Foreign Aid

Foreign Aid. Foreign aid includes private or public bilateral or multilateral assistance to nations suffering the ravages of war, natural calamity, or long‐standing poverty.Foreign aid may also be given for reasons relating to U.S. economic, diplomatic, or national‐security interests. The concept derived from humanitarian concerns and, in a larger sense, from the processes of colonialism, world war, and economic depression. The Depression of the 1930s, World War II, and the Cold War, for example, demonstrated the necessity of resource transfers from rich to poor nations in order to correct the inherent capitalist tendency toward unequal income distribution and concomitant socioeconomic and political upheavals. Once poor nations received capital and technology, the conventional wisdom held, they would “take off” into self‐sustained economic growth.

By the 1940s, U.S. public and private policy‐makers had embraced an economic development theory that identified the causes of poverty and underdevelopment as internal to particular societies. Their solutions centered on external private capital transfers and technical assistance, as well as on the natural operation of free trade and comparative advantage. During the second half of the twentieth century, foreign aid meant giving capital (grants or loans), technology, equipment, and food to the less developed world. It also entailed state efforts to enhance the proper functioning of the private market.

For the United States, giving foreign aid served overlapping economic, military, political, and humanitarian purposes. It could help expand export markets to alleviate domestic industrial and agricultural surpluses, guarantee the availability of strategic natural resources, or bolster the political fortunes of foreign allies. Whether operating through bilateral programs or international institutions (e.g., the World Bank or International Monetary Fund), foreign aid helped the United States to incorporate new states into an expanding capitalist world‐economy.

Government foreign‐aid programs originated with wartime relief and private philanthropic agencies. After World War I, for example, the privately sponsored American Federated Russian Famine Relief Committee worked closely with the U.S. government to help alleviate large‐scale famine in the Soviet Union, subsidize the sale of American agricultural surpluses, and aid anti‐Bolshevik factions. During World War II, the government took control of voluntary relief agencies through licensing procedures and created new bureaucracies that directly dispensed foreign aid (e.g., the Office of Inter‐American Affairs and the U.S.–dominated United Nations Relief and Rehabilitation Administration).

Foreign aid became a major government institution during the Cold War. The European Recovery Program or Marshall Plan (1948–1952) sought to reconstruct European economies and reintegrate them into the capitalist world economy while creating a unified economic bloc against the Soviet Union's influence. The Point Four Program, created by the Act for International Development (1950), proposed that American technical experts help agrarian nations to stimulate their domestic economies—especially the export of selected crops and raw materials—enhance their ability to purchase American exports, attract private foreign capital, and become integrated into the global economy. Such economic growth supposedly would build Third World political stability and allegiance to the West. The Foreign Assistance Act of 1961, which created the Agency for International Development (AID), also identified development aid as a mechanism for improving the lives of poor people in developing nations and undermining the appeal of non‐ or anticapitalist models of economic development.

During the Cold War, American aid funded large‐scale infrastructure projects such as highways and hydroelectric dams. Recipient nations spent the bulk of their foreign aid in the United States to purchase needed technology, machinery, and other capital goods. While acknowledging that much of U.S. foreign assistance went to elites in the recipient nations, aid officials predicted that this process eventually would lead to expanded national output and higher living standards for all. Widespread disillusionment with this trickle‐down strategy led to the Foreign Assistance Act of 1973 and the International Development and Food Assistance Act of 1975. Emphasizing “basic human needs” and “appropriate technology,” this legislation targeted Third World poverty by providing assistance for health, nutrition, population planning, and rural development. But the “new direction” in foreign aid failed, in large part because it continued to ignore power and class conflicts between rich and poor at the local, national, and international levels.

The presidential administration of Ronald Reagan refocused on general economic growth and direct aid to private businesses. Foreign‐aid agencies during the 1980s and 1990s insisted that developing nations adopt austerity programs (especially in the sphere of social welfare and price controls); liberal trade policies; and market‐oriented, open‐door economies geared to export promotion. The demise of the Soviet Union in 1989 eliminated some of the strategic rationale for foreign aid, and levels of various forms of assistance reached new lows as Americans focused their attentions domestically. As the twentieth century ended, the concept of foreign aid found itself increasingly enervated by a fundamentalist belief in private markets and the global economy as engines of growth.
See also Agriculture: Since 1920; Birth Control and Family Planning; Depressions, Economic; Economic Development; Foreign Relations; Foreign Trade, U.S.; United Nations.

Bibliography

Merle Curti and and Kendal Birr , Prelude to Point Four: American Technical Missions Overseas, 1838–1938, 1954.
Teresa Hayter , Aid as Imperialism, 1971.
Emily S. Rosenberg , Spreading the American Dream: American Economic and Cultural Expansion, 1890–1945, 1982.
Nathan Godfried , Bridging the Gap between Rich and Poor: American Economic Development Policy toward the Arab East, 1942–1949, 1987.
Frances Moore Lappe,, Rachel Schurman,, and and Kevin Danaher , Betraying the National Interest, 1987.
Vernon W. Ruttan , United States Development Assistance Policy: The Domestic Politics of Foreign Economic Aid, 1996.

Nathan Godfried