Problems with the U.S. Foreign Aid

Foreign aid is an oft-cited example of American Public misconception of U.S. overseas governmental operations. A study by Kaiser Family Foundation in 2015 found that a whopping number of Americans believe that an average of 31% of the U.S. federal budget went to foreign aid. Yet, the actual amount is less than 1%.

But given the massive federal budget, even 1 percent is much larger than all private philanthropy for global development in a given year combined, with the USAID- an organization primarily responsible for administering civilian foreign aid and development assistance- spending tens of billions of dollars a year on global development programs. And the USAID is in charge of implementing around 60% of America’s foreign assistance spending.

Since 1961, USAID has spent hundreds of billions of dollars on international aid. For instance, USAID provided $28.3 billion in foreign aid for a variety of humanitarian purposes in 2021, including initiatives to combat hunger, provide medical care, and improve education. Its operation spans across 36 program areas in about 120 countries. But critics often claim that American foreign aid programs do little good to their stated goals, because of the underlying discrepancies sprawling across the foreign aid industry, from the disbursement process to the eventual outcomes to the recipient countries.

Disbursement Drawbacks

The majority of the foreign aid that the United States provides is funneled through nonprofit organizations, multilateral organizations, or private enterprises. Only around 22.5% of it goes to governments directly. But the contractors through which funds are channeled down to the organizations at the bottom are overwhelmingly dominated by western ones. It is because of the onerously complicated bidding process and gigantic document requirements that small but worthy organizations cannot get away with. Such a complicated grants process means that smaller groups, particularly those located in the Global South, frequently miss out on grants, even when a little contribution to them could make a significant difference.

Eventually, there are scores of U.S. organizations that get a sizeable piece of the American aid industry pie. For instance, the vast majority of USAID money is going to only 75 organizations (legacy contractors mostly based in the US), and only 6 percent of grants are given to organizations based in USAID-recipient countries. This implies that thousands of innovative organizations from the Global South are not receiving funding out of the bureaucratic issue. Yet, these organizations may be more effective because they are more familiar with the local context and interact with local policy actors to ensure that successful programs continue even after USAID departs. Besides, the way USAID’s grant structures are set up now substantially lacks much incentive for contractors to produce results.

Oversight Anomalies

As USAID’s humanitarian aid often goes to the regions where groups designated as terrorists by the US government control large swaths of territory as well as people desperately need humanitarian assistance, such as Yemen, Syria, Pakistan, Iraq, Somalia, Afghanistan, etc. In such chaotic places, those terrorist, criminal, and corrupt actors view foreign aid as an opportunity for patronage, kickbacks, and financing illicit terror activities, observed Bill and Max in their article titled, “USAID must protect the integrity of its humanitarian aid programs.”

For many years, however, USAID "lacked a framework to handle such underlying risks in humanitarian responses," stated the Office of the USAID Inspector General in its audit report in 2021. Such lack of sophisticated oversight measures and inefficient, fragmented approaches to vetting partners not only lead to the diversion of resources to the wrong hands but also questions the very sincerity of USAID’s stated goals of foreign assistance. 

Questionable Efficacy

Despite being the largest in the world, America's aid program is far from the world’s most respected.  In terms of using the recipient country budget, audit, and procurement procedures, only around 5% of American assistance flows adhere to internationally accepted best practice norms whereas, according to the OECD, it is a 50% average across all donors.

Whereas U.S. foreign aid should focus on alleviating global poverty and increasing prosperity, it’s long seen that the US weaponizes foreign aid programs to advance its radical ideological agenda. Insisting more on abstract and ideological goals, like democracy, human rights, and press freedom, in line with its foreign policy than prioritizing recipient countries’ structural economic and social benefits has resulted in many countries ending up with perpetual reliance on U.S financial hand-outs. Among many, Afghanistan is the strikingly most recent example. Hundreds of thousands of dollars spent on the so-called state-building mission over the twenty years of the U.S. longest war only resulted in the immediate collapse of the state after the US withdrawal.

Some critics point to it as the hubris of U.S. foreign aid, the sure sense that the US knows what’s good for others. Given that every society is a distinct, complex, and tightly woven mosaic of its own political, cultural, social, structural, and historically constructed pieces, the appropriate stance toward helping those societies improve their well-being is humility to their system and calibrated approaches to their needs and sustainable economic progress. Yet despite the evident truth of contextual complexity, aid agencies like USAID continue to be wedded to preconceived recipes for how to implement development in poor and underdeveloped countries.

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