Billions Wasted in Foreign Aid—but at Least It’s Not Elitist

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On Feb. 24 the United Nations Development Program commemorated its 50th anniversary. Beneath the boisterous celebration of past achievements, a UNDP background paper quietly sounded a sobering note. “Significant deprivations persist,” the paper stated, “and many problems faced today are deep-seated, structural in nature, and not susceptible to quick fixes.”

Such caution was in scarce supply in the heady early days of the U.N. after World War II, when wealthy nations poured money into the Third World in the belief that poverty would be eradicated within one generation. Experts in the West predicted that with technical assistance from foreigners to help jump-start social and economic development, the locals would acquire the necessary skills from the expatriates quickly.

Instead of withering away, however, foreign aid and technical assistance grew over time. The total amount of wealth transferred from prosperous to poor nations since World War II has surpassed $2.5 trillion, one-quarter of which has been spent maintaining the expatriate labor force. Some progress has been made in ending “extreme poverty”—defined as income of less than $2 a day—thanks in great part to the economic takeoffs in India and China. Nevertheless, according to the latest World Bank figures, more than two billion people are still living on less than $3.10 a day. Pestilence and starvation have been curbed in most of the Third World, but civil war, extremism and tyranny continue to run rampant.

During the 1950s and 1960s, leading development thinkers discerned that Third World nations were not making the same progress as Western Europe’s Marshall Plan recipients because they lacked elites with comparable educational levels and cultural beliefs. These experts convinced the U.S. government, private foundations and other major donors to support Third World universities and fund scholarships from the U.S. Agency for International Development (USAID) that brought 20,000 foreigners to American universities annually.

These higher-education initiatives imbued the beneficiaries with Western cultural and political ideas, most of the positive variety. Many of them went on to lead cultural and political transformations in their home countries, in such places as Taiwan, South Korea, Indonesia, Colombia and Chile. The biggest successes took place where foreign donors spent the most money—typically countries of high geostrategic importance to the U. S.—which helped explain why the number of success stories was limited.

Instead of following up with intensive programs in additional countries, in the 1970s the U.S. and other donors began slashing assistance for higher education. The number of USAID scholarship recipients fell from its high of 20,000 a year to only 1,000 in the early 21st century. Private foundations also slashed their scholarship programs. Driving this change was the belief within development circles that higher education benefited only privileged, self-interested elites, and hence foreign assistance ought to be funneled exclusively to programs directly benefiting the poor.

Opposition to funding for higher education received reinforcement from Congress, the White House Office of Management and Budget and UNDP, where experts argued that the impossibility of quantifying the results of support for higher education rendered it an inferior form of aid. The Millennium Development Goals promulgated by the U.N. in 2000 focus on numerical targets such as halving the number of people in extreme poverty, reducing child-mortality rates by two-thirds, and increasing primary-school enrollment to 100% world-wide.

To meet these goals, aid agencies turned to foreign contractors and foreign NGOs, to carry out the work and comply with the onerous administrative requirements. They eschewed local governments and companies or local NGOs, since these had fewer personnel and were more prone to waste, fraud and abuse. As a result, international aid increasingly propped up the bottom of society while the more-educated top was left to stew in its own juice.

With the top dysfunctional, the bottom remains stuck in a state of perpetual dependency on foreign assistance. Not only is dependency unhealthy psychologically. It also leaves the dependents at high economic risk, because donors often reduce aid when their own economies experience downturns.

To end this unhappy state of affairs, donors must go back to addressing the problems at the top. The U.S. should revive funding for public and private institutions of higher education in underdeveloped countries, with emphasis on programs pertaining to governance and security, and bring back USAID and private scholarship programs.

New approaches are also worth trying. The U.S. could increase the intake of foreign students at West Point, the Naval Academy and the Air Force Academy, which at present admit very small numbers of foreign students, who account for only 1% of their student bodies. To provide new opportunities for foreign civil officials, as well as future American leaders, the U.S. can create a civil version of West Point and transform the Foreign Service Institute from a diplomatic training center into a world-class educational institution.

Such initiatives would take 20 or 30 years to bear fruit. But common sense tells us that while bottom-up programs can relieve some symptoms of a dysfunctional society, only a long-term, top-down approach can cure the dysfunction and permanently eliminate poverty, extremism, human smuggling and the other blights of the Third World.

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