U.S. Economic Foreign Aid

A Case Study of the United States Agency for International Development

David S. Porter

• Editorial: Routledge
• Año: 2019
• ISBN:
  9781000586916
• Edición: 1
• Categoría: Negocios y empresa
• Categoría: Negocios en general

Originally published in 1990, this volume is a comprehensive study of United States foreign aid allocation from 1961-1983 and the significance it has for US Foreign Policy as a whole. As well as developing a theoretically consistent measure of poverty for the research, the book also examines the relationship between bilateral foreign aid and multilateral foreign aid. A number of theoretical issues in comparative politics, international relations, US domestic institutional decision making and the development of political and economic institutions are explored.

CHAPTER ONE

THE HISTORICAL DEVELOPMENT OF UNITED STATES FOREIGN AID POLICY

“In the history of Diplomacy,
subsidies and tributes have
been common … but the peace
time economic aid among
governments is novel”

(Ohlin:66:9)

Throughout World War II, the United States provided foreign aid in the form of war materials and economic credits to assist its allies in the war effort. (Black: 68:4–12) In the closing days of World War II, the United States had to decide whether to continue the systematic transfer of wealth to other nations or to discontinue the policy of assistance as was the case at the end of World War I. The decision to continue providing assistance began a new era in the relations between rich and poor nations, and marked the first time the United States adopted a policy of systematic and annual transfer of substantial economic resources to other countries during peacetime.

This decision in 1945, to continue to provide assistance after victory, marked the beginning of the modern foreign aid policy era. (Holbert: 66:20) Since that time, the United States’ foreign aid policy has gone through three distinct periods, each with its own enabling legislation, policy mandates, political priorities, and administrating agencies. (see Figure One)

THE FIRST FOREIGN AID PERIOD

The first period began with the close of World War II and ends with the National Security Act of 1951. (Pastor: 80: 256) Immediately after the war, the greatest need was for simple relief including; housing, food, medication, and resettlement. At first, the peacetime aid policies designed to meet these needs were simply extensions of wartime programs, such as Lend-Lease and the UNRRA. The principle recipients, during this period, were Western European. (Black: 68: 4–5)

However, as the political-economic problems of the post-World War II era, and the politics of the Cold War, began to develop the need for a more comprehensive policy to provide for the reconstruction and the recovery of Western Europe became apparent. The response was the establishment of the Marshall Plan in March of 1948. The dominant forms of aid during this period were economic grants and loans with only a relatively small portion of total aid expenditures going to military assistance. (Pastor: 80: 256)

THE SECOND FOREIGN AID PERIOD

The second period is dominated by its enabling legislation, the Mutual Security Act of 1951, and as the name of the enabling legislation suggests, the paramount objective of foreign aid during the second period was the security of the United States and its allies. The political goal of the Mutual Security Act of 1951 was consistent with the general emphasis of United States foreign policy at the time, which stressed the containment of Communism. The Act itself was partly a response to the Korean War which created concern over the defensive capabilities of United States and its allies. To contain Communism the United States began to allocate foreign assistance to our allies on the rim of the Soviet Union. (Pastor:80:256–266)

Prior to this time, the primary emphasis in United States foreign aid policy was economic, but the new security concerns of the United States quickly shifted foreign aid priorities from economic aid to military assistance. During the first period the ratio of economic to military aid was 4:1, by 1954 the ratio had reversed itself; for every dollar allocated for economic aid the United States was allocating four dollars for military aid. (Pastor: 80: 256)

The different periods of United States foreign aid overlap and the enabling legislation of one period has often been based on earlier, though less comprehensive legislation. At first, aid for the recovery of Europe was an extension of wartime programs and policies. The Mutual Security Act was based on antecedent legislation including military aid to Greece and Turkey, the Philippines Military Assistance Act, and NATO. It’s important to note that throughout the post-World War II period United States foreign aid has included both military and economic assistance.

The distinguishing factor between the three periods is the emphasis of one form of aid over the other, the administrating agencies, and the legal constraints and policy objectives of the enabling legislation. Under the Mutual Security Act, for example, the United States had a mutual security obligation as a condition for economic assistance. As a consequence one would expect the allocations of United States bilateral aid to reflect United States security requirements and commitments. And, it appears reasonable to assume, that the differences in legal authorizations, policy mandates, administrating agencies, and other variables between the three periods will effect the distribution of United States economic aid for their perspective periods. (Mason: 64: 41)

THE THIRD FOREIGN AID PERIOD

The third period of United States foreign aid policy is dominated by the concept of aid to promote economic development, or developmental assistance. The allocation of aid for development and has its origins in Point IV of President Truman’s 1949 inaugural address:

“The policy of the United States is to aid the efforts of the peoples economically underdeveloped areas to develop their resources and improve living conditions.”

President Truman, Inaugural
Address, Point IV, 1949

When President Truman announced this ambitious policy in 1949, its symbolism was more impressive than its substantive impact on foreign aid policy. The budget request for foreign aid in the 1949 fiscal year included some seven billion dollars for the Marshall Plan and related programs for the recovery of Europe, and only forty-five million dollars for Point IV countries. (Pastor: 80:269) Point IV, nevertheless, did establish development aid as a national policy for the United States. But, twelve years would pass before development aid became the paramount priority of the United States foreign aid policy.

President Truman’s Point IV policy, and development aid, is not necessarily a question of military versus economic assistance. There are respected theories of economic development that predict periods of political instability caused by the rising demands and expectations that are a natural result of economic development. (Huntington: 68: 1–88) Under these conditions, the distribution of military aid might conceivably be necessary to restore political stability and insure continued economic development. Development aid is basically a question of distribution priorities.

The first period was dominated by distribution of United States bilateral aid to Western Europe, the second foreign aid period by distribution to countries on the rim of the Soviet Union. (Pastor:80:256) The third period of United States foreign aid policy is dominated by aid policies and legal authorizations designed to assist the less developed regions of the world in their economic development. (Nelson:68:14–19)(see Figure One) And, the observable distribution pattern for the third period is dominated by the allocation of economic assistance to the less developed, the poor countries, of the international system. It is this distribution pattern that separates the third foreign aid period from the two previous periods.

There are several reasons why development aid did not dominate early United States foreign aid policy. First, is the economic condition of Europe which mandated that recovery and reconstruction consume the majority of scarce foreign aid expenditures. Point IV could conceivable have been implemented after the reconstruction of Europe and one could argue that this was the original intent of President Truman. However, just as such a transition became feasible, the United States became preoccupied, if not besieged, with security concerns caused by the loss of China, the Korean War, the increased Soviet threat in Europe and the beginnings of the Indo-China War.

Finally, it must be remembered that during the 1940s and the 1950s, the first two periods of United States foreign aid policies, most of the undeveloped regions of the world were colonies of European states. A rationale for a type of international division of responsibility developed whereby each colonial power was responsible for providing aid to its former colonies. (Mason: 64:72–81) As a consequence, all of Africa and a substantial portion of Asia, outside the Philippines Islands, were considered ineligible for United States development aid. The United States primary responsibility during this period was to assist in the development of Latin America, and what development aid was provided from 1949 through 1959 tended to be concentrated in this region. (Mason: 64: 72–81) The primary program for providing assistance to the less developed regions of the world during this period was PL 480, the Food for Peace Program, which was “admittedly devised less for the concern for the developing world than from a domestic problem” of a large surplus of farm commodities. (Pastor: 80: 269)

President Truman in his 1949 Inaugural Address adopted development aid as a formal policy of the United States, twelve years later in his Inaugural Address, President Kennedy reaffirmed the Point IV policy and specified development aid as the paramount principle of United States foreign aid policy.

“To those people in the huts and villages of half the globe struggling to break the bonds of mass misery, we pledge our best efforts to help them help themselves, for whatever period is required, not because the Communist may be doing it, not because we seek their votes, but because it is right. If a free society cannot help the many who are poor, it cannot save the few who are rich.”

President Kennedy Inaugural
Address, January, 1961

President Kennedy operationalized his policy declaration by requesting Congress to replace the ten year old Mutual Security Act with new enabling legislation that became the Foreign Assistance Act of 1961. (Nelson:68:1–14) Under the new enabling legislation there can be no question that the distribution of United States foreign aid shifted from the nations on the rim of the Soviet Union to the developing nations of the international system.

To some extent the shift in distributional patterns began in the late 1950s as the United States responded to increased demands from the new nations that were emerging from decolonization. (Little & Clifford: 65:17) However, whether developmental foreign aid administered under the new act was distributed to meet the demands of the new states, or in response to United States foreign policy objectives, such as national security, or economic self interest, has been a major focus of debate in the foreign aid literature.

A second impact of the Kennedy policy initiative was a comprehensive revamping of the administrative agencies responsible for carrying out United States foreign aid policy. Prior to 1961 the foreign aid policy of the United States was administered by a number of often changing and poorly coordinated agencies. The inefficiencies of the administrative system were widely acknowledged and several evaluative reports including the Gray Report, Partners in Progress Report, and The Administration of Foreign Affairs Report recommended the establishment of one central coordinating agency which would have primary responsibilities for implementation, coordination and administration of policy. (Brown & Opie: 53: 506–508)

President Kennedy’s developmental emphasis included the restructuring of the aid administrative network through the creation the Agency for International Development (A.I.D.). A.I.D. subsequently became the central coordinating agency for all bilateral United States economic aid and for certain types of supportive military aid. (Black: 68: 6–7) Direct military aid in the form of arm sales and assistance, and training military personnel, though coordinated by A.I.D., remain under the jurisdiction, budget authority, and responsibility of the Department of Defense. (Black: 68: 6–7)

The use of overlapping and changing administrative agencies prior to the establishment of A.I.D. has an important impact on the temporal period of this study. Both the international and domestic approaches to explaining United States foreign aid policy develop decision making models derived from the rational choice paradigm. To apply the rational choice paradigm to an organization, regardless whether one’s level of analysis is the nation state or domestic institution, certain minimum theoretical standards must be met; including some minimum level of variance in environmental constraints, legal authority, political relationships, and the organizational structure of the decision making units of interest.

At the nation state level of analysis the discrepancies of organizational structure and legal authority between A.I.D. and its predecessor agencies is relatively unimportant. However, when the level of analysis is reduced to explaining the behavior of domestic institutions, with substantive legal authority over United States foreign aid policy, the variance between A.I.D. and its predecessor agencies becomes a significant challenge to validity. Of particular concern is the tendency to fragmentize the administrative responsibilities and reporting systems of administering agencies prior to 1961.

The Mutual Security Agency, for exam...