SEATTLE — Foreign aid serves a number of different purposes. Countries can use foreign aid to increase their national security, such as through establishing military bases on foreign soil. Foreign aid is also a good example of soft power, the goal of which is to persuade others without resorting to force or coercion, and helps countries achieve diplomatic goals. Additionally, foreign aid can be used as a palliative, short-term measure after natural disasters or during national crises.
Another objective of foreign aid is to increase recipients’ self-reliance and eventually reduce the overall amount of foreign aid. USAID plans to shift its focus and start promoting self-reliance with the release of its new Policy Framework in the fall of 2018.
The Importance of Self-Reliance
The Community Empowerment Network (CEN), a U.S.-based NGO, asserts that promoting self-reliance is vital for developing countries’ continued growth. Countries that rely too heavily on others for too long become dependent on foreign aid. Reliant countries often give up decision-making abilities and control over their natural resources. Many developing countries have more than enough resources to take care of their citizens, but extended foreign interference often increases foreign exports, leaving insufficient resources and citizens living in poverty.
A lack of self-reliance not only affects political decisions and the availability of natural resources, it also impacts citizens’ mindsets and economic growth. CEN references a small village in the Brazilian Amazon, Suruacá, where a German organization built a kitchen for women to use to make marketable sweets and generate income. However, the women in the town did not use the kitchen at first because, while they knew how to make the sweets, they were waiting for the German organization to tell them how to sell their product. CEN calls this “learned helplessness.”
Is Foreign Aid Promoting Self-Reliance?
There is extensive debate over whether or not foreign aid can actually increase self-reliance or whether it simply creates learned helplessness. Self-reliance is heavily connected to economic prosperity, and one way to evaluate a country’s level of self-reliance is to look at its economic growth. A paper published by the National Bureau of Economic Research (NBER) in 2016 sought to establish a link between foreign aid and economic growth.
The NBER paper’s study used eligibility for support from the International Development Association (IDA), an organization within the World Bank, as an instrument for foreign aid. The IDA provides loans and grants for programs that reduce inequalities and boost economic growth. Eligibility for IDA support depends on a country’s gross net income per capita, which defines a country’s relative poverty level. In the end, the study involved 35 countries and data spanning from 1987 to 2010.
The study found a positive, statistically significant and economically sizeable effect of foreign aid on economic growth. The researchers acknowledged the link between economic growth and self-reliance and argued that, for foreign aid to be a long-term success, aid providers should improve aid allocation, especially toward the quality of a country’s governance and institutions. In other words, the researches argued that foreign aid can increase a country’s self-reliance if allocated effectively.
USAID’s New Policy Framework
In the fall of 2018, USAID is set to implement a new Policy Framework centered on a broader self-reliance approach. In late 2017, USAID started collecting self-reliance metrics, a cornerstone of their Transformation Effort and their journey toward ending the need for foreign assistance. The agency will use these metrics to create country-specific plans for aid allocation.
USAID acknowledges that every country has different needs and hindrances on their road toward self-reliance and the agency has set about creating what it calls Self-Reliance Country Roadmaps using the self-reliance metrics. The roadmaps use 17 metrics to measure a country’s progress in achieving self-reliance. The indicators are separated into two categories: commitment and capacity. There are seven commitment indicators that measure policy choices, actions and behaviors. The remaining 10 capacity indicators measure how much a country has developed so far.
The agency hopes to have roadmaps ready for every low- and middle- income country by the time it implements its new Policy Framework in the fall. USAID notes that its roadmaps will not be perfect immediately, but they will be an important element of the agency’s efforts toward promoting self-reliance in developing nations.
– Kathryn Quelle