The Masquerade of Foreign Aid

Issue 6, Volume 113

By Kikyo Makino-siller 

Foreign aid has been a long-contested part of American politics. Aid programs have been described as both insidious and life-saving. Foreign aid has consistently taken up less than one percent of the US national budget, but this small percentage has had numerous negative effects. Though American foreign aid produces short-term humanitarian effects that make it look like the US government genuinely cares about countries in need, the long-term harms often reflect a different reality.

America has conducted various foreign aid programs throughout history. The United States Agency for International Development, the $60.4 billion per year American foreign aid agency, claims to have saved the lives of 4.6 million children and 200 thousand women since 2008. The President’s Emergency Plan for AIDS Relief, the largest health initiative ever undertaken worldwide, provided 17 million people in Africa with HIV treatment since its launch in 2003. In addition, aid has been a critical part of American soft power for decades, and many see it as key to the development of American trade.

However, foreign aid has been criticized by many politicians, economists, and researchers as detrimental to the development of emerging countries. The money given to developing countries tends to end up in the hands of corrupt governments that don’t disperse aid to the people. Some studies estimate that 76 percent of American aid is supplied to governments that are deemed “corrupt.” As much as one-sixth of foreign aid can end up in the pockets of the already wealthy elite. This flow further funds their politics, creating a never-ending cycle of deceit and ensuring that the voices of their fellow citizens will never be heard.

When the effects of foreign aid stunt the long-term development of emerging countries, they remain unable to diversify their economies or stabilize their societies. Money from foreign aid makes developing countries believe that they don’t need to be self-sufficient and develop manufacturing sectors. American investment in a country’s profitable markets, such as oil, can cause those countries to focus on solely exporting those goods. Sub-Saharan Africa, for example, mainly exports oil and minerals because they receive massive amounts of aid. However, this focus has led to American economic interest in the region, which comes mainly in the form of investment in oil and mineral fields. The dependence of certain African countries on oil and minerals is troubling because they are such volatile goods. When the international price of oil and minerals is low (like during the pandemic), exports become unprofitable, and those countries struggle. Data from multiple developing countries shows that on average, a one percent increase in foreign aid decreased long term growth in the country by 0.18 percent. Long term growth is incredibly important in reducing poverty rates and improving living conditions.

Foreign aid can be in the form of loans, which cripple countries because of high interest rates. Since the early 2000s, Western governments such as America’s have borrowed money from developing countries at low rates by setting up aid programs that lend to said countries with high interest rates and exploiting the global poor. Thankfully, American programs have largely shifted from loans to less predatory grants in recent years. However, many countries still struggle with debt and hindered economies.

The process of providing foreign aid has not been reformed because of American incentives. Because America gains geopolitical and trade benefits from providing aid, disreputable practices likely won’t stop in the near future. Many countries look up to America as a great power and a symbol of Western democracy. No matter how dysfunctional, it is important to recognize that American foreign aid has been an important part of maintaining the image of a country apt at soft power. Thus, it is more realistic to fix the institution of American aid than to remove it.

To better the system, America must reevaluate its relationship with foreign neighbors and adopt a no-strings-attached approach to foreign aid. To avoid corruption, America should partner with local non-governmental organizations to distribute funds, provide services, and build infrastructure. The government should increase communications with recipient countries to promote transparency about where the money is going and provide resources specifically for certain projects. A wide-scale reevaluation of American foreign aid is necessary to prevent future harm to developing countries. American economic benefit should not be at the expense of stability in disadvantaged foreign countries.