How to fix foreign aid

February 25, 2014

All war-torn countries, including Iraq and Afghanistan, share a common characteristic — the absence or destruction of economic infrastructure. The lack of opportunity fuels frustration and unrest, giving violent actors an opening to destabilize fragile institutions.

The frustration in Iraq and Afghanistan, as well as in other fragile states, exists despite Washington having spent billions of dollars in military and non-military aid to boost their economic development during the past decade. The lack of progress has fed a growing sense that U.S. foreign aid programs cannot establish economically viable systems.

I know this firsthand. As Deputy Under Secretary of Defense from 2006 to 2011, I led a team of private-sector business leaders, agriculture experts, geologists and engineers in an effort to restore or create economic opportunity in war-torn communities. Our work focused on Iraq and Afghanistan, but it later expanded to Pakistan, Sudan and Rwanda.

Since leaving government, I have continued talking with government officials and outside experts about how to reverse this failure of our foreign assistance programs. These discussions usually address ways to improve capabilities within the existing organizational and statutory framework. Yet this very framework is what can make progress difficult — if not impossible — to achieve.

America’s inability to provide even symbolic access to economic opportunity is crippling our image abroad. The mistaken belief that the United States is the great rebuilder of postwar countries — a belief that stems from the U.S.-funded aid to the postwar economic expansions in Japan, Germany and South Korea — has fostered expectations that our diplomatic and foreign aid institutions cannot fulfill.

When these unrealistic expectations are combined with the fact that major U.S. foreign aid programs fail to establish sustained economic opportunity in recipient countries, we have the worst of all worlds.

One solution is to stop making these promises. Washington, for example, could drop the Marshall Plan references when dealing with countries that receive U.S. aid. If the past decade has taught us anything, it should be that we lack the civilian capacity to deliver on our grandiose rhetoric.

But these expectations are unlikely to change — particularly because of the heavy U.S. military presence in some regions where we send foreign aid. So we must focus instead on improving our ability to help these regions build viable economies.

The first step is to end the State Department’s management of foreign assistance, and return to an earlier organizational system in Washington.

The Foreign Service plays a crucial role in the establishment and implementation of U.S. foreign policy. But diplomats are not program executors. The culture of diplomacy, so crucial to negotiation and resolution of conflict, is completely wrong for managing economic development programs. Much less the tactical business development necessary for economic growth.

The primary instrument for implementing foreign assistance, the United States Agency for International Development (USAID), was moved into the State Department in 2005 — in a misguided effort to better align its programs with security and counterterrorism policies. The verdict is now in on this transition. USAID is not effective in carrying out its principal mission: delivering cost-effective outcomes that advance U.S. foreign policy goals.

In addition, the agency’s humanitarian mission has been broadened to encompass areas that are incompatible with its culture — including economic development.

The priority of the State Department — from staffing, to allocation of resources, to a forbidding security posture that inhibits local engagement of war-torn populations — is to fulfill a diplomatic mission. Not to run foreign assistance programs. Realigning organizations, like this move of USAID into State’s sphere, is a poor means of carrying out presidential policy.

The reason: Organization realignment is an operational decision, not a policy decision. It sets the cultural tone and operational priority of how an organization does its work, how its objectives will be met, its resources allocated and its people rewarded. But, as in the case of USAID, the mix of strategic objectives caused by the merger of disparate organizations makes it harder to improve operational capability.

Too often in the past decade, the Washington solution to operational challenges within federal agencies has been to consolidate failing organizations into ever-larger Cabinet-level departments. As a result, problems are subsumed into massive bureaucratic infrastructures, stifling any ability to focus on improvement and increase agility.

From websites to disaster relief to foreign assistance programs, the results of this hyper-bureaucratic approach have been discouragingly clear.

The Bush administration struggled to a forge a common direction for its national-security Cabinet secretaries — particularly State and Defense. Its solution unwisely gave organizational realignment a central role. In the case of USAID, the agency’s ability to focus on improving its operational execution continues to weaken, because it is ever more woven into the ill-fitting diplomatic management framework.

Re-establishing foreign assistance as a stand-alone organization is an essential first step to solving our broken foreign assistance system. USAID could be free to refocus on its core mission of humanitarian aid — and be better able to excel at it again.

We could then move to take a fresh look at economic development and how to best leverage all elements of U.S. capability, from our vibrant private sector to our academic institutions. After a decade of lackluster results in spite of billions of dollars of taxpayer investment, this fresh look is long overdue.

PHOTOS: The shadow of a Philippine Army personnel is cast on boxes of relief items from U.S. Agency for International Development (USAID) for the victims of super typhoon Haiyan, at Villamor Air Base in Manila November 13, 2013.  REUTERS/Cheryl Ravelo 

A woman, who has been displaced by floods, uses a USAID box to move her belongings while taking refuge on an embankment at Chandan Mori village in Dadu, some 320 km (199 miles) north of Karachi October 10, 2010. REUTERS/Akhtar Soomro








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Makes sense. But I don’t trust ex-high level government officials anymore. Far to often they are actually lobbyist for someone else’s interests.

Posted by tmc | Report as abusive

The far simpler reason for why foreign aid does not boost local economic growth is that that was never the intention of the aid in the first place. The USA gives aid to further its own foreign policy goals and advance its own economic interests, end of story.

Posted by Benny27 | Report as abusive

Too many managers in a room generate combustible cash flow problems and lead to creative constipation. Spending large sums of money generally provides a few people with large sums of the aforesaid money. Keep it small. Micro-banks worked in India. Communication is the key to commerce. A pocket calculator with a memory is a super computer if that’s all anyone you know has. Massive program’s fail because no one is talking to the guy, or women, the program is aimed at. Important people don’t know more they just have the microphone.

Posted by nozone | Report as abusive

Where on earth did you get the idea that USAID’s principal mission is “delivering cost-effective outcomes that advance U.S. foreign policy goals”? It’s the Agency for International Development. And when you say “the agency’s humanitarian mission has been broadened to encompass areas that are incompatible with its culture — including economic development”, it makes me suspect you are confusing USAID with another agency entirely. USAID has been the United States’s lead economic development agency for fifty years. It does not belong under the State Department, but not for the reasons you state here.

Posted by kellyr | Report as abusive

Trusting the establishment got us in this mess to begin with…

Posted by andisplace | Report as abusive

I am currently volunteering with and It’s really sad to see that America is struggling to aid other countries. Of all the countries that can make an impact, America should be one of the most impacting ones.

Posted by dianat | Report as abusive