NYU Students Study Foreign Aid Programs

The Development Research Institute at NYU has a program that studies how to hold agencies accountable for delivering foreign assistance to developing countries. DRI’s mission is to “expand the number and diversity of serious commentators on the state of foreign aid and development.” DRI’s “ultimate goal is to have a positive impact on the lives of the poor, who deserve the benefit of high-quality, clear-eyed, hard-headed economic research applied to the problems of world poverty.”

I recently provided a comment for an item that they posted on Madagascar and the potential use of economic sanctions on that country: “Here’s a U.S. development program working – stop it immediately!” DRI has published several interesting papers about economic development and the use of taxpayer monies in foreign countries.  It also has prepared several spreadsheets on economic growth that are worth a look.

A component of foreign assistance that could always use follow-up, at least those programs financed with U.S. taxpayer monies, is the Congressional oversight that should be taking place regularly.  Is our money being invested as required by law?  Are the terms and conditions of goals-based programs being monitored?  What is the U.S. taxpayer’s return on our investment?

Ultimately, how you spend U.S. taxpayer monies as is as important as where you spend it.  The road to hell is paved with good intentions, and, many times than most care to admit, U.S. foreign assistance monies are spent on things that are wasteful and counterproductive to the rule of law, transparency, and free markets.  Foreign assistance programs have become like welfare programs; they lead to dependency on the donors, not independence and development.

The most significant roadblock to lifting people out of poverty in these countries is the very governments that claim to be helping the people by making it harder to grow small businesses and allowing for a climate of transparency and the rule of law to take root.  In these environments, foreign aid programs make things worse.

An excellent recent example of how U.S. taxpayer monies could end up doing more harm than good, is the $108 billion included in the FY10 War Supplemental bill for the International Monetary Fund. House Republican Whip Eric Cantor (R-Va.) says that “handing over billions to the IMF not only saddles young Americans with more debt but could fund terrorist activity – a complete affront to our troops combating terrorism across the globe.” Hezbollah has said it will seek IMF funding if it wins the elections in Lebanon.

The best type of foreign assistance to a developing usually comes in the form of increased trade and private sector investments in free and open markets.  With business comes training, new jobs, new products, and new services.   Where foreign assistance can complement these goals, all the better, but it should be done with robust Congressional oversight, and programs should be suspended when recipients break the laws or the agreements on which these programs are based.