Title: Think Again: U.S. Foreign Aid – Foreign Policy
Headings: Think Again: U.S. Foreign Aid
Think Again
Think Again: U.S. Foreign Aid
Shortly after a tsunami swept through the Indian Ocean last December, a U.N. official complained that the West was stingy with its relief donations. Stung by this criticism, the Bush administration increased its financial pledge tenfold overnightwhile loudly asserting that the United States actually led the global pack in foreign aid. Is the worlds wealthiest country a scrooge or a savior?

Content: Trade is an enormously powerful engine for development, especially trade in manufactured goods (less so for commodities). Countries that export labor-intensive, manufactured goods to the rest of the world generally experience faster economic growth and less poverty because such exports help create jobs, improve worker skills and productivity, and upgrade local technologies. Aid without tradeor, more accurately, aid without the creation of a robust private sectorcannot stimulate long-term growth and development. But simply lowering trade barriers and opening markets is often insufficient. Many poor countries just dont have the resources to build the roads, train the teachers, and buy the medicines necessary to increase worker productivity and compete in global markets. Some of the greatest development success stories of the last 40 years have relied on a combination of trade and aid. South Korea created millions of jobs by exporting its products around the world while receiving nearly $100 per person (in todays dollars) in annual aid between 1955 and1972. Botswanas rapid expansion of diamond exports and exceptionally good governance made it the worlds fastest growing economy between 1965 and 1995, during which time it received annual aid flows averaging $127 per person. By contrast, annual assistance to sub-Saharan Africa today averages about $28 per personnot nearly enough to build a foundation for sustained growth and development. Private Investment and Other Financial Flows to Developing Countries in the 1990s Offset the Decline in Aid.