. The U.S. ties more of its aid than most 

other donors, which significantly weakens the effectiveness of our aid programs. The U.S. has made numerous pledges in recent years to reduce tied 

aid, but little has actually been accomplished.

3. Develop a National Foreign Assistance Strategy. Each administration 

should be expected to prepare, early in its tenure, a national foreign assistance 

strategy. This document would lay out its main objectives and priorities, describe 

the main programs it will use to meet these objectives, and explain its strategies 

for coordinating and communicating across agencies. It would not be necessary to 

prepare such a strategy every year. Each administration should be expected to complete it by the end of its first year in office, and perhaps to revise it during the third 

year if necessary. 

4. Clarify the Budget. The budget should be at the center of designing clear priorities and tradeoffs. However, foreign assistance activities are scattered throughout 

several accounts in the budget. Even within the 150 Account, where most assistance 

activities are located, it is difficult to clearly understand the amounts being allocated to different purposes and priorities. It is very difficult to look through the 

budget and determine where and how we are spending our assistance dollars. As 

a policy and planning document, the foreign assistance budget needs to be significantly strengthened. 

5. Strengthen Monitoring and Evaluation. With only a few exceptions, monitoring and evaluation of U.S. foreign aid programs focuses on ensuring that funds 

are spent according to plan, rather than on their contribution to development. We 

need to orient our programs much more toward achieving results. We need strong 

monitoring and evaluation processes aimed at keeping funded programs on track to 

meet their goals, guiding the allocation of resources towards successful activities 

and away from failures; and ensuring that the lessons learned—from both successes 

and failures—inform the design of new programs. Monitoring and evaluation should 

be incorporated into projects from the outset, not added on as an afterthought halfway through the process 

22

6. Refocus USAID. The administration and Congress should develop a new strategic vision for USAID. The agency’s report ‘‘Foreign Aid in the National Interest’’ 

contains some useful ideas, but falls far short of proposing a new strategy and vision. The recent ‘‘White Paper’’ goes further, but is a discussion document rather 

than a policy paper. The Agency should define more clearly the different approaches 

it will make in ‘‘Tier-II’’ countries, weaker countries, and failed and failing states 

to achieve results, recognizing the greater risks inherent in these circumstances. It 

should narrow the scope of substantive activities that it funds. USAID now takes 

on too wide a range of activities in many countries, making it more difficult to 

achieve strong results in any. Setting priorities means making clear decisions about 

the range of activities that the agency will not undertake, and will leave to other 

agencies (some outside the U.S. government) that have greater expertise. In addition, it should work to streamline its contracting and procurement procedures and 

otherwise simplify bureaucratic processes. Finally, Congress needs to do its part by 

reducing the amount of earmarked funds and tied aid that severely limit the agency’s flexibility and effectiveness. 

Taking on these challenges will not be easy. But today there is backing for a renewed focus on foreign assistance in the administration and among lawmakers on 

both sides of the aisles, with a growing consensus around objectives, methods, and 

strategies. It is time to take advantage of this rare opportunity to make U.S. foreign 

assistance more effective in combating poverty, widening the circle of development 

and prosperity, fighting terrorism, and furthering other U.S. strategic interests 

abroad.

Mr. ROHRBACHER. Thank you very much. That was very thoughtprovoking, and I am sure we will have some questions for you 

afterwards. I like your thoroughness very much. 

Ms. Dale? 

STATEMENT OF HELLE DALE, DEPUTY DIRECTOR, DAVIS INSTITUTE FOR INTERNATIONAL STUDIES, THE HERITAGE 

FOUNDATION (APPEARING ON BEHALF OF MARC MILES, 

PH.D., DIRECTOR, CENTER FOR INTERNATIONAL TRADE 

AND ECONOMICS, THE HERITAGE FOUNDATION) 

Ms. DALE. Thank you. First of all let me just say that somebody 

who was born in Denmark is delighted to hear all the honorary 

mentions of the country of my birth. If I could just remark briefly 

that while it is a record to be very proud of, Denmark does not 

have anywhere near the international commitments of the United 

States, which helps keep peace and prosperity in lots of areas of 

the world. It is but a small country; big of heart, but only 5 million 

people, so that is a big part of their foreign policy. 

And now on to my testimony. Mr. Chairman and distinguished 

Members of the Committee, thank you for inviting me to share my 

views on U.S. foreign policy assistance in a post-September 11 environment. 

In doing so, I would like to acknowledge the important work done 

by my colleague, Marc Miles, Director of the Center for International Trade and Economics at the Heritage Foundation. Dr. 

Miles was originally scheduled to appear before the Committee 

when the hearing was postponed, but he is traveling and could not 

be here himself today. 

I would like to commend the efforts of Chairman Hyde, ranking 

Member Lantos, all the Members and their staffs, for working to 

make U.S. foreign aid more effective. And of course, the Bush Administration, as well, for embracing this important and admirable 

goal. 

23

In terms of an overall strategy for U.S. foreign aid, the single 

most important point I would like to leave you with today is that 

foreign aid is only as effective as the government that receives it. 

The record of foreign aid in the 20th Century was a deplorable 

failure because, like welfare programs, foreign aid too often kept 

the people they were meant to help from achieving prosperity. Between 1980 and 2002, the United States gave $140 billion in 

official development aid to just over 100 countries. And that, of 

course, does not include aid from other countries or international 

institutions. The result was average economic growth in recipient 

countries of 0.81 percent. That is not exactly a record to write 

home about. 

The record of the World Bank and the International Monetary 

Fund is no more encouraging. Their lending practices tend to remove incentives for governments to pursue reform. It creates more 

hazard, and it helps shore up corruption and harmful practices. 

Just look at Argentina. 

To make foreign aid effective, it needs to undergo the equivalent 

of welfare reform. The goal should be to encourage good governance 

among recipient countries. More than anything, that will empower 

these countries and help them rise to self-sufficiency. 

The Millennium Challenge Account represents a good step toward the right direction. It was a historic day when this Committee, on June 12, 2003, passed the Millennium Challenge Act by 

landslide vote of 31 to 4. I entirely agree with Chairman Hyde’s 

comment in The New York Times that for too long, U.S. foreign assistance programs had been adrift without an overall strategy, and 

without reasonable standards of accountability. 

We need to reward and encourage good behavior. This is not 

about helping countries that are already doing well. None of the 63 

countries identified by the Millennium Challenge Corporation are 

doing well. But about helping those of them who are willing to try 

proven ways of helping themselves. 

It is important that grants be tied to the achievement of specific 

goals. Today, MCA represents a vision and a strategy that ought 

to set a course for other foreign aid programs. 

I am pleased to see that one of the key questions the Committee 

seeks to answer today is whether we have the ability to measure 

the effectiveness of foreign aid. The answer is yes. 

Each year, for the past 10 years, the Heritage Foundation has 

published the Index of Economic Freedom, which measures the 

movement of some 160 countries toward and away from economic 

self-reliance. Each of you have copies of the CD/ROM version of 

this document. 

Forty-nine of the nations that have recently been designated by 

the Millennium Challenge Corporation as potential recipients of 

MCA grants are listed in the Index of Economic Freedom, where 

their relative scores serve as an indication of future success rates. 

I would like to refer you to a Heritage paper, published yesterday 

and also distributed here, that established the rankings. The index 

can also be found on the Heritage Foundation’s Web site, Heritage.org. 

That said, there is clearly still a need for foreign aid related to 

U.S. national security, and humanitarian aid may also be subject 

24

1See http://www.whitehouse.gov/nsc/nss.pdf. 

to a different set of standards. Indeed, both in Afghanistan and in 

Iraq, post-conflict resolution assistance is based on both United 

States national security and humanitarian needs. Yet in both 

cases, this aid ought also to be used to bolster national self-reliance. 

Foreign aid is only as effective as the government that receives 

it. After 50 years of foreign aid as international welfare, it is now 

widely accepted that this is not the way to pull anyone out of poverty, individuals or countries. Economic freedom is, as it leads to 

trade and direct foreign investment. 

And as for the American taxpayer, who among us would invest 

in a company if they knew that the money would be spirited away 

to foreign bank accounts, used on lavish birthday parties or $5,000 

shower curtains? No one would. We can do better than that. 

Once again, I want to thank Chairman Hyde, ranking Member 

Lantos, and Members of the Committee for the opportunity to testify here today. I look forward to replying to any questions you may 

have. 

[The prepared statement of Mr. Miles follows:]

PREPARED STATEMENT OF MARC A. MILES, PH.D., DIRECTOR, CENTER FOR

INTERNATIONAL TRADE AND ECONOMICS, THE HERITAGE FOUNDATION

Mr. Chairman and distinguished members of the Committee, thank you for inviting me to address the issue of U.S. foreign assistance strategy in a post-9/11 environment. 

Since the attacks on September 11, 2001, there have been drastic changes in the 

Bush Administration’s foreign aid policies and a shift in the appropriation of foreign 

aid funds. While these changes and many new initiatives have raised concerns 

about the lack of an overall foreign aid strategy, the 2002 National Security Strategy clearly states that ‘‘the United States will use this moment of opportunity to 

extend the benefits of freedom across the globe. We will actively work to bring the 

hope of democracy, development, free markets, and free trade to every corner of the 

world.’’ 1

The question is how to accomplish these admirable goals at a time of concern for 

national security, and with a minimum of expense. With that in mind, permit me 

to summarize briefly the points I would like to make and answer some of the questions you posed in your background letter:

• Twentieth century approaches to foreign aid, on which current legislation is 

based, have proven a failure.

• Like the welfare programs of the 20th century, these programs too often have 

hurt those they were designed to benefit: in this case, by keeping the very 

people they are supposed to help from reaching prosperity.

• Foreign aid should undergo the equivalent of welfare reform. Aid should be 

used primarily to encourage and achieve self-sufficiency in developing countries.

• Annual distribution of aid should depend on evidence of a country’s quantifiable progress towards self-sufficiency.

• The Millennium Challenge Account (MCA) is an important first step in the 

efficient and effective use of foreign aid. But it is only a small first step.

• It is important that the MCA be administered strictly on a basis of countries’ 

accomplishments of specified goals.

• Under current legislation, the MCA is an addition to traditional aid programs, leaving room for other aid criteria.

• Ultimately, however, the focus of foreign aid must evolve to encourage economic freedom in domestic and international markets for countries so that 

they may attain economic self-reliance. The success of such an aid program 

can be readily measured. Each year The Heritage Foundation publishes the 

Index of Economic Freedom, which quantitatively and qualitatively measures 

25

2Denise H. Froning, ‘‘U.S. Foreign Aid Program,’’ in Stuart M. Butler and Kim R. Holmes, 

eds., Issues 2000: The Candidate’s Briefing Book (Washington, D.C.: The Heritage Foundation, 

2000), p. 800. 3 Ibid., pp. 803–804. 4Organisation for Economic Co-operation and Development (OECD), Corporate Data Environment Database: Development Assistance Committee, available at http://www1.oecd.org/scripts/

cde/. 5World Bank, World Development Indicators Online, available at www.worldbank.org/data. 6 John Githongo, ‘‘No Moi Witch-Hunt in Kenya,’’ BBC News, December 22, 2003. 

7The Honorable Johnnie Carson, ‘‘Fighting Graft Should Be Kenya’s Priority,’’ East African 

Standard, December 27, 2002. 8Office of the U.S. Trade Representative, Foreign Trade Barriers, 2003, pp. 234–238, at http:/

/www.ustr.gov/reports/nte/2003/kenya.pdf. 

the movement of about 160 countries along the road to economic self-reliance. 

Long-term, with such a positive, empowering approach to country assistance, 

the overall level of prosperity throughout the world would rise, and with that 

rise the need for foreign aid would decline and eventually disappear.

• There are legitimate reasons for using foreign aid for national security purposes.

• Humanitarian concerns may even lead to aid for enemies of the United 

States.

• However, national security and humanitarian aid are stopgap measures and 

should be viewed as precursors to encouraging countries to move farther 

along the road to economic self-reliance. 

WHY TRADITIONAL FOREIGN AID IS A FAILED SYSTEM

Experience has demonstrated that development assistance (i.e., government-togovernment assistance intended to catalyze development in poor nations) is not a 

key factor in increasing economic growth in underdeveloped countries. On the contrary, development assistance has often proved to be counterproductive. Whether it 

is skimmed off by corruption, kept beyond the reach of poorer inhabitants due to 

regulations, or access is denied due to a lack of property rights or rigid credit markets, traditional aid usually fails to reach those below the top rungs. The lack of 

lasting impact is a demonstrable fact. 

Throughout the past 50 years, the United States has given more than $500 billion 

in foreign assistance to less-developed countries.2 Yet the people in many of these 

countries are no better off today in terms of per capita gross domestic product (GDP) 

than they were decades ago; some, in fact, are actually poorer. Zambia, for example, 

has received U.S. foreign aid for four decades;3 despite more than $800 million (constant dollars) in U.S. bilateral economic aid in just the past two decades,4 however, 

Zambia’s real GDP per capita has fallen by almost 50 percent, from $664 in 1965 

to $410 in 2002.5

Kenya’s lot is even worse. Despite receiving almost $1.5 billion in constant-dollar 

bilateral aid from the United States since 1980, Kenya’s real GDP per capita is 

merely $325. The aid was squandered by former President Daniel arap Moi. According to media reports, the Kenyan ‘‘government believes between $1bn and $4bn was 

stolen from the country under Mr. Moi’s 24-year rule.’’ 6 According to a 2002 op-ed 

by Johnnie Carson, the former U.S. Ambassador to Kenya, corruption ranges from 

bribing policemen to ‘‘the submission of false invoices by politically-connected Government contractors. . . .’’ 7 Ambassador Carson also noted the connection between 

corruption and international terrorism: 

Immigration officials who steal and sell Kenyan passports to foreign nationals 

and who take bribes to issue illegal visas could open the door to persons such 

as the men who perpetrated the heinous attack on Paradise Hotel on November 

28, 2002, the destruction of the American embassy on August 7, 1998, and the 

bombing of the Norfolk Hotel on December 31, 1980.

Kenya has not flourished from economic assistance and has not been held accountable for the assistance; instead, it has squandered the money in ways that stifle the free market and possibly advance acts of terror. 

Despite a change in the presidency, Kenya continues to struggle. According to the 

Office of the U.S. Trade Representative (USTR), ‘‘Kenya continues to experience reduced foreign investment as a result of corruption, poor infrastructure, high power 

costs and other factors.’’ 8 The USTR notes that Kenya is taking advantage of the 

opportunities given by the Africa Growth and Opportunity Act (AGOA), yet ‘‘Kenya 

26

9 Ibid. 

10See Marc A. Miles, Edwin J. Feulner, and Mary Anastasia O’Grady, 2004 Index of Economic 

Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones & Company, Inc.), p. 249. 11World Bank, World Development Indicators Online, available at www.worldbank.org/data. 12 Craig Burnside and David Dollar, ‘‘Aid Policies, and Growth,’’ World Bank, Policy Research 

Department, Macroeconomic and Growth Division, June 1997, cover. 13David Dollar and Lant Pritchett, Assessing Aid: What Works, What Doesn’t and Why, World 

Bank Policy Research Report, 1998, p. 2. 

continues . . . to rely on tariffs as the primary instrument of trade policy.’’ 9 Kenya’s 

score in the Index of Economic Freedom is little changed from 10 years ago. It remains ‘‘mostly unfree,’’ with a protectionist trade policy, high cost of government, 

high regulation, and high level of corruption.10 Aid is not the root of Kenya’s poverty 

problem; a serious lack of economic freedom is. 

The failure of U.S. Official Direct Aid is illustrated in Appendix Table 1, which 

lists aid to countries between 1980 and 2002. The first two numerical columns indicate the total aid over that period in current and constant 2001 dollars. The next 

two columns compare the per capita GDP of the countries over the 22 years. Notice 

how per capita GDP growth averages at least 2 percent per annum in only about 

a quarter of the countries. In 70 percent of the countries, there is little change or 

a decline. The average per capita growth rate between 1980 and 2002 for all assisted countries with GDP data is a meager 0.81 percent per year. Not a stellar outcome. The dismal failure of development assistance to catalyze economic growth is not 

confined to acts of Congress. Multilateral lending institutions have had similar results. For instance, in sub-Saharan Africa, 16 countries experienced a decline in real 

per capita GDP between 1970 and 2002 despite receiving well over $100 billion in 

World Bank assistance.11

Achieving prosperity in developing countries, like success for individuals, requires 

the acceptance of personal responsibility. The responsibility for economic growth in 

underdeveloped countries lies largely with the government of each country, since the 

primary determinant of economic growth is a country’s own institutions and policies. 

Countries with institutions and policies that promote economic freedom tend to have 

higher per capita incomes, on average, than countries that do not embrace economic 

freedom. A 1997 World Bank analysis of foreign aid underscored this premise, finding that assistance ‘‘has positive impact on growth in countries with good fiscal, 

monetary, and trade policies.’’ 12 Conversely, countries with poor economic policies 

did not experience sustained economic growth, regardless of the amount of assistance they received.13

IMF AND WORLD BANK ARE PART OF THE PROBLEM

This failure of the 20th century redistribution approach is not confined to the 

United States. Shifting the allocation of foreign aid from U.S. agencies to international institutions would not improve the chances for development. The track 

record of the IMF and World Bank in developing countries reveals that, far from 

being the solution to global economic instability and poverty, these two international 

institutions are a major problem. For one thing, their lending practices deter growth 

because the money they loan removes the pressure or incentives for governments 

to advance economic freedom. Shielded from change, corruption and harmful existing practices can flourish. For these reasons, the vast majority of recipient countries 

have been unable to develop despite huge handouts from these institutions for over 

40 years. 

Appendix Tables 2 and 3 illustrate the point. Appendix Table 2 lists the top 10 

recipients of World Bank aid, and Appendix Table 3 lists the top recipients of IMF 

aid. The tables list for each country the total amount of loans received, the GDP 

per capita in the first year aid was received, and the GDP per capita in 2002. The 

results are very clear: In all but one of these countries, per capita GDP grew only 

slightly or declined, despite massive aid for about 40 years. The far right column 

lists the country’s score in the 2004 Index of Economic Freedom. No wonder the repeated aid packages failed, for the overwhelming majority of countries remain 

‘‘mostly unfree.’’

The sign over the entrance of the World Bank building in Washington, D.C., may 

read, ‘‘Our dream is a world without poverty,’’ but its actions have not had the desired effect. Not that no one has benefited, however: To fulfill that dream, the World 

Bank employs over 10,000 people in more than 100 offices around the world with 

an annual budget of $1.5 billion. 

The IMF has committed ever-greater resources to combat growing financial crises 

around the world over the past 15 years. However, in many cases the recipients of 

27

14 International Monetary Fund, About the IMF, at www.imf.org/external/about.htm. 15The full International Financial Institutions Advisory Commission (IFIAC) report is available in English at www.house.gov/jec/img/meltzer.htm and in Spanish at www.heritage.org/library/efp/efp00–04.html.

IMF loans are worse off today (e.g., Argentina) than before the IMF loans began to 

flow. The reason is simple. Financial crises are the result of poor policymaking and 

corruption, not of some inexplicable evil design. 

The Fund’s goal is ‘‘to promote international monetary cooperation [and] exchange 

stability . . . to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease the balance of payments adjustment.’’ 14 However, if the IMF were to bail out a country from an impending crisis, it would not allow the country’s leaders to face the consequences of 

poor policymaking and corruption. Hence, the leaders would have no incentive to 

change the poor way in which they run the country. 

At the same time, the country’s government bonds would be sold in the market 

at a very high yield-reflecting the high risk of default from poor policymaking. But 

because the IMF continuously bails out the country, regardless of continued corruption and poor policy, buying the bonds would become a unique investment: a highyield bond bearing no risk. 

Far from achieving the IMF’s stated goal, in other words, bailout loan packages 

reduce the political risks associated with faulty economic decisions, and recipient 

countries consequently end up with greater debt, lower standards of living, higher 

unemployment, and less savings. Rather than promoting economic self-sufficiency, 

the actions of both the IMF and World Bank have created client states for the international financial institutions. 

The debate on the effectiveness of international financial institutions in promoting 

reform peaked about five years ago, when the U.S. Congress created the International Financial Institutions Advisory Commission (IFIAC), chaired by Professor 

Allan Meltzer. The IFIAC assessed the role and effectiveness of the World Bank, 

the International Monetary Fund, the regional development banks, the Bank of 

International Settlements, and the World Trade Organization. 

Regarding the IMF and the World Bank, the IFIAC concluded that the work of 

these institutions left much to be desired. Specifically:

The IMF has given too little attention to improving financial structures in developing countries and too much to expensive rescue operations. Its system of 

short-term crisis management is too costly, its responses too slow, its advice 

often incorrect, and its efforts to influence policy and practice too intrusive. 

High cost and low effectiveness characterize many development bank operations as well. The World Bank’s evaluation of its own performance in Africa 

found a 73% failure rate. . . . In reducing poverty and promoting the creation 

and development of markets and institutional structures that facilitate development, the record of the World Bank and the regional development banks leaves 

much room for improvement.15

The ineffectiveness of the World Bank and the IMF is caused by the disincentives 

they create in the countries they are trying to help. Sending money to countries 

with misdirected policies and weak rule of law increases the recipients’ debt without 

visible economic growth. Nevertheless, no significant reform of these international 

institutions has taken place. 

THE MCA: A STEP IN THE RIGHT DIRECTION

The President’s Millennium Challenge Account (MCA) is a step in the right direction for reforming foreign aid. The MCA differs from previous aid programs because 

recipients earn eligibility by surpassing minimum criteria based on simple, transparent, and publicly available performance indicators. These indicators have been 

selected based on evidence that they contribute or are complimentary to long-term 

growth and prosperity rather than on subjective, political motivations unrelated to 

development. 

The Administration’s approach to aid reform is similar to the welfare reform that 

took place in 1996 when the Personal Responsibility and Work Opportunity Reconciliation Act (P.L. 104–193) replaced the failed Aid to Families with Dependent 

Children (AFDC) program with a new program called Temporary Assistance to 

Needy Families (TANF). The key to the success of welfare reform is self-reliance requirements. Under the reform act, a certain portion of TANF recipients were required to undertake constructive activities aimed at self-sufficiency: supervised job 

search, training, and community service work. When TANF recipients were required 

28

16David Dollar and Aart Kraay, ‘‘Growth Is Good for the Poor,’’ World Bank Development Research Group, March 2000, p. 2. 

to undertake constructive activities as a condition of getting aid, the number of new 

applications for welfare fell precipitately, the length of stay on welfare dropped dramatically, and measures of childhood poverty fell dramatically, especially among African-American children. 

Similarly, the MCA will link development assistance with economic reforms and 

good governance to move poor economies toward self-dependency. 

The MCA will not replace existing development assistance programs or subtract 

from their budgets. In fact, the Omnibus Appropriations bill included a separate 

$650 million to fund the MCA. As a separate and distinct entity, the MCA is essentially an experimental program that attempts to learn from past mistakes and explore new strategies to improve the effectiveness of future development aid programs. 

The President’s three broad criteria that recipients must meet to qualify for MCA 

assistance—good governance, investment in health and education, and sound economic policies—are consistent with the findings of numerous studies that show that 

good policies, not aid, are the primary drivers of development. At best, foreign development assistance will accelerate the economic growth that results from sound policies and good governance. 

The basic framework for the Millennium Challenge Account as presented by the 

Administration is sound, but Congress can improve its implementation and prevent 

the recurrence of past failures in development assistance. Here are a few steps that 

I urge Congress to consider taking as we move forward. 

First, it is critical that Congress conducts active and ongoing oversight of the Millennium Challenge Account program to ensure that the true intent of this promising 

groundbreaking legislation is upheld. I believe that a key component of this new approach is that Congress did not intend for the MCA to be a business-as-usual international aid program, and it should not be allowed to become one. 

Second, Congress must ensure that the core MCA principle—which is that we will 

help countries that are doing the right things to help their people help themselves—

is not diluted in the regulatory writing and implementation of the MCA. The purpose is to teach impoverished nations how to fish, rather than annually appropriating fish to hand out. 

Third, Congress should ensure that eligibility for the MCA is determined solely 

according to a country’s performance in the 16 indicators identified by the Administration. Many of the civil servants who will be tasked with writing and implementing the MCA undoubtedly have a lot of experience running traditional international aid programs and, as a result, are more familiar and comfortable with that 

kind of approach. Accordingly, there is a very real prospect that without active and 

ongoing Congressional oversight, the MCA could become another business-as-usual 

program. 

Fourth, if it becomes apparent that the MCA is not being implemented as Congress intended, I encourage Congress to consider amending the underlying law to 

allow the MCA to be run by an independent public corporation as was envisioned 

in the original version of the MCA. 

But the MCA is likely to be only a small step toward more extensive alteration 

to a 21st century approach to foreign aid. If run correctly, the MCA approach should 

prove successful. In that case, the Administration and Congress should consider 

shifting a greater share of foreign aid funds to the alternative 21st century approach. 

THE ALTERNATIVE: THE ‘‘INDEX OF ECONOMIC FREEDOM’’ AS ROAD MAP TO PROSPERITY

Economic freedom is the most consistent and reliable determinant of economic 

growth. The 10 editions of the Index of Economic Freedom conclude that countries 

with the most economic freedom are more prosperous than are those with less economic freedom. This difference occurs because open markets promote healthy competition, which requires the institutionalization of transparency and the rule of law 

and also results in the most efficient allocation of resources. Contrary to popular 

myth, economic growth benefits the poor directly. In the words of a World Bank 

working paper on the effects of economic growth on the poor, ‘‘As overall income increases, on average [the] incomes of the poor increase exactly the same amount.’’ 16

The study concludes that economic growth does not worsen inequality. 

Policies that promote economic freedom often coincide with or directly result in 

good governance and permanent improvements in health and education standards. 

For example, an environment conducive to commercial enterprise requires fair and 

29

17For details of the 10 factors, see William W. Beach and Marc A. Miles, Chapter 5, ‘‘Explaining the Factors of the Index of Economic Freedom,’’ in 2004 Index of Economic Freedom.

equitable dispute settlement in the form of an independent judiciary, which is also 

essential for good governance. Free-market policies that encourage open competition 

and minimal government intervention render corruption unprofitable or remove opportunities for corruption, creating a natural incentive for good governance. In contrast, excessive tariffs, taxation or regulation, or tightly controlled credit allocation 

or government procurement create opportunities and incentives for corruption to 

flourish. 

Economic freedom, in addition to advancing growth rates, also has implications 

for U.S. national security, such as in the war on terrorism. There is ample evidence 

that the poverty caused by a lack of economic freedom fuels the resentment, desperation, and hopelessness that terrorist organizations utilize to recruit new members and muster support for their activities. A key component of any long-term solution to terrorism, therefore, must be creating circumstances under which people become stakeholders in their countries. Promotion of economic freedom offers the opportunity to reduce susceptibility to the enticement of terrorists around the world. 

The concept of economic freedom therefore holds out the possibility of a very attractive road map to prosperity throughout the world. While concepts are useful, the 

acid test of any concept is whether it bears close empirical resemblance to the way 

the world works. Now that we have 10 years of data, at The Heritage Foundation 

we have been subjecting our Index of Economic Freedom to such empirical questioning. The answer the data have been giving us about the realism of our concept 

is a resounding ‘‘yes!’’

The findings of this study are straightforward: The countries where economic freedom increases most boast higher rates of economic growth. 

The Heritage Index of Economic Freedom evaluates about 160 countries based on 

10 criteria. Each criterion receives a score between 1 (economically free or good) and 

5 (economically repressed or bad). A simple (equal weight) average of the scores for 

a country’s 10 factors yields the overall score for the country. The 10 factors or criteria are:17

• Trade policy

• Fiscal burden of government

• Government intervention in the economy

• Monetary policy

• Capital flows and foreign investment

• Banking and finance

• Wages and prices

• Property rights

• Regulation

• Informal market activities

An immediate question is whether it is appropriate to equally weight the factors. 

Perhaps some factors are more important than others. There is nothing that says 

equal weighting is appropriate. Then, again, there is nothing that says it is inappropriate either. 

To sort out this issue we asked Professor Richard Roll of the Anderson School of 

Business at UCLA to use the best statistical techniques available to evaluate this 

question. His conclusion: Equally weighting the factors is as good as the most optimal statistical weighting approach. 

In other words, the empirical tests show that each of the 10 criteria is equally 

important. The 10 criteria are like the parts of a car. What is the most important 

component of the car: the powerful engine, the transmission, the seats, the steering 

wheel, the brakes, or the tires? The question defies the answer, because without any 

of these components, the car is unlikely to go very far or very fast, much less reach 

the desired destination. 

In similar fashion, countries that try to achieve economic freedom in only three 

or four of the criteria are putting together a car that is missing valuable parts. 

Those countries are unlikely to grow very fast or very long, and therefore are unlikely to achieve their goal of economic prosperity. 

In contrast, those countries that are putting together complete (10 criteria) cars 

are likely to grow fast and long, catching up to the more developed world economies. 

That is why we often refer to the 10 factors of the Index as a ‘‘10-step plan to end 

aid dependency.’’ The 10 factors provide a road map, and only by sticking to the 

30

18For more details, see Ana I. Eiras, ‘‘Chile: Ten Steps for Abandoning Aid Dependency for 

Prosperity,’’ Heritage Foundation Backgrounder No. 1654, May 20, 2003. 

highlighted route can a country achieve economic freedom, prosperity, and self-sufficiency. 

A CASE STUDY OF WHAT WORKS

A wonderful example of the power of this 10-step plan is the difference between 

the neighboring countries of Chile and Bolivia. Between 1980 and 2002 (see Appendix Table 1), Bolivia received almost $3 billion (constant dollars) of Official Development Aid from the U.S. government. Over that period, its per capita GDP actually 

fell at an annual rate of 0.3 percent. 

On the other hand, Chile received less than $200 million (constant dollars) of aid. 

Yet its economy grew at an average annual rate of 3.3 percent, more than doubling 

over the period. How does one explain such a divergence of experience? The geography is similar, and Bolivia received over 10 times as much aid. 

But the two countries’ experiences with economic freedom have been very different. Over the past 30 years, Chile has stuck to the economic freedom road map 

by establishing the rule of law; knocking down tax rates, regulation, and foreign 

trade barriers; freeing the banking system and capital flows; and reducing the burden and scope of government. It has put together a whole car. In the 10 years of 

the Index, Chile has moved steadily from a rank of 24th out of the 101 countries 

covered in 1995 to 13th out of the 161 analyzed this year. Over the past 10 years, 

economic growth has been notably better in Chile than among its neighbors, and 

Chile has been largely immune from the latest round of South American economic 

disasters.18

Bolivia by comparison had the same economic freedom score as Chile in the 1996 

Index, yet has improved its score little if at all since then. The reason is that the 

Bolivian economy has weak property rights, high government expenditure, high regulation, and a high level of corruption. At most, Bolivia has resorted to picking a 

couple of tires, a passenger seat, maybe a steering wheel, and some brakes. No wonder its economy has sputtered. 

LESSONS LEARNED

The case of Chile and Bolivia is not isolated. It reflects a pattern throughout the 

world. For several years, we have published a chart showing that a country’s Index

score is positively related to per capita GDP (Appendix Figure 1). The average per 

capita income of the ‘‘free’’ countries is twice that of the ‘‘mostly free’’ countries. 

That average drops precipitously as economic freedom drops to the last two categories. In other words, economically free countries have higher per capita incomes. 

But there is another, more important dimension to that relationship: one that involves the evolution of the score and of incomes over time. The next chart (Appendix 

Figure 2) demonstrates that seven-year average growth rates in countries are positively related to seven-year improvements in the Index scores. 

The 142 countries with available data were divided into fifths according to how 

much their Index scores had improved over the seven years. The countries with the 

most improvement are in the first quintile, and those with the least improvement 

(or most deterioration) are in the fifth quintile. Comparing the average growth rates 

of these two groups, the countries in the top quintile had almost twice as much 

growth (4.9 percent) as those in the bottom quintile (2.5 percent). Even for the middle three quintiles, growth rises and falls with changes in the Index score. 

In other words, countries moving further along the road map to economic freedom 

have higher growth rates. As long as they keep progressing along the road map, 

their growth rate tends to be above the average for all countries. The faster they 

move (the greater the improvement in the score), the higher the growth rate. This 

faster growth is especially important to those countries that are trying to play 

‘‘catch-up’’ to developed countries. Once countries decide to stop by the roadside or 

to retrace their steps, however, growth plummets. 

So the important message to the countries of the world is that they can help 

themselves just by starting to adopt economic freedom. In the words of the Nike ad, 

‘‘Just do it.’’ Just start increasing economic freedom somewhere. The more economic 

freedom they adopt, the faster they grow or the longer they have superior growth. 

More growth in turn means that the average level of prosperity is increasing. While 

foreign aid linked to measurable improvement in these indicators might be necessary at the very start of this process, for those countries that stay focused on improving economic freedom, any need for aid will soon disappear. 

31

19 Nile Gardiner, Ph.D., and Marc Miles, Ph.D., ‘‘Forgive the Iraqi Debt,’’ Heritage Foundation 

Executive Memorandum No. 871, April 30, 2003. 

And the good news for both the Congress and the administrators of aid is that 

countries’ efforts (or lack of efforts) to work toward these criteria are measured annually in Heritage’s Index of Economic Freedom. Compilation of this objective, quantitative and qualitative measure of countries’ movements along the road to self-reliance takes over six months each year. The Index is no cursory glance at countries’ 

progress. Using independent, reliable outside sources, each country is closely examined in terms of the 10 criteria. The Index can therefore serve as a guide to which 

countries deserve more assistance and which deserve less. It also holds out the real 

hope that countries that follow this road map will eventually graduate from the 

need for any assistance at all. Those mired as ‘‘client states’’ of international financial institutions suddenly have a path to liberation. 

OTHER FORMS OF AID

Additional questions from the Committee’s background memo remain, such as 

whether foreign aid should be used to bolster national security, whether we should 

give aid to our enemies, and the extreme case of whether aid should ever be given 

to North Korea. The answer to all these questions is yes. 

The United States’ foreign aid strategy should support long-term U.S. national security and should be administered in a way that enhances the larger political goal 

of the United States. However, U.S. foreign aid strategy must still encourage free 

markets and growth while also addressing humanitarian crises through well-monitored aid assistance programs. The aid should also encourage self-reliance in recipient countries. 

Afghanistan and Iraq are examples of where post-war reconstruction assistance 

both fulfills a humanitarian mission and enhances U.S. national security. U.S. postwar commitments in Iraq and Afghanistan result from U.S. obligation not only to 

transfer resources, but also to empower these countries to follow the road map of 

economic freedom and good governance. In those two examples, the United States 

has used foreign operations funds to set the framework to support development and 

growth in the recipient countries. 

Not all the assistance requires large transfers of money. For example, the Administration has formally called upon the European powers (primarily Russia, Germany, and France) and Arab nations (including the Gulf states and Egypt) to forgive the huge debts owed by the Iraqi government. Forgiving these debts would constitute both an historic contribution to the economic development of post-Saddam 

Iraq and a major gesture toward permitting the Iraqi people to establish a new 

economy. 

As The Heritage Foundation pointed out last April,19 the lessons learned from the 

immediate aftermath of the Versailles Treaty of 1919, when France demanded $32 

billion in reparations from Germany, illustrate the dilemma. This onerous debt burden contributed to the hyperinflation that crippled Germany’s economy, Germany’s 

financial collapse in the 1930s, and the end of the Weimar Republic, paving the way 

for the rise of the Nazi Party. 

Estimates of Iraq’s indebtedness vary greatly from 60 billion to several hundred 

billion dollars. The most comprehensive study of Iraqi debts, by the Center for Strategic and International Studies (CSIS), calculates Iraq’s overall financial burden to 

be $383 billion. Based on these figures, Iraq’s financial obligations are 14 times its 

estimated annual GDP of $27 billion—a staggering $16,000 per person. 

Establishing fiscal and monetary stability and a stable currency will be virtually 

impossible if Iraq has no realistic prospect of paying down the debt to manageable 

levels in the near future. The Iraqi government has made virtually no debt-service 

payments since 1991. With its huge debt burden, Iraq will have extreme difficulty 

in attracting substantial foreign direct investment, and this will further limit economic growth. 

If it were free of debt and proceeding along the road map to economic prosperity, 

Iraq could well become an economic powerhouse in the Middle East and an example 

for others to follow. With the world’s second largest oil reserves (112 billion barrels) 

and vast supplies of natural gas (110 trillion cubic feet), Iraq’s economy can be 

transformed if it adopts sound principles such as keeping tariffs and taxes low, 

privatizing state monopolies, and upholding the rule of law. These principles will 

enhance economic freedom and create the conditions for a thriving entrepreneurship. Without substantial debt relief, however, Iraq’s economic rejuvenation will be 

significantly delayed. The efforts of Secretary Baker are therefore a prime example 

of effective, efficient relief. 

32

20Public Law 108–25. 21 ‘‘Iran-Earthquake,’’ Fact Sheet # 8, Fiscal Year (FY) 2004, U.S. Agency for International Development, Bureau for Democracy, Conflict, and Humanitarian Assistance, Office of U.S. Foreign Disaster Assistance, January 9, 2004, at http://www.usaid.gov/our—work/humanitarian—assistance/disaster—assistance/countries/iran/fy2004/Iran—ND—FS08—1–09–

2004.pdf. 

U.S. involvement in Africa through the AIDS initiative exemplifies a case where 

foreign aid has been used for humanitarian reasons while, in the long-term, establishing a U.S. presence in the region. In 2003, the Bush Administration persuaded 

Congress to authorize $15 billion over the next five years to fight the AIDS pandemic in Africa and the Caribbean. The U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 is a bold legislative effort.20 About 42 million people worldwide are dying of AIDS or are infected with the HIV virus that causes the 

disease. Of these individuals, 29 million live in Africa. In addition, Africa is home 

to a staggering 11 million orphans who have lost their parents to AIDS. These facts 

carry political as well as moral implications: Failure to confront the pandemic in nations ravaged by AIDS is a recipe for economic decline and social chaos. 

But efforts should not stop at aid to contain these deadly diseases. While 

epidemics can distract internal moves to reform the economy, humanitarian aid can 

permit countries to refocus on how to attain economic self-reliance. Humanitarian 

aid is only a stopgap measure. The real test of the effectiveness of U.S. aid is whether it is followed by aid that encourages the countries that receive humanitarian aid 

to start down the road to economic self-reliance. 

In the aftermath of the recent earthquake in Iran, the United States contributed a total value of $3 million in USAID donations and services and $2 million in Department of Defense assistance. Assistance included an 81-member USAID/DART 

team, four airlifts of relief commodities, seven C–130’s filled with 68 metric tons of 

medical supplies, and a 10k forklift to assist in offloading relief commodities.21

While the United States does not support the Iranian regime and has labeled the 

country part of the ‘‘axis of evil,’’ cases of such extreme humanitarian crises are exceptions where the United States needs to provide assistance. Through our humanitarian actions, we can build trust and understanding, permitting the idea of economic self-reliance to become part of Iran’s public debate. 

The Bush Administration has taken a sound stance that it will not use food aid 

as a negotiating tool in dealing with rogue nations and totalitarian regimes. In 

North Korea, for example, the United States continues to supply food to help relieve 

the famine crisis. However, the United States has stopped all monetary assistance 

to North Korea, where it is unable to monitor North Korea’s use of the aid money 

and when it suspects that the regime might be using aid resources to develop and 

purchase weapons of mass destruction. Yet, if the North Korean government were 

to make a commitment to freeing its markets and working toward economic selfreliance, U.S. foreign aid would be justified in the initial stages. 

The purpose of U.S. foreign assistance should be to help other countries wean 

themselves from dependency on foreign aid by encouraging them to establish strong 

rule of law and policies of economic freedom to foster growth. The traditional foreign 

aid system that the United States employs does not advance such values. 

WHEN FOREIGN AID SHOULD BE USED TO ADVANCE U.S. NATIONAL SECURITY

Based both on evidence that traditional foreign aid has failed to improve the economic conditions of poor countries and on the empirical proof that economic freedom 

correlates with growth and prosperity, it is safe to say that the traditional foreign 

aid process will not help advance U.S. national security. 

Alternatively, if the Administration were to implement sound aid reforms based 

on countries’ progress toward economic freedom, foreign aid would, in the long term, 

always benefit U.S. national security because such an approach provides incentives 

for repressed countries to implement strong rule of law and other economic freedoms 

that will raise the level of prosperity, reducing the threat of terrorism. 

After 9/11, the United States and the global community proposed many new security initiatives to secure legitimate trade and travel from the threats of terrorism. 

Implementing these security regimes can be costly. Emerging economies have expressed concerns about the recent security regulations that have been imposed on 

the global trade arena. For example, the International Maritime Organization’s 

International Shipping and Port Security (ISPS) code requires that ports implement 

specific security measures by July 2004. The consequence of not meeting this deadline is alienation from trade until the country fulfills security demands. While these 

new security regulations attempt to address serious vulnerabilities of maritime commerce, emerging countries find themselves scrambling for financial resources to supVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00036 Fmt 6633 Sfmt 6621 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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port security rules, for the consequence of not meeting the deadline could be devastating to a small economy. 

The answer, however, is not to lower the security standards. In the interim, foreign aid funds should be used to assist these countries to secure their ships and 

ports by the July 2004 deadline while concurrently helping these countries build 

trade capacity and increase efficiency through the use of effective technologies. 

CONCLUSION

In sum, in line with the President’s 2002 National Security Strategy, foreign aid 

presents us with an opportunity to extend freedom across the globe by providing incentives for countries to pursue policies that promote rule of law and economic freedom, thereby generating growth and development. While the United States should 

always provide assistance in times of humanitarian need, a general strategy that 

moves countries toward self-generated prosperity is the most viable and measurable 

long-term plan to contribute to strengthening our national security.

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Mr. ROHRBACHER. Thank you very much. We have had two very 

thought-provoking witnesses. 

Ms. McClymont. 

STATEMENT OF MARY E. McCLYMONT, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, INTERACTION 

Ms. MCCLYMONT. Thank you. Mr. Chairman, thank you for the 

opportunity to testify before the Committee today. A special thanks 

to you, Mr. Payne, and others on the Committee who have supported development of humanitarian concerns throughout the 

years. 

InterAction, which I represent, is the largest alliance of American development and relief NGOs. Our 160 member NGOs operate 

in all developing countries, and reach, through their programs, millions of Americans, as well, who support our foreign assistance programs. 

Our policy paper, entitled Emerging Trends, analyzes some of the 

recent major trends in foreign assistance post-9/11. And I would request that that be submitted along with my written testimony for 

the record. But I will be touching here today on key findings and 

recommendations actually from that paper, which will focus predominantly on development. 

Mr. ROHRABACHER. It will be included in the record. Hearing no 

objection, they will be included in the record. 

Ms. MCCLYMONT. Thank you very much, Mr. Chairman. 

First, some context. President Bush, as has been noted, identified 

development to be a central commitment of American foreign policy, both in the Administration’s national security strategy, and 

also in his subsequent major address on the MCA. 

He said, and I quote:

‘‘We work for prosperity and opportunity, not only because it 

is the right thing to do, but because it helps defeat terror, since 

governments that fail to meet basic needs of their people can 

become havens for terror.’’

Indeed, we believe there is a fundamental link between development assistance and our national security and national interest 

goals, broadly defined. 

Indeed, programs which meet basic needs and build self-sufficiency in people lead to more peaceful, prosperous, democratic, and 

stable nations, which in turn helps ensure greater security for us 

here at home. 

Yet, for development to have the positive impact we all seek, policy must be coherent, programs effective, with clear goals to reduce 

poverty, and increased resources made available to support them. 

Some of the post-9/11 changes have been most welcome, such as 

the promised increased resources for the President’s HIV/AIDS initiative and the new Millennium Challenge Account, which has 

great potential for transforming some of the selected countries in 

which it will be operating. 

We are concerned, however, that the President has chosen to create, for these and other presidential initiatives, altogether new 

structures and mechanisms, rather than using existing structures, 

such as USAID, the focal point of foreign assistance for 40 years. 

43

Moreover, new presidential development initiatives appear to be 

little more than presidential earmarks. They are not prioritized 

within, nor apparently connected to, existing programs. 

In addition, as has been noted, the growing number of Federal 

agencies involved in providing assistance overseas further complicates decision-making, and increases the potential for waste and 

duplication. 

Meanwhile, USAID, the only Federal entity with a mandate to 

look at the big picture, appears to have less authority, and a greatly diminished ability to shape and influence policy, or properly plan 

and evaluate programs. 

In short, without a clear plan and strategy, this approach is leading to increased fragmentation of resources and responsibilities, duplication within the Administration, confusion externally about 

who is in charge, and a loss of coherence in the field, as multiple 

Federal agencies pursue similar goals with little coordination. 

Equally troubling, these changes have been planned and implemented in a rather ad hoc fashion, with little transparency and 

consultation. 

Finally, although we warmly welcome the overall increases in 

the foreign operations budget recently, particularly the MCA and 

the HIV/AIDS initiatives, presidential pledges to maintain funding 

levels for core development work, and provide substantial incremental funding for the new initiatives, have not been fully met. Including cuts to the core development activities. 

Indeed, it is becoming apparent that resources for the MCA and 

the HIV/AIDS initiatives, although critically important, are coming 

at the expense of existing development and humanitarian programs. 

I will offer up three recommendations of the ones we presented 

in our paper, and close. 

Number one. The Administration, Congress, and the development community should support together a full-scale independent 

review of U.S. foreign assistance programs, their organizational 

structures and implementing mechanisms, with the aim of creating 

a more coherent capability to meet our development in our foreign 

aid objectives. 

Through a transparent and consultative process, an overall enabling policy framework should be developed, with clear goals, and 

better aligning U.S. foreign aid, trade, and debt programs; clarifying the authorities of relevant Federal agencies, and ensuring 

close coordination among all. This would surely likely lead to a full 

review and updating of the Foreign Assistance Act. 

Number two. In the interim, absent a formal reorganization, the 

Administration should strengthen existing foreign assistance structures, particularly USAID, which, despite flaws it may have, is the 

principal repository of U.S. technical development expertise. Immediate steps should also be taken to address the recent fragmentation. 

And finally, number three. We urge that the Administration, 

working with the Congress, make good on funding pledges, maintaining and enhancing core humanitarian and development assistance levels, in addition to funding new initiatives, such as the 

44

MCA, or as needed, extraordinary contingencies, such as post-conflict reconstruction in Afghanistan and Iraq. 

Thank you very much, Mr. Chairman. I would be happy to answer your questions later. 

[The prepared statement of Ms. McClymont and material submitted for the record follow:]

PREPARED STATEMENT OF MARY E. MCCLYMONT, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, INTERACTION

Thank you, Mr. Chairman, for the opportunity to testify before this Committee 

on a subject of paramount importance, U.S. Foreign Assistance Policy post September 11. I also want to acknowledge the leadership and support that you, Representative Lantos, and many others on this Committee have provided on issues of 

concern to us in the humanitarian and development community. I particularly want 

to note the leadership of the Chairman and Ranking Member in authorizing the 

Millennium Challenge Account and enacting the ‘‘United States Leadership Against 

HIV/AIDS, Tuberculosis, and Malaria Act of 2003.’’ We were gratified by the bipartisan and collaborative manner in which this committee, and your staff, engaged 

with InterAction and the broader development community throughout the legislative 

process. 

InterAction is the largest alliance of U.S.-based international development and 

humanitarian nongovernmental organizations. Our 160 members operate in every 

developing country and have decades of experience on the ground in working to 

overcome poverty, exclusion and suffering by advancing social justice and basic dignity for all. While many in our membership have a long and successful history of 

partnership with U.S. government agencies, collectively, the members receive approximately $3 billion in annual contributions from private donors, including direct 

contributions from the American people. Both faith-based and secular, InterAction 

members are headquartered in 25 states and have branch offices and/or constituencies in every state in the country. Furthermore, when you look at the donors, 

sponsors, and supporters of our member organizations, InterAction reaches millions 

of Americans who care about and support in some form our foreign assistance programs. 

I come before you to reflect views from this broad-based coalition, with a focus 

on the development and humanitarian assistance component of our foreign assistance programs. 

As the title of this hearing underscores, there have been major changes to our foreign assistance programs in the past three years, particularly following the tragic 

terrorist attacks of September 11, 2001. Many of these changes have been most welcome, such as the increased resources for combating disease and promoting international development promised in the President’s HIV/AIDS and the MCA initiatives. We have commended the Bush Administration for declaring the advancement 

of development as a central commitment of American foreign policy. 

We are concerned, however, about a number of intended and unintended consequences of the Administration’s goals and methods. The recent changes have 

brought with them new policies, structures and mechanisms for delivering this assistance. In short, the Administration is dispersing responsibilities and resources so 

widely that the delivery and impact of foreign aid may well fall far short of expectations, both in countries of strategic interest and on a global basis. 

It was this concern that spurred us to issue a policy paper analyzing some of 

these post-9/11 trends and making a series of recommendations to address our concerns. I ask, Mr. Chairman, that this paper, entitled, ‘‘Foreign Assistance in Focus: 

Emerging Trends, ‘‘ be submitted for the record along with my written testimony, 

which summarizes our key findings and recommendations. 

CONTEXT FOR FOREIGN ASSISTANCE

Recent changes in US foreign assistance appear to have emerged in response to 

the attacks on the United States of September 11, 2001 and the subsequent creation 

of a ‘‘National Security Strategy’’ uniting diplomacy, defense, and development. In 

a major March 2002 address, President Bush confirmed that the ‘‘advance of development is a central commitment of American foreign policy’’ and that ‘‘we work for 

prosperity and opportunity because they’re right.’’ However, he added, ‘‘we also work 

for prosperity and opportunity because they help defeat terror . . . persistent poverty and oppression can lead to hopelessness and despair. And when governments 

45

1 Remarks by President Bush on Global Development, Inter-American Development Bank, 

Washington, DC, March 14, 2002. 

fail to meet the most basic needs of their people, these failed states can become havens for terror.’’

Most of us in the development community have welcomed this heightened emphasis on development as a high priority in this Administration’s foreign policy. We 

would agree that there is a fundamental link between development assistance and 

our national security and national interest goals, broadly defined. 

However, for development to have the positive impact that the President notes, 

that is to create prosperity and opportunity, and to help governments meet the most 

basic needs of their people, development policy has to be coherent, development programs effective with clear goals to reduce poverty and increased resources must be 

allocated to support them. If development assistance is tied only to short-term narrowly defined national interest objectives, or if it is channeled through ineffective 

or unaccountable means, certain specific political or foreign policy objectives may be 

met, but it is not likely to achieve the broader development objectives to which the 

President alluded in his March 2002 speech. 

On the other hand, we know that programs which work to reduce poverty, meet 

basic needs and build self-sufficiency in people—such as providing basic education, 

healthcare, work and farming skills, reducing hunger, promoting women and girls—

lead to more peaceful, prosperous, democratic and stable nations which in turn leads 

to greater security for the United States. 

A cornerstone of the President Bush’s new vision on foreign assistance is the Millennium Challenge Account (MCA). The President has called for ‘‘a new compact for 

global development’’ based on the mutual responsibilities of rich nations to provide 

the tools poor countries need to ‘‘seize the opportunities of the global economy,’’ and 

of poor countries to ‘‘adopt the reforms and policies that make development effective 

and lasting.’’ To show U.S. leadership and commitment to these goals, he announced 

the creation of the MCA, which would increase U.S. development assistance by $5 

billion a year over current levels by FY2006 and reward nations ‘‘ruling justly, investing in their people, and encouraging economic freedom.’’ 1

The Bush Administration has announced this initiative as a step toward greater 

innovation, focus and accountability in foreign assistance programs. Significantly, 

the President did not choose to use the existing mechanisms and authorities of the 

U.S. Agency for International Development, the focal point of U.S. foreign assistance 

since 1961. Other subsequent Presidential initiatives and major assistance programs 

in high profile, post-conflict cases like Iraq have also been created with new authorities and structures. 

These initiatives have been received with a certain degree of ambivalence in the 

development community. There is a clear consensus in the NGO community on the 

need for additional resources for humanitarian and development assistance, and the 

President’s promise of additional resources for HIV/AIDS and the MCA has been 

warmly welcomed. Furthermore, most in the development community agree that 

there is much room for reform in U.S. foreign assistance programs and structures, 

particularly USAID, and see potential value in testing multiple approaches to the 

wide range of development challenges and foreign policy objectives we face today. 

We are concerned, however, that the creation of new entities alongside a diminished—but otherwise unreformed—USAID is leading to increased fragmentation of 

resources and responsibilities, duplication within the Administration, confusion externally about who is in charge, and a loss of coherence in the field as multiple federal agencies pursue similar goals with little coordination. In addition, the national 

security lens through which the Administration is viewing development has increasingly focused on short-term goals, encouraging a preference for foreign aid ‘‘quick 

fixes’’ over the longer-term approaches that are more likely to bring sustainable 

change, and indeed ultimately the global prosperity and stability the Administration 

seeks. 

Equally troubling to the NGO community, the Administration’s recent modifications of foreign assistance structures have been planned and implemented in an ad 

hoc fashion. This process has taken place with little transparency or consultation 

with stakeholders, or consideration for the lessons learned from America’s long experience in foreign aid. 

Indeed, a comprehensive U.S. development strategy should be designed. This 

strategy should include clear goals, realistic timetables, and sufficient resources for 

reducing poverty and meeting the Millennium Development Goals through programs 

of assistance, trade and economic policies, debt relief and private investment flows. 

This must be accompanied by appropriate organizational mechanisms and structures to assure effective delivery of programs, and make clear the ways to reach not 

46

just people in MCA eligible countries but in those not eligible yet in great need of 

assistance as well. 

SOME LESSONS LEARNED

We in the NGO community firmly believe in the importance of lessons learned 

from past experience and in the need to continue improving mechanisms for quantifying the impact of foreign assistance. The successes and failures of U.S. development experience over many decades can serve as a useful guide as we move forward. 

This experience has demonstrated, among others, the following lessons:

• In most countries, it takes a patient and steady commitment of resources and 

expertise over a long period to achieve sustainable development.

• There is no single road map to sustainable development. The process varies 

from country to country, is rarely linear, and requires addressing multiple 

interrelated challenges simultaneously.

• There are few effective shortcuts in the development process. Quick fixes born 

of short-term political and economic calculations are the least likely to 

produce lasting impact.

• The most effective aid programs are those that are reinforced by the local government’s commitment to sound economic policies, human resource development and strengthening of institutions.

• Equally important is the U.S. government’s commitment to address a range 

of issues (including trade and debt issues and equitable growth and development) that might otherwise undercut efforts of developing countries to reduce 

poverty and spur economic growth. In fact, one could argue that coherence of 

U.S. policies towards recipient countries is as important to the effectiveness 

of U.S. assistance as are the kinds and quantity of aid provided.

• Even where developing country governments are committed to promoting policy reforms and poverty reduction, engagement of the nongovernmental sector 

is critical to achieving broad, sustainable changes and reinforcing democratic 

participation.

• The impact of foreign aid in specific countries can be magnified by the close 

coordination with other donors and multilateral development organizations.

• Failure to consider the development priorities of recipient countries and to coordinate with other donors may lead to confusion, duplication, waste and ill 

will towards the United States.

InterAction is concerned that a number of these basic lessons have been insufficiently considered in the formulation of the current Administration’s views on foreign assistance, and particularly in the new structures it has created to address development challenges. 

THE MILLENNIUM CHALLENGE ACCOUNT

Indeed, the Millennium Challenge Account is the centerpiece of the Bush Administration’s new approach to development aid. We believe that the MCA represents 

a unique opportunity to revitalize and redefine U.S. foreign assistance policy and 

to maximize the impact, effectiveness and coherence of our aid programs. However, 

we are concerned that this experiment will fall far short of its goals without sufficient funding and adequately trained human resources, consensus on implementation and greater clarity about the policy framework in which the MCC will operate. 

Although it represents a significant step forward, the MCA is just one tool to 

stimulate broad-based economic growth and prosperity in developing countries. We 

are therefore concerned about the broad impact of the MCA on other aspects of U.S. 

foreign assistance. First, in a resource-constrained environment—and without more 

robust Administration budget requests and justifications—the MCA threatens to 

drain funding from USAID and other Presidential initiatives, rather than add to 

them, as promised. 

The MCA initiative is forcing USAID to redefine and redesign its development 

role in relationship to the MCA. In June of 2003, USAID has declared among its 

highest priorities helping the next tier of countries prepare themselves for MCA eligibility; providing aid to strategically important states; giving post conflict and humanitarian assistance to failed or failing states; and assisting mid range performers 

that have a will to reform. However, for the largest group of countries that are poor 

and home to the bulk of the developing world’s population, many of whom live in 

absolute poverty and lack access to adequate food, education and basic health services, but are considered neither MCA eligible nor failed states, USAID lacks the reVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00050 Fmt 6633 Sfmt 6621 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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sources to promote development and growth in any comprehensive or consistent 

fashion. Yet, these are the very nations that, if left unattended, are vulnerable to 

becoming failed states, serving as breeding grounds for instability and terrorism. 

Second, the implementation of the MCA by a completely separate entity from 

USAID may produce conflicting country strategies and will complicate the coordination of different kinds of U.S. development assistance, both in Washington and in 

the field. This fragmentation is also apt to have a negative effect on U.S. relations 

with recipient countries, other donors, and U.S. foreign assistance contractors and 

grantees. We were gratified that Congress has mandated some measures for coordination between programs and agencies in the authorizing legislation for the MCA. 

It remains to be seen, however, how this is implemented between competing bureaucracies. 

KEY STRUCTURAL TRENDS AND CONCERNS

Despite more cohesive policy statements on the role of foreign aid in general, the 

Administration has announced various other initiatives besides the MCA, many of 

which are narrowly defined and appear to be little more than Presidential earmarks 

and directives that will tie the hands of USAID in devising appropriate strategies 

and programs for countries receiving U.S. assistance. The USAID Web site lists 

eighteen Presidential initiatives designed to address problems ranging from global 

HIV/AIDS and safe drinking water to illegal logging and ‘‘digital freedom,’’ without 

a clear sense of priority or indication of how these activities will be integrated into 

on-going development planning in Washington or delivery in the field. 

New entities are being created and scattered throughout the government, at times 

addressing similar problems. Yet, there seems to be inadequate or ineffective institutional coordination among them or incentive for collaboration. 

And, with the growing number of federal agencies (such as State, Treasury, 

Health and Human Services, and Agriculture) involved in providing assistance overseas, the need for consultation and coordination is more important than ever. The 

increasing role of the Defense Department to plan and implement humanitarian relief and reconstruction in hot spots such as Afghanistan and Iraq undercuts efforts 

to lay the foundation for longer term development, ignores the experience and expertise of USAID, its NGO grantees and international organizations, and poses operational challenges and security implications for humanitarian groups. 

The proliferation of these entities is complicating decision-making and creating a 

competitive—rather than collaborative—environment in which staff and resources 

may be wasted on duplicative efforts. In turn, the fragmentation of decision making 

makes it more difficult for potential U.S. government partners (whether other donors, multilateral organizations, contractors, NGOs, or foreign governments seeking 

assistance) to know who is in charge and whether there are overarching policies and 

procedures governing U.S. foreign assistance programs. This is especially so as consultation and coordination with U.S. development partners, other donors and recipient countries remains limited as well. 

And, USAID—the only federal entity with a mandate to look at the big picture 

and coordinate all forms of humanitarian and development assistance around the 

world and in specific countries—appears to be submerged under new layers of bureaucracy, with less authority, fewer resources and a greatly diminished ability to 

shape and influence policy. USAID missions are losing their ability to develop comprehensive country strategies with host-country governments and other stakeholders, as well as to monitor and evaluate the effectiveness of the full range of 

U.S.-funded development activities in country. The reduced USAID role and the 

fragmentation of planning and delivery of U.S. assistance are also leading inevitably 

to a much less cohesive targeting of assistance. 

FUNDING CONCERNS

Finally, pledges to maintain funding levels for broad development work and provide substantial incremental funding for new initiatives have not been fully honored, resulting in cuts to traditional development activities, slow starts for new initiatives, and overall a diminished ability to demonstrate the effectiveness of all foreign assistance programs. 

President Bush’s announcement of two major development initiatives was received 

with much fanfare and applause from the development community. The President’s 

promises of $15 billion over five years to combat the HIV/AIDS pandemic and an 

additional $5 billion annually in development assistance by 2006 through the MCA 

initiative were welcomed as the first step in reversing a decade of declining levels 

of foreign assistance. However, there is increasing concern that resources for these 

48

important initiatives will come at the expense of existing development and humanitarian programs. 

For example, the Administration’s budget request in FY2004 included an impressive 14% increase in overall foreign assistance spending. When the funding for new 

initiatives is subtracted, however, there was less than 3% increase for the remainder of the foreign operations budget—not sufficient to keep pace with both inflation 

and population growth. For example, in the request for the development assistance 

account, which is the main account through which USAID funds development activities in all the non-MCA countries, $35 million was actually cut over FY2003 enacted 

levels. This was further exacerbated when the Administration failed to request additional funding for Afghanistan, earmarking instead $150 million out of an already 

diminished DA account. As a result, the President’s DA request for Latin America, 

Africa and Asia were all cut from the previous year. In Child Survival and Health, 

the President’s funding request for non-HIV/AIDS related programs—such as assistance for vulnerable children, maternal and child health, other infectious diseases, 

and family planning programs—was $125 million below what Congress appropriated 

the previous year. We believe this failure to adequately fund the core humanitarian 

and development accounts is one of the reasons why Congress, in the end, cut funding for the MCA and other new initiatives and increased funding for DA, Child Survival, Refugees and other key programs. 

The funding gap was further exacerbated when the Administration unveiled the 

expected resource requirements for long-term reconstruction and development in Afghanistan and Iraq in the supplemental appropriation packages last year. While it 

is difficult to attribute a direct causal relationship between last year’s $87 billion 

supplemental request and the regular budget process, it bears pointing out that the 

President’s request for foreign operations was $18.8 billion in FY 2004 and the final 

appropriation was nearly $1.5 billion below that request. Furthermore, the $20 billion for Iraq reconstruction contained in the supplemental is larger than the entire 

foreign assistance budget. From an NGO perspective, the staggering magnitude of 

these extraordinary expenses makes the short-changing of accounts for global development aid and the President’s new initiatives all the more unfortunate. 

While the FY2005 budget will not be released for another week, early indications 

are that a similar situation is likely to unfold this year—significant resources allocated for Administration initiatives, but inadequate resources for ongoing humanitarian and development programs. 

RECOMMENDATIONS

Mr. Chairman, we recognize that U.S. foreign assistance is shaped by foreign policy and national security priorities as well as our national interest in promoting a 

stable and prosperous world in which every country has the means to master its 

own development process. From our long history of helping others, our country has 

unequaled expertise to implement effective foreign aid in many different circumstances. However, some new approaches may be required to address the particular challenges and opportunities we face in the 21st Century. We look forward 

to working with Congress and the Administration to ensure that the United States 

has a clear and consistent policy framework and appropriate mechanisms and resources to carry out its humanitarian and development programs. 

Let me therefore conclude with the following recommendations: 

1. The Administration, Congress and the development community should support a 

full-scale, independent review of U.S. foreign assistance programs, organizational structures and implementing mechanisms, with the aim of creating a more 

coherent, cohesive and modern assistance capability that can meet our myriad 

foreign policy and foreign aid objectives. 

To be truly comprehensive and effective, this review should include the participation of outside experts as well as development practitioners. The scope of the review 

should take into consideration the interdependence of U.S. policies on aid, trade and 

debt issues in developing countries. The goal should be to develop, through a transparent and consultative process with all stakeholders, an overall enabling policy 

framework for U.S. foreign aid/trade/debt programs, clarifying the authorities of relevant federal agencies and ensuring close coordination among all. 

We urge the Administration to ensure that the overall policy framework and the 

mechanisms to plan and deliver U.S. foreign aid are consistent and supportive of 

each other. 

Similarly, it may be time for Congress to review and update the Foreign Assistance Act. As we know from past experience, revision of underlying legislation is a 

difficult task that risks exacerbating differences rather than unifying views on how 

the United States should carry out its foreign assistance programs. However, it 

49

could be extremely useful to clear away the layer upon layer of restrictive and often 

outdated provisions in the FAA and to develop a clear and consistent statement of 

overall foreign aid goals. 

2. In the interim, the Administration, at a minimum, should strengthen existing foreign assistance structures, particularly USAID. 

Given the challenges that the United States faces in the 21st Century, it is imperative that our foreign assistance capability be agile, fast, innovative and united in 

purpose. But to be effective in promoting the global prosperity and stability we all 

seek, it must also have a single center of gravity and a comprehensive perspective 

on broad-based and long-term development. 

USAID has served as the focal point of U.S. foreign assistance for more than 40 

years. Despite flaws, it remains the principal repository of U.S. technical development expertise, it has established ties with the major U.S. development partners at 

home and abroad, and its credibility and access around the world cannot be duplicated easily by other entities. Absent a formal reorganization, USAID’s coordinating 

and planning roles and resources should be enhanced to provide a smooth interface 

with recipient countries, development partners, other donors and all federal entities 

involved in international assistance. 

3. The Administration should also take immediate steps to address the recent fragmentation of foreign assistance and its implications both for planning and funding in Washington and for delivery of assistance in the field. 

These could include steps to:

• Demonstrate the overall vision and coherency of U.S. foreign assistance policy 

through regular, consistent statements by the President, the National Security Advisor, the Secretary of State, and the Administrator of USAID.

• Utilize better the existing authority and resources of USAID and its field missions to 1) coordinate the planning, delivery, monitoring and evaluation of humanitarian and development programs across the board, regardless of implementing agency, 2) take the lead in working with recipient governments and 

other stakeholders to develop comprehensive country strategies that identify 

broad needs and appropriate resources, and 3) improve coordination with 

other donors.

• Clarify reporting and coordinating responsibilities of all U.S. government 

agencies vis-a-vis the U.S. Ambassador and the USAID Mission Director 

when working in the field on humanitarian relief, post-conflict reconstruction 

and long-term development.

• Examine the roles, responsibilities and resources of military and non-military 

entities involved in humanitarian relief and post-conflict reconstruction to ensure respect for the independence and impartiality, as well as the expertise 

and experience of humanitarian actors. 

4. Overall, the Administration and Congress should ensure that expertise and resources for long-term development remain at the core of our foreign aid policies 

and programs. 

While U.S. foreign and security objectives will inevitably change to reflect new 

Administration priorities in the face of an evolving world, the achievement of longterm development goals will require a steady and patient approach. In turn, ongoing development work will lay the groundwork for more effective short-term interventions. The interdependence of short- and long-term development approaches requires appreciation for their differences and their similarities, as well as space to 

pursue each and coordinate where they overlap. 

InterAction therefore calls on the Administration to:

• Recognize the long-term nature of development goals such as reducing poverty and corruption, promoting good governance and democratic participation 

and supporting private-sector development.

• Ensure that development projects are designed, managed and evaluated from 

the perspective of their long-term nature, not just their short-term political 

impact.

• Build into all grants and contracts adequate provision for capacity-building 

activities with local government and nongovernmental organizations, recognizing that a commitment to policy reform alone will not lift poor countries 

out of poverty and poor governance.

50

• Review the activities, indicators of success, and funding sources of each foreign assistance program to ensure that they adequately reflect the proper mix 

of short- and long-term objectives. 

5. Finally, President Bush and Congress must make good on pledges to increase U.S. 

foreign assistance by maintaining and enhancing traditional humanitarian and 

development assistance levels in addition to funding new initiatives like the 

MCA. Assistance for extraordinary contingencies such as the post-conflict reconstruction of Iraq and Afghanistan cannot come at the expense of humanitarian 

and development needs in other regions. 

Thank you, and I would be happy to answer any questions.


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Mr. ROHRBACHER. Yes, you made some very good points, and we 

appreciate your testimony. 

Ms. Brainard. 

STATEMENT OF LAEL BRAINARD, PH.D., SENIOR FELLOW, THE 

BROOKINGS INSTITUTION 

Ms. BRAINARD. Thank you, Mr. Chairman. Thanks also to Mr. 

Payne and the distinguished Members of this Committee. 

It is an honor to be here. And I have to say this could not be 

a better moment for the set of questions that you are posing. 

We are standing at a moment of fundamental reorientation in 

American strategy and purpose in the world. We are confronting 

new threats that could prove as sustained as the totalitarian challenge of the last half-century. We also have within our reach new 

opportunities associated with scientific advance, as well as with 

America’s unrivaled position in the world. The choices we are making today are enormously consequential. 

Since September 11 we have seen enormous changes to the three 

inter-dependent components of national security policy: The military, homeland security, and the softer tools of diplomacy and foreign assistance. Enormous attention has been given to strategies 

governing defense and homeland security and their organizational 

underpinnings. 

By contrast, although we have seen resources increase in the 

area of foreign assistance, as well as a big increase in the programmatic expanse, this has taken place in a largely ad hoc manner. 

The expansion of resources is taking place through a proliferation of new programs and organizational arrangements, which are 

layered on top of an already complicated maze of U.S. programs directed at developing countries. 

Although these new initiatives bring a greater sense of ownership on the part of the Administration that is proposing them, they 

largely ignore the hard, and I think critical, work of rationalizing 

and reforming the existing structures and programs. 

In short, U.S. foreign assistance is undergoing a fundamental 

transformation by default, rather than design. 

My colleagues here have already spoken about the proliferation 

of organizations, 16 to 18 within the U.S. Government alone that 

administer programs to developing countries. We recently counted 

50 stated objectives for foreign assistance, depending on which set 

of documents you are looking at. 

And adding to the morass, recent presidential initiatives and requests entail completely new structures, outside of USAID, for 

global HIV/AIDS initiative, Millennium Challenge Corporation, the 

Middle East Partnership, reconstruction in Iraq and Afghanistan, 

and the list goes on. 

In addition, we have no systematic coordination between these 

foreign assistance programs and the host of other U.S. programs 

that, in the end, could prove more important to many of these developing countries. I speak here of trade preferences, trade agreements, debt relief, investment, and financial policies. 

The proliferation of programs and the confusion of agency roles 

are costly to the U.S. taxpayer. They are very costly to the morale 

67

and the effectiveness of those administering the programs, and ultimately to the very people we are trying to help. 

In addition, despite a lot of evidence suggesting coordination 

internationally is a critical key factor for success and aid effectiveness, we are currently adding to the problem rather than the solution. 

In terms of what we need to do going forward, we need a strategy that identifies defining our strategic priorities. Let me put out 

six, and putting in place the organizational underpinnings. 

All of our foreign assistance serves three clear purposes: To promote national security, to advance the national interest, and to respond to humanitarian imperatives. 

For each country we should be able to locate them in a matrix, 

essentially along the dimensions of where they are relative to 

American national interests, and where they are internally in 

terms of their governance capacity, their economic development, 

their poverty challenges. 

If you look at those different parts of the matrix, the first strategic priority is the interest in seeing impoverished nations get 

onto a sustained trajectory of growth and of good governance. That 

is going to remain the primary purpose of U.S. foreign assistance 

for the majority of poor nations, although for a minority of resources. 

We have a book out on the Millennium Challenge Account. It is 

a very important initiative, and it is critically important that we 

get it right, because the lessons are going to carry over into other 

assistance programs. It is also going to be critically important in 

sustaining future public support for this kind of assistance. 

We cannot, however, fool ourselves into believing that this is a 

silver wallet. The largest majority of African population in the 

poorest countries are unlikely to qualify for the MCA. So we need 

to continue to work through our traditional accounts if we are to 

reach many of the poor in Africa. 

It is therefore troubling that development assistance in the current budget request would go down 3.5 percent this year, and by 

an astonishing 22.4 percent in real terms over the next 5 years. 

The second basket is HIV/AIDS and humanitarian crises more 

generally, where it is critically important that we keep faith with 

developing countries. We must not approach from a single issue 

perspective, but rather embed it in a larger strategy for these countries. 

The third area, which we really haven’t talked about, is taking 

a more strategic approach to the threats that spill across borders. 

We never talk in the lore about development, about the massive 

success story of the green revolution, which is one of those areas 

where U.S. scientific advance paired with the government and with 

foundations to make a leap forward for mankind. We focus too little 

on successes in areas like the campaigns against smallpox, polio, 

and other killer diseases. 

I know that I am running out of time. Let me just mention the 

last two strategic priorities: The areas of failing states, as well as 

perhaps the most important area, those countries where we have 

geostrategic imperatives. We don’t really have good ways of measVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00071 Fmt 6633 Sfmt 6601 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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uring whether we are making progress or the effectiveness of aid 

in these two areas. 

Finally, to undergird those strategic goals, we need to be specific 

about what we are trying to achieve, and measure those results. 

And to be effective, we need to rationalize the U.S. existing foreign 

assistance structure. That means looking very carefully at AID, 

looking at more coordination among and between the various components of development policy, and finally, working more effectively 

with the international organizations. 

Thank you. 

[The prepared statement of Ms. Brainard follows:]

PREPARED STATEMENT OF LAEL BRAINARD, DIRECTOR OF GLOBAL POVERTY

INITIATIVE AND NEW CENTURY CHAIR, THE BROOKINGS INSTITUTION

SOFT POWER IN AN AGE OF GLOBAL THREATS

We stand at a time of fundamental reorientation in American strategy and purpose in the world. The United States today confronts new threats from radical extremism, killer diseases, uneven globalization, and states that fail their own people, 

which could prove as sustained as the totalitarian challenges of the previous halfcentury. We also have within our reach rare opportunities associated with scientific 

advance and America’s unrivalled position on the world stage. The choices America 

makes today will be tremendously consequential in shaping America’s role in the 

world and its perceived legitimacy for years to come. 

Since September 11, we have seen enormous changes to the three interdependent 

components of national security policy: military force, homeland security, and the 

‘‘softer’’ tools of diplomacy and foreign assistance. Enormous attention has been 

given to the formulation of strategies governing defense and homeland security and 

the organizational requirements for their execution. By contrast, although there has 

been an important increase in the amount and programmatic expanse of foreign assistance, it has taken place in a largely ad hoc manner. The deployment of soft 

power no less than hard has important consequences for American national interests and requires American resources. Consequently, U.S. foreign assistance should 

be guided by a strategy and built on sound organizational principles—neither of 

which holds today. 

NEW RESOURCES, NEW PROGRAMS

The past few years have seen a breathtaking increase in new programs and resources for foreign aid probably not seen since the Cold War. Between fiscal 2000 

and fiscal 2004, foreign affairs budget authority has grown by $3 billion to $26.6 

billion, an increase of roughly one eighth. While large relative to foreign operations 

spending in the 1990s, this increase nonetheless pales by comparison with other elements of national security. Over the same period, defense spending has increased 

by $64 billion or over one fifth, and homeland security has increased by $23 billion 

or 175 percent. When fiscal 2004 supplemental budget authority is included, the expansion is a breathtaking $24.9 billion for foreign operations and $128.8 billion for 

defense. 

Several forces have driven this striking expansion. First, the post-September 11 

war on terrorism has greatly expanded the strategic calls on foreign aid-directly to 

reward allies, shore up frontline states, and rebuild Afghanistan and indirectly to 

address the poverty that weakens states and provides space for terrorist networks 

to grow. Second, the war on Iraq has created a huge call on U.S. taxpayer resources. 

Third, there is a consensus across the political spectrum that American resources 

are critical to combat the HIV/AIDS pandemic. Finally, there are growing concerns 

that unless the benefits of rapid globalization are better shared, the divide between 

rich and poor could contribute to civil conflict, extremism, conflict over resources, 

and environmental degradation in this increasingly connected world. 

RISKS

The recent expansion of resources is taking place through a proliferation of new 

programs and organizational arrangements, which will be layered on top of an already complicated maze of U.S. programs directed at developing countries. The administration has demonstrated a strong proclivity to create its own signature programs and initiatives. But while these new initiatives bring a greater sense of ownVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00072 Fmt 6633 Sfmt 6621 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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1Lael Brainard, Carol Graham, Nigel Purvis, Steven Radelet, and Gayle Smith, The Other 

War: Global Poverty and the Millennium Challenge Account, The Brookings Institution Press, 

2003. 2Susan Rice, ‘‘The New National Security Strategy: Focus on Failed States,’’ Brookings Policy 

Brief 116, February 2003. 3This includes USAID, the Departments of State, Agriculture, and Treasury, and the Peace 

Corps, as well as the Departments of Defense, Education, Health and Human Services, Commerce, and Transportation; the U.S. trade representative; the IRS and INS; the Export-Import 

Bank, OPIC, and TDA; the Small Business Administration; and the Federal Aeronautics Administration. 4Development Co-Operation Review: United States Paris: Organization for Economic Cooperation and Development, 2002. 

ership on the part of the current administration, they ignore the hard and ultimately critical work of rationalizing and reforming existing structures and programs. However you look at it—relative to the Foreign Assistance Act, relative to 

the roles of the existing U.S. agencies, or relative to the size of the Foreign Operations Account—US foreign assistance is undergoing a fundamental transformation 

by default rather than design. While the new initiatives and postconflict reconstruction entail large funding increases, existing programs are getting squeezed, and the 

administration’s future budget projections imply a much more severe squeeze over 

time. 

A recent study with a colleague, Gayle Smith, counted over fifty stated objectives 

for foreign assistance, between the Foreign Assistance Act of 1961, as amended, the 

President’s National Security Strategy of 2002, and the President’s fiscal 2004 budget request.1 The net result is that U.S. foreign assistance is not guided by a coherent strategic framework but is instead allocated haphazardly to meet successive 

presidential and congressional imperatives. Improving the effectiveness of U.S. foreign assistance demands a coherent strategy in which assistance instruments are 

arrayed against policy requirements. Absent the more deliberate allocation of foreign assistance, key priorities will go unmet. Even with over fifty stated objectives, 

there are still costly gaps. Despite growing recognition in the national security strategy and elsewhere of the threat posed to the United States by failing states, the 

foreign assistance program lacks the mandate and resources to address this vulnerability proactively. As my colleague at Brookings, Susan Rice, and others have 

pointed out, ‘‘Current development strategies leave little place for significant, non 

humanitarian expenditures in failing states, much less those that have already gone 

into the abyss. There are occasional exceptions in high-profile cases where the U.S. 

military is deployed, as in Afghanistan and Bosnia, but these are rare.’’ 2

The daunting multiplicity of foreign aid objectives is further complicated by a 

maze of U.S. entities involved in the allocation of aid, often with overlapping jurisdictions. Even before the latest initiatives, there were a staggering eighteen separate U.S. official entities involved in foreign assistance,3 and, according to one report, the Agency for International Development (USAID) administered only about 

half of U.S. net overseas development assistance.4

Adding to this morass, recent Presidential initiatives and requests entail new 

structures outside of USAID for the Global HIV/AIDS initiative, the Millennium 

Challenge Corporation (MCA), the Middle East Partnership, reconstruction in Iraq 

and Afghanistan, and proposals for a new Famine Fund and a U.S. Emergency 

Fund for Complex Foreign Crises. Each new initiative appears to be reinventing the 

wheel through new mechanisms whose internal logic may be extremely compelling 

but whose place in the overall structure has been considered little—if at all—in the 

rush of events. 

And the foreign assistance structure does not even include a host of other U.S. 

programs that are of increasing importance to the growth prospects of developing 

countries. These include trade preferences and agreements, involving the U.S. Trade 

Representative, Commerce and Agriculture; debt relief, bilateral investment treaties, and multilateral financial stabilization, where Treasury has the lead; and support for trade and investment provided by Ex-Im, OPIC, and TDA. 

Unfortunately, the proliferation of programs and the confusion of agency roles and 

responsibilities are costly to the U.S. taxpayer, to the morale and effectiveness of 

those administering the programs, and ultimately to the very people we are trying 

to help. One of the most enduring lessons from the many recent studies of aid effectiveness is that diverse conditions and reporting requirements by multiple donors 

can overwhelm the capacity of small, poor countries. According to the World Bank, 

developing countries contend with an average of thirty aid agencies sending at least 

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5 James D. Wolfensohn, ‘‘Aid Donors Should Get Their Act Together,’’ International Herald 

Tribune, February 24, 2003. 6Lael Brainard, Carol Graham, Nigel Purvis, Steven Radelet, and Gayle Smith, The Other 

War: Global Poverty and the Millennium Challenge Account, The Brookings Institution Press, 

2003. 7Lael Brainard and Allison Driscoll, ‘‘Making the Millennium Challenge Account Work for Africa,’’ Brookings Institution Policy Brief 123, September 2003. 

five missions a year each to oversee diverse projects.5 A United Nations study documented 1,500 projects in Burkina Faso alone and as many as 850 in Bolivia. Increasingly, the maze of U.S. programs is part of the problem rather than the solution. 

CHALLENGES AHEAD

This hearing could not come at a better moment. Before turning attention to the 

urgent—the press of more spending requests and the possibility of more new initiatives—there is a critically important need to refine strategy. This entails identifying 

key strategic choices, stating priority goals, aligning existing agency resources and 

structures against them, and ensuring accountability and overall coherence. 

U.S. foreign assistance serves three clear purposes: to promote national security, 

to advance the national interest, and to respond to humanitarian imperatives in accordance with our values. A logical corollary of deploying foreign assistance by design rather than default is that there should be a deliberate, medium term strategy 

for targeted foreign countries rather than the episodic humanitarian interventions, 

strategic quid pro quos, and grab bag of goodies for presidential trips and state visits that characterize current policy. The critical determinants of the types and 

amounts of assistance deployed in a given country—along with complementary 

trade, investment, and debt policies—should be its strategic importance, the extent 

of need, governmental capacity, accountability, and transparency, and the policy environment—both performance and potential. 

U.S. interests in seeing impoverished nations get onto a sustained trajectory of 

poverty reduction and growth will remain the primary purpose of U.S. foreign assistance for the majority of poor nations—although for a minority of U.S. resources. 

Recent years have seen substantial improvement in understanding the kinds of political and policy environments where poverty reduction and growth are most likely 

to take hold and where U.S. assistance is likely to be productive. The MCA is an 

enormously significant opportunity to put those lessons into practice. But it also 

shoulders an enormous burden as a test case whose success or failure could materially affect public support for development assistance for years to come. It is critical 

that we get it right the first time. 

Several colleagues and I have outlined the major risks and key factors for success 

in a recent book.6 Let me highlight a few here. First, it is critical that the mission 

of the MCA be narrowly defined around development and protected from 

geostrategic considerations. Second, there needs to be a much clearer division of 

labor between USAID and the MCA than the administration has thus far established—especially in the field. USAID’s resources, focus, and morale risk being further dissipated by serving as an adjunct to a better funded, more focused, and more 

flexible MCA—while USAID will retain responsibility for providing foreign assistance to the vast majority of the world’s poorest. 

Third, the MCA eligibility criteria must be applied in a way that does not exclude 

ninety percent of the population in the poorest countries in Africa. It is critical to 

ensure that meritorious African nations are not left behind by median rankings relative to countries in regions with completely different conditions, such as Asia. One 

way I have suggested doing that is to regionalize the selection process. This could 

triple the number of low income Sub-Saharan African countries that qualify for the 

MCA from three to nine and double the population coverage in this group to sixteen 

percent.7

But even under these circumstances, there will be a large number of populous and 

needy and in some cases promising countries whose performance will not meet the 

MCA criteria—especially in Africa. Despite administration promises that MCA funding would not come at the expense of existing bilateral assistance, the recent budget 

request would cut Development Assistance—the primary assistance program for the 

preponderance of poor African countries that will not meet MCA performance criteria—by 3.5 percent next year alone and by 22.4 percent in real terms over the 

next 5 years. We need to keep faith with these countries through a consistently applied medium term strategy underpinned by appropriate funding and through greater coherence across the range of U.S. development policies—rather than dealing 

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8 James Dobbins, John G. McGinn, Keith Crane, Seth G. Jones, Rollie Lal, Andrew Rathmell, 

Rachel Swanger, Anga Timilsina, ‘‘America’s Role in Nation-Building: from Germany to Iraq,’’ 

Rand, 2003. 9Lael Brainard and Michael O’Hanlon, ‘‘National Security,’’ in Alice Rivlin and Isabel Sawhill, 

eds., Restoring Fiscal Sanity, Balancing the Budget, The Brookings Institution Press, 2003. 

with them episodically only when there is a humanitarian crisis or on a particular 

strategic initiative. 

America must also stay the course on combating the HIV/AIDS pandemic, a humanitarian tragedy of epic proportions that threatens to reverse impressive gains 

on child survival and health, life expectancy, productivity, and literacy in the 

world’s poorest countries. This will require a growing commitment of U.S. resources 

and much greater coordination between multilateral and bilateral programs. It is 

also important that U.S. programs to combat HIV/AIDS are integrated into broader 

poverty strategies for each country to ensure resources are used to maximum effect, 

recognizing the pandemic leaves its mark on all dimensions of development from 

education to productivity to demographics. 

Beyond this, the U.S. should develop a more strategic approach to threats that 

spill across borders in this global age. There is great potential for the U.S. government to play a catalytic role in identifying such global challenges and helping channel private sector innovation and resources toward solutions. I am struck that the 

development lore is littered with broken wells and wasted money, and scarcely mentions the enormous achievement of the Green Revolution or the successful campaigns against small pox, polio, and other killer diseases. Today, for example, collaboration between the Gates Foundation and international and bilateral agencies 

has potential not only to extend existing vaccines to children in poor countries but 

also to make it commercially attractive for U.S. companies to invest in developing 

new vaccines for killer diseases such as malaria. The U.S. has unrivalled capacity 

for technological advance, and abundant experience of successful collaboration between the U.S. government, private foundations, and the private sector in the fight 

against global poverty. 

Because the war against terrorism and the war in Iraq have defined a new breed 

of post-cold war allies, the majority of total U.S. aid dollars will continue to go to 

countries selected on the basis of political and strategic criteria over and above development criteria. For those countries where the U.S. has overriding strategic interests, it has historically proven very difficult to demand performance and to 

achieve sustained improvements—especially on democratization and governance. Indeed, during the Cold War, U.S. economic assistance for strategic purposes was too 

often equated with development assistance, contributing greatly to aid’s discredit. 

Foreign aid allocated according to geopolitical criteria is one area that requires some 

especially hard headed thinking about goals, measuring results, and demanding performance. 

Another aspect of national security related assistance that merits immediate attention is that of failing states. Although U.S. involvement in so-called ‘‘nation 

building’’ was a subject of some controversy during the 2000 election, just three 

years later the United States has taken on two such exercises of daunting proportions. This follows on four post-conflict reconstruction projects in the past decade 

alone, initiated under presidents from both parties, making the endeavor fully bipartisan. Like it or not, stabilization and transition in post-conflict societies are likely to remain unavoidable U.S. responsibilities.8 Failing to prepare for this reality 

would be negligent and shortsighted. Recent studies at Brookings and Rand have 

called for a more deliberate approach to such exigencies. This could include the creation of a standing civilian capacity that could be quickly deployed and ramped up 

through outside contracting—instead of reinventing the wheel each time with idiosyncratic reporting structures and little institutional memory.9 This would also help 

to reduce the burden on an over-stretched military, which, in Iraq as elsewhere, is 

often asked to do things that are largely civilian in nature, simply because it is better equipped to respond quickly and to find resources for unanticipated missions. 

DELIVERING ON THE PROMISES

Although the administration’s many new initiatives have lofty goals, there is a 

tendency to overpromise and underdeliver. An effective foreign assistance strategy 

depends on strong organizational underpinnings. This will require rationalizing the 

multiplicity of U.S. agencies administering assistance and creating clear reporting 

lines, establishing a coordinating mechanism to bring some coherence across our 

trade, aid, investment, and financial policies, and putting a much greater emphasis 

on working with other donors rather than going it alone. 

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10Lael Brainard, Carol Graham, Nigel Purvis, Steven Radelet, and Gayle Smith, The Other 

War: Global Poverty and the Millennium Challenge Account, The Brookings Institution Press, 

2003. 11Lael Brainard and Michael O’Hanlon, ‘‘The Heavy Price of Going It Alone,’’ The Financial 

Times, August 6, 2003. 

Since the inception of the Marshall Plan in 1948, six separate agencies have been 

created to address international development-only one of which exists today. Unlike 

past efforts, the Millennium Challenge Corporation and the administration’s other 

new initiatives create new structures without either replacing or triggering the reorganization of already existing foreign assistance programs. This has the potential 

to lead to bureaucratic duplication and misalignment of staff responsibilities and 

performance evaluation. A number of proposals have been put on the table for 

rationalizing the unwieldy foreign assistance structure, including by creating a new 

cabinet department or appointing a czar to oversee coordination or subsuming all 

the activities under the State Department. It is time to consider this question anew. 

At minimum, there is a need for a new policy coordination process to ensure deployment of all the development tools in the U.S. arsenal in a mutually reinforcing 

way. This should include foreign aid, technical assistance, debt relief, trade preferences or trade agreements, export credits, investment support, and bilateral investment treaties. Our study on the MCA recommended that this could be done by 

expanding existing coordination mechanisms, as one possible alternative.10

Finally, in virtually every new program discussed above, coordination with other 

donors and international agencies is an afterthought at best. It would be a terrible 

irony if the laudable goals of the new aid programs were perceived as America again 

going it alone. The risk is real, since the new initiatives bypass international efforts 

and existing aid agencies in favor of U.S. programs with idiosyncratic criteria and 

newly invented institutional arrangements. In foreign assistance programs ranging 

from post conflict reconstruction to combating HIV/AIDS, unilateralism has a 

price—and the loser is the U.S. taxpayer.11 Surprisingly, the recent budget request 

proposes a significant cut in voluntary contribution to the UNDP at a time when 

their work on postconflict reconstruction and democratization is especially vital. 

Complementarity with international efforts and the amount of international funding 

leveraged by U.S. dollars should be a key criterion for evaluating every assistance 

program we fund. 

CLOSING THOUGHTS

Paradoxically, it is those who most strongly support expanded U.S. support for development in the poorest countries that should be most worried about the proliferation of programs and confusion of roles. Recent history leaves little ambiguity about 

the risks. If we are not hard headed about the strategy guiding our assistance programs, ruthless about demanding results, and relentless about organizational efficiency, there will surely be a backlash that guts aid programs indiscriminately rather than on the basis of merit or results.

Mr. ROHRBACHER. Determining that progress in poor countries 

should be much easier than in Germany and more affluent countries, shouldn’t it? Because if there is progress happening in a society, it is much more demonstrable, is it not? But we will get back 

to that later on. 

Thank you very much for your very interesting and poignant testimony. 

Mr. Cronin. 

STATEMENT OF PATRICK M. CRONIN, PH.D., SENIOR VICE 

PRESIDENT AND DIRECTOR OF STUDIES, CENTER FOR 

STRATEGIC INTERNATIONAL STUDIES 

Mr. CRONIN. Thank you, Mr. Chairman, and to Mr. Payne and 

distinguished Members of this Committee. 

I feel like I am going to echo a lot of what has already been said, 

and I don’t want to do that. So I want to even reduce my introduction more than I would have by simply saying that there are three 

points to be made here. 

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There has been a resurgence in foreign aid in the past few years, 

since 9/11, in fact. And this is a remarkable time, therefore, to hold 

this hearing, which hopefully will begin a process that I would 

liken to the Defense Reorganization Act of 1986, the GoldwaterNichols Act, where Congress played a pivotal role in trying to 

streamline and organize various institutions that had grown over 

time, but no longer were equally aligned to the tasks at hand. 

We do face three goals, really, with foreign aid. We can reduce 

it to three. I think Steve Radelet’s four could also be agreed to. 

But there is a security goal, first and foremost. I think most 

Americans would want to know how can our economic tools of policy be integrated to defend our security interests. 

And when we speak about foreign aid, we are talking about the 

developing world. And the developing world is riven with three 

basic problems. Obviously very weak institutions, often because of 

conflict, but there is no good government in many cases. It is very 

weak. 

There is now a problem of political extremism, in the form of extreme political Islam in particular that Americans are worried 

about post-9/11. And foreign aid can do something about that. Not 

a lot; it is one more instrument. But it needs to be thoroughly integrated into the mix of our policy tools. 

And thirdly, there is the bigger problem of proliferation. And 

again, foreign aid is not the chief answer for that, but it can play 

a role at the right time. 

And when we think about security, we can think, therefore, 

about what we need to do with foreign aid institutions. We need 

to deal with the post-conflict situations that we face now, in Iraq, 

Afghanistan, and Sudan. We need to deal with governance issues 

and institutions to the extent we can. UNDP Air World reports, the 

last two reports have indicated that this is a huge deficit. And we 

can use foreign aid tools to work on this. 

And we can also create the leadership at the community, regional, and national level in a lot of these countries that are at 

risk, to be part of the longer-term solution. Through education programs, for instance. 

So security and foreign aid are now related. And that is why this 

all matters, in part. 

But secondly, and just as importantly—Mr. Payne in particular, 

we have had discussions on the Millennium Challenge Corporation—attacking poverty, economic growth, again, they are inseparable. We have to deal with them across the differentiated levels 

of countries, just as Steve Radelet and Lael and others have talked 

about. 

And the Millennium Challenge Corporation is not the answer to 

all development. It is to try to provide a whole new incentive, focused on governance and national economic growth that will allow 

sustainable development. Because how do you let these countries 

grow out of poverty in the longer term? That is the big question. 

They need ownership. They do not have it now, because we do 

not give them ownership. They need economic growth. We do not 

have economic growth, because we are so focused on individual 

projects and sectors. It is all broken down. 

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If you went to AID today, and I was there watching all of this, 

very different from the Kennedy Administration where it was set 

up. We do not give a mission director $200 million and say, ‘‘Find 

out what is needed on the ground, and spend it strategically for 

economic growth.’’ We no longer do it. So it is predetermined, basically, in Washington, and it is some very small pots of money. 

And we have got to focus on the issue of governance. And this 

goes back to, if you do not deal with the policy environment—I 

mean, the UNDP report that is coming out, this excellent commission on mobilizing the private sector for development, it talks exactly about that. The principle responsibility for development rests 

with the developing countries. And that principal responsibility is 

good policies. There has to be political will. And that is what the 

Millennium Challenge Corporation puts in place, a new incentive. 

Then the next tier of countries, as Steve Radelet was saying. Retool U.S. agency for international development to help those countries achieve the good governance, and qualify for the Millennium 

Challenge Account in future years. 

And then for the lesser countries that we still can’t ignore, let’s 

just stop trying to do everything in those countries, but still 

achieve an attack on poverty. And that is what the President has 

started to do, for instance, through a major emergency plan on 

HIV/AIDS, malaria, and tuberculosis. 

So besides the health problem, also the President has reemphasized education. And we can do more than that. We could actually 

achieve the Millennium Development goal of 2015 of basic primary 

universal education by focusing even more on education. Not just 

U.S. dollars, but leveraging our leadership internationally. So that 

is this tiered approach across the developing world. 

And then thirdly, the third goal of development is humanitarian. 

We are leaders on humanitarian assistance. We should continue to 

be leaders. 

The things that we need to fix is to be more preventive. We can 

actually prevent famine. We do not have to simply provide the food, 

we can actually go in and help with governance, agricultural policies, and so on. Administrator Andrew Nazzios, for instance, has 

spoken eloquently for this and other Committees on some of those 

ideas. 

So those are some of the things that need to happen. Those are 

the goals. I agree with a lot of the recommendations that have already been said. And let me just say that a commission, an independent commission to try to help bring all of these issues together 

for post-election, when we can have the Congress next year think 

about whether we have a new Foreign Assistance Act, or whether 

we fix major parts of it, that should be on the table. How we reconcile the creation of new institutions like the Millennium Challenge Corporation with USAID and other parts of the government, 

that needs to be on the table. How we build non-defense institutions to deal with post-conflict environments, that needs to be on 

the table. 

So we have a lot to do in this country. But just as with the Goldwater-Nichols Act, that is all right. It will take time. It will take 

building a consensus, a bipartisan consensus, that the United 

States will be able to go forward internationally, as it did in the 

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sixties, and will be able to lead the international development debate and foreign assistance debate in a way we haven’t done for 

decades. 

Thank you very much. 

[The prepared statement of Mr. Cronin follows:]

PREPARED STATEMENT OF PATRICK M. CRONIN, SENIOR VICE PRESIDENT AND

DIRECTOR OF STUDIES, CSIS 

I. INTRODUCTION

Chairman Hyde, Mr. Lantos, and members of the Committee, thank you for conducting this hearing on how the United States Government can make foreign assistance programs more strategic, coherent, and effective. This Committee has historically played a pivotal role in shaping the debate and providing essential authorization for America’s foreign assistance policies and programs. A fundamental review 

and reshaping of those programs is long overdue. Hopefully, this hearing will launch 

a larger debate and process to transform our foreign assistance programs so they 

adequately address our nation’s security, economic, and humanitarian objectives. 

Let me begin by making three points. 

First, in the past couple of years we have seen the resurgence of foreign aid. Indeed, 

foreign assistance has assumed an importance within U.S. national security that it 

has not enjoyed since the Marshall Plan more than half a century ago. At the same 

time, the United States has an extraordinary opening in which to reassert leadership among wealthy countries with respect to aid. 

The Bush Administration deserves much credit for reinvigorating foreign assistance in support of U.S. interests and values. In particular, let me commend the administration for three major endeavors. President Bush has begun to attack global 

poverty by ushering in a new focus on achieving economic growth, education and 

health in the developing world-chiefly, through the creation of the Millennium Challenge Corporation, renewed attention to education, and the Emergency Plan for 

AIDS Relief. Next, he is grappling with the problem of weak and failed states, which 

he highlighted in his 2002 National Security Strategy, by focusing on key problems 

of political extremism, corrupt governance, and weapons proliferation. Finally, 

President Bush has at once demonstrated American generosity and compassion by 

taking the leading role in providing humanitarian aid and preventing famine 

around the globe. Collectively, these efforts have revitalized foreign assistance, and 

we have a unique opportunity to build both a bipartisan and international consensus around our leadership. 

Second, if we are to realize this opportunity, we are going to have to change the 

way we do foreign assistance. Paradoxically, at the same time as I praise recent 

steps taken to resurrect aid, I also tell you unequivocally that our foreign assistance 

programs are in many ways broken and obsolete. The United States Agency for 

International Development (USAID), for instance, is far removed from the golden 

Kennedy Administration era when mission directors were given the resources and 

the flexibility to focus on a core set of objectives determined in the recipient country. 

When I was named the third-ranking official within USAID in 2001, I was 

dumbstruck to learn that the central goals of achieving economic growth and poverty reduction were buried in a sea of more than 300 competing ‘‘strategic objectives’’ spread across nearly 100 countries. 

Notwithstanding considerable success at the project or sector level, our foreign assistance programs are unfocused, opaque, and sclerotic. There remains a great deal 

to reassess and do together if we are to harness economic instruments of policy to 

the benefit of America’s power and purpose; bolster the standing of the United 

States in the world; restore U.S. leadership in the realm of foreign aid; and provide 

for innovative and effective governmental aid programs and policy. 

Third, the direction in which we need to go is apparent, but leadership and followthrough from both the Executive and Legislative branches of government are the sine 

qua non of successful transformation. Specifically, some of the measures that need 

to be considered are as follows:

• Rewriting the whole or significant parts of the 1961 Foreign Assistance Act;

• Requiring a single, integrated U.S. foreign aid strategy every four years;

• Implementing the full measure of the Millennium Challenge Account as a 

new paradigm for achieving economic growth and hence sustainable development among poor countries hewing to good governance;

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• Retooling USAID to focus on helping the next group of countries qualify for 

Millennium Challenge Account grants;

• Forging stronger institutions for shoring up weak and failing states, and for 

disarming, securing, and building state institutions in countries recovering 

from conflict, such as Afghanistan and Iraq;

• Creating greater policy coherence by demarcating the division of labor among 

governmental aid entities, establishing a unified and common-sense budget in 

which it is obvious how each account should be spent, and improving the natural synergy between trade and aid;

• Better direction of aid programs to support mid-to-long-term approaches to 

countering terrorism;

• Improving our capacity for measuring results; and

• Building a new international consensus among wealthy countries on foreign 

assistance priorities.

These are the major missing elements in the revolution in foreign assistance that 

is now underway. Myriad actions and proposals have yet to be put into a coherent 

overall strategy; we lack an effective, integrated architecture for making informed 

decisions on how to use foreign aid as part of an overarching policy; and when it 

comes to expecting results from key officials we have a dangerous misalignment between their authority and their responsibility. New authorization, reorganization 

and reform are essential as we move forward. 

This is an ambitious agenda. One thing to remember is that sometimes we can 

do more by doing less. Although there are multiple uses of foreign assistance, we 

must find a way to streamline our fundamental objectives so that we can focus our 

resources and enhance our chances of success. We need a single integrated strategy 

document that relates the ends of the National Security Strategy to the specific 

means of our foreign assistance programs and budgets. 

The transformation of our foreign assistance programs can be likened to defense 

transformation. The historic Goldwater-Nichols Defense Reorganization Act of 1986, 

for instance, took nearly five years of debate—not to mention military debacles such 

as in Beirut and before that the desert of Iran—to galvanize a consensus and action. 

Surely the limits of our achievements in the developing world—whether to promote 

economic growth and democratic governance, or to stem the rise of poverty and disease, or to rebuild state institutions in the wake of war—should serve as an analogous impetus for change and renewal in the realm of foreign assistance. However 

long this process takes, let us hope that we can all look back at this hearing today, 

and others like it, as marking the beginning of that effort. 

II. FOREIGN AID’S RESURGENCE

Foreign aid has been resurrected like a phoenix from the ashes. Politics aside, the 

United States’ foreign aid budget was on a sharp decline throughout most of the 

1990s. While the ‘‘hard power’’ of military might has grown increasingly strong in 

the past forty years, the ‘‘soft power’’ of foreign aid—in many ways more effective 

and efficient at winning over the post-Cold War world to American values of freedom and opportunity—has been left to stagnate. Though the 1990s saw significant 

global progress in development, the reason behind the gains had more to do with 

the economic growth programs in China and India, the two most populous developing countries, than the effects of foreign aid. USAID assistance, in constant dollars, remained basically flat overall. This budget trend-line masks the fact that 

USAID had also lost some 1,800 trained Foreign Service officers during this period. 

By 2000, USAID stood at roughly 1,200 professionals worldwide, and the ranks of 

specialists in key technical areas such as development economics, agriculture, education and engineering were greatly reduced. Ability to carry out the staggering 

array of directives stipulated in the unwieldy Foreign Assistance Act sank, as this 

assistance remained an incoherent mix of earmarks from Congress and initiatives 

from the White House. In trying to do everything nearly everywhere, American foreign aid had become slave to the conceit that everything was equally important—

the classic recipe for losing focus. 

The Marshall Plan remains the high watermark of the American experience in 

foreign aid. Some fifty years later, President George W. Bush and his policy advisors 

face the dual challenge of returning to successful development practices and increasing the means available to do so more effectively. Much of their policy formulation 

has been driven by the lessons learned from aid effectiveness literature and the best 

practices gleaned from the history of aid performance. However, before attempting 

to benchmark current efforts to those of the past, we need to bear in mind one major 

trend of the past decade—globalization. In the 1960s and 1970s, about three-fourths 

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of U.S. assistance to the developing world emanated from the public sector. Today 

the opposite is true; three-fourths of money flowing to the developing world comes 

from the private sector, trade and investment, and remittances. 

The catastrophic events of September 11, 2001 highlighted the need for intense 

focus in U.S. foreign aid policies, which far too often had been omnivorous in promises but anorexic in results. Foreign aid was vaulted to a renewed position of prominence in foreign policy. This greater attention has provided policymakers with an 

opportunity to re-vitalize and re-orient our foreign assistance policies toward best 

practices. The current Administration’s efforts to resurrect foreign aid have given 

all of us a chance to push for a new, bipartisan consensus on the central goals and 

implementation of foreign aid. This consensus must tackle, among other things, several key issues. For one thing, we need to come to an agreement between the Legislative and Executive branches on the timeframe we are dealing with. At the same 

time, we need to be able to work across more budget cycles and even administrations than we currently do if we are to avoid a foreign aid ballet comprising one 

never-ending pirouette. 

The prospect of the United States reverting to a stronger commitment to development and foreign assistance—a role that has steadily declined since the 1960s—has 

won great support in the international community; while that support has been 

overshadowed by the high policy over Iraq, there continues to be an opportunity to 

help consolidate other major donors, both bilateral and multilateral, behind U.S. approaches. For example, the United Nations Commission on Private Sector Development will present a new report next week that is notable both for its congruence 

with some of the thinking of the Millennium Challenge Account and for the inclusive step of seeking to tap the power that can be come from engaging the private 

sector in the work of development. 

International consensus and cooperation will be critical to success in our development efforts. Most stakeholders would agree that past performance has shown that 

an increased level of foreign assistance is not enough to ensure positive or sustainable development outcomes. Today’s global development agenda is expected to address a wider range of policy concerns than in previous decades (e.g. HIV/AIDS, 

water scarcity, corruption, human trafficking), and the international development 

community is also expected to demonstrate tangible results with a newfound sense 

of urgency. The war on terrorism, from the perspective of the development community, becomes another, urgent and important, priority in this complex agenda. The 

stark reality is that future success will likely rest on two pillars: pursuing policy 

innovations with partner governments and applying best practices on the ground. 

Without these pillars, no resurrection of foreign aid will succeed. 

The Bush Administration has launched some 20 new initiatives in the past three 

years. These initiatives have centered on innovation grounded in best practices and 

are thus exciting steps toward a revitalized foreign aid system for the United States. 

However, because of the fragmentation of our foreign assistance programs and agencies, it is not clear whether there is an overarching strategy and, if so, what it is. 

The new initiatives serve to further fragment the whole. Before we continue in this 

vein, we will need to identify an overall strategy that stipulates objectives and 

means for foreign aid. 

Permit me to step back a moment to synthesize the three main objectives of foreign assistance; that is, the three realms in which foreign assistance policy can provide critical tools. These are: attacking poverty, grappling with weak and failed 

states, and leading the world with respect to humanitarian assistance. 

Attacking poverty 

In a world of increasing prosperity the gulf between the ‘‘haves’’ and the ‘‘have 

nots’’ is untenable, particularly because we possess the tools to attack global poverty: namely, by ushering in a new focus on achieving broad-based economic growth, 

backstopped by investments in the health and education of people in the developing 

world. Programs fundamental to this assault on global poverty have been the creation of the new Millennium Challenge Corporation; stemming the biggest health 

problems of AIDS, tuberculosis and malaria; and ensuring a primary education for 

all. 

Grappling with weak and failing states 

The Bush Administration’s 2002 National Security Strategy highlights grappling 

with the problem of weak and failed states as a key element. The administration 

has since then focused on a deadly triad of problems: political extremism, corrupt 

governance, and potential weapons proliferation. Post-conflict institution building in 

Afghanistan and Iraq is receiving the lion’s share of attention. At the same time, 

the elevation of good governance, in and beyond the greater Middle East, cuts across 

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economic and security objectives. From the Balkans to Colombia to Angola and Afghanistan, foreign aid is being used to quell violence and produce a foundation of 

stability and governance that can, in turn, lead to successful development. Promoting good governance as a bulwark against extremism and terrorism by inculcating moderation and stability is a major national security objective for which foreign assistance and economic instruments of policy are particularly well suited, albeit within limits. Achieving good governance is strongest as a crosscutting goal that 

should be built into the incentives of economic-growth-oriented aid, as well as into 

humanitarian aid or assistance to civil society around the margins of a corrupt government. 

Governance is an issue in what might be considered front-line states in the campaign against international terrorism, from Egypt and Jordan in the Middle East 

to Pakistan and Indonesia in South and Southeast Asia. Here we have governments 

that are closely aligned with the United States and are willing to consider sacrifices 

for the good of the nation provided they can be reconciled with political survival and 

stability. There is also a group of less scrupulous leaders who would likely not implement economic incentives to broadly help their country at their own personal expense. These include some Middle Eastern countries, perhaps some Central Asian 

countries, and certainly a country like North Korea. In these countries, it may be 

useful to subordinate aid to larger purposes, but it is not realistic to expect the ‘‘carrots’’ of foreign aid to tip the balance toward good governance when larger strategic 

and security interests are in play. In some of these cases, it may be appropriate to 

tailor more punitive, particular smart sanctions (such as limiting the travel of regime family members, for instance) to gain the attention of these regimes. Another 

group of countries have considerable political will but institutional ability lags far 

behind; for these countries, economic incentives may indeed help. National and global security depend on having the flexibility to respond to countries such as Georgia 

or Kenya where a new government comes into being that is head-and-shoulders 

above its predecessor; we must reward these countries by providing a timely package of financial and technical assistance for these governments to meet the lofty expectations confronting them. This will shore up regions and give other weak or failing states an example for which to strive. 

Providing humanitarian relief 

Thirdly, the Administration appears committed to demonstrating American generosity and compassion by taking the leading role in providing humanitarian aid 

and preventing famines around the globe. We must carry on in this task. There will 

continue to be a predictable need to manage humanitarian crises, whether of natural causes such as earthquakes or hurricanes, or at least partly man-made such 

as with some famines. The United States is proud to be the largest bilateral donor 

of humanitarian assistance, and President Bush has made the argument that it 

should continue to play this role. Nothing speaks to the character of the American 

people more eloquently—nor reminds Americans of the need for us to use wealth 

to help the neediest—than this role. While within our bureaucracy we need to be 

mindful of our shortcomings and the need to provide for an effective professional 

corps of people who can respond to foreign disasters, our humanitarian relief in the 

wake of some natural or man-made disaster can be remarkably effective. This is 

often achieved in tandem with other organizations. For example, USAID provided 

funding and support so that the U.N. World Food Program (WFP) in Afghanistan 

could deliver an unprecedented amount of food in record time; over 9 million men, 

women and children were fed by wheat, oil and lentils delivered from the United 

States. 

These three roles for foreign aid are not simply a theoretical structure but have 

a deep and abiding basis in resource debates. And in order for foreign aid to be effective as it is employed toward these three objectives, aid commitments need to correspond not just to promises, but lead to concrete results. We must create development programs that have built in the right incentives to achieve critical reforms in 

recipient countries, thereby maximizing each dollar’s effectiveness. In recipient 

countries, our foreign aid can and should contribute to the creation of policies that 

create open political processes, promote financial transparency and curb corruption, 

while also making a strong commitment to open economic opportunities, whether 

that is monitored by the credit rating of a country or measured by the number of 

days it takes to start a business. 

Foreign aid, whether for purposes of economic growth or other foreign policy aims, 

should be treated as conscious strategic investments. Too often, foreign aid is simply 

set in motion and kept alive by the inertia of bureaucracies. Policy makers have 

erred by focusing on singular tasks without facing realistic tradeoffs over how else 

to spend public money. One lesson I learned from my experience within USAID was 

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1For a longer discussion of this topic, see Patrick Cronin in Audrey Kurth Cronin and James 

D. Ludes, eds., Attacking Terrorism: Elements of a Grand Strategy, Georgetown University 

Press, (2004). 2 Robert I. Rotberg, ‘‘The New Nature of Nation-State Failure,’’ The Washington Quarterly, 

(Summer 2002) p. 85. 3 Rotberg at p.90. 

how far the bureaucracy had become Balkanized, satisfied and self-interested in protecting a small program at the expense of the larger objective of country transformation, of helping to work in partnership with people who want to transform the 

fundamental quality of their lives. 

At the same time, many forget that foreign aid is relatively small when compared 

to other financial flows. Development aid totaled about $54 billion in 2000; this was 

only one-third as much as foreign direct investment in developing countries ($167 

billion). The U.S., for example, contributed $11 billion dollars in official development 

assistance in 2001. American private capital investment in developing countries 

averaged roughly $12 billion a year over the last three years. Given this discrepancy 

in scale, aid effectiveness has to primarily come through catalyzing institutional development and strategic policy changes that promote economic growth. 

There remains, however, a mismatch between the objectives for which the United 

States hopes to use foreign aid in the future and the current means available for 

such assistance. Indeed, as a percentage of U.S. GDP, spending for foreign assistance has dropped from 0.5% to 0.1%. The needs of the developing world, and even 

the Islamic world stretching from North Africa to Central Asia to Indonesia, greatly 

surpass available donor aid. The Marshall Plan, by contrast, pumped the equivalent 

of nearly $100 billion into 17 countries over three or four years, which is significantly more money than even the largest missions, such as Egypt and Indonesia, 

receive today. The sum was large enough to be used for major investments; there 

was local ownership of the projects; and the governments committed to broad economic reforms and support for political pluralism. If the U.S. is willing to adapt aid 

to achieve effective results in pursuit of dampening the sources of terrorism, or at 

least addressing moderate institutions that can serve as bulwarks against terrorism 

and its supporters, then it will have to devote the necessary resources while focusing on specific areas and ends and maximizing coordination. 

III. REORGANIZING FOREIGN AID

Especially considering the flurry of new initiatives, we are currently operating 

without a solid consensus with respect to an overarching strategy for foreign aid. 

The need to clarify roles, responsibilities, the decision-making process, and the 

interagency and international policy coordination process grows more urgent by the 

day. 

Even while we discuss reorganizing, we face a critical imperative for more follow 

through with the initiatives underway. The path is clear but there is much that remains to be done in each of the three abovementioned uses for foreign aid. 

Successfully combating poverty requires the full implementation of the MCC and 

embedding its principles as the new paradigm for development. In addition, we 

must forge free trade areas not just in Southern Africa but also in Central America 

and complete the Doha Round. We must implement the AIDS, tuberculosis and malaria fund not just in the initial 14 countries but in soon-to-erupt follow-on areas, 

as well. Finally, we must extend U.S. leadership in education by considering the notion of calling for the G–8 countries to commit to achieving the goal of education 

for all by 2015. 

Strengthening weak or failing states can be achieved through a greater focus on 

governance in all our foreign aid programs. We will need to devote the time and 

resources to making significant progress in institution building in Iraq and Afghanistan. Also, we should strategically target greater assistance to countries and areas 

of countries at risk of extreme forms of political Islam, not just in the Middle East 

but also in South and Southeast Asia.1

State failure occurs because governments ‘‘no longer deliver positive political 

goods to their people’’ and they ‘‘lose [their] legitimacy and, in the eyes and hearts 

of a growing plurality of its citizens, the nation-state itself becomes illegitimate.’’ 2

Officials and institutions in these countries have completely failed to deliver political goods such as national security, public safety, economic opportunity, education 

programs, health services and the rule of law. Afghanistan, Angola, Burundi, the 

Democratic Republic of Congo, Liberia, Sierra Leone, Somalia and Sudan represent 

the failed or collapsed states of the last ten years while many more have been on 

the brink.3 In all these cases, the state failure was man-made; it resulted from polVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00083 Fmt 6633 Sfmt 6621 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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4 Ray Takeyh and Nikolas Gvosdev, ‘‘Do Terrorist Networks Need a Home?’’ The Washington 

Quarterly, (Summer 2002), p. 105. 

icy decisions and leadership failures rather than natural disasters, geography or 

pestilence. The resulting vacuums in power and authority attract criminal and terrorist networks that have demonstrated time and again their global reach. Once inside, these groups hide behind the professed sovereignty of the failed states and 

their extraction becomes both a diplomatic and military challenge. Prevention therefore is clearly better than cure because once military operations commence and then 

cease the arduous task of state building begins. We cannot, however, expect to 

strengthen weak states remotely from Washington, DC. We need to recognize that 

failed states put development professionals at considerable risk, but realistic prevention efforts require people on the ground ‘‘focusing on existing conditions and 

working to rebuild and reconstruct viable institutions.’’ 4

For our humanitarian purposes, in addition to providing the food and medical 

supplies to the national and international mechanisms for rapid response, we need 

to be better poised for preventive engagement, from better early warning of crises 

to proactive measures to prevent such problems as famine. 

Redirecting aid will require agreeing on the main goals, which will necessarily 

overlap. In order to ensure that our policies are then tightly bound to those goals, 

we will need to agree on a new architecture for formulating policy, coordinating 

among donors, delivering assistance, and monitoring and reporting results. 

The status quo is a loose collection of agencies working on some aspect of development. Over time, the effect has been largely to diminish the role of USAID, which 

actually has the mission in its title. While new initiatives have been coordinated on 

a case-by-case basis, this has left huge questions about the rest of our development 

infrastructure and particularly USAID. The result is that aid’s implementation is 

piecemeal rather than holistic; redundancy and overlapping jurisdictions abound; accountability is often unclear; and new initiatives are not yet understood with respect 

to their integration into decision-making. 

There are two basic bureaucratic models for organizing U.S. foreign assistance 

programs:

• Hub-and-spokes model: This approach would make an existing Cabinet member, namely the Secretary of State, responsible for determining our overall 

foreign assistance policies that address security, economic, and humanitarian 

needs, while allowing individual agencies to be primarily in charge of ensuring successful implementation. Under this model, deputy-level heads of 

USAID, the MCC, and perhaps other institutions would report directly to the 

Secretary of State. This would be a logical refinement of recent trends, which 

have been marked by the creation of a new permanent interagency Millennium Challenge Corporation responsible to a board headed by the Secretary 

of State; a new coordinator for HIV/AIDS within the State Department; and 

the decision to make the Administrator of USAID report to the Secretary of 

State.

• Consolidated model: This approach would join policymaking and operational 

control within a new department with Cabinet rank, such as the United Kingdom’s Department for International Development. While it would represent a 

significant departure from the status quo, a new department would allow for 

USAID, MCC, the AIDS coordinator and others to be integrated into a single 

arm of the government that would still have to work closely with the State 

Department, as well as the Defense Department and other government agencies. There are various tradeoffs in creating a new department, and the issues 

are sufficiently complex that they deserve rigorous study. 

IV. REDIRECTING FOREIGN ASSISTANCE

As President Bush dictated in his National Security Strategy, foreign aid has a 

critical role to play in the United States’ foreign policy. However, at the same time 

it is vital not to oversell what aid can accomplish, and, crucially, we must remember 

that the manner in which we give aid is far more important than the sum total of 

aid. 

Toward that end, we must improve aid’s peripheral view so that it can be more 

flexible, responsive and accountable. For USAID, this will mean changing the current five-year country planning process to incorporate a broader view beyond the 

U.S. bilateral stovepipe. The Millennium Challenge Corporation and other international donor organizations are implementing long-needed fresh ideas, and we 

must require a mechanism for communication and coordination that enables the full 

81

measure of U.S. foreign assistance to benefit from the effective and efficient strategies developed. It simply should not be acceptable to the American taxpayer to hear 

the same old song that programs are ‘‘successful,’’ even when overall results desired 

are lacking due to a bureaucratic refusal to select the best means of delivering assistance, thereby impeding an opportunity to reduce waste, fraud and abuse. 

Improved coordination and communication could be arrived at through requirements such as the following:

• Identification of dollar amounts of Official Development Assistance coming in 

the last five years from various sources. This would show how the United 

States Government’s stream is one among several and negate the assertion 

that the United States can or should operate in isolation from these other 

sources;

• Discussion of how much foreign aid the United States gives as a percentage 

of our economy’s GDP. This would create greater political support for increased aid as Americans see how little we actually give;

• Identification of the percentage of the fiscal budget that is financed through 

external sources;

• Discussion of the differing approaches of various bilateral donors (e.g., supporting the budget of a recipient country versus providing assistance for specific projects). Here, compare European approaches such as the British DFID 

and USAID;

• Asking for a qualitative assessment of how assistance is coordinated around 

a national development strategy;

• Comparison of the relative success of the country to generate economic growth 

and reduce poverty over time; and

• Identification of any broad lessons learned in development practices.

Meanwhile, through measures such as those set out in the beginning of this 

paper, we need to deal with what might be called the three major weaknesses of 

our foreign assistance approaches: policy incoherence; the lack of the lack of consensus on aid in the international community, where many feel the U.S. would prefer to ‘‘go it alone’’; and inadequate responses to weak and conflicted states. 

Coherence 

The chief problem with foreign assistance is the absence of clear and obtainable 

goals, not organization. As long as our development dollars are spread around chasing hundreds of so-called strategic objectives rather than more tightly focused on 

economic growth and good governance, then considerable failure will be foreordained. The Bush Administration has revitalized aid not just by nearly doubling 

development spending but above all by putting forth clear strategic objectives. His 

initiatives, however, do require a reassessment of how to achieve greater interagency coherence. The MCC provides such unprecedented cooperation in microcosm. 

Public calls for creating a new cabinet-level department contribute to a national debate; meanwhile, we need effective cooperation between our policy-making State Department and our main operational agencies such as USAID and now the MCC. In 

the longer run, we need a rigorous study of organizational options that might be 

considered after the election by both the Legislative and Executive branches of government. 

Consensus 

Critics like to seize upon the highly emotional debates leading up to the Iraq conflict as symbolic of U.S. unilateralism. Such a limited focus does not do justice to 

the progress some officials have sought to make in widening the consensus on development, from U.N. forums like the Conference on Financing for Development in 

Monterrey, Mexico in March 2002 and the World Summit on Sustainable Development in Johannesburg, South Africa in August 2002, to G–8 summits. But having 

dealt with the international donor community for more than two years as Assistant 

Administrator at USAID, and given my frequent contacts with the international 

donor community since leaving government, I can tell you we have a much larger 

divide than we should. Because of Iraq more than any other reason, we have failed 

to capitalize on innovative approaches and increased spending to bring other major 

donors on board with some of the ideas, show them how they affect their policies 

and foreign aid programs, and work through conflicts. The potential for international cooperation is great, but certain steps will have to be taken in order to 

jump-start the process, starting with greater communication. The MCA and Millennium Development Goals can work in concert; the amount of money we spend to 

fight AIDS bilaterally should be optimized to fit with the amount we channel 

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through the Global Fund; and we need to find ways to work closely with the international financial institutions and regional banks. One of the biggest hurdles to 

greater coordination stems from the fact that many European and Middle Eastern 

governments are unsure about American intentions for giving foreign aid; even the 

noblest motives will accomplish little if they are not communicated in a credible dialogue. 

Conflict Areas 

We may yet need a new office just to deal with weak and failing states, as well 

as a generous new fund to channel to these countries. But there are some 60 countries in the world that are either failed, failing, or capable of suddenly being perceived as failing. We cannot realistically hope to set aside enough tax money for foreign assistance to make a fundamental difference in all of these countries. Instead, 

we must make priorities, and the Bush Administration has done this. It must stay 

the course on helping with reconstruction in Afghanistan and Iraq. It must seize opportunities for cementing peace, as it has done in Angola, Sri Lanka, Sudan and 

elsewhere. It must bolster our national capacity for stability operations (the Department of Defense) and institution building (State/USAID and others). It must focus 

on those specific countries and regions where conflict could erupt through terrorism 

and proliferation. The Bush Administration is doing that with the Middle East Partnership Initiative, which works toward good governance not just in poor countries 

but also wealthy ones that help finance terrorism. At the same time, the sine qua non for a greater consensus on our approaches to governance in the greater Middle 

East and beyond remains a concerted effort to find peace between Israel and a future democratic Palestinian state. 

In conclusion, foreign aid has re-emerged in a critical role in foreign policy and 

is confronted with a complicated international landscape to address. Because of this, 

we must not oversell what foreign assistance can accomplish. We do need to devote 

more resources to assistance, but how we spend our money remains more important 

than how much we spend. Correspondingly, we need to manage expectations for development efforts because aid is only one instrument and it depends on a range of 

other factors, such as stability, a hospitable policy environment and political will, 

for success. 

Even given effective implementation, it will take time for aid to achieve the goals 

we set for it—far more time than we are generally accustomed to in the United 

States. The systemic development of national institutions and the opening of education and opportunity to all people will necessarily transcend administrations and 

political tenure, and so we must adjust ourselves to work across parties, budgets, 

and branches of government to create accountable, lasting efforts. Foreign aid has 

undergone a resurrection many thought would never arrive. Now, foreign aid needs 

to attain two more challenges: reorganization and redirection. Though this will be 

a difficult undertaking, that fact in no way mitigates its importance or predetermines its failure.

Mr. ROHRBACHER. Thank you very much. So is it your position that when we gave someone $40 million and said go to that country 

and use your discretion in trying to make it a better place, that 

was a better approach? 

Mr. CRONIN. Sir, the point is simply that there has to be certain 

core principles. We know this from development. It is not a mystery what works. 

If there is a good governing environment, there is political will 

on the ground and good policy. So in those cases where there was 

good policy, it worked better than not. 

Mr. ROHRBACHER. I think the major point is discretion by people 

who really control the resources that we put into this. 

Mr. CRONIN. Mr. Chairman, it is also the—exactly that, it is the 

ownership. And what we are not doing now is, we talk about ownership. That is, what does ownership mean? It means this is their 

country. And if I want to really change my community or my country, what do I want to do? What is needed? 

I know what is needed. I know what I have to do. And if I have 

ownership of it, and you give me the wherewithal that I don’t have, 

then it will happen. It will be more likely——

83

Mr. ROHRBACHER. It sounds like you are saying that back during 

the Kennedy Administration, when foreign aid was in its infancy, 

that we provided much more discretion with those dollars for the 

American representatives to go in and use that money. 

Mr. CRONIN. Yes, sir. We did it twice. We did it during the Marshall Plan, where we gave the 17 chief countries that we gave assistance to over a 3- or 4-year period, we gave a lot of discretion 

on the ground. Total ownership. 

And we did, in the Kennedy Administration, in the first few 

years of AID we did that, as well. We then started to accrue a 

whole set of proliferating goals. 

Mr. ROHRBACHER. I understand that. So would you think that we 

should go back toward that direction? Providing more discretion 

with chunks of money to people on the scene? 

Mr. CRONIN. Yes, sir. With the proviso that you need oversight. 

And that is the strong monitoring and evaluation, the real-time information that we lack right now. 

I was desperate for getting information, even within AID. It is 

opaque and sporadic. You need better information. 

Mr. ROHRBACHER. I would hope that that would result in more 

effective efforts. But sometimes you go to these countries, and you 

realize that even the money that is already being sent is being 

used by the people running the show, for limousines, drivers, cooks, 

household attendants, large homes. 

Mr. CRONIN. And one reason for that is because of the cacophony 

of programs that is ongoing, and the information is not real-time. 

If we had a real strategic objective, as the Millennium Challenge 

compact proposal is set up, or that USAID, working with the second-tier set of countries, streamlines its objectives to a couple of 

major goals. 

Mr. ROHRBACHER. Okay. 

Mr. CRONIN. And then you ask, and Congress says, well, what 

will you achieve with this investment over the next couple of years? 

We want to see the return on that investment. And that will diminish the amount of waste and abuse that goes on in the foreign assistance. 

And that is something that the Millennium Challenge Account 

sets up a new incentive, and a principle of transference that we 

don’t have. 

Mr. ROHRBACHER. Well, if we have more discretion, I am not 

sure. 

I would like to ask—again, I mentioned this family that lives in 

my district whose property was confiscated by the Ethiopian Government. So this is, they are American citizens now. They came 

here penniless. And they are a wonderful, very well-respected family. But their property is gone. And the Ethiopian Government 

won’t give it back, even though they have a democratic government 

now. 

When we are trying to make our decision on how to approach 

Ethiopia and like situations, what role should that play? Should we 

not consider the interests of American citizens whose property has 

been taken away? Or should that be part of the decision-making 

process? Let me just start down the line. 

84

Mr. RADELET. It should definitely be part of the decision-making 

process. In any country we have many different interests, and this 

would be one of them. 

Others would be to make sure that the country remains politically stable, and does not become a failed state that could raise security interests. And Ethiopia, given the neighborhood, next-door to 

Somalia and Sudan, there is that risk, as well. 

We have other objectives of trying to fight HIV/AIDS and the 

spread of that. So we have many different objectives. And when we 

are thinking about our approach, this should be one of the factors 

on the table, when we consider, in balance, our different objectives, 

and match that with the tools going forward. 

Mr. ROHRBACHER. Ms. Dale, what about countries, should we insist that the countries—we have been talking about good government, governance. And of course, I agree with the point that has 

been made by most of the panelists here today, that no matter how 

much money we pump into a dictatorship—and a corrupt dictatorship, at that, because most dictatorships are corrupt by their nature, without a free press and without opposition parties to keep 

the government honest. That is what happens. 

But we have to make sure, at what point does America’s interests play in providing which countries that we aid? And not just 

the interests of specific Americans, but our national interests. 

Ms. DALE. Yes. I think we need to be a little bit careful when 

we tie so closely foreign aid to the concept of national security. Because in some instances, it is correct that there is a congruence of 

interest between the two. There are countries that are of strategic 

interest to the United States. 

But we may actually have to deal with governments that are less 

than ideal. But I don’t think that is the overall situation. I think, 

as a matter of principle, we should not be pouring money into corrupt governments, into dictatorships. Which, Mr. Chairman, as you 

rightly point out, it is more likely to go to somebody’s limousine 

driver, and golden faucets in their bathrooms, than it is to benefit 

the people that live below the poverty line. 

And oftentimes what we are doing, instead of actually helping 

those countries, is perpetuating a government that is harming its 

own people. 

So I would say that we need to be extremely discriminating. I 

think where we do give aid, we need to hold people accountable. 

If we set a set of standards, we should adhere to those standards. 

We shouldn’t simply say well, they were not quite met, maybe they 

will be met next year. There needs to be a serious oversight function. 

But I would also say that, you know, I sort of agree with the idea 

that countries that have a record of governance that we approve of, 

let them use the money as they see best, and let us have oversight 

here and take a look at where that has then brought the country 

within a period of a year, 2 years, 5 years. 

Mr. ROHRBACHER. Well, let me be a little more specific. The first 

pending grant from the Administration’s Millennium Challenge Account has been awarded to Senagal. And I am informed that there 

have been reports that Senagal’s copyright enforcement agency is 

85

being run by someone who is very questionable whether they are 

corrupt or not. 

And here we have a country that may or may not be really serious at all about enforcing copyright, which is an important—again, 

it is an American property that is being taken away, and people 

are not being compensated for it. 

So how do we intervene, or should we intervene in a situation 

like that? Maybe Ms. McClymont would like to answer that. 

Ms. MCCLYMONT. Thank you, Mr. Rohrbacher. I just wanted to 

put some other points on the table. And that is that I——

Mr. ROHRBACHER. We can let you put other points on the table, 

as long as that question gets answered. I will come back to you if 

you want to put other points on the table. 

Ms. MCCLYMONT. Well, no, I am sorry. I meant to say that the 

point is that we don’t always have to give our development assistance directly to a government. And I think that is what is key, 

that, as you noted earlier, there are NGOs, there is civil society, 

there are other ways to spend our development dollars. Which we 

do, which can help build people’s lives and capacity, despite a corrupt government. 

Mr. ROHRBACHER. I see. So in other words, if you do have a government that maybe is not enforcing our copyright laws, or letting 

our citizens, as Ethiopia is doing, letting their property remain confiscated, not returned, we can then try to direct our assistance to 

things that go around the government. That go down to help people 

directly. Is that what you are saying? 

Ms. MCCLYMONT. Even today there are numerous countries 

where the governments are not as we would wish. But as you 

know, we are able to give development dollars to NGOs. They can 

help build reformers in the country. They can help civil society 

grow, which will put pressure hopefully on a government which 

may be corrupt. 

And so I just think it is important to keep in mind that we have 

those tools available to us, which help in the longer term. 

Mr. ROHRBACHER. All right, thank you very much. 

Now, for the record, is the United States the largest donor of foreign aid in the world? Take the amount of money that we have 

given, that we actually give in foreign aid, are we the largest donor 

in the world? 

All right. From the tongue-lashing that we get every year, one 

would think that that was not the case. And let me note, having 

seen some of the foreign aid of some other major donors—I do not 

want to hurt the feelings of the Japanese at all, but when I went 

to Cambodia, I remember that the Japanese had promised a couple 

billion dollars worth of help to Cambodia. And it all came in the 

form of Toyota vehicles that were like 2 or 3 years, they hadn’t 

sold. And thus, Cambodia ended up in the future having to buy all 

of those spare parts from Japan. 

Now, is our foreign aid that self-serving? And then I will let Mr. 

Payne have the next question. What about that? Is our foreign aid 

that self-serving, as well? Or are we a little bit more benevolent 

than that? 

Ms. BRAINARD. Before I answer that, let me just make one point 

relative to your previous questions. 

86

Mr. ROHRBACHER. All right. 

Ms. BRAINARD. I can’t speak to the specifics obviously of the Ethiopia case that you raised, but the cases that you raise are actually 

areas where American interests overlap 100 percent with what we 

believe are the necessary foundations for growth and poverty reduction in those countries. 

In areas such as the rule of law and property rights, we know 

from lots of research that they are essential to development. Pioneers like Hernando DeSoto are doing amazing things in this area, 

trying to create better property rights in some of these impoverished countries——

Mr. ROHRBACHER. I would agree with that 100 percent. And that 

if a government is blatantly disrespecting the property rights of 

people, especially their former citizens or whatever who own the 

property legitimately, and there are attentions on it, it certainly 

means they probably violate the property rights of their own people. Which then undermines any real growth and potential increase 

in the standard of living of their people. 

I had one other point to make, and then I will move on to Mr. 

Payne. Yes, Ms. Brainard. 

Ms. BRAINARD. Regarding the geostrategic cases, I think those 

are the toughest places for gauging U.S. aid effectiveness because 

of the trade-off you mentioned earlier. 

The Middle East traditionally is a good example, where we have 

needed certain governments to undertake certain things that we 

have seen as vital to our national security. And we have often 

looked the other way when progress on democratization has not 

been forthcoming. 

That is the area of foreign assistance that requires the hardest 

look right now. We should be measuring results somewhat differently. Obviously what we are trying to achieve there has to do 

essentially with out national security. 

And so I don’t think it is right to lump the funding that we give 

in geostrategic cases, which all the cold war numbers do, to take 

all the aid that we gave to foreign dictators with whom we were 

trying to achieve strategic purposes, and say hey, look, we didn’t 

get economic results. 

But we don’t measure those the right way. And we don’t know 

how to be hard-headed about democratization. And in the end, that 

could actually undermine the strategic purposes we are trying to 

achieve. 

So I think that is one of the prime areas for hard work. 

Mr. ROHRBACHER. I would like to thank all the witnesses for 

some very thought-provoking testimony today. 

Mr. Payne? 

Mr. PAYNE. Thank you very much. I would just like to perhaps 

keep that line of questioning. 

You know, during the cold war the United States—and we talked 

about all those billions of dollars spent. But as you may recall, one 

of the driving purposes of United States assistance during the cold 

war was, especially in third world countries and Africa, for example, was, who was on our side, fighting for democracy, and who was 

on the USSR side. So actually probably both sides wasted a lot of 

money. But we say well, it was important that we support Mobutu, 

87

who we knew had villas in France, and some of the things that my 

colleague here was talking about. That was during the cold war period. We have got to kind of come up to where we are today. 

So it was clear that we were looking the other way, just as long 

as that country said we don’t like communists, and you get our 

money. 

Now countries like DRC now is still strapped with the Mobutu 

debt, which we knew was being stolen, money being stolen. 

And so I wonder, how do we deal with a country that, because 

of the cold war, because of our policy, because it was driven that 

way, these countries now are strapped with having to pay back 

these debts. Anybody want to take that? 

Mr. RADELET. I will take the first stab at that. I think that is 

a really important point, and I think it is one of the reasons why 

we need to have different strategies for different countries, depending on our objectives. 

There is no question that a lot of our foreign aid money has been 

wasted, and has gone to corrupt dictatorships. But we have to 

think about why that money went there, and what the true objectives were. 

Let me take a specific example right now. One of our largest aid 

recipients right now is Pakistan. We have very important national 

security reasons why we are providing a lot of aid to Pakistan right 

now. I believe it is the most dangerous country on the planet, and 

we ought to be engaged there. 

They are not a paragon of good governance. They are no democracy. Corruption is a big problem. Is our money going to be spent 

effectively? I do not know. Is some of it going to disappear? Probably. Are they going to achieve rapid economic growth because of 

our aid there? I doubt it. Does that mean we should leave? No. We 

need to engage because we have very high priority national security goals, and our assistance there needs to be judged by how it 

contributes to those national security goals, not in terms of economic growth. 

If there is economic growth on top of it, that is terrific. But that 

will be icing on the cake. 

Other countries, our priority is going to be economic growth. And 

we need to judge our programs by that standard, whether they reduce poverty, increase literacy, reduce infant mortality or increase 

economic growth. We have to have different standards depending 

on what the objective is. 

There was some discussion about Senegal before, and I do not 

know anything about their copyright rules. I do know that they 

were the first country in West Africa to have democratic elections 

when an opposition candidate came into office because of those 

elections with no political chaos. I know that they are the country 

in West Africa that has kept their HIV/AIDS rate at a very low 

rate, and that they have been a friend to the United States. And 

we need to support those objectives. 

We have other objectives, like copyright rules, but I think we 

also need to support countries that really are moving toward democracy and economic growth where those circumstances lie. 

88

So I think the issue is really just to be clear what our purposes 

are, and judge the results based on those purposes, not judge them 

by some other standard. 

Thank you. 

Mr. PAYNE. All right, yes. And I would like to hear anyone else’s 

comment. I guess I am looking for what is the balance, you know. 

Because as you have mentioned, we have got the, especially during 

the time when we were shopping around for votes in the U.N. for 

Iraq, whether we should go in or not, there was a lot of, I guess, 

priorities put on countries that did support our position, and others 

that did not, were not looked at favorably. 

I mean, even to say that Sudan is making progress because they 

said they are going to share intelligence with us, and let us have 

some information about where terrorists are, when we know 

Osama bin Laden stayed there 6, 7 years, and planned the bombings of the Embassies in Africa. 

We simply almost are saying—and if we had some affirmative action at that time, we probably could have apprehended Osama bin 

Laden and prevented all of this terrorism that we have at 9/11 and 

all the rest. Because certainly Osama bin Laden and the Al Qaida 

people that have created all this, you know, I am glad Saddam 

Hussein is out. 

However, we need to concentrate—I think the greatest threat is 

the Osama bin Laden and the Al Qaida cells that are around the 

world, and we really need to focus on wiping them out. And that 

will keep those red alerts and green alerts and pink alerts out, 

once we can weed out that evil network. 

But I just wonder, what is the balance, or how far do you think 

we should go? And anyone could answer that. 

Ms. DALE. If I could just make two points. The first one being 

that the previous question you asked, Congressman Payne, related 

to the question of what do you do with countries that are burdened 

with that from a former dictatorship. And the most important of 

these, of course, has been Iraq, where reconstruction has been 

hampered by the huge burden of debt owed, in particular to Russia, 

France, and Germany, of the Iraqi people. 

Now, I think there is a good argument to be made that under 

certain circumstances, such debts should be forgiven. This would 

include some American debts, as well. There are countries that 

need, in order to move forward, to be relieved of the burden they 

are carrying at this point. 

Anybody who would be in debt over their head would need to 

deal with that situation first, before creating a plan to improve 

their finances. 

Secondarily, it is unfortunate that you have to apply different 

sets of standards at different times. And the votes in the Security 

Council was obviously one such instance. I don’t believe that will 

change the fundamental principles on which you base foreign aid, 

but there are foreign policy considerations that come into play, security considerations at various points. And you can’t just say that 

whatever you vote in the U.N. Security Council doesn’t really matter as far as a country’s bilateral relations with the United States 

is concerned. The world is not that compartmentalized, unfortunately. 

89

Ms. MCCLYMONT. Mr. Payne, with respect to when you think 

about our foreign policy and our foreign operations budget and our 

foreign aid strategy, we don’t necessarily tie together in a thoughtful way how development assistance interacts with debt relief, 

interacts with trade, interacts with investment. 

And so we have got to remember all the tools in our arsenal that 

can solve these problems. It is not necessarily that you have to go 

and give a country debt development assistance, but rather debt relief may be another approach. And I think we don’t think about the 

whole set of tools in that toolbox, and that is yet another reason, 

we believe, for a need to take a stronger look and develop a strategy around this. 

The second point I would like to make about when we are talking 

about what we are measuring, we set a goal. And then what are 

the criteria we use to measure it. And my colleagues have talked 

very adequately and eloquently about that. But I would also just 

like to underscore that it has come to our attention that, for example, at USAID, even though we talk a lot about monitoring and 

evaluation, resources at that institution for doing evaluation have 

been cut tremendously over the last decade, as I am sure you 

know. 

And I think this is a fundamental point. How do we really measure anything properly if there aren’t resources for it? How do we 

really look at the broader impact of something if there aren’t resources to do that, and an impetus to do that? 

We can run around and measure a lot of individual projects. But 

rather, we need to look at the larger impact. 

And I wanted to finally just close by underscoring again the 

point that there are many ways to do development. And we worry 

a lot about these corrupt governments and problems with governments. But if we hadn’t had all these other mechanisms to give development assistance to countries around the world, it is really giving it to the people around the world. And again, I underscore myriad institutions, civil society, multi-lateral organizations, many 

mechanisms. 

So we have always got to keep that in mind, and not get overly 

concerned about governments themselves. Quite obviously, if you 

are going to pour a large, large amount of money into a country, 

like we would be doing with the MCA, you have got to fundamentally have a government that can manage it. 

But it is really the people working with the government that has 

to happen, as well. We cannot forget the people in the process. And 

I just wanted to underscore that. 

Thank you. 

Ms. BRAINARD. First on the debt relief point you raised, which I 

think is a very important one. 

Not only do we, by relieving debt that was incurred by illegitimate governments, make it more possible for new, more democratic governments and systems that have become more transparent to rule more effectively, and to deliver results quickly to 

their people, which is critical for sustaining that democratic impulse, but we also send the signal to people in countries with illegitimate rulers, that there is a silver lining. That the more they 

push their government for greater transparency, less corruption, 

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more legitimacy, the more the international community, and particularly the U.S., is going to stand behind them. 

It also sends a signal to private investors. Don’t be lending your 

money in countries with corrupt regimes because it is not sure you 

are going to be getting it back. So it has a lot of positive ramifications, which is why we started down that track under the Clinton 

Administration, and why we still need to do more. 

With regard to the Iraq situation, we also need to think very 

hard about the level of needs in countries eligible for debt relief. 

And we can’t suddenly push our entire debt relief agenda with the 

poorest countries off the table because suddenly we have got a 

geostrategic priority elsewhere. We have got to be a little steadier 

in terms of where we are headed on debt relief broadly. 

And that gets to your second point. To the extent that we have 

medium-term strategies for each of the countries that we are dealing with in the developing world, they would not be as easily buffeted by events. It would be harder to suddenly take out the grabbag of U.S. assistance goodies and say, now that we have a shortterm political priority over here; let’s go through the list of what 

we can give you for the next year. 

That is the problem with our current system. We don’t have a 

steady-as-she-goes view about where each country fits on that matrix incorporating both our national interests, and also their capabilities and their needs. And that is what we need to be moving towards. 

Mr. PAYNE. Thank you very much. I will yield to the Chairman 

at this time. 

Mr. TANCREDO [presiding]. Thank you, Mr. Payne. We have 

talked a great deal, and you have provided a great deal of testimony about what might be both the appropriate amounts and the 

appropriate usage of our foreign aid. And if we strictly define foreign aid as the transfer of wealth from one country to another, let 

me ask you if it would not be appropriate for us to add to our calculations of how much money the United States distributes to other 

nations, which we call remittances, the amount of money that flows 

from the United States to countries all over the world. 

Ten percent of the GDP, for instance, of El Salvador, Eritrea, 

Jordan, Nicaragua, Yemen is made up of remittances from nationals, their nationals here in the United States. Far more than that, 

a much higher percentage of the GDP, flows to Mexico from the 

folks who are here, Mexican nationals working in the United 

States. 

It is actually a much more direct form of foreign aid than anything we do in terms of transfer of funds from the United States 

to a government of another country, or even to NGOs. Because, of 

course, the money is going directly to—we make an assumption, 

anyway, that 99 percent of it, I would suppose, is going directly to 

the people of another country. 

You wonder, then, that stated, and I am going to ask you to respond, each of you, as to whether or not it is legitimate for us to 

think about that as a form of foreign aid. 

Then if it is legitimate to consider it in that vein, why would we 

not also think about ways in which we could use that or manipuVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00094 Fmt 6633 Sfmt 6601 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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late that process to our ends? To achieve the same goals, whatever 

they may be, that we use all our other foreign aid dollars for? 

The FMLN, for instance, is just—there is a little thing I got just 

before I came in, the Central American Report, talking about the 

fact that the FMLN is apparently going to win, or it looks like they 

may win the election in El Salvador. If they do, considering who 

and what we know the FMLN to be, should we not think about 

ways that we could use our influence, both political and economic, 

to address this kind of a situation, if that actually happens in El 

Salvador? 

I asked the Secretary of State, when he was here, whether we 

should not use the dollars that we provide to Mexico in foreign aid, 

to do something about our national security interests that develop 

as a result of our porous borders. And asking Mexico—certainly 

asking Canada, but we don’t have that same sort of leverage there 

with them, but we do with Mexico, both in terms of direct foreign 

aid and remittances—to talk to them about helping us on the border, in securing the border. It is a national security issue. Not just 

against people coming here illegally, but of course, people bringing 

in enormous amounts of drugs. We know terrorists come into the 

country over those borders, both north and south. 

So why wouldn’t we use whatever we can, whatever you establish 

as being the appropriate criteria for us to use foreign aid for, why 

wouldn’t we use remittances in the same way? 

For instance, what could we do with them, in terms of trying to 

control far more than we do. Right now we actually approve, the 

Treasury Department has given the banks an approval to use, for 

instance, the Matricula Consular to open up accounts so that they 

can more easily make the transfer of funds. 

So there are ways that we could actually begin to control the flow 

of funds, I think, if we wanted to. So I ask you all to just respond 

to that. 

Mr. RADELET. Thank you. Remittances are extremely important 

for many low-income countries. They are a very important financial 

flow, and they are essential to economic growth and poverty reduction in many countries. But they are not foreign aid, for a couple 

of reasons. 

First, it goes two ways. If we count remittances from the United 

States to other countries as foreign aid, then when United States 

oil workers work in Angola or Nigeria or other countries around 

the world and remit money back, we would think that Angola was 

providing foreign aid to the United States, or Nigeria providing foreign aid to the United States. And I don’t think that most people 

think of it that way. 

I spent 4 years working in Indonesia, not financed by foreign aid, 

and some of the money that I earned there came back to the 

United States. It was important to me and to my family; it wasn’t 

foreign aid. 

Mr. TANCREDO. How about if we just balanced the accounts, 

then? We will just say——

Mr. RADELET. Here is how much that comes from Angola, and 

here is how much we are sending; we will take that out. 

Mr. TANCREDO [continuing]. The amount of money that is flowing 

back to the United States from our nationals working in Angola. 

92

Mr. RADELET. And that is important to look at in terms of flows 

and financial flows. The net financial flows are extremely important. But I don’t think it foreign aid, for the reason I just gave, first 

of all. 

But second of all, because——

Mr. TANCREDO. Well, wait a minute, for the reason you just gave. 

You just said because we get some money back. But I am saying 

if you take that off, and if the balance is in our favor, why isn’t 

that foreign aid? 

Mr. RADELET. Well, because if you count that as foreign aid, you 

would have to count flows both ways. Unless we are willing to say 

that what United States oil workers earn in Angola and bring back 

is foreign aid from Angola to the United States——

Mr. TANCREDO. I would be willing to. 

Mr. RADELET. Well, if you would be willing to, that would be consistent. 

Mr. TANCREDO. Then it would be foreign aid. 

Mr. RADELET. I wouldn’t be willing to call it that. 

Mr. TANCREDO. I didn’t think so. Let’s go ahead, because we are 

running out of time. 

Mr. RADELET. But let me actually add another point about why 

it shouldn’t be foreign aid. 

Because, although it is extremely important, the financial flows, 

we cannot use it as a foreign policy tool as effectively as other 

ways, because we can’t influence it as directly as we can with aid. 

We can’t quickly give it to new and emerging democracies, or countries where we have national security, or countries that might 

qualify for the Millennium Challenge Account. Because what matters is if people in the country happen to live here or not. 

As one of our broader set of foreign policy tools, we should be 

thinking about remittance policies, along with immigration policies, 

trade, investment, foreign aid, as all of those. So it is definitely 

part of the policy tools in our arsenal; I just would not define it in 

the same way as foreign aid as a——

Mr. TANCREDO. Well, then, a policy tool in our arsenal. I am 

going to ask you to, if we don’t mind, because we don’t have the 

time now, but if you could just actually respond to the Committee 

with written testimony as to exactly what kind of a policy tool you 

envision remittances might be. I would sincerely appreciate it. 

Ms. Dale. 

Ms. DALE. Yes. I realize how important remittances are for many 

countries. And if you look at the United States and its dealings 

with poor countries around the world, I do think it is a part of that 

larger picture. 

However, we are talking here about private property. We are 

talking about the private property of the workers who are here, 

who send their money home. They are not giving it to the U.S. 

Government, they are giving it to their families. 

So I think if we were to look at remittances as a foreign policy 

tool, and to tweak it in order to produce a certain result, we would, 

in fact, be undermining what we want to encourage in other countries, which is respect for private property. 

Therefore, I would not advocate using that as a pressure tool in 

foreign policy. 

93

Mr. TANCREDO. Let me ask you if you would hold that same feeling even though, let’s say, a certain percentage of the people who 

are actually providing those remittances are working here illegally 

themselves, violating our law. 

Ms. DALE. Now, that I am not in favor of. 

Mr. TANCREDO. Good. 

Ms. MCCLYMONT. Yes, sir. As my colleagues have said, remittances are terribly important. The problem with remittances is we 

don’t know what they are being directed for, we don’t know how 

they are being used in the country. Are they really going to help 

pull people out of poverty? Are they going to really help broadbased economic growth? We don’t know. 

Mr. TANCREDO. Let me ask you this. If we are sending money to 

any country, with the hope that that money gets past the government, past the NGO, to the people; and we know that, in fact, remittances go exactly that way. I mean, they are not usually sending them to the government of the country, they are sending them 

directly to the people who are in need. That is really why most of 

the folk have come here is to help support families someplace else. 

Why isn’t that a perfect example of foreign aid? 

Ms. MCCLYMONT. Well, they are just not being used in an organized fashion. 

Mr. TANCREDO. Well, that is true. 

Ms. MCCLYMONT. What people are they actually going to? I think 

what is really the fundamental point, Mr. Tancredo, is that development really is about investments. Building institutions. 

Mr. TANCREDO. Yes. 

Ms. MCCLYMONT. Helping civil society, helping people help themselves, really, at the end of the day. Helping their education, helping their health care. 

And so I think we have to think about development, and really 

getting something done in that fashion. 

Mr. TANCREDO. Sounds to me like a perfect example of what remittances do. 

Ms. Brainard. 

Ms. BRAINARD. Remittances are a critical financial flow, conceptually similar to foreign investment, and to trade. And America 

does fantastically on all three fronts, and we are contributing enormously to the growth of the world and to developing countries 

through all three types of flows. 

We do have policies that affect remittances. We have immigration policy. We have financial policies. 

But thinking about remittances as something that the government could directly control makes me think about those of our ancestors who came here voluntarily and sent money home to their 

kids to get educations and to have brighter economic prospects. 

The notion that somehow the government would have confiscated 

those private earnings and said no, this is in our control to decide 

who it should go to, I think it would trouble all of us. 

And so that gets to the private property point that Ms. Dale 

raised earlier. 

But I do think that you are raising the importance of remittances, which is absolutely right. And we should have a set of conVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00097 Fmt 6633 Sfmt 6601 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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scious policies to make sure that remittances contribute as positively as possible to development prospects of these countries. 

Mr. TANCREDO. Well, I am not even suggesting, and never, hopefully, did I suggest that we should be confiscating anybody’s, you 

know, the dollars they make here. That certainly was not my point, 

taking their private property. 

Manipulating the flow, controlling the flow, I think, is a little different concept. 

But even if we didn’t do that, even if we just simply said no, we 

will allow it to flow as freely as possible, in fact, we will encourage 

it, why will we not count that as part of what the United States 

provides in terms of foreign policy? Instead of $17.4 billion, $17.5 

billion in 2004 appropriations, why couldn’t we legitimately say we 

are contributing, well, closer to double that, certainly? 

Yes, go ahead. 

Ms. BRAINARD. When you do comparisons across countries, we actually do try to look at private flows. And in the category of private 

flows we look at trade, we look at investment. We should be looking at remittances. 

Foreign aid has been defined internationally in a way that the 

U.S. actually has greatly influenced, for purposes of comparison, of 

what the government itself is providing. And so it is an internationally-agreed definition, and it is useful. 

The U.S. does a lot in terms of having workers here send remittances home. So do other countries. And so we should be looking 

at remittances comparatively, but not in the same box as foreign 

aid. 

Mr. TANCREDO. Thank you. One way we, in fact, do have a responsibility, the Federal Government, it seems to me, can claim a 

role to play here is that as along as our borders remain porous, as 

long as we approve of the fact that millions of people come here illegally and send money back, that is, in fact, a determination of the 

Federal Government. And we should add it, I think, to the amount 

of money. 

My time has ended. I want to give a ranking Member another 

opportunity for questions. 

Mr. PAYNE. Thank you very much. I can see how you are accustomed to being in the Chair, because the Chairman’s time never 

runs out. He can take all the time——

Mr. TANCREDO. In that case, let me go back. 

Mr. PAYNE. You could stay until 3 o’clock. 

However, it is pretty interesting. I have never thought about, you 

know, the remittance, and how that might be calibrated as U.S. assistance. 

I mean, Mr. Radelet mentioned about, you know, the salaries of 

oil workers, which is interesting. If you really wanted to go wholehog, you could take a look at perhaps the profit made. I mean, the 

cost of what we pay for coffee beans, and when they come to the 

U.S., and all of the process that goes on after those beans. Which 

is you buy a whole 100-pound bag, we might pay $100. But then 

you go to Starbucks and you are paying two dollars for a glass, a 

little cup of coffee. 

If you wanted to start really dealing with stuff, I mean, the profit 

that we make off of the oil, for example, that comes here as crude, 

95

you know. We just pump it out, we pay the crude, $35 a barrel. 

Well, gasoline in California is about $2.50 a gallon right now. So 

you look at how many gallons are in a barrel of crude; probably 

hundreds. 

So if you start playing around with that, you can find that third 

world countries are actually subsidized. I mean, what makes countries rich? Where is the amount of profit being made? Oil, of 

course, everybody needs it, everybody fights for it. Whatever the 

price is, we buy it. 

Diamonds, for example. You know, diamonds come out of Zaire. 

People live on a dollar a day. The diamond cutters, the diamond 

sellers, they are the most wealthy people in the world. 

If you look at gold, where does gold come from? Not from under 

the water somewhere. It comes from developing countries. Those 

countries do not make the profit when the gold is tinkered with 

and played with, and sold for wedding bands, you know. 

So there are a lot of ways to look at——

Mr. TANCREDO. Will the gentleman yield? 

Mr. PAYNE. Sure. That is why I wanted to get into a colloquy, 

that is because we are the only ones here, But I do not want to 

hold you up. 

Mr. TANCREDO. Yes, exactly. It does make it fun, at least for us. 

I do not know about anybody else. 

But the fact is, of course, we do use—and I think the gentleman 

would agree that it is important for us to use—investment policy 

and our control over that as a tool for foreign policy. 

You and I have both, in fact more than once, supported restrictions on investment policies from the United States. And often, in 

fact, even access to our markets to governments who we believed 

didn’t deserve them. 

And so, well, anyway. It is an interesting colloquy. I know that 

Mr. Cronin probably feels badly, because we keep starting over 

here, and it always gets down to there and we run out of time, and 

he doesn’t get a chance to comment. 

Mr. PAYNE. If you would like to comment, Mr. Cronin. 

Mr. CRONIN. The official development assistance only measures 

some of the assistance that indeed flows from the United States. 

And we have to remember that it is always a minuscule fraction 

of the private flows around the world, of which remittances are a 

huge part. 

And so we do, and certainly back when I was in policy, we did 

take account of what we call total resource flows that talked about 

trade, talked about remittances. And we have to remember that 

when we are trying to promote economic growth in the developing 

world, and therefore poverty reduction, we should be trying to use 

every dollar effectively as a catalyst for how will it promote either 

the institutions, or the investment in people, or the rule of law that 

will ultimately allow them to have freer trade, private investments 

that will gain, and therefore make development sustainable. 

And that was the main point that I think needs to be looked at 

through a commission, and through subsequent debates, as we 

think about providing greater policy coherence across our foreign 

policy and economic policy institutions. 

96

This goes back to the debt issue, as well. I mean, Mary 

McClymont, in her interaction paper, said it perhaps first, and said 

it very well. She repeated it today. Across treasury and AID and 

state and other institutions of the government, we need to have 

better peripheral vision about the interests in what we are trying 

to get done for the country in question. It really calls into question, 

as we put together a country strategy in the government, and as 

Congress provides oversight of country strategies, we need to make 

sure that we are trying to achieve and work on the same purpose 

overall in that country. 

Often we are working at counter-purposes, as with agricultural 

subsidy, sometimes, and development policies, as we all know. It 

happens not just with the United States, but with Europe, with 

Japan. And we need to try to analyze that, as well, over the next 

year, as we think about the future of foreign aid. 

Mr. PAYNE. That is true. I am glad you mentioned that, because 

I know, Ms. Dale, in your comments, you did mention that foreign 

aid alone can’t pull countries out of poverty, which I agree. 

However, when we look at, as Mr. Cronin just mentioned, there 

is about a $300 billion subsidy in EU and United States and Japan, 

developed countries. And people in the Caribbean say they could 

buy a Purdue chicken flown in from New York, frozen, cheaper 

than they could throw some chicken feed out every day and finally 

cut that chicken up to eat. I mean, that is almost unbelievable, but 

that is the truth. 

So you know, there has to be some, we have to take a look at 

subsidies of U.S. agriculture, because this $300 billion that is spent 

around the world subsidizing these countries, where many of them, 

80 percent of the people are farmers, how will they ever be able 

to survive? 

Ms. DALE. Congressman Payne, I could not agree with you more. 

I think it is a great disgrace the way that the United States and 

Europe have subsidized certain constituencies at the expense of developing world farmers and producers. Their best possibility of 

bringing their countries and their families out of poverty is to sell 

to us as free trade. 

We are wealthy, they are not. We can buy their things. And we 

would if we were not catering, perhaps too much, to domestic pressure groups. 

I think the agricultural policies, industrial policies are both in 

the United States, but even more so I believe in Europe, constitute 

a detriment to those countries. And the WTO has been trying to 

construct recently around this very question. Unfortunately, in 

Cancun last year it sort of ran off the tracks. And I sincerely hope 

the United States will take some leadership, and look toward our 

own policies to make our markets open and reduce our subsidies. 

Mr. PAYNE. Thank you. Just finally, I guess, I might mention 

about this new friends, and as the policy is being driven about—

well, it has always been. And I think the biggest tragedy is, we 

take a look at Afghanistan, where we were supporting the Taliban, 

I guess, to overthrow the Soviet Union, because indirectly that was 

going to be a good win for us. The Soviets losing, the question sort 

of equated Afghanistan, and the Soviet Union to the United States 

97

and Vietnam as sort of a stalemate. Nobody really won, no one lost, 

the big guys went back home. 

But now we find that much of that hardware, military and training and intelligence teaching have been now used against us, because Afghanistan then changed into being the ultimate enemy, 

with people like Osama bin Laden. I mean, a horrible government 

that we sort of helped, I guess indirectly, get into power. And that 

is sort of you Pakistan, today’s issue. 

And I wonder, just in conclusion, how do we—is there, I guess 

the question is is there any way to prevent or to try to know what 

we are doing, so that we don’t turn around and find that we are 

getting bitten in the backside again. 

Mr. RADELET. I don’t think there is any way to know in advance 

what is going to happen. Dealing particularly in failed and failing 

weak states is an extremely risky and complex business. And that 

means because with high risk, that sometimes it is going to succeed, and sometimes it is going to fail. 

Now, that doesn’t mean that we are cavalier about it and we just 

go in. We have to be careful. We have to use the best intelligence, 

the best motivations that we have at the time. But we also have 

to be very careful with whom we are dealing with, and try to not 

make a bad situation worse going forward. 

But there is no easy answers to those kinds of complex issues. 

And you are right, we may be facing a similar situation with Pakistan 5 or 10 years from now. 

At the moment, I think our judgment is right, that we have got 

to do our best to try to help that situation now, but it could get 

much worse. 

Mr. TANCREDO. Thank you. Ms. Watson. 

Ms. WATSON. Thank you, Mr. Chairman. And if this comment 

and question has already been addressed, please let me know. 

But as I travel the world, I am finding that America’s credibility, 

and the impression people have of America, has really deteriorated 

greatly. People interpret what is happening in the Middle East 

from their own background of experiences. 

The way we are dealing with countries that we consider terrorist, 

you know, some are okay. There are partners like Saudi Arabia. 

But a country like Iraq or Pakistan, who are trying to rebuild after 

the destruction of war, have we considered the kind of Marshall 

Plan that we came out of the Second World War with? And along 

with that, what are we doing diplomatically to improve our image 

throughout the world? 

In the last 6 months, I have been in Italy. We were in Scandinavia. I have been in Cuba, I have been in Haiti. I have been in 

Canada. And I am going to tell you this. The prestige that we had 

has dimmed greatly. 

I, as an Ambassador, watched many occurrences that were hard 

for me to explain to the citizens of the country where I was hosted. 

And since the war on Iraq, our esteem has fallen greatly. Because 

we don’t seem to have a consistent, effective plan for dealing with 

the program after the war, for foreign aid. And we don’t seem to 

be able to espouse the kinds of programs that would be available 

to the countries that need assisting. 

98

Can anyone enlighten me or correct my view? Those of you that 

work with these issues, bring me up to date, please. 

Mr. CRONIN. Very big questions, and very important ones. We 

did speak about them in general terms. Let me just give you three 

points. 

Clearly, the United States Government overall needs a greater 

capacity to do what we would call winning the peace, rather than 

just removing regimes. That is not something that is going to be 

born overnight. 

I was privileged to serve in the administration of the U.S. Agency for International Development. We had some outstanding professionals who were in very small, relatively small parts of the organization—something like the Office of Transition Initiatives, or the 

Office of Foreign Disaster Assistance, which wasn’t even as capable 

as it used to be, was not used to sort of nationwide institution 

building. 

Nor was the Defense Department prepared to do that responsibility. 

So where in the government that had some operational capacity, 

where are we going to get that done? Even within the international 

community of the United Nations, it didn’t have machinery fully in 

place with the full support of the nations to try to do those tasks. 

This is something I hope we learn from Afghanistan and Iraq, 

and start to address through a study of foreign assistance overall 

over the next couple of years. Which is how do we build not just 

our defense capability for stability operations, if you will, but our 

non-defense civilian capacity, working with other institutions—

international, NGOs, and so on—to provide things that build institutions that will endure. And that will make the difference in a 

place like Afghanistan. We didn’t just oust the Soviet Union, but 

we have to think about the peace and building the institutions 

there, as well. 

I think also with respect to the message and our credibility, 

clearly we have been going through a couple of major conflicts in 

terms of Afghanistan, where there was broad international support, 

I think you would agree, on removing the Taliban. It was when we 

went to Iraq that around the world, it was much more hotly debated over what was the United States doing, what was the role. 

As we hopefully work with an Iraqi government soon, and bring 

in the international community to help an Iraqi government stand 

up over time, hopefully that will dissipate. 

At the same time, we have the ongoing conflict between the 

Israelis and the Palestinians. And clearly our credibility is hurt, as 

you know, ma’am, in the Middle East in particular, but also in Europe, for instance, because we have not been able to make progress 

overall on the peace plan that has been put on the table. And that 

becomes the sine quo non of credibility throughout largely the Muslim world, if you will. And hopefully over time again, that will be 

back on the table and there will be that opportunity. 

But as with development, it can’t be forced from Washington 

without some kind of willing interlocutors on the ground, as well. 

So it is a dynamic, complex issue, as you know. 

So it is that combination of building institutions to allow the U.S. 

Government to go in and win the peace, and to build institutions 

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over time. It is, yes, providing even money for public diplomacy to 

get our message out. But thirdly, it is most importantly having a 

comprehensive set of policies that show America’s true intentions 

and values, which really are geared toward open democracy, economic growth, and peace. 

Thank you. 

Ms. WATSON. May I just respond? 

Mr. TANCREDO. Sure, go ahead. 

Ms. WATSON. I am going to interpret what you said as saying 

that you didn’t really, at the moment, plan for this, so you have 

to do it here from this point ongoing. 

I think certainly 9/11 was the wake-up call. Somebody hates us, 

hates us enough to attack and destroy not only property, but thousands of people, innocent people. 

And what I would like to get to the bottom of publicly is, have 

we thought through a plan from here on as to how to better improve our relationships with countries that we feel are at risk, or 

countries that we feel harbor terrorism, or countries that are terrorist. 

And what I am digging for is some public announcement of what 

we are doing to better our standing, to be better trusted. Are we 

being honest and open? Are we massaging what we think might be 

factual? Are we stretching it? Or just what we are doing. I am not 

clear, and I am a Member of Congress. I get as much information 

as they all let us have, and it is not clear to me how we are going 

to improve, in some kind of coherent and consistent way, our relationships since 9/11, since the Iraqi war, with other countries. 

I know that in our attempt to put together a coalition, that we 

were very demeaning to France, to Russia, and to Germany. Even 

here in this House, silly, childish kinds of things were done that 

I thought were not appropriate for this policy-making body of such 

high esteem. I really thought we reacted without thought. 

I am hoping, in the aftermath of 9/11, that we would make a 

greater attempt——

Mr. TANCREDO. I would ask the gentlelady to please conclude her 

statement, since we have gone far over time. 

Ms. WATSON. Yes, I will. So what I am seeking is that we be informed of what this Administration plans to do to improve our 

standing in the world, and what diplomatic approaches you might 

take, to the extent you can do it publicly. 

Mr. TANCREDO. And with just a couple of minutes, actually, 

please. Because I know we have kept you here a long time. We are 

going to have a vote in just a few minutes, so this will be it. 

Go ahead, quickly. 

Mr. RADELET. I think that you have raised very important points. 

I have lived and worked and traveled in developing countries for 

25 years, and I have never seen our esteem so low. And I worked 

for the first year and a half with the Bush Administration, and I 

do think it is a problem. 

I think it gets back to our issues about quality and quantity of 

foreign aid. We can add in some of the other quantities of remittances and trade and migration and all this other stuff; it won’t 

change the fact that we are not achieving our goals. We are not 

winning the hearts and minds for openness, democracy, and ecoVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00103 Fmt 6633 Sfmt 6601 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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nomic opportunity around the world. We are not winning the war 

on terrorism at the moment. We are not winning the war against 

HIV/AIDS, we are not winning the war on global poverty. 

So however you measure the numbers, we are not achieving our 

goals. And to do that, I think we need to rethink not just our foreign assistance programs, but the range of foreign policy tools, all 

of them together, working together in countries that should be and 

can be our allies, that can share this vision, that can work with us. 

And have it working in the riskier countries that are failed and 

failing states. 

But it is going to take an approach looking at all of these tools 

together, and thinking about how we can use them to achieve our 

foreign policy. 

Mr. TANCREDO. Ms. Dale. 

Ms. DALE. If I could just comment briefly. I would take some exception to the idea that we are losing the war on terrorism, among 

the other losses that Mr. Radelet outlined. 

I do think that the world is safer for the measures that the Bush 

Administration has taken. I do think we will win in Iraq. I think 

we are doing it. And I see that, not having had an attack on American soil since 9/11, as an example of the fact that we are moving 

ahead in this war. 

On the diplomatic front, I would say there are a great many people who are concerned, as you are, Congresswoman, who I travel 

to. And I hear this all over the world. There are businesspeople 

who want to help improve America’s image. There are lots of 

groups who are getting together and putting their heads together 

for creating programs, exchange programs, student programs, journalism programs, ways that people can interact with the United 

States in a way that will give them a more positive, or a more immediate impression of what this country is all about. 

We now have a new Undersecretary of State for diplomatic public 

diplomacy, and I hope that Secretary Tutweiler will put some effort 

into this. I would say the Administration has not so far done quite 

as much as one would have liked to see. I am just hoping that the 

level of concern is rising now to a point where there will be a focus 

on this effort. 

Mr. TANCREDO. Thank you. Ms. McClymont. 

Ms. MCCLYMONT. Yes. Congresswoman Watson, I think you raise 

a very important point, as well. And it is about our image in the 

world. 

And I think one thing we can absolutely do is continue to, in a 

very robust way, fund the development and humanitarian assistance programs that help people all over the world. 

We can help them build their education and their health care 

and their skills, and that is something we know the American people believe in. They support programs that build self-sufficiency. 

They believe that by doing this development and humanitarian assistance it does build good will. 

And so what we must not do is, as we deal with all the trouble 

spots around the world, and there are many, we cannot forget other 

countries in the world. And that is what we fear. If we diminish 

our resources, which I alluded to earlier in my testimony is startVerDate Mar 21 2002 09:55 Jul 13, 2004 Jkt 092188 PO 00000 Frm 00104 Fmt 6633 Sfmt 6601 F:\WORK\FULL\022604\92188.000 HINTREL1 PsN: SHIRL
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ing to happen, that is going to undercut us in the end, and make 

it very difficult to maintain our image. 

The way we can assure a better image is to show that we are 

helping people at the ground level, in a very robust way. And I 

think we need to continue to do that, and not forget about that aspect as we go forward in other aspects of security in the war on 

terrorism. 

Mr. TANCREDO. Ms. Brainard, do you have a comment? 

Ms. BRAINARD. Yes. I think the questions are very difficult ones 

to answer. It is not just in discussions with people, but also if you 

look at the polling abroad there has been a breathtaking change in 

the perception of America’s legitimacy abroad. It is very clear in 

the numbers; it is a big divergence from what we have seen before. 

This matters not just because Americans want other people to 

like us. The reality is when America’s perceived legitimacy abroad 

goes down, it costs us. It costs us economically, it costs us in terms 

of how much we need to be spending on security and on homeland 

security. So it is actually very centrally related to hard, concrete 

resource questions. America’s perceived legitimacy is one of our 

greatest intangible assets. 

The flip side of that is if you do polling at home, the polls are 

also very clear. Americans care greatly that they are perceived as 

legitimate abroad. Americans are also very big-hearted when it 

comes to tangible foreign challenges. 

So we very much need to be engaged in winning hearts and 

minds, as well as winning the peace in these critical countries that 

we are reconstructing. I think a lot of decisions that are going to 

be made by this Committee will centrally impact that, and that is 

certainly not only in the area of foreign assistance, but it really 

goes to our broader foreign policy, our broader strategic purpose in 

the world. 

Mr. TANCREDO. Thank you. Mr. Cronin. 

Mr. CRONIN. By integrating our economic instruments of policy 

into our national security and our foreign policies, we can do a better job of showing the world that we have multiple ways of dealing 

with issues, other than military force. So that is the first issue. 

And that is why we need an overhaul and a review of foreign aid, 

is because really, economic policy does touch so many different important goals that we have been talking about here this morning 

and this afternoon. 

It does help prevent conflict, and even dampen the roots of terrorism. And we can do more on that, including building institutions 

to win the peace in areas of conflict. 

We can attack poverty through an economic growth focus and 

through good governance, but also through providing health and 

education programs, for instance. And we can also continue our 

leadership on humanitarian assistance, including preventing, not 

just dealing and reacting in a crisis to natural or man-made disaster. 

Mr. TANCREDO. Thank you. Your testimony cumulatively has 

been, I think, both provocative and elucidative. And I sincerely appreciate the time you have spent with us, and the information you 

have shared with us. 

We are adjourned. 

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[Whereupon, at 1:15 p.m., the Committee meeting was adjourned.] 

(103)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF KEN HACKETT, PRESIDENT, CATHOLIC RELIEF SERVICES

Mr. Chairman: I am Ken Hackett, President of Catholic Relief Services (CRS). On 

behalf of CRS and our partners around the world, I would like to thank the House 

International Relations Committee for the opportunity to testify on ‘‘Foreign Assistance after September 11th’’. We appreciate your leadership and that of Ranking 

Member Lantos in addressing this complex issue that deeply affects US national security and the image of America abroad. The Committee’s thoughtful consideration 

will help ensure a more positive impact of US foreign assistance on the lives of real 

people—especially many of the world’s 2.8 billion people who live on less than $2 

a day. 

In the two plus years since September 11th, the Bush Administration and Congress have committed substantial new resources to foreign assistance. These new resources mark the most significant additions to our foreign assistance program in 

more than two decades. In announcing the new funding, the Bush Administration 

and Congress have called for greater effectiveness and more measurable results. 

With increased funding comes an increased obligation to ensure the most coherent 

and effective approaches possible. 

CRS would like to call your attention to three challenges facing the future of foreign assistance: the fragmentation of assistance programs; the diminishing support 

for existing programs; and the closer association of humanitarian aims to the expediencies of short-term foreign policy goals. These three trends merit your further 

consideration, as responding wisely could significantly improve US foreign assistance and enhance the effective delivery of life-saving resources to our hungry, impoverished and imperiled global neighbors. 

FRAGMENTATION: 

New stand-alone initiatives have accompanied the recent financial additions to 

the US foreign assistance program, from the Millennium Challenge Account (MCA) 

to HIV/AIDS, the Middle East Partnership Initiative, and a proposed complex emergency fund. In each case, resources have been directed away from the US Agency 

for International Development (USAID) and placed under the management of the 

State Department, made available through Presidential Determination, or, in the 

case of the MCA, placed under the management of an entirely new entity. 

While USAID’s efforts have concentrated on core development and relief programs, a variety of federal agencies have long implemented aid programs along side 

the agency. These entities fulfill more narrow mandates, and include the US Trade 

and Development Agency, OPIC, and the African and Inter-American Development 

Foundations. More recently, however, domestic agencies have begun to increase 

their foreign programming. Health and Human Services, the Environmental Protection Agency, and the Departments of Energy and Defense, to name just a few, all 

have active programs in developing countries. 

Taken together, the already numerous actors along with the proliferation of new 

initiatives puts both policy coherence and donor coordination at risk. The potential 

for overlap, duplication, and contradictory purposes could ultimately undermine results and complicate the role of groups like CRS. 

A recent peer review of USAID by the Organization for Economic Cooperation and 

Development (OECD) has raised policy coherence and donor coordination as significant challenges for the US. Additional programs and agencies may further complicate this challenge. The OECD review also laments the lack of ‘‘a unified strategic 

approach to aid, . . . the end result of which is to deprive the US of a more effective 

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1Draft Development Assistance Committee Peer Review, Part II. Organization for Economic 

Cooperation and Development. February 7, 2002. pp. 5–9. 2The National Security Strategy of the United States. The White House. Washington, DC. 

September 2002. P. 1. 

approach to its aid.’’ 1 Without a more overarching vision, the US bilateral program 

becomes little more than a multitude of separate initiatives and differing mandates 

likely to reduce impact. Recent efforts to build greater ownership over the development agenda by local governments and citizens—key to improving effectiveness—

could be eroded by such a piecemeal approach. 

DIMINISHED SUPPORT FOR EXISTING PROGRAMS: 

Another area of concern is that, in resource allocation, the more visible new initiatives seem to be favored over existing programs, despite promises to the contrary. 

In FY 2004, congressional action was required to restore the core accounts to ’03 

levels. For FY 2005, the administration’s budget request cuts $100 million from 

child survival funds not related to HIV/AIDS, and also eliminates $56 million from 

the Development Assistance (D.A.) account. Of remaining D.A. funds, earmarks to 

Afghanistan and the Sudan have increased, meaning overall cuts will be even more 

sharply felt by other countries. Migration and refugee programs were also cut by 

$40 million, and the US contribution to international efforts to fight HIV/AIDS suffered a drastic $350 cut million in comparison with last year. 

Beyond this, we at Catholic Relief Services are concerned about some of the implications of targeting the MCA and HIV/AIDS programs to a limited number of countries that meet certain criteria. Appropriately targeting funds to enhance impact is 

indeed important. However, concentrating high levels of resources to a chosen few 

while cutting already insufficient funding to the majority of countries is an inadequate response to growing needs around the world. For example, estimates are that 

only 5 or 6 African nations will likely qualify for MCA funding. Likewise, concentrating HIV/AIDS funds in only 14 African and Caribbean nations means that other 

poor nations in Africa, Asia and Latin America go without. Such disparity in access 

to resources could increase the income gap among nations and further destabilize 

populations struggling with severe poverty. Our experience in places such as Ethiopia—which is unlikely to meet MCA criteria—is that investing more resources in 

development ultimately offers cost savings over chronic emergency response. 

Favoring new initiatives and new offices rather than strengthening the existing 

US development agency misses the opportunity to tackle the deeper problems of US 

bilateral assistance as a whole. The rationale for creating a new agency to manage 

the MCA funds was to give the new entity certain advantages over USAID. The administration expects the Millennium Challenge Corporation (MCC) will be more accountable than USAID. It will demand results and cut funds to non-performers. It 

will be free of the regulatory burdens of USAID and will therefore be more innovative and business—like in its approaches. 

However, details on how the MCA will be more accountable remain unclear, and 

precise problems with USAID’s accountability have not been set forth for resolution. 

It also remains vague how the MCC will demand results differently from USAID’s 

rigorous ‘‘results framework’’ of objectives, indicators and benchmarks. With respect 

to cutting non-performers, the MCC (and USAID) would benefit from a transparent 

assessment of the reasons behind these difficult decisions—including the political realities in both the US and recipient countries. Lastly, further consideration should 

be given to the possibility of eliminating burdensome regulations for USAID. 

That these questions remain outstanding suggests that decisions related to the 

MCC’s institutional structure—as well as USAID itself—would benefit from a more 

in-depth analysis of the difficulties facing foreign assistance in general. Without 

such an analysis, and without a sufficient understanding of the current problems 

with foreign assistance, the MCA may be poised to repeat many mistakes, and the 

US bilateral assistance program could be eroded by the piecemeal approach described above. 

CLOSER LINK TO SHORT-TERM FOREIGN POLICY GOALS: 

An overriding element of US foreign policy is to ensure US security by building 

greater global stability. The US National Security Strategy states that America will 

use its strength to ‘‘translate this moment of influence into decades of peace, prosperity and liberty.’’ 2 Carefully implemented, foreign assistance programs designed 

to reduce poverty, and to promote democracy and freedom contribute greatly to this 

overarching goal, and also reflect American values. 

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3 Ibid. 

Establishing new foreign aid initiatives outside of the US development agency, 

however, raises questions about how this valuable tool is best used to promote security. Placing funding largely within the State Department (HIV/AIDS, Middle East 

Partnership, chair of the MCC) and White House (complex emergencies) narrows 

the space between longer-term development goals and short-term foreign policy 

goals. Too close an association could mean that humanitarian objectives become subject to more immediately tangible political interests, and lead to different kinds of 

decisions on where to invest development funds and on what sectors to prioritize. 

Where communities may call for clean water and education, political interests may 

demand alternative agriculture or police reform. 

Though both may be important, it is ultimately in the interest of the US (and the 

recipient country) to ensure that more immediate strategic interests are met without diminishing longer-term human development programs. Maintaining a separation of political goals from humanitarian goals will allow a greater clarity of purpose, promote a more coherent approach, and if necessary, allow a better understanding of consequences where difficult decisions must be made. 

Lessons from the Cold War demonstrate that strategic investments can have the 

desired impact on the short-term political interest in question, but may come at the 

expense of more humanitarian purposes. Where political and development goals are 

blurred, longer term approaches aimed at sustainable poverty reduction, equitable 

growth and stability can suffer. However, it is precisely the achievement of these

goals that will promote greater global stability and national security for the US. The 

National Security Strategy recognizes that ‘‘America is now threatened less by conquering states than we are by failing ones.’’ 3 Given this reality, foreign assistance 

funds most effectively contribute to national security when invested in long-term, 

democratic approaches to reduce poverty and build the capacities of governments 

and civil society to advance their own development. 

CRS is also concerned that linking foreign assistance too closely with more politically expedient goals may bring about a diminished role for American Private Voluntary Organizations (PVOs). Some officials have suggested that the use of for-profit contractors is more expeditious in terms of contributing to foreign policy goals as 

contractors implement the will of the federal government. Similarly, with respect to 

emergency programs, the US has begun to rely on the military to conduct activities 

more traditionally the role of USAID and PVOs. This has resulted in logistical challenges arising from a lack of understanding of development principles, including in 

Afghanistan, where food relief was airdropped in packages the color of cluster 

bombs. Linking assistance to the military has also generated a certain amount of 

confusion on the part of local communities. Again in Afghanistan, military personnel 

engaged in humanitarian assistance while dressed in civilian clothes and carrying 

weapons. Recipients of aid who may be frightened or who disapprove of the military 

action may view this as contradictory. Confusion on the part of aid recipients can 

be destabilizing, and can compromise the ability of PVOs to deliver needed services, 

as well as our safety. 

PVOs have historically maintained a distance from political and military aims to 

ensure that we are viewed as impartial providers of needed services. We use our 

local presence to forge relationships with local populations. This has allowed us to 

more easily gain access to communities than might the military or private contractors. As you consider rebuilding for war-torn Liberia, we hope that PVOs will play 

a central role. Our understanding of the issues and existing local partnerships can 

help avoid the problems of confusion and logistics. 

Another advantage of PVO programs is that we focus on the long-term institution 

building of local organizations to develop local capacities in a sustainable manner. 

We are driven neither by political interests nor by the profit motive. Our strength 

is derived from the spirit of volunteerism and our desire to achieve a more equitable 

world. CRS in particular, as an agency that represents a faith community, has a 

special role and contribution to make. 

Our impartial approach to relief and development has helped us earn the support 

of our American constituencies. Americans want to help those in need and understand that PVO programs directly reach some of the neediest populations in the 

world. They support PVOs not only with their hard earned dollars, over and above 

their taxpayer contributions, but also through the actions of global solidarity they 

undertake in their daily lives, like buying fair trade coffee or contacting their elected officials to support social justice. 

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CONCLUSION: 

The trends outlined above—fragmentation of programs and agencies, diminished 

support for existing programs, and a closer association to short-term foreign policy 

goals—could have an adverse impact on US foreign assistance. Ultimately, foreign 

assistance programs do influence our national security goals, and can most effectively do so through a longer-term, people-centered approach. Though they represent 

a cost to the American taxpayer, they are also an investment in our future. The paradox is that, to achieve greater security and stability in the world—and for the 

United States—humanitarian aims must be pursued in a disinterested way. By defining a comprehensive approach to development that empowers the poor people of 

all nations to raise themselves from the indignities of hunger and poverty, the US 

can also arrive at a stability gained by achieving greater prosperity for all. 

To more thoroughly examine these trends and their implications, we recommend 

a comprehensive review of US bilateral assistance, and a recommitment to longterm developmental goals. Such a commitment should be built upon a foundation 

of local ownership—including a vibrant role for civil society, and significant improvements in policy coherence and donor coordination. 

Thank you again for your leadership on this issue. We hope to be of assistance 

as you consider these challenges and possible actions.

Æ