In the era of Jesse Helms, the rabidly anti-aid senator, the idea of using half a billion taxpayer dollars on a development project in Africa would be almost laughable. Last week two congressional committees voted to slash international spending by more than $3 billion. Secretary of State Warren Christopher complained to Congress that “we cannot lead if we are deprived of the tools of leadership.” But the Republicans argue that in foreign policy, as in domestic affairs, the public sector has basically failed. House Speaker Newt Ging-rich recently suggested that Third World development would be better left to American corporations “so that we can have CNN cover [the world] peacefully and Coca-Cola can be sold locally and Delta Air Lines can land at [foreign] airports safely.”
Whether or not private investment actually works better than foreign aid–it’s a bit early to judge-it’s already bigger. The amount of money available on international capital markets now overwhelms what any government, or even the World Bank, can provide (chart). New equipment, such as cellular phones, is accelerating the trend toward privatization. “The technologies have become modular,” says Richard Richardson of the Overseas Development Council. “The private sector can get into things it never could do before.”
Aid organizations argue that they’re far from obsolete. “If companies are there, contemplating private power plants, it’s almost always because we’ve been there before,” says Jean-Francois Rischard, vice president for private-sector development at the World Bank. Disaster relief and refugee resettlement need response from government, and no one is suggesting they be privatized–although private individuals do contribute about $4 billion every year to international humanitarian causes. And even Enron Development Corp. depends on loans financed by the U.S. foreign-aid budget. It typically can’t fund more than 30 percent of a project with its own money.
Republicans think that squishy-headed liberalism in foreign aid has actually done the Third World more harm than good. Party ideologues liken foreign aid to giving welfare checks to unwed teenage moms. And some aid officials do concede privately that a country like Egypt, which receives 29.5 percent of all American foreign aid, has grown lazy and dependent on the U.S. dole. But Egypt is still getting thank-you money for having signed a peace treaty with Israel 16 years ago, and U.S. officials argue that it’s a unique case. “We just don’t subsidize governments that refuse to reform anymore,” insists Brian Atwood, head of the Agency for International Development. AID has recently cut off 16 countries, from Zaire to Cameroon, for corruption and fiscal irresponsibility. World Bank officials, too, deny that they’ve created a culture of dependency. “We are a tough lender,” says a World Bank official. “If the American welfare system had our conditions for getting training and finding a real job, it would work a lot better.”
Aid officials are scrambling now to demonstrate their own private-sector savvy. The World Bank–normally a stately, above-the-fray institution–took out advertisements in the two Washington newspapers last week, claiming that its loans “give you more bang for your buck.” AID distributed fat folders of documents showing that nearly 80 percent of its budget is recycled back to the United States. That’s a strange argument for a defender of foreign aid to make–but these are strange times.
