GMF - The German Marshall Fund of the United States - Strengthening Transatlantic Cooperation

I want to talk to you about the future of our foreign assistance program. I make these remarks at a moment we face a major turning point in U.S. foreign policy. The old geopolitical and economic order is rearranging itself, and we are ill-suited to meet these changes.

When I started my career in Congress some 26 years ago, we lived in a bi-polar world dominated by two opposing powers, the United States and the Soviet Union.  A bi-polar world was relatively simple. The USSR was dangerous, and the threat of miscalculation and nuclear war was a constant in our lives. Paradoxically, the challenges of that era were more conventional and predictable—maintain the status quo, don’t upset the equilibrium, keep the super powers at arm’s length.  Today, the old international order is undergoing a fundamental transformation, bringing forth a multi-polar world fraught with unanticipated challenges and threats coming from every corner of the globe.

These complex challenges have come into full flower in  the first decade of the 21^st century—global terrorism, pandemic disease, overpopulation, and climate change, to name but a few. These are challenges that cannot be solved using the tools and template of the last century.  It has always been the case that the United States’ ability to influence global events depends as much on how we leverage the civilian tools of foreign policy as how we flex our military muscle, but it is more true today than ever before.

Compounding the difficulty of trying to use all the instruments of foreign policy is a sluggish economic recovery and a budget environment steeped in perpetual crisis and increasing volatility. In such an atmosphere, leveraging these civilian tools – diplomacy and particularly development – will be indispensible if the U.S. is to maintain its global leadership position.

Fifty years ago, in another moment of great uncertainty and a mounting threat to US hegemony, President John F. Kennedy made a speech before Congress to lay the groundwork and build the case for a multi-billion dollar foreign assistance program.

In that speech he asked: “Is a foreign aid program really necessary?” A few years before President Kennedy’s speech, I remember as a young high school student, serving as a Page in the United States Senate, listening to the likes of Senator William Jenner of Indiana railing against foreign aid—not some, but all--aid.  It is a sentiment still expressed by some today. And my answer now would be what President Kennedy answered then:  Our foreign aid program is not only necessary, it is a vital component of our foreign policy.

We must see it as a responsible investment that we can afford, even as we struggle to reduce the deficit. While consuming barely1% of the federal budget, U.S. development leadership has saved and improved tens of millions of lives. I’m going to repeat that. Tens of millions of lives saved and improved, for about 1% of the entire federal budget.

I want to accomplish four things this evening in my remarks. I want to tell you why I am convinced continued U.S. leadership for development is vital.   Then I will discuss why foreign assistance should be considered a common-sense, strategic investment, even in the context of the current budget environment. While we often hear the case made for aid as a moral obligation, my comments will concentrate on economic and national security arguments for assistance.  I will also touch on the substantial progress made during the administration of George W. Bush to add creative new programs and expand our reach, particularly in Africa, and in the administration of Barack Obama to initiate real reforms of our foreign assistance system to get more value from every dollar that we spend.

Finally, I will offer some suggestions about how we can move “beyond aid” and make greater use of the available tool kit to drive development outcomes.

As I suggested a moment ago, it is particularly appropriate to be discussing development right now.  We are two years into a major overhaul of U.S. foreign assistance to make it more effective at addressing the challenges of today. We are approaching the tenth anniversary of the historic commitment to development made by President George W. Bush. And this year is the 50^th anniversary of the creation of the modern-day U.S. foreign assistance system, which began with the passage of the Foreign Assistance Act of 1961 and the establishment of the U.S. Agency for International Development.

President Kennedy crafted the foreign assistance system that endures today, fifteen years after an earlier President and Secretary of State designed the Marshall Plan to rebuild a Europe devastated by war and politically teetering on the edge of home-grown communist party takeover.  Kennedy, likeTruman and Marshall before him, recognized—even in an age before cellphones, i-pads, and internet—that our nation’s security was closely connected with the fate of others thousands of miles away. And in the years since the tragedy of 9/11, we have come to realize that distance from events in the poorest and most dangerous corners of the world provides no cushion for our safety. Today, our motivation for providing resources to bolster economic growth in vulnerable countries and communities echoes the Marshall Plan’s commitment to free markets and open societies in post-war Europe.

In the fifty years since President Kennedy created USAID, the United States has played a leading role in defining virtually every moment for global development. We helped launch the green revolution, which prevented famines across Asia; we have helped bring about dramatic declines in maternal and childhood deaths; and we fertilized the soil for peaceful democratic transitions in Eastern Europe after the Soviet Union collapsed.

More recently, the U.S. government has partnered with relatively recent entrants to the development field, like the Bill and Melinda Gates Foundation, to drive previously unimaginable achievements in Asia and sub-Saharan Africa.   Forty-three countries cut the number of people infected with malaria in half over the last three years alone. Forty-two million more children attended school in Africa in 2007 than in 1999.   Three point two million men, women, and children, who would otherwise have perished, are kept alive thanks to U.S. supported antiretroviral treatments.  Our nation’s commitment to international development has made a real impact on millions of lives.   It’s an impact that we simply don’t talk about enough.

Past accomplishments notwithstanding, a lively debate is underway about how to reform U.S. foreign assistance to get even better results in a changed world. We are moving into a post-aid era, when policymakers are thinking creatively about entering into new kinds of partnerships and harnessing new technologies for social good.

I’ll come back to this topic of how we are changing and improving the way we do development a little later, but for a moment I want to step back and revisit President Kennedy’s original question about the purpose of foreign assistance.

When we think about the motivations that have driven our foreign assistance programs since World War II, the moral or altruistic argument probably tops the list.  We do it because we can and because we should.

We give because giving is a core American value.

The rest of the world looks to the U.S. for leadership, not just because of the wealth and power we possess, but because of our generosity and values, especially in times of crisis. When Pakistan is afflicted by floods, Sudan by drought, or when a tsunami washes over Indonesia, we do not hesitate to extend a helping hand.

But foreign assistance is much more than a one-way transaction—particularly in an increasingly globalized economy. Today’s development work secures tomorrow’s trading partners, who in turn create the demand for American exports that ultimately creates American jobs.

As the middle class in the developing world expands—and 300 million Chinese and Indians alone have moved into the middle class in the last decade--we will experience the impact here at home--not just on Wall Street, but on Main Street.

USAID Administrator Rajiv Shah puts it very succinctly:  “By doing good, we do well.”

Last year, the United States exported a little more than one and a quarter trillion dollars in goods and services. Half of those exports went to developing countries.  So that is a 600 billion dollar piece of our economic well-being that depends on developing countries—not Japan and Germany, but Indonesia and Liberia. When you dissect the $600 billion piece of the economic pie, you will find that 80% percent comes not from big corporations but from small and medium-sized businesses scattered across the United States.

A relatively small investment today will ensure that the growing consumer class in the developing world fuels demand for American goods and services tomorrow.  Even now, one in ten jobs in the U.S. is supported by exports to the developing world, and that number is certain to grow in the next decade.

But this is not just about macro-economic statistics.  Chris Policinski, the CEO of Land O'Lakes, knows a thing or two about turning a profit. In July he told the Minnesota Star Tribune that the center of gravity for the American private sector has shifted from the domestic market to the emerging markets abroad.  Land O’Lakes’ fastest growing business is not butter intended for American consumers; it is milk powders intended for Asian markets. Listen to what he said: “Through development and diplomacy, you create stable political environments and markets for our goods.  It's a productive spend.  It results in jobs. We'd be worse off without it.”

In a trip to Malawi earlier this year, I saw the practical impact of Land O’Lakes efforts. Working under a USAID contract, Land O’Lakes has imported herds of high producing milk cows which are given, one by one, to Malawi families (80% headed by women) who create a cooperative, pool the milk at a central cooling facility and get paid the going market rate. The first born female calf is given to the next family in line for this chance at economic prosperity, but subsequent offspring can be kept to expand the family’s milk production. Now get this: the economic output from one single milk cow increases the family’s income, on average, by 300%! One cow. Milk cows exported from the United States, lifting scores—hundreds--of Malawi families out of poverty. That’s a pretty dramatic demonstration of the economic impact of development assistance.

There is, of course, a third argument beyond the moral and economic ones, and that is the national security case for continued global engagement. As we tragically learned on 9/11, failed states provide breeding grounds for extremism. Our military leaders understand that development is a key pillar to ensuring stability abroad and creating the conditions for our men and women in uniform to leave Iraq and Afghanistan.

What we are really talking about here is prevention. Prevention is always a tough sell, even when we talk about our own health. But it is especially tough in Washington.  We can only imagine how differently events might have unfolded if we had placed greater emphasis on prevention in Afghanistan in the 1990s instead of leaving the AfPak border to become a training ground for Al Qaeda terrorists.

Simply put, building more stable and healthy societies abroad contributes to our safety here at home.

This is why Bob Gates never missed an opportunity during his tenure as Secretary of Defense to remind people that, “development is a lot cheaper than sending soldiers,” and why the Commander of U.S. Forces in Afghanistan Lieutenant General John Allen said earlier this year: “In many respects, USAID’s efforts can do as much — over the long term — to prevent conflict as the deterrent effect of a carrier strike group or a marine expeditionary force.”  

One or more of those arguments--moral, economic, national security—may make a compelling argument foryou to support U.S. global engagement. But even so, there remains a large part of the public that remains unconvinced. People want to see results, especially when we are talking about taxpayer money—their taxpayer dollars. There is certainly more than one country we can point to as an example where our foreign assistance has made a difference, but South Korea provides a particularly thriving example of a strategic American investment.

Following the Korean War, South Korea was poorer than two thirds of sub-Saharan Africa. The United States provided billions of dollars in economic support, with an emphasis on sanitation, water, and education projects. In the aftermath of the war we financed the construction of new power systems, railroads, and ports; built 23,000 classrooms; promoted the use of modern agricultural technology and new seed varieties; trained thousands of Koreans, including many government officials; and guided the country’s industrialization through an aggressive export strategy.

Thanks in part to these efforts, Korea’s agricultural output and productivity skyrocketed. In the last fifty years, Korean literacy jumped from 13% to 99%, life expectancy from 54 to79, and GDP per capita from $152  to $17,078. In recent years, South Korea has emerged as a new and significant aid donor, providing tens of millions of dollars as well as humanitarian workers, engineers, and medics for the post-conflict reconstruction effort underway in Afghanistan.

Note that I said: “Thanks in part to these efforts….” The biggest contributors to the economic miracle were the Koreans themselves—with their commitment to political and economic transparency, their laser-like focus on education as the ladder to achieve hi-tech economic advancement, and their forward looking reform of scores of laws ranging from land tenure to banking regulation. Korea’s contemporary prosperity serves as an instructive example for other aid-receiving countries looking to improve their lot.

Today, South Korea is one of our strongest military allies, and American companies do more business with Korea than they do with France. Just last week, Congress passed a Free Trade Agreement with Korea that will help create thousands of new American jobs. The investments that we made in the 1950s, 60s, and 70s have yielded an economic, political, and military partnership of incalculable worth.

But as I suggested earlier, South Korea isn’t the only success story. Twelve of the 15 fastest growing markets are former aid recipient countries.  A number of African countries are experiencing strong economic growth and boast promising development indicators. While economic growth per capita was essentially flat in continental Africa between 1975 and 1995, between 1996 and 2008, the average growth rate moved up to 3.2%. Mozambique’s average annual growth rate was 5.3%, and Botswana’s and Ethiopia’s rate was 4.1%.

This historic progress is due in part to the commitment that President George W. Bush made to changing the approach to foreign assistance nearly ten years ago. At that time President Bush joined with a broad coalition of policymakers, citizens, private foundations, faith groups, and businesses to recognize that longstanding, structural development challenges would not be solved simply by increasing funding.  In 2002, he told an audience at the Inter-American Development Bank that, “The needs of the developing world demand a new approach…This new vision [for development] unleashes the potential of those who are poor, instead of locking them into a cycle of dependence. This new vision looks beyond arbitrary inputs from the rich, and demands tangible outcomes for the poor.”

The President delivered on his promise to put people on a path toward healthier, more prosperous lives. His landmark President’s Emergency Plan for AIDS Relief—PEPFAR--broke down barriers to the delivery of life-saving drugs by forging new partnerships with international institutions and the private sector. His support for the creation of the Global Fund to Fight AIDS, TB, and Malaria rallied the international community behind a more accountable, results-focused effort to combat deadly diseases.

Perhaps most important was the creation of the Millennium Challenge Corporation, which embodied the spirit of country ownership, partnership and selectivity— now widely accepted concepts for effective development. The MCC was created with the belief that truly catalytic change can only happen if we’ve created the right conditions for free markets to operate. In other words, follow the path blazed decades earlier by South Korea--tackle government corruption, cut unnecessary red tape, open the country to private investment, provide much-needed infrastructure—and the U.S. will be ready to support your success as a partner in reform.

Today, the MCC is almost certainly the most popular vehicle among congresspersons for delivering development assistance, and grudgingly admired by other executive agencies for its effectiveness.

So here we are, ten years after this historic commitment. The state of the economy is on everyone’s mind, our country is nearing double-digit unemployment, and we are trying to recover from a painful financial crisis. It is difficult to celebrate the progress that has been made in so much of the developing world when our own communities are hurting.

Congress and the broad array of aid agencies are facing the fierce headwinds of an unforgiving budget environment. The Congressional Budget Office estimates our national deficit for 2011 at $1.3 trillion.  When I came to Congress the entire federal budget was considerably smaller than this deficit! As you know, lawmakers negotiated the debt-ceiling deal in August that cuts an initial $1 trillion in government spending. Now, the Congressional “super committee” is looking to find an additional 1.2 - 1.5 trillion dollars in deficit reduction through spending cuts or revenue increases.   All this to be accomplished in three short months!

The international affairs budget is especially vulnerable to further cuts by the super committee. What is the first answer most Members of Congress give when pressed by a reporter or a constituent to point to where they would find budget savings?   Cut or eliminate all foreign assistance is the answer least likely to provoke a wave of angry phone calls and e-mails.  It is an easy answer which minimizes the potential for political fallout, but it greatly exaggerates the scale of spending on foreign assistance.

In the current appropriations process the House appropriations subcommittee proposed cutting the President’s request for spending on international affairs by $12 billion, a staggering 20 percent. The Senate proposes cutting less, but its number--$6 Billion below the President’s request--is insufficient to meet the challenges that our nation will face in coming years.  And these proposed cuts to diplomacy and development come on top of an $8 billion reduction that occurred in April as part of the FY 11 compromise to avoid a government shutdown.

These cuts are disproportionate and dangerous, and both our national security and economic prosperity will almost certainly suffer. But I believe that this conversation cannot simply be about dollars and cents. Our focus has to be on how we can do development better. This is the challenge I’ve wrestled with since I left Congress and became the co-chair of MFAN--the Modernizing Foreign Assistance Network.  MFAN is a reform coalition composed of most of Washington’s international development community--foreign policy practitioners, policy advocates and experts, concerned citizens, NGOs and private sector corporations. MFAN’s mission is to ensure that the U.S. plays a leading role in reducing global poverty while making our nation’s foreign assistance system more effective, efficient, and transparent.

I believe that we’ve made a lot of progress in transforming our foreign assistance system, thanks to the commitment cited earlier by Presidents Bush and Obama, USAID’s own pursuit of internal reform, and efforts by advocacy groups like MFAN. However, it is worth noting the heavy lifting that remains.  Our nation’s approach to global development is still governed by the Foreign Assistance Act of 1961 and neither the law nor the operating systems have kept up with a rapidly changing world. Worse, it has grown larger and more byzantine over the years. Today, foreign aid programs are spread across 12 departments, 25 agencies, and almost 60 federal offices. That’s a lot of cooks in the kitchen.

Furthermore, USAID is an agency the shadow of its former self. Since the end of the Cold War, it has been starved of resources and personnel and relegated to a secondary role in foreign policy. An effort to rebuild USAID’s capacity was begun in the previous administration. Several consecutive years of budget increases went a long way toward restoring USAID’s capacity—but the gains that have been made are fragile, reversible, and very much in jeopardy.

If we hope to continue the momentum and build on the  achievements of the last decade, we need to focus on reform.  Happily, the first steps have already been taken. Just a year ago President Obama signed the first Presidential Policy Directive on Global Development, known in the Washington world of acronyms as the “PPD”.  For the first time, we have an Executive vision set down in writing to guide foreign assistance planning.

The President’s policy directive called for common-sense improvements to foreign assistance. Among them: making sustainable economic growth the core goal of U.S. development activities; rebuilding USAID to lead U.S. development efforts; improving the process of country selectivity; and refocusing on accountability and transparency to show where our aid dollars are being spent. Most important, the PPD officially elevated development to a key pillar of U.S. foreign policy, alongside diplomacy and defense.

Congressional action is going to be critical to finishing the job on reform, and we at MFAN have been busy talking to lawmakers, trying to convince them to pass bipartisan legislation to codify these important reforms into law.  House Foreign Affairs Committee Ranking Member Howard Berman recently introduced the Global Partnerships Act of 2011, which would replace the outdated 1961 legislation, and make a sweeping overhaul of our foreign assistance system along the lines called for in the PPD and advocated by MFAN.  Just last week, Committee member Rep. Ted Poe (R-TX) crafted new legislation to greatly increase the transparency and accountability of U.S. foreign assistance. A partnership between Congress and the administration that transcends partisan lines—the sort of partnership that produced the MCC just a few years ago—is the only way to achieve real and lasting reform.

So, where do we go from here? We are on the cusp of reaping the returns on a decade-long, multi-billion dollar investment in global stability, the fruit of the MCC, PEPFAR, trade agreements, and USAID budget infusions. But now, the tiny slice of the pie that is development assistance is under siege. Congress is set to slash funding for the State Department and USAID at a time we can least afford it.  And even as we cut assistance budgets, we are moving into a transitional phase for the conflicts in Iraq and Afghanistan, drawing down our military forces and tasking civilian agencies to assume the lion’s share of responsibility for future progress.

We can neither dig our way out of the deficit nor address these momentous challenges by slashing the international affairs budget. If we cut the legs out from under U.S. foreign assistance, the development gains we have made over the last decade–and the good will and partnerships we have forged – would be lost. We will isolate ourselves at the exact moment when our global leadership is most needed and most challenged.

We must remain determined to implement reforms to our foreign aid infrastructure even if Congress persists in cutting operating budgets.   We have to do more with every dollar we have for development in such a challenging atmosphere.  I believe that we need to focus on five key reform priorities.

First is the obvious, already stated, and not really a reform. We have to make certain there are sufficient resources for diplomacy, trade, and development.  Resourcing our civilian capacity takes the burden for post-conflict reconstruction off our military. And using these tools to support indigenous economic growth will go a long way in creating the conditions where our aid is eventually no longer needed. Without resources, none of the other reforms can be made to work.

Second, we should support efforts to craft bipartisan legislation that will modernize our foreign assistance system. It is absolutely critical for Congress and the White House to work together in this area. Ideally, it would be a comprehensive overhaul of foreign assistance, but more likely it is going to be done piece meal, in smaller, easily digestible bites.

Third, Congress and the Administration must empower USAID to once again assume its role as the leading development agency in our fragmented system.

Fourth, we must continue to give developing countries more ownership of and responsibility for their own development processes. This not only increases the impact of our investments, but ensures mutual accountability for results.

Finally, we must look beyond aid and make better use of the other tools of development – including trade and partnerships with the private sector. The U.S. private sector has the capacity and resources needed to tackle development challenges and simultaneously opening opportunities for U.S. exports. We must unlock that potential by making USAID and our other agencies better partners with business. It is a role USAID has never been comfortable with, but it is time for them to step up and learn how business is done from the private sector.

Fifty years after the birth of our foreign assistance system, we are on the brink of catalytic change.  In critical hotspots like the Middle East, programs that build democratic institutions, enhance trade capacity and provide sustainable development are likely to be the most effective way to influence events and protect our interests.  Indeed, they may be the only tools in our kit.

But budget pressures cannot be wished away.

Today we face a hard moment of truth. Yes, we can afford foreign aid in today’s environment of budget austerity, but we must look beyond the old models of development and commit to seeing through the reforms begun a decade ago and continuing today.

It’s up to Congress and the Administration to write a new chapter that charts the future for U.S. development policy. It’s up to the rest of us who care about our global leadership to demand of Washington decision makers that they make this happen.

Thank you.

 

Jim Kolbe