The Little-Known History of US Foreign Aid
Learn the history of foreign aid, and then stop foreign aid from becoming history.
The term “foreign aid” is a misnomer, not because it implies anything false, but because it fails to fully reflect the scope of the policy’s pragmatism. The two-word phrase implies a one-way relationship in which the United States finances humanitarian development initiatives to other countries with no return on investment. This perspective is misguided.
In fact, foreign aid benefits the United States both in terms of national security and economic prosperity.
Foreign aid makes the US safer. It stabilizes countries that have been devastated by conflict and poverty, thereby alleviating the conditions that lead to terrorism. Essentially, foreign aid can stop wars before they start. More than 120 retired generals said as much in a letter urging lawmakers to oppose US President Donald Trump’s proposed cuts to foreign aid.
“The State Department, USAID, Millennium Challenge Corporation, Peace Corps and other development agencies are critical to preventing conflict and reducing the need to put our men and women in uniform in harm’s way,” the letter said.
Furthermore, foreign aid helps the US economy by creating trade partners and markets for American goods. Currently, 11 of America’s top 15 trade partners have received foreign aid.
“Foreign aid” is also a broad term. Some of the money is military aid, some is economic, some addresses health issues like eradicating disease and providing food and clean water. There are a number of different government initiatives and private efforts to help developing countries in these areas.
But foreign aid hasn’t always existed as an extension of US policy and investment has fluctuated with the global socio-political landscape. Some years foreign aid is uncontroversially added to the budget, other times it causes partisan skirmishes. Some foreign aid programs have had unquestionably good effects — others, not so much.
So with all the focus on foreign aid’s place in the upcoming US budget, it’s good to take a step back. How, after all, has foreign aid gotten to the point it’s currently at?
Foreign aid in the current sense of the phrase (used in both a moral and strategic capacity) started with the Marshall Plan after World War II, named after then-Secretary of State George C. Marshall.
While speaking at the Harvard University commencement on June 5, 1947, Marshall called for an aggressive foreign aid policy to help rebuild Europe which was still enduring the devastation of war two years after it had officially ended.
“It is logical that the United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace,” Marshall said. “Our policy is directed not against any country or doctrine but against hunger, poverty, desperation and chaos.”
The Marshall Plan was passed in March of 1948, officially known as the European Recovery Program. Through 1952, the US provided more than $13 billion in aid to 17 European nations, helping to avoid a humanitarian crisis and to stimulate economic recovery. Even then, foreign aid wasn’t seen as a form of charity. The plan also invigorated the US economy by creating a market for American goods in western Europe and fostered alliances — 13 of those nations are NATO members.
The moral calling to rebuild European society was nevertheless shadowed by a political agenda. The Marshall Plan didn’t help millions of impoverished people solely for the sake of health and human prosperity; the US wanted a strong European continent to act as a bulwark against the world’s other emerging superpower, the Soviet Union.
Shortly after the Marshall Plan was implemented under Harry S Truman’s administration, other initiatives like the Point Four Program in 1949 and the Mutual Security Act of 1951 added further military, economic and technical aid to US allies in Western Europe to check Soviet power and stop the spread of communism.
These early efforts were all separate initiatives. Ten years later, with John F. Kennedy in the White House, the US looked to centralize foreign aid efforts into one agency.
The United States Agency for International Development (USAID) was established by the Foreign Assistance Act of 1961. Kennedy claimed that by uniting foreign assistance programs, the US could better maintain its place as a global leader and moral compass.
“There is no escaping our obligations,” Kennedy said. “Our moral obligations as a wise leader and good neighbor in the interdependent community of free nations — our economic obligations as the wealthiest people in a world of largely poor people, as a nation no longer dependent on the loans from abroad that once helped us develop our own economy — and our political obligations as the single largest counter to the adversaries of freedom.”
Ever since, USAID has acted as the primary arm of US foreign aid.
Kennedy also created the Peace Corps in 1961, via executive order, to further promote cultural exchange and economic development.
The Cold War and the 1990s
In 1973, Congress shifted the focus of foreign aid to meeting “basic human needs,” which meant a greater emphasis on food production, rural development and nutrition, population planning, health, and education.
Still, throughout the 1970s and 1980s, foreign aid was shaped by political strategy. The bulk of aid went primarily towards curbing communism and aiding countries in the Middle East.
In fact, the amount of aid sent to countries throughout this period correlates to the extent of US military involvement.
Funds going to Vietnam trended upwards through the 1960s and into the 1970s, peaking in 1973. Korea and India followed similar trends. Aid to Israel spiked in 1974, thanks to the Yom Kippur War, and peaked in 1979. Egypt also received an all-time high in aid in 1979 thanks to military assistance. These nations have been the top two recipients of US foreign aid since the 1940s.
The same decade saw massive increases in economic investment in Central American countries like El Salvador, Guatemala, Honduras, and Costa Rica, at a time when many of these countries were experiencing debt crises.
Though certain regions experienced upticks in US aid foreign aid, overall spending trended downward starting midway through the 80s and continuing into the 1990s.
The US invasion of Panama, for instance, coincided with a flash of economic aid in 1990. Nevertheless, foreign aid spending continued its drop from the previous decade thanks to the end of the Cold War and efforts by Congress at deficit reduction. Foreign aid hit lows in 1996 and 1997 and remained less than 1% of the federal budget until 2003, when the US invaded Iraq.
Bush and Obama
After September 11, 2001, terrorism replaced communism in the American psyche as the greatest existential threat to the nation. Accordingly, foreign aid has increasingly been devoted to reduce global terrorism.
From 2003-20014, Iraq experienced a surge in economic and military assistance. Afghanistan has also received increased aid stemming from war. At $4.7 billion, Afghanistan is set to be the biggest recipient of US foreign aid in 2017, ahead of Israel ($3.1 billion) and Jordan ($1 billion).
There have also been massive efforts at global development beyond the Middle East. In 2003, George W. Bush created the US President’s Emergency Plan for AIDS Relief (PEPFAR) which has provided health services and support for about 11.5 million people living with HIV/AIDS, primarily in Africa.
The following year, Congress created the Millennium Challenge Corporation which provides grants to developing nations in sectors like farming and irrigation, infrastructure, clean water, sanitation, health, and education with the goal of sustaining economic growth and raising the standard of living. Both PEPFAR and MCC continue to receive strong bipartisan support.
Almost a decade after leaving office, Bush has continued the push for foreign aid, calling on Trump to continue assistance programs as a moral and security imperative.
“When you have an entire generation of people being wiped out and the free world turns its back, it provides a convenient opportunity for people to spread extremism,” he told NPR.
After taking office in 2008, Obama picked up where Bush left off. In addition to renewing PEPFAR, he signed the first US Presidential Policy Directive on Global Development reaffirming long-term foreign aid as a strategic, economic, and moral imperative for the US, and naming international development as a “core pillar of American power.”
In 2009, then-Secretary of State Hillary Clinton announced the first Quadrennial Diplomacy and Development Review. Conducted every four years, the study reformed the State Department and USAID by providing a blueprint for long-term development, rather than a year-by-year basis, and streamlined foreign assistance policies across US agencies. Thus, foreign aid was elevated as an extension of policy.
Trump’s budget proposal for 2018 slashes foreign aid in order to increase military spending, including a 44% cut to development programs that provide education, clean water, and sanitation. Though it is just that — a proposal — it nevertheless provides insight as to what the White House administration thinks about foreign aid.
Foreign assistance currently makes up less than 1% of the federal budget, though the American public believes it composes about 25%. Trump has tapped into that misinformation, claiming America will only pay its “fair share” for international development.
It’s true that the US is the biggest foreign aid donor in terms of total dollars. But when considering the aid contributions in relation to the size of its economy, the US doesn’t come out on top — far from it, in fact. Compared to its Gross National Income, the US ranks 22nd in the world in official development assistance.
Trump’s budget proposal also cuts funding to the United Nations (UN) in half. Since its establishment 1945, backing the UN has been pivotal to US foreign aid (supporting the UN was one of Truman’s four points in 1949).
The Office for the Coordination of Humanitarian Affairs (OCHA) is the main branch that distributes humanitarian aid, but the World Food Program, UN Refugee Agency (UNHCR), UN Children’s Fund (UNICEF) and UN Development Program (UNDP) are all pivotal in delivering relief assistance to populations in need.
The US provides roughly 20% of the UN’s budget. Suffice to say, the proposed cuts would cripple humanitarian aid operations.
While US foreign aid has made great strides in ending hunger and alleviating disease, historical trends show that majority of foreign aid follows conflict. By increasing military spending, foreign aid will only be needed more, but the organizations that provide it will be handcuffed by funding cuts, if they continue to exist at all.
It seems to be a self-defeating policy.
Foreign aid has never been a solely altruistic endeavor. It’s had two goals since its inception: helping people and strategically advancing the interests of the US. Regardless of political alignment, lawmakers and military leaders agree that foreign aid makes the world healthier and safer.
As Secretary of Defense Jim Mattis so said in 2013, “If you don’t fund the State Department fully, then I need to buy more ammunition ultimately.”