Under pressure from Republicans, the 2012 foreign aid budget wending itself through Congress reflects billions of dollars in aid cuts. Despite the instinct to help starving children in Somalia, sick refugees or earthquake victims, there are only so many resources available. Most of the public thinks foreign aid should be cut, and some lawmakers want aid cut to zero.
What is harder, however, is to summon skill and focus to differentiate what works and what doesn’t, to eliminate the bad investments and keep the good ones. Clearly, this is not happening. A main reason is insufficient use of business and persuasion skills. In a sense, aid proponents have brought problems on themselves either by not making the case or by thinking they shouldn’t have to. If post 9-11 lawmakers want to cut aid to parts of Somalia controlled by Islamist terrorists, for example, you can bet the aid community will have to make a case to feed the destitute there.
At least since the end of World War II, foreign aid’s explicit rationale has been to spread democratic ideals and otherwise protect the United States. From rebuilding Germany and Japan to developing the Peace Corps and providing food and medical relief in Africa, U.S. aid has slowed communism, reduced diseases that could have migrated here, preserved ethical leadership, created American export markets and helped combat illegal drugs. U.S. aid buys a seat at the negotiating table for release of kidnapping victims, environmental talks and other thorny issues. And it doesn’t cost much: Although the annual total is upwards of $50 billion, that’s little more than 1 percent of the total federal budget—a similar percentage since Ronald Reagan’s presidency.
Yet the record is uneven: early support of the Taliban in Afghanistan, confiscation of farmers’ grants by governments, support of countries sheltering U.S. enemies, and the inability of food and medical programs to promote economic progress in many countries. A July 2011 report by the U.S. Government Accountability Office found insufficient (a) reporting (b) performance targets, (c) best practices, (d) monitoring, and (e) spending on required trade enhancement by the State Department’s U.S. Agency for International Development (USAID).
Skilled business leaders know that a key to gaining opportunities is minimizing the risk. This requires risk-reward estimates and return on investment calculations before a project is funded. But few examples of this can be found with U.S. foreign aid. Though some efforts, such as smallpox programs, have had great benefits ($100 million cost, $1.3 billion annual savings), that was known only after the fact. If returns were routinely part of foreign aid proposals to Congress by the State Department, projects would be less vulnerable to failure or criticism. It’s no longer sufficient to say, “It’s the right thing to do.” One has to make the case that the foreign aid will not only help other countries, but the United States as well.