Fearing a Drought of Aid
As Major Economies Totter, Bush Urges Commitment to World's Most Vulnerable

By Dan Eggen and Anthony Faiola
Washington Post Staff Writers
Wednesday, October 22, 2008; D01

President Bush, who has made international aid a cornerstone of his foreign policy, warned yesterday against cutting U.S. assistance to impoverished nations in the midst of the financial turmoil sweeping Wall Street and Main Street, arguing that doing so would undermine America's economy, national security and moral authority.

"During times of economic crisis, some may be tempted to turn inward -- focusing on our problems here at home, while ignoring our interests around the world," Bush said at a White House summit on international development in Washington. "This would be a serious mistake. America is committed, and America must stay committed, to international development for reasons that remain true regardless of the ebb and flow of the markets."

The remarks came as fears grew that the financial crisis could further harm developing nations already whipsawed by surging food and energy prices over the past two years.

The United Nations estimates that, even before the market crisis, rising food prices had pushed an additional 75 million people into chronic hunger, bringing the total to 925 million after years of decline.

Liberian President Ellen Johnson Sirleaf said in an interview yesterday that her country, and others in Africa, were feeling the pinch of the global economic crisis. Foreign investors battered in their home countries, she said, were scaling back plans to build a massive palm oil plantation and factory.

A major London-based mining company, she added, is behind schedule on a $1.5 billion plan to extract iron ore and build roads. "That's going to have a major impact on the poor," she said.

Secretary of State Condoleezza Rice made a pitch for preserving foreign aid at yesterday's conference. "Some will ask the inevitable question in these troubled times: 'How can we afford it?' " she said. "I would ask instead, 'How can we not afford it?' "

Even before the recent crisis, Western largesse was waning. The Bush administration, which has garnered accolades for dramatic increases in U.S. international aid programs, cut its foreign aid in 2007 by 3.5 percent, to $21.7 billion, according to the Paris-based Organization for Economic Cooperation and Development.

"Developing countries have been making real progress, so this is a real setback," said David Beckmann, president of Bread for the World, a Christian advocacy group. "The one piece of good news from the last eight years is that the world has made real progress against poverty, and the U.S. has been quite good in this area."

The two major U.S. presidential candidates, Sens. John McCain (R-Ariz.) and Barack Obama (D-Ill.), have suggested that the financial crisis would not curtail their ambitions for foreign aid. Obama has vowed to more than double the annual outlay for international aid, to $50 billion, while McCain has focused on reforming the bureaucracy that doles out U.S. assistance.

Obama spokeswoman Wendy Morigi said that if elected president, Obama would likely "extend the time period" for meeting his $50 billion aid target. "The current financial crisis, along with the $700 billion recovery package, will clearly put short-term pressure on our budget," she said.

McCain has not put a dollar amount on foreign assistance, but he is committed to using both public and private money to pay for increased aid, according to Richard Fontaine, McCain's senior foreign policy adviser. "We are going through tough economic times, and we have to take that into consideration," he said. "But we are also a generous country."

Years of global plenty ushered in a period of generosity in the early 2000s, with wealthy countries forgiving billions of dollars worth of debt in poor countries and scaling up direct foreign assistance. Yet those increases had begun to level off even before the crisis erupted. Excluding debt relief, aid from the world's 22 richest countries edged up only 2.4 percent in 2007, to $94 billion.

If history is any guide, poor nations could be hit hard as wealthy countries cope with financial bailouts and potential downturns. Stung by a stock market and real estate crash, Japan slashed aid by some 44 percent between 1990 and 1996. Although Tokyo ramped up assistance in subsequent years, it still is spending less on foreign aid now than it did in 1990, according to David Roodman, a researcher at the Washington-based Center for Global Development.

After a financial crisis struck a number of Nordic countries in 1991, Norway slashed foreign aid by 10 percent and Sweden by 17 percent. Finland, which underwent a harsher economic contraction than its neighbors, cut foreign aid about 62 percent.

"I would not be surprised to see global aid flows fall by a quarter or a third," Roodman said.

Aid to countries Washington sees as less strategically important, and whose needs are relatively less dire, is perhaps most vulnerable. Few think, for instance, that financial assistance to Iraq and Afghanistan will suffer. Funds to fight AIDS in Africa may also be relatively safe, given bipartisan support for the recent legislation that gave those programs $50 billion over the next five years.

But a host of recipient nations that have made strides to improve their economies and strengthen their political systems may fall victim to their success, with wealthy countries now seeing them as better able to withstand cuts. In July, the Senate appropriations committee voted to dramatically scale back a funding request for new programs at the Millennium Challenge Corp., established in 2004 by the Bush administration to reward countries meeting strict requirements of transparency, sound economic policy and good governance.

But the agency has faced criticism for disbursing less than 10 percent of the $6.3 billion it has received to fund projects in 18 countries. John Danilovich, who leads the agency, defended it, saying the crisis has made it "even more important" that foreign aid not be disbursed haphazardly. "I think the global financial crisis will force governments to look at the effectiveness of their aid," he said, "as well as the amount of aid."