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Volume III, Number 113 January 2003

Another Insult to the Developing World

Tim Francis-Wright

Amidst all of the hubbub in Washington in the last few weeks, about Iraq and North Korea and yet another huge tax cut, was a story that exemplified how the Bush administration feels about much of the world. In an interview with Newsweek, Andrew Natsios defended the size of the American foreign aid budget by claiming, essentially, that a larger amount would wreck the economies of the world's blighted nations.

Natsios runs the United States Agency for International Development. He is the same official who explained to Representative Norman Delahunt during a House committee meeting in June 2001 that spending money on antiviral therapy for African AIDS victims was foolhardy. He claimed that Africans "do not know what watches and clocks are. They do not use western means for telling time." Natsios, of course, was dead wrong then. And he has not lost his penchant for placing his foot in his mouth in the course of an off-hand remark.

When Natsios slandered the intelligence of hundreds of millions of Africans in 2001, a number of groups called for his resignation, because his comments smacked of racism. His latest comments have ironically received much less attention, because they concern most of the rest of the world, not just Africans. But they are just as wrong as his more infamous ones were.

Reporter Michael Hirsh mentioned to Natsios that the United States spent 0.1 percent, far less than many European nations, of its gross domestic product on foreign aid. Natsios replied, "You know how much we'd be spending on foreign aid if we spent as much as 0.7 percent? $70 billion. We're spending $10 billion now. We would be bigger than all the banks put together. It would distort the economies in the Third World to an extraordinary degree."

In 2001, the budget for USAID was some $6.91 billion, including some $800 million in food aid from the Department of Agriculture. This sum is good deal less than 0.1 percent of the $10.2 trillion gross domestic product for 2001. The 2003 budget request, including the food aid, was just under $8.5 billion. While these sums are impressive, the United States nonetheless lags in providing economic aid to the least developed nations. A sizeable chunk of its annual foreign aid budget—$1.24 billion—goes to Israel and Egypt as a consequence of the Camp David Accords. No other country on Earth, no matter how ravaged by famine or war or pestilence, received even half of what Egypt received.

Natsios was wrong about American foreign aid for three main reasons, and as administrator of USAID, he should know better.

First, he defended skimping on foreign aid because a larger amount would distort foreign economies. What he has forgotten is that distortion is just what these economies need! Avoiding distortion of economies in rich nations is a good first-order policy. In North America, Europe, and parts of Asia, most nations have interconnected economic and social systems in which major shocks could have disastrous effects. But many of the economies in the Third World are disasters. Burkina Faso and Chad and Niger and Madagascar do not need subtle tweaks to remain vibrant: they need major help to become functional.

Second, he claimed that an additional $60 billion in foreign aid to the Third World would wreck those economic systems. Even if that sum were confined to what the United Nations deems the 49 least-developed nations, it would represent less than $100 per capita for their 692 million citizens. Perhaps someone in charge of a rich country's international development agency should have some ideas about how a poor country could use an infusion of capital like that.

Third, Natsios ignored how foreign trade can have a dramatically pervasive effect on a poor country. For several poor countries, the commodity with the largest impact on the economy is petroleum. In 2001, the United States imported petroleum from a number of developing nations: 307 million barrels from Nigeria; 117 million barrels from Angola; 95 million barrels from Colombia; and 51 million barrels from Gabon. From these four countries alone, at $20 per barrel, the United States paid some $11.4 billion for petroleum. For the three African countries, the oil revenues outstrip the $1.27 billion in USAID assistance for the entire continent of Africa by a factor of more than seven.

Oil revenues are notorious in Africa for making the autocrats who run many countries fabulously wealthy, but doing little for the masses. Oil is sparkling clean, compared to another commodity. Some of the poorest countries in Africa—Liberia, Sierra Leone, and the Ivory Coast— have suffered devastating human losses from civil wars fueled by the money that diamonds bring.

The average African stands a chance of receiving some benefit from American economic aid programs. They may help improve roads, or sanitation, or agriculture. The continuance of aid depends, in theory, on the continued good conduct of the recipient governments in using the funds appropriately. Consider instead the use of American oil money. How much of it has been siphoned off by corrupt rulers or used to fight fruitless civil wars? Has the average Nigerian or Angolan really benefitted one iota from the billions of oil dollars funneled into those two countries over the past quarter-century?

Natsios could have spoken out about some truths of foreign aid. A dramatic increase in foreign aid is a tough request to make during tough economic times at home. Furthermore, the United States has an obligation to ensure that its foreign aid is spent wisely. But American governments have been loathe to match European government spending on foreign aid, despite the success of the Marshall Plan in rebuilding Europe after the Second World War. The hypothetical $60 billion increase that Natsios found so untenable is a small fraction of what the United States spends to outfit its military forces every year. The world is full of the starving and poor, yet bereft of any competent military challenge to American hegemony.

The Bush administration has spoken forcefully and at great length about the dangers that al-Qaeda and similar terrorist groups pose to the United States. Al-Qaeda and its ilk fester in the slums of the poorest nations in the world, nations that would welcome an expended American role in promoting economic and social development. Yet the man George Bush put in charge of international development cannot see how more funds could be used. Ultimately, what is billed as compassionate conservatism is merely misinformed paternalism.