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Putting results and economic growth at the center of U.S. development assistance

As I noted in this same space earlier this year, I have long been skeptical of how U.S. taxpayer dollars are spent overseas, having heard countless stories of America’s generosity being rewarded by wasteful projects and corrupt foreign bureaucrats enriching themselves at the expense of the U.S. taxpayer and robbing their own citizens of those intended benefits. 

As a member of the House Foreign Affairs Committee, I have developed a deeper understanding of how this aid can also be an important tool in maintaining American leadership while creating strong allies in a complicated and unpredictable world. Over the past 15 years, there has been movement toward a more accountable, results-based approach to aid that places the ingenuity of the private sector and American values front and center.

{mosads}Twenty-first century programs like President George W. Bush’s Millennium Challenge Corporation, which sets benchmarks to be achieved by aid recipients in areas such as economic freedom and control of corruption, and the Power Africa initiative Congress passed last year which empowers the private sector to do the heavy-lifting in efforts to provide the people of Africa with electricity—a basic necessity for economic development.

These programs are part of a paradigm shift in the way the United States provides foreign aid. USAID, our government’s lead development agency, also has undergone a significant and much-needed modernization in recent years, substantially improving the transparency, accountability and learning efforts that are necessary to achieve lasting development results.  Lastly, the United States is making critical new strides to build capacity in aid-recipient countries to transition from aid-dependent to trading partners. 

These programs recognize the important role the private sector must play in creating the economic growth necessary to elevate people out of poverty and to embrace the unique tools such as development finance. But more must be done. At the time of USAID’s founding in 1961, aid accounted for over 70 percent of resources flowing into the developing world. Today that figure is dwarfed by the private sources of capital that now make up over 80 percent of the resources flowing into the region.

The developing world’s decreased reliance on foreign aid is encouraging, but the role for smart U.S. government investment still remains. Global competitors– sometimes in the form of rival governments and the industries they own– are not governed by the same rules and standards that guide the U.S. private sector.  American companies offer the highest quality products and services in the world, but can encounter difficulties when negotiating with a foreign government official asking for a kickback or operating in a country without a financial services sector. 

U.S. development programs targeted at addressing these difficulties can encourage the type of economic growth that the developing world needs in order to thrive. 

That is why I am introducing the Economic Growth and Development Act. This legislation is aimed at unleashing the power of the private sector by connecting American businesses with the federal development agencies and ensuring that U.S. development policy takes into account the constraints facing U.S. companies in the developing world.  This bill is a first step in a series that will help foster the paradigm shift that is needed in U.S. foreign aid.  

Today, in South Korea, one is hard-pressed to find signs of the country that was left in ruins by the Korean War. With the assistance of the United States in the years following the war, South Korea embraced democratic and free market principles and has transformed from a recipient of U.S. poverty-focused development assistance to a strong ally and trading partner of the United States– and a foreign assistance donor itself. 

The case of South Korea represents a high mark in modern development policy, and there are certainly many additional factors that contributed to South Korea’s astonishing transformation.  South Korea’s example should be one that U.S. development advocates and professionals strive for as they articulate a vision for a modern development agenda– an agenda driven by the economic freedom and growth that is essential to lifting people all over the world out of poverty. 

Rep. Yoho serves as a member of the House Foreign Affairs Committee and as the new co-chair of the bipartisan Congressional Caucus on Effective Foreign Assistance.

The views expressed by authors are their own and not the views of The Hill.


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