U.S. Foreign Aid As Foreign Policy

U.S. Foreign Aid as Foreign Policy

Debates, Choices and Normative Ambiguities

Louis A. Picard Division of International Development Graduate School of Public and International Affairs University of Pittsburgh

February 28, 2007

This is a manuscript in progress and as such may contain errors or lack clarity. For this I apologize to the reader.

i Part I: The Historical Legacy

Chapter One: The Nature of the Book 2 Foreign Aid as Foreign Policy 2-3 The Nature of Foreign Aid 3-5 The Importance of Institutional Development 5-8 Humanitarian Approaches and Commerce 8 Financial Inducements and the Origins of Foreign Aid 8-10 The Search for a Counter-Thesis 10 The Cold War 10-11 From the Cold War to the War on Terror 11 Foreign Aid Assumptions and the March of Folly 11-12 Conclusion 12-13

Chapter Two: Historical Antecedents to Foreign Aid 19 Historical Theories of Foreign Policy 19 Foreign Exchange as a Form of Diplomacy 19-21 Imperial Expansion in the Nineteenth Century 22-23 The Impact of Colonialism on International Assistance 23 The Missionary Factor 23-25 The Legacy of Colonialism 25-28 Imperial Influences on Development 28-29 Conclusion 29-30

Chapter Three: Manifest Destiny and American Antecedents 36 The American Expansion: 1789-1900 36 Manifest Destiny 36-38 The Impact of the Spanish-American War 38-41 International Assistance: Historical Antecedents 41-43 Early Technical Assistance 43-45 Interventions in the Western Hemisphere 45 Hemispheric Technical Assistance 45-46 Cuba: The Model Protectorate 46-47 The Haiti Conundrum and Latin America: Variations on a 48-50 Theme Competition with Europe and Imperial Forms 50 The Prelude to U.S. Interventions 50-52 Liberia: America’s African Colony 52-53 The Modernization of Turkey 53-54 Opening Up of East Asia 54-57 Conclusion 57

Chapter Four: The World Wars and the Origins of Contemporary U.S. 64 Foreign Aid War and the Origins of Foreign Aid 64

ii Humanitarian Assistance 65-67 Early Foreign Aid 67 Influence, Values and Stereotypes in Inter-war International 67-70 Assistance Foreign Assistance and the New Deal 70 The Good Neighbor Policy and the Beginning of Modern 70-73 Foreign Aid The Impact of Renewed War 73-76 Crisis in the Balkans and the Marshall Plan 76-78 A Model of Foreign Aid 78-80 Conclusion 80

Part II: U.S. Foreign Aid in the Last Half of the Twentieth Century

Chapter Five: Point Four, the Cold War, and the Legacy of Vietnam 89 Origins in the Cold War 89 Foreign Assistance before 1950 89-91 The 1950 Point Four Program 91-96 The First Decade 96-97 Staffing Foreign Aid 97-99 The Eisenhower Legacy and Criticism of Foreign Aid 99-101 Institutionalizing Foreign Aid 101 The Situation in 1960 101-103 The Kennedy Reforms 103-105 The Creation of USAID 105-106 Vietnam 106 Early Years and Assumptions 106-109 Kennedy, Johnson and Vietnam 109-112 The Militarization of Aid 112-115 The Legacy 115-117 Conclusion 117

Chapter Six: Basic Needs, Structural Adjustment and the End of the Cold 131 War The Search for New Models 131 Agriculture, Food Aid and Rural Development 131-133 The Shift to Basic Needs 133-135 The Poverty Debate 135-137 Policy Reforms and Structural Adjustment 137 Ronald Reagan and a New Foreign Policy Agenda 137-138 The Problem of Debt, Structural Adjustment and Privatization 138-143 Towards the End of the Century 143 George Herbert Walker Bush and William Jefferson Clinton: 143-148 The End of the Cold War Conclusion 148-149

iii Part III: Towards the Millennium: Processes, Policies and Projects

Chapter Seven: Foreign Aid at the End of the Twentieth Century: From 159 Policy to Process Institutional Development 159 Technical Assistance and Organizational Development 159-161 Planning and the Curse of the Project 161-164 The Projectization of Foreign Aid 164-165 The Changing Environment of Foreign Aid 165 Contracts, Grants and the NGO Conundrum 165-170 Personnel Ceilings and Contracting Out 171-174 Intra-Governmental Agreements and Public-Private 174-176 Partnerships? Capacity Building for Sustainability 177 Human Resources and Institutional Development 177-179 Representation, Education and Training Realities 179-184 Conclusion 184-185

Chapter Eight: Donors and Clients: Dilemmas and Contradictions 197 Operational Limitations 197 Stereotypes, Motives and Dilemmas 197-199 The Not So New Missionaries 199-203 Donor Fatigue and Organizational Weakness 203-206 Debates about Funding 206 Standing Operating Procedures 206-209 Foreign Aid Spending and the End of the Cold War 209-212 Dealing with Donors 212 The Donor as a Problem 212-213 The LDC Program Manager 214-216 Strategies for Coping 216-219 Coping with Clients 219 LDC Failures 219-220 Tolerating Corruption 220-222 Interactions between Donors and Program Officers 222-223 Conclusion 223-225

Chapter Nine: Foreign Aid: September Eleven and Debates into the 241 Twenty-First Century George W. Bush and Unilateralism 241 The Bush Premises and September 11 241-243 Iraq: Return to the Quagmire 243-246 Iraq and Foreign Aid 246-248 The Iraq Fiasco 248-250 Contemporary Debates 250

iv Unilateralism vs. Multilateralism 250-253 Pulling Back from Unilateralism 253-255 Human Security, Democracy and the Governance Problem 255-260 Trade and Investment Debates 260-263 Millennium Challenge Account 263-267 Transformation Diplomacy, USAID and the Department of State 267-270 Conclusion 270-271 Chapter Ten: U.S. Foreign Aid: Challenges for the Future 288 Into the Twenty First Century 288 Limited Successes in Foreign Aid 289-291 When Foreign Aid Fails? 291-295 A Potential for Success? 295-299 Conclusion 299-300

v Author’s Note

The focus of this book is on U.S. foreign aid policy and its relationship to foreign policy issues. The book has a historical focus, placing foreign aid within the context of diplomacy and foreign policy going back to the eighteenth century and beyond but going up to the present time with the last two chapters examining foreign aid and foreign policy in the post-September 11 world.

The book tries to demonstrate and simplify the complex world of foreign aid with all its diversity and range of definitions. In the end, however, my position is that foreign aid like defense and security policy is a sub-set of foreign policy.. My goal was to write a book that was accessible to an undergraduate university audience but which also presents new ideas, debates and information which will be of interest to foreign policy specialists.

The book does have a point of view which I try to make clear: foreign aid (grants, sub- market loans and non-monetary transfers of resources) can be used to provide social services, develop human resources and democratic institutions. It is not by itself the best tool to promote economic growth. My use of sources is broad and includes non-social science materials both to make the manuscript interesting to the reader and also because I think it provides a broader perspective. It does not shy away from the polemic but tries to use it to understand the diversity in our understanding of foreign aid at a time when foreign policy choices have gotten out of control. I do however make use of the social science sources referred to by one of your reviewers.

While this book is not a memoir it has been effected by more than forty years of work and research in foreign aid and international development work. I have always seen my consulting and practical work, and my academic research, as two halves of the same coin, my consulting work feeding into my research and my academic research informing my consultancies. I try in all of my work to bridge the gap between the academic and the practitioner and the university community and international technical assistance.

Since 1965, I have spent over ten years in long term residency in Uganda, Tanzania, Botswana and South Africa. Over the years, I have worked for USAID, DANIDA, the World Bank, the United Nations Development Programme and the Food and Agriculture Organization and more than a dozen contractors and non-profit organizations on more than fifty short term projects in over 30 countries in Africa, the Middle East, Central America and the Caribbean. This has influenced my judgments presented in this book.

Among others I would like to acknowledge the influence and support that I have received from Ed Connerley, Jeanne North, Ken Kornher and Bob Groelsema currently or formerly with the U.S. Agency for International Development. I am grateful to the support given to me by Al Zuck formerly the Director of the National Association of Schools of Public Affairs and Administration during my period at NASPAA between 1984 and 1987. Financial support for this book came from the Graduate School of Public and International Affairs of the University of Pittsburgh. I am grateful for the Sabbatical granted to me by the University of Pittsburgh from January through August of 2007.

vi I am grateful to Lynne Rienner, her able staff and the two anonymous readers who commented on an earlier version of this manuscript.