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U.S. Foreign Aid: A Historical Overview

By Edited Nov 13, 2013 1 0

US Aid

Foreign assistance is a fundamental component of the American international affairs budget and is viewed by many as an essential instrument of U.S. foreign policy. Lee H. Hamilton said that “foreign aid is neither a failure nor a panacea. It is, instead, an important tool of American policy that can serve the interests of the United States and the world if wisely administered”. There are five major categories of foreign assistance: bilateral development aid, economic assistance supporting U.S. political and security goals, humanitarian aid, multilateral economic contributions, and military aid. Due largely to the implementation of two new foreign aid initiatives—the Millennium Challenge Corporation and the HIV/AIDS Initiative—bilateral development assistance has become the largest category of U.S. aid.

In 2010, the United States provided some form of foreign assistance to about 154 countries. Israel and Egypt placed among the top recipients in 2010, as they have since the late 1970s, although on-going reconstruction activities in Iraq and Afghanistan now place these two devastated nations near the top as well. The focus of U.S. foreign aid policy has been transformed since the terrorist attacks of September 11, 2001. The subsequent use of foreign aid to support the U.S. led War on Terror is clearly shown in the estimated country-aid levels for 2010. Pakistan and Jordan are U.S. allies and major beneficiaries of U.S. assistance, though the yearly 3 billion dollars of U.S. aid to Pakistan is being revaluated after the killing of Osama bin Laden in Abbottabad. Also among the leading recipients are some populous African countries (Kenya, Ethiopia, Nigeria, and South Africa) that are the focus of the multi-billion dollar HIV/AIDS initiative.

US Foreign Aid recipients

By nearly all measures, the amount of foreign aid provided by the United States declined for several decades but has grown in the past few years. After hitting an all-time low in the mid-1990s, foreign assistance levels since 2004, in real terms, have been higher than any period since the early 1950s, largely due to Iraq and Afghanistan reconstruction and HIV/AIDS funding. The 0.19% of U.S. gross national product represented by foreign aid obligations for 2008 is consistent with recent years, but quite low compared to the early decades of the foreign assistance program. The United States is the single largest international economic aid donor in absolute dollar terms but is one of the smallest contributors amongst the developed countries of the West when calculated as a percent of gross national income.


US Foreign Aid

Each year, it is the subject of extensive congressional debate and legislative and executive branch initiatives, proposing changes in the size, composition, and purpose of the program. In 2002, a National Security Strategy for the first time established global development as a third pillar of U.S. national security, along with defense and diplomacy. This report addresses a number of the more frequently asked queries regarding the U.S. foreign aid program, its objectives, costs, organization, the role of Congress, and how it compares to those of other aid donors. In particular, the discussion attempts not only to present a current snapshot of American foreign assistance, but also to illustrate the extent to which this instrument of U.S. foreign policy has changed from past practices, especially since the end of the Cold War and the launching of the war on terror

Since the start of modern U.S. foreign aid programs, the rationale for such assistance has been posited in terms of national security. From a beginning in rebuilding Europe after World War II under the Marshall Plan (1948-1951), U.S. aid programs reflected anti-communist Cold War tensions that continued through the 1980s up to the Fall of Communism in 1989. U.S. development assistance programs to newly independent states were viewed by policymakers as a way to prevent the incursion of Soviet influence in Latin America, Southeast Asia, and Africa. Military and economic assistance programs were provided to allies offering U.S. base rights or other support in the anti-Soviet struggle.

In the immediate aftermath of the dissolution of the Soviet Union in 1991, aid programs lost their Cold War underpinnings. Foreign aid programs reflected less of a strategic focus on a global scale and instead responded to regional issues, such as Middle East peace initiatives, the transition to democracy of eastern Europe and republics of the former Soviet Union, and international illicit drug production and trafficking in the Andes. Without an overarching theme, foreign aid budgets decreased in the 1990s. However, since the September 11 terrorist attacks in the United States, policymakers have frequently cast foreign assistance as a tool in the global war on terror. This has comprised an emphasis on aid to partner states in the war on terror, including the substantial reconstruction programs in both Afghanistan and Iraq. As noted, global development is now accepted, along with defense and diplomacy, as a key element of U.S. national security.

US Foreign Aid over time

Even during periods when aid programs were framed in the context of anti-communism, and more recently in the context of anti-terrorism, foreign aid programs have been justified for other reasons as well, primarily commercial and humanitarian. Foreign assistance has long been defended as a way to either promote U.S. exports by creating new customers for U.S. products or by improving the global economic environment in which U.S. companies compete. At the same time, a strong current has existed that explained U.S. assistance as a moral imperative to help poverty-stricken countries and those trying to overcome disasters or conflict. Providing assistance for humanitarian reasons or in response to natural disasters has generally been the least contested purpose of aid by the American public and policymakers alike.

Foreign aid is most definitively an essential instrument of foreign policy for the United States. The continually evolving rationales behind and focus of U.S. assistance in various parts of the world over the past two decades is a reflection of the changes within the global community and pays testimony to the importance placed on it by government. It remains to be seen whether the weak American budget commitment to foreign aid in terms of percent of gross national income will be increased to the level set by the rest of the developed world.

Total Foreign Aid assistance map


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