Bush taking new tack on foreign aid

U.S. would boost money, provide incentives for democracy, development

March 21, 2002|By Mark Matthews | Mark Matthews,SUN NATIONAL STAFF

WASHINGTON - President Bush leaves today for an international development conference in Mexico, carrying the message that the United States is not a tightwad when it comes to fighting world poverty, but that rich and poor countries alike need to get smarter about how they dole out and use foreign aid.

Since Bush launched the war on terrorism last year, critics abroad and at home have said that the U.S. response to the Sept. 11 attacks places too much emphasis on military force and too little on dealing with "root causes," such as poverty and powerlessness, of the hatred that nurtures terrorism.

They note that the United States ranks at the bottom of the list of rich donor nations in foreign-aid spending when measured as a percentage of national income. In 2000, the United States spent $10 billion in foreign aid, compared with Japan's $13.5 billion. European countries combined spent $25 billion.

Bush's response is the Millennium Challenge Account, announced in a speech last week, which would combine a 50 percent increase in foreign aid with incentives for poor countries to democratize, stamp out corruption and open their economies. Officials hope that the proposal will quiet the critics while setting an example.

"This is a significant, substantial, really large increase in American development assistance. It is larger than any increase in recent memory," Condoleezza Rice, the president's national security adviser, said yesterday. "And it is going to change the terms of the debate about development."

Along with the proposal, Bush administration officials present a spirited argument that investment and trade - not aid - are the keys to lifting the developing world out of poverty.

And they say that when these factors are taken into account, the United States contributes far more than its foreign aid budget suggests.

"The president believes that the development debate has focused too much on inputs on levels of aid - arbitrary levels of aid from the developed countries - and not enough on ensuring tangible outcomes - growth and opportunity, education and health - for the poor," a senior Bush administration official said.

"Now we know that trade and investment are the real drivers of development," the official told reporters.

Foreign aid has long been controversial in Washington, mirroring in some ways the domestic conservative-liberal debate over welfare. Aid advocates point to the dire human consequences of poverty overseas, including hunger, disease and illiteracy, which they say feed instability in the developing world.

Skeptics say that aid leads to dependence on handouts and reduces the incentive for poor countries to develop their own economies in a way that would generate wealth for their populations.

Moreover, they say that aid money crowds out private capital and is too often siphoned off by corrupt leaders and funneled into private bank accounts. If this was a price worth paying to keep allies during the Cold War, it isn't now, they say.

The war on terrorism has sharpened the debate. Aid advocates say poverty and hopelessness create a fertile environment for extremists who use terror to achieve their ends.

A number of American conservatives question this argument, pointing out that many of the Sept. 11 terrorists were educated members of the middle class and were from Saudi Arabia, one of the world's biggest oil producers.

The Bush administration comes down in the middle.

"If there's something that we know about al-Qaida, it's that an awful lot of it, and especially its leadership ... comes from privilege, not from poverty. Poor people are not murderers," Rice said yesterday. "However, in countries where there are not good policies and where there is a hopelessness and where there is poverty, you can create conditions of a kind that you had in Afghanistan that these parasites can latch on."

Bush administration officials said that a new foreign aid policy had been in the works for some time. But Rice acknowledged that the United States had to come forward with an overall aid increase if it wanted to persuade developing countries of the need to change their policies.

"We felt very strongly [that] we could not go out there and say, `This really has to be about outputs,' unless we were prepared to say something about inputs as well."

The U.S. initiative drew a mixed response from the leaders and aid organizations gathering at the United Nations conference in Monterrey. This week, the aid figures were revised upward.

"This appears to be a turning point for U.S. development policy, a significant signal our government recognizes that the United States must play a much larger role in fighting world poverty," Mary E. McClymont, head of the umbrella nongovernment aid organization InterAction, said yesterday in Monterrey. "But the initial three-year pledge must be seen as only the first installment."

George Soros, the international financier and philanthropist, criticized the proposed U.S. aid increase as too little. The World Bank and Great Britain have called for a doubling of foreign aid from the world's rich countries.

Key ingredients in a developing nation's economic success, officials say, are establishing the rule of law, which builds investors' trust; cracking down on corruption; improving education; and opening up economies to outside investment and freer trade.

The president is headed to a part of the world with a mixed record on pursuing these policies, despite a shift by nearly all of its governments away from dictatorship.

But Latin America contains a number of countries afflicted by "crony capitalism," where elites tied to the political leadership hold sway over large sectors of the economy, a senior administration official said. As a result, there is public disillusionment not just with capitalism, but with democracy as well.

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