Does foreign aid help? Some claim it may hurt


WASHINGTON -- In the 1980s, the United States pumped tens of millions of aid dollars into Sudan, then a pro-Western bulwark on the Horn of Africa. Now the country is an economic basket case. It is an anti-American terrorist state, riven by civil conflict and gripped by a war-induced famine threatening half a million lives.

In the 1970s, an economically stagnant Chile was drawing the world's second-biggest pot of foreign aid. Donor countries then turned off the aid spigot to punish the regime of dictator Gen. Augusto Pinochet. Two decades later, Chile has one of the region's most dynamic economies, is a growing U.S. American trade partner and is hailed as a durable democracy.

Sudan and Chile are extreme examples in a growing debate that may lead to the biggest overhaul of American foreign aid since the 1960s, when John F. Kennedy launched the Agency for International Development (AID) for humanitarian reasons and to stem the spread of communism through the post-colonial Third World.

The nation's foreign aid tab has long been unpopular among many members of Congress and with taxpayers who believe it wastes money and shortchanges this country's own needs.

Now, with impending GOP control of the purse, the question asked repeatedly on Capitol Hill is not just how to restructure foreign aid programs but whether the whole concept of aid as traditionally practiced continues to make sense.

More fundamentally, it's a debate on what America's interests are in the rest of the world and how U.S. tax dollars can best be used to advance them.

'The vision thing'

"I hate to use the term again, but it's 'the vision thing,' " says Albert J. Ossman, a retired professor of international relations who participated in a 1992 study of State Department operations. "We still have not got a geo-strategic view of the world."

The debate is set against a backdrop of widespread public misconceptions about the size of U.S. aid. Military and economic aid together total $14 billion a year -- about 1 percent of the federal budget.

When President Harry S. Truman launched the post-World War II rebuilding of Europe with the Marshall Plan -- the foreign aid project against which all subsequent efforts have been measured -- the United States was virtually the world's only donor country. It was spending about 3 percent of its entire gross national product on foreign assistance.

Now it spends only about a quarter of a percent of GNP. And it ranks near the bottom of the list of donor countries, when their contributions are measured in relation to the size of each country's economy.

The biggest single chunk of U.S. aid, more than $5 billion to Israel and Egypt, is virtually off the table for discussion -- because of the powerful pro-Israel lobby in Washington and a widespread belief among Republicans and Democrats that it is needed for regional stability and to advance the Middle East peace process.

Spent in U.S.

A large part of foreign aid money actually is spent in this country, including $3.4 billion in military aid and another $1.4 billion in food aid. The AID reports that in 1993, $10 billion in U.S. goods and services were purchased by foreign aid recipients.

Many U.S.-based private, nonprofit organizations, including CARE, Feed the Children and Catholic Relief Services, headquartered in Baltimore, depend heavily on U.S. foreign aid. About 3,500 U.S. firms have contracts with AID.

But if the amount at issue is relatively small, the controversy over how to divide a shrinking pie is not.

During the Cold War, the guideline was simple: help our friends. "Part of it was spent to buy influence," says Brian Atwood, AID director.

Take Sudan, where the United States spent about $600 million in economic aid between 1981 and 1988 in return for support from its government. Washington and Moscow were each competing for influence. Not all this money was wasted, U.S. officials say, since it helped build institutions and infrastructure and got the government started on economic reform.

But even at the time, Sudan never achieved better than slow economic growth, despite great agricultural wealth south of Khartoum, the capital. Then, in a 1989 coup, a radical Islamic regime seized power.

The economy has deteriorated, the government's sponsorship of terrorism threatens U.S. allies and interests in Egypt and elsewhere, and a civil war between the government and secessionists has created a humanitarian catastrophe rivaling Somalia's.

U.S. aid can't be blamed for the rise of Islamic extremism or the outbreak of civil war. But Sudan offers proof that even sizable amounts of U.S. money don't guarantee friendship, long-term political stability or economic growth.

Rwanda, a big aid recipient -- though most of its money came from Europe -- underscores the failure of aid to ensure political stability.

Another example is Zaire, where dictator Sese Seko Mobutu enjoyed substantial U.S. and Western aid during the Cold War, particularly when the United States and Soviet Union fought a proxy war in Angola.

When Mr. Mobutu's loyalty no longer was needed, the United States and Europeans stopped turning a blind eye to the government's rampant corruption and brutality. But by then it was too late. The country's infrastructure and economy have all but collapsed.

With the East-West conflict now past, officials in the United States and other donor countries are free to take a clearer-eyed view of what, besides political loyalty, they're buying.

Besides Mideast peace, Republicans and Democrats also are agreed that the states of the former Soviet Union should not be allowed to regroup or rebuild into another imperial menace. Republicans, though, would spread more of the aid outside Russia itself, to other former Soviet republics.

And both parties agree on a goal of expanding the number of free-market democracies worldwide. But the approaches differ widely.

Creates dependency

Citing past waste, U.S. conservatives such as Republican Sen. Mitch McConnell of Kentucky argue that economic aid creates a dependence akin to multi-generational welfare -- inhibiting prosperity and trapping people in poverty.

"I can't think of a single country, not one, that has graduated from foreign aid," Mr. McConnell said at a news conference last week. He would remove entirely the $800 million in aid slated for Africa and force the continent to compete with other countries.

He and the Heritage Foundation, the conservative Washington think tank, cite Chile as a shining example of a country that pulled itself up to prosperity and democracy only after aid was cut off, forcing its government to undertake fundamental free-market reforms.

It is now both a force for stability in an increasingly democratic hemisphere and a growing market for U.S. goods.

"We strongly believe aid is not necessary to development," says Thomas P. Sheehy, co-author of a new Heritage study that ranks economies worldwide according to their free-market potential.

The Clinton administration, which has reduced foreign aid and shut down some two dozen aid missions overseas, also stresses the development of free markets worldwide but insists that aid can help.

"Some of us believe in the Immaculate Conception, but there's no miracle here," said Mr. Atwood of AID. The major part of foreign aid "created new markets and educated the work forces that today drive the engines of such productive economies as South Korea, Taiwan, Mexico, Chile, India, Thailand and Tunisia."

'Technical assistance'

Even some Democrats are disillusioned with large amounts of government-to-government aid. But the Clinton administration still favors "technical assistance," in which government-paid consultants train businessmen, bankers and officials of emerging economies in the ways of modern commerce.

Some of these programs have drawn criticism as boondoggles.

Many Republicans would bypass the federal foreign aid bureaucracy and concentrate on working through business-oriented quasi-governmental institutions such as the Overseas Private Investment Corp. and the Export-Import Bank.

Assigning top priority to free markets, Republicans put creation of democratic institutions a distant second and scoff at the whole idea, discredited in Somalia, of "nation building."

Some even argue that, as in Chile, a period of authoritarian rule may be necessary to wean countries off heavy regulation and high subsidies, taxes, welfare and tariffs. The Clinton administration believes both democracy and free markets should pushed at the same time, although the amount of money assigned to building democratic institutions is far lower.

But all agree: Disaster aid, particularly to relieve highly publicized suffering in the age of Cable News Network, is more popular in Congress and with the public than foreign aid generally. It provides visible reassurance that America is generous.

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