The fight over America giving itself foreign aid

One of the most inefficient and frequently counterproductive aspects of American foreign aid is our tendency to give aid to ourselves — experts call it “tied aid” — rather than directly giving it to those poor folks and communities overseas we are trying to assist.

Obviously, we don’t say that’s what we’re doing.

The U.S. Agency for International Development, USAID, has long been criticized in development circles for this tendency we have to give foreign aid to ourselves. Lately, under Rajiv Shah, the agency appears to have been making a serious effort to reduce this bad habit — untying aid — by allowing USAID to directly fund local organizations in the countries we are trying to help.

As The Guardian reported in February USAID Now Free to Buy Goods in Developing Countries

The US agency for international development, USAid, will no longer have to “buy American”, thanks to a policy change that will open up the agency’s contracts to firms in developing countries and could herald a significant shift in how the world’s largest aid donor does business.

Well, as they say, no good deed goes unpunished.

As Bill Easterly and Laura Freschi note in the blog AidWatch, many of these international companies who benefit from the more traditional “tied aid” approach have launched a blitzkrieg:

“(They have) hired a major Washington lobbying firm to kill the reforms in Congress.  Joining forces as the Professional Services Council and the public-facing Coalition of International Development Companies (from the website: “Did You Know…that funding through international development companies offers superior accountability and transparency?”) they have employed the Podesta Group, which, according to lobbying disclosure forms, has been hard at work “promoting the work of international development companies” in Congress at PSC’s behest.”

Oxfam America is among those organizations trying to rally other humanitarian organizations to get involved in this fight, and to support the reforms. Proponents of “tied aid” say it provides a check on corruption by foreign governments. Here’s what Oxfam says in its report Fighting Corruption with Aid Dollars featuring a Kenyan and one of Africa’s leading anti-corruption crusaders:

It might seem strange that anti-corruption activists would support direct funding of this sort flowing to their countries. But they support it precisely because they know that Washington can’t solve developing countries problems for them.

Britain, it should be noted, has largely ended the practice of “tied aid” due to its conservative government there deciding it was neither effective or cost-efficient. The biggest concern among the humanitarian community remains the desire by some in Congress to cut the already miniscule (less than 1 percent of the budget) amount of money that now goes to foreign aid.

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Tom Paulson

Tom Paulson is founder and lead journalist at Humanosphere. Prior to operating this online news site, he reported on science,  medicine, health policy, aid and development for the Seattle Post-Intelligencer. Contact him at tom[at]humanosphere.org or follow him on Twitter @tompaulson.