The Magazine

Help That Helps

A new business model for foreign aid.

Aug 31, 2009, Vol. 14, No. 46 • By CAROL C. ADELMAN and NICHOLAS EBERSTADT
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Over six months into President Obama's term of office, there is still no head for the U.S. Agency for International Development (USAID), America's main foreign aid agency. Nor is there yet a CEO at the Millennium Challenge Corporation (Washington's newer, arguably more flexible foreign assistance organization). The Obama White House has not even forwarded the names of nominees for those positions to Congress, and our major aid programs are being run on autopilot by caretakers.

There is, moreover, no tangible indication of any new thinking on aid from the Obama team. Halfway through the president's first year, no position papers--much less white papers--on how to improve our foreign assistance programs have emanated from his halls of government.

But this has not kept the president from saying a few words about aid to Africa, fittingly in Ghana--one of the few African success stories. In an address televised across Africa after the G8 Summit in July, the leader of the largest aid donor to Africa acknowledged the continent's troubled colonial past. But this son of an African refuted the standard mantra that the West is still responsible for Africa's economic and social woes. In an interview with, Obama pointed out that Kenya's GDP was actually higher than South Korea's in the early 1960s and credited South Korea with putting into place successful policies that promoted foreign investment, exports, a skilled workforce, and homegrown industries.

Emphasizing rule of law, trade, institution building, good governance, and anticorruption, Obama's message was a breath of fresh air, especially as he underscored self-reliance, saying "wherever folks want to help themselves, we want to be there as a partner." Obama's apparent preference for a performance-based aid approach could not be more different from the traditions of the foreign aid business, which emphasizes how much (or little) we give and how poor (and getting poorer) they are. That traditional focus implies that aid is the engine of economic growth in developing countries and that it is mostly the responsibility of Western aid agencies.

Obama's comments on foreign aid make it all the more surprising that the only real change in our foreign assistance programs under his administration so far is in indicated spending. In the president's first budget (FY 2010), outlays for "international assistance programs" were ratcheted up by over half from the level of the final year of the Bush administration ($18.9 billion vs. $12.4 billion--not a trivial difference, even in Washington these days). Proposed outlays for FY 2011 are even higher. President Obama may well be on track to keep his campaign promise of doubling overall foreign assistance.

The lack of any substantive--or even superficial--effort to improve the functioning of our aid apparatus, in conjunction with the evident determination to shovel massive new amounts of money into our aid programs, can only suggest that the key thinkers in the Obama administration regard the primary shortcoming of existing aid programs as a lack of funding. Such sentiments are shared at the United Nations, where the U.N. Millennium Project has been beating the drum since 2005 for a doubling of rich nations' aid to poorer countries, under the argument that these new transfers are both necessary for and instrumental to the reduction of global poverty in the years immediately ahead.

But if the Obama administration believes it can simply scale up foreign aid and muddle through with the structures and approaches that underpin our current international assistance programs on ever higher funding levels, it is setting course for a terrible failure. The U.S. foreign aid system is broken and must be overhauled. This is not some well-concealed secret, and it is not a position particular to a limited segment of the political or ideological spectrum. In Washington today, there are few policy conclusions that elicit such bipartisan agreement. More money will not change the delivery of foreign aid on the ground. And President Obama knows this. In his interview with he warned of how "Western consultants and administrative costs end up gobbling huge percentages of our aid overall."

A new business model is manifestly required if development assistance is to avoid endlessly repeating past mistakes and if it is to capitalize upon important emerging opportunities.