[Issue Briefing] The Decline of U.S. Official Development Assistance (ODA) Policy: The Shifting Stature of the Largest Donor

Editor's Note

This Issue Briefing is a product of the "Think Tank Joint Research" initiative, led by Yeo Si Jae (與時齋) and conducted by EAI in collaboration with major domestic think tanks. It was originally published on the Yeo Si Jae website on January 19, 2018.

From the Main Text

"Presidential Policy Directive 6 (PPD-6) is historically significant not only because it was the first policy directive issued by a U.S. President dealing exclusively with development issues, but also because it elevated development to a national security issue on par with defense and foreign affairs. It is somewhat surprising that despite being the world's largest donor of aid since the mid-20th century, the executive branch had never before presented a specific aid policy. However, considering the prevalent view that aid was a morally right but not (or only indirectly) beneficial act for national interests, or a form of idealistic diplomacy, it is understandable that development aid policy occupied a secondary position in U.S. foreign policy. This directive, however, made development a strategic, economic, and moral priority. In an era of global threats and challenges such as environmental issues and terrorism, severe global economic inequality, and increasing demand for new resource development, development assistance is no longer merely about helping others or foreign countries, but is directly linked to the interests of one's own country and its citizens."

"Of course, in absolute terms, it is true that the United States remains the world's largest donor country. According to an OECD report, the U.S. spends more than one-third more on foreign aid than Germany, the second-largest donor. However, considering that the U.S. economy is more than five times larger than Germany's, a different picture emerges. While Germany spends 0.7% of its Gross Domestic Product (GDP) on ODA, the U.S. spends only 0.18%, less than a quarter of Germany's rate. This gap becomes even more stark when compared to other OECD countries. The U.S.'s ODA spending relative to its economic size ranks a mere 22nd among the 29 OECD member countries."

"Furthermore, to avoid falling behind in this development aid competition with China, it is advised that Western countries change their conventional understanding of international development. Specifically, while traditional wealthy nations and international organizations aim to alleviate and eradicate poverty in developing countries using non-commercial, non-profit means, China, based on its own economic development experience, perceives development as an everyday economic activity and a 'bread and butter' issue, essentially equating it with material living standard improvements. This represents a crucial difference from the U.S. and European countries, which view development almost exclusively as a problem for other nations (especially developing ones) and as a separate domain from general business activities."

"However, the Trump administration's budget proposal for fiscal year 2018, released in March 2017, moves in the exact opposite direction of these warnings. Scott Morris and Isaac Shapiro, senior fellows at the Center for Global Development (CGD), criticize the Trump administration's justification for significant cuts to foreign aid programs by claiming the U.S. pays more than its 'fair share.' They point out that the $26 billion the U.S. spent on ODA last year is far from a 'fair share' compared to the contributions of other developed nations. They further criticize that if President Trump truly intended to pay his 'fair share,' he should have increased the budget to approach the ODA target of 2% of total GDP, but instead, he is moving in the opposite direction."

"However, conservative groups in the U.S., advocating for economic libertarianism and foreign isolationism, support President Trump's actions by emphasizing the costs rather than the benefits of foreign aid. The Cato Institute, a prominent conservative think tank in the U.S., points out that while U.S. foreign aid has more than doubled over the past two decades, from an average of $14 billion annually in the 1990s to $32 billion in the 2010s, there is insufficient evidence of its effectiveness, and some studies suggest it even reduces productivity. The argument is that countries that have succeeded in market reforms have generally achieved steady and high economic growth, regardless of the presence or scale of aid."

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