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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About Author

Editor 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, follow him on Twitter @tompaulson and/or send a comment below.

  • Judy Anderson

    Thanks, Tom, for this and related articles.  I was in Congo when you got  it out there and am just now catching up. It is certainly true that most US aid is tied to US jobs and NGOs that have huge staffs and often flashy buildings in the US…and most small organisations in the developing world don’t even get in the door in their country offices.  Re-thinking aid will cause so much angst among all the “experts” in the beltway, so it’s no surprise that a lot of money is being spent to change minds there.  What is needed is a long slow path, lots of accountability on both sides, as none of us changes  our minds or our practices easily, without being convinced of the necessity of changing…witness our food consumption, exercise patterns, etc–and we have access to more information on the subjects than we can read!  People looking from a village to the cars that drive by day after day, with their radio antennae or convoys…say, or think, as one woman said to me in Malawi years ago,  “You people are leaking money”

    Thanks for your efforts in making it different!
    Judy Anderson

    • http://humanosphere.kplu.org Tom Paulson

      Thanks Judy,

      I think it’s a fair bet that, despite all the rhetoric about re-inventing foreign aid that change will indeed come slow.

      Cheers