As attention shifts to fiscal 2015 appropriations, interest groups, from farmers to big pharma, are all weighing in. But one group is missing from the conversation: the intended beneficiaries of America’s assistance programs abroad.
The international affairs budget, including foreign aid, accounts for just over 1 percent of federal spending. With ever-tightening resources, Congress is rightly focused on ensuring that every dollar gives Americans and recipients abroad the most bang for the buck. But neither Congress nor the administration is ensuring that our aid dollars are focused on recipients’ most pressing problems.
The U.S. government has done an embarrassingly poor job of listening to the recipients of its assistance programs to find out just what their priorities are. Over the past decade, when ordinary Africans were asked about the most pressing problems affecting their countries, roughly 70 percent of respondents routinely cited jobs, infrastructure, economic policies and inequality. Yet, during the same period, only 16 percent of U.S. assistance targeted these problems — instead skewing dramatically toward health and education. A similar misalignment between U.S. assistance and ordinary people’s priorities holds true in Latin America.
Some might argue against listening to what citizens in poorer countries cite as their priorities. Isn’t that what the buildings full of Washington-based development experts are supposed to figure out? Others say that isn’t even the point of U.S. foreign assistance: It’s our money, so we’ll spend it how we want.
But it’s difficult to argue with what people in Africa and Latin America and elsewhere want. They’re clamoring for access to economic opportunity. And with that comes the ability to meet other daily demands, such as paying for health clinic visits or school books. Access to opportunity allows a definitive exit from dependency and a path toward prosperity. Prosperity in developing countries also means greater opportunities for U.S. businesses.
This is not to dismiss efforts in health or education or disaster relief by the U.S. Agency for International Development. Instead, it means the U.S. must bolster its efforts to promote growth, trade and investment in developing countries. In Africa, this means helping to ensure that the 14 million youth entering the job market every year have a path to a brighter future. In Latin America, this means helping people escape from ever-escalating violence, fueled by a lack of good jobs and growing inequality. The Arab Spring is a stark reminder of what happens when large segments of society are shut out of the economy and a representative voice in government. The risks posed to U.S. national security and our commercial priorities will only grow over time.
Congress should consider three low-cost fixes to push us toward a more effective development policy: an approach that responds to what people in developing countries want.
First, better leverage the Millennium Challenge Corporation. The MCC is the only U.S. institution with an explicit mandate to support country-based priorities and to reduce poverty through economic growth. Fully funding the MCC and encouraging it to explore ways to crowd in large-scale private investments will help make the agency the development powerhouse that President George W. Bush, with strong bipartisan support, originally envisioned.
Second, unleash the Overseas Private Investment Corporation. The U.S. government’s development finance institution should be at the forefront of its development policy. The OPIC is charged with supporting U.S. private investment in frontier markets. But it is currently leaving a leveraged $40 billion in additional capital on the table because it is hamstrung by a lack of staff and outdated authorities. A few budget-neutral tweaks, such as allowing the OPIC to retain some of its profits to hire additional staff, would allow it to drive economic growth in developing countries, support American businesses and return additional money to the Treasury to support deficit reduction.
Third, expand support for USAID’s under-resourced Development Credit Authority. With an annual operating budget of only $8 million, the DCA has helped catalyze $1 billion in local lending over the past two years alone. A modest budgetary increase would give the DCA the ability to scale its proven approach of unlocking local capital in developing countries through limited loan guarantees for under-served entrepreneurs.
If the three-legged stool of defense, diplomacy and development is ever going to serve the U.S. and the world beyond providing a talking point, then the U.S. government, starting with the Appropriations committees, would be well-served to take developing country citizen demand for greater economic opportunities into account as the 150 Account is being allocated.
Ben Leo is a senior fellow and director of the Rethinking US Development Policy Program at the Center for Global Development. Beth Schwanke is senior policy counsel at the Center for Global Development.
An earlier version of this article gave an incorrect amount for the budget of the U.S. Agency for International Development's Development Credit Authority. Its annual operating budget is $8 million.