Return on Investment: Foreign Aid as more than ‘Soft Power’
Charles W. King
Many American policy-makers, in the in Congress and the White House, are increasingly critical of spending on foreign aid. The criticism of cuts to foreign aid as a method of balancing the national budget is legitimate, but beyond the scope of this article. Instead it will discuss what kinds of aid the United States provides, why it does so, and what the benefits and drawbacks of such aid are. The United States, through the State Department and USAID, provide not only monetary aid, but also food, medical aid, and defense aid. While ‘Soft Power’ has been a focus of the State Department in recent decades, the United States has engaged in foreign aid for much longer than that. It did so, and continues to provide foreign aid for a multitude of reasons.
Food and medical aid are perhaps the most visible form of foreign aid that the United States provides; white sacks of grain with red and blue “USA” on them have become a staple of reporting on USAID programs. The reputation as a good samaritan that the United States gains from disaster relief is not irrelevant, but the impact that such aid has in the US and abroad has more concrete effects. In states receiving aid there can be significant distortions in the economy, and local politics. The presence of free or cheap food can cause a drop in food prices, leading local farmers to cease farming, exacerbating food shortages. There are also repeated accounts of warlords and others seizing food and medical aid and using it to strengthen their political standing. The flip side of the coin is that food aid is intended to distort the United States economy. The vast majority of foodstuffs provided are purchased as part of the US’s agricultural subsidy program to boost the market price of the products of American farms. US food aid also introduces American staple grains like corn and wheat to markets where they were not previous popular, creating new markets for American goods. Starvation and epidemics also increase instability, providing aid ensures stability to regions of vital national interest to the US.
Monetary aid is also a mixed blessing. President Carter began providing aid to Egypt in exchange for Egyptian recognition of Israel. This achieved a minor policy objective. The Egyptian government fulfilled its commitment with lip service, and the money sustained the repressive Egyptian state without the need to develop the Egyptian economy. This resulted in a loss of American prestige in Egypt at a steep monetary cost for little gain. Not all monetary aid is money down the drain. The Marshall Plan provided a tremendous amount of monetary aid to Europe after World War Two, which was then used to purchase American goods. This sustained the American economy as it transitioned from war materiel to consumer goods, and increased the access of American businesses to foreign markets.
Similarly defense aid to foreign allies, in the form of arms as well as cash or financing for arms purchases, serve as a subsidy for the American economy. Israel continues to be the largest recipient of American foreign aid, and much of that money returns to the US as payment to American defense contractors and manufacturers. While it is true that this money could be spent on other domestic projects or purchases for the US military, it is in US interests to ensure that both the manufacturing and research and development fields of the American defense industry are healthy. Foreign aid for defense spending does this effectively.
The United States does not provide foreign aid out of the goodness of its heart, nor simply to stake a claim on the moral high ground in international affairs. Foreign aid does have some negative side effects, but the benefits to the US are concrete and substantial. Foreign aid subsidizes American agriculture, industry & science, ensures market access, preserves regional stability, and facilitates foreign cooperation with policy objectives. Cutting the foreign aid budget would not simply be a sacrifice of nebulous American ‘Soft Power’; it would be a serious blow to the United States’ economy and national security.
Further Reading
William Appleman Williams, The Tragedy of American Diplomacy, (New York, NY: W. W. Norton & Company, 2009).
Michael E. Latham, The Right Kind of Revolution: Moderinzation, Development, and U.S. Foreign Policy from the Cold War to the Present, (Ithaca, NY: Cornell University Press, 2011).
Eric Hobsbawm, The Age of Extremes: A History of the World, 1914-1991, (New York, NY: Vintage Books, 1994).