The Hidden Dangers Of Fixing Foreign Aid

REUTERS/Petar Kujundzic

Eliot Bakker Freelance Writer
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As the world’s biggest foreign aid donor, the United States has plenty of room to trim fat when it comes to sending money overseas. President-elect Trump told audiences on the campaign trail that the US should stop sending money to countries that hate us and cease nation-building abroad in favor of building infrastructure here at home. Putting a stop to wasteful foreign aid is long overdue, but cutting out too much too quickly may be throwing the baby out with the bathwater.

There’s little doubt a significant portion of the foreign aid Western countries dole out is lost to corruption. In October, a committee of British parliamentarians acknowledged the elephant in the room: namely, funding corruption in third-world countries will likely always be a fact of life when it comes to foreign aid. Although “huge amounts” of taxpayer money is lost, the British government says the risk of fomenting more violence and instability outweighs the possible rewards of intensive anti-corruption efforts.

Of course, the Brits have a less convoluted approach to foreign aid and development projects than the US does. The confusing web of public and private aid and feel-good investment that connects USAID, major corporations, and foundations like the Clintons’ or the Gates’ opens doors for all kinds of shrinkage or influence peddling.

In addition to fueling corruption, there is a sizeable body of evidence that, like welfare, handing out money abroad does more harm than good. Distributing tons of food to the poor may help alleviate immediate hunger, but doing it repeatedly creates a market where prices are depressed and local farmers are shut out, making the establishment of an independent food market impossible. Citing that argument, the Cooperative for Assistance and Relief Everywhere (CARE), reversed course after decades of food aid to African countries and took the controversial step of phasing out the practice beginning in 2007, walking away from $45 million per year in federal funding in the process. CARE’s is a rare example of an organization walking away from government dollars for the greater good.

Although Americans like to think our efforts abroad promote freedom and democracy, too often our dollars keep enemies of liberty in power. Egypt’s Abdul Fattah el-Sisi is a prime example. Ascending to Egypt’s pharaonic presidency in a military coup three years ago, Sisi has actively suppressed human rights since his first day in office. The United States initially took a strong stance against his abuses, but Washington eventually relented and a meeting between Sisi and Senator Lindsey Graham (one of Sisi’s harshest Americans critics) was enough for Graham to come back to Capitol Hill pushing Congress to loosen the purse strings. The reason? The promises of democracy and the short-term stability Sisi’s regime provides are preferable to Islamist terrorism in an unstable Egypt. In bankrolling Cairo, our aid money funds the evil we know for fear of allowing in the evil we don’t.

There lies our conundrum: if foreign aid can turn out badly, cutting it out entirely could be even worse. In places like Africa, where Western countries have battled for influence for centuries and where emerging economies are turning into valuable trade partners, a powerful new contender has emerged – the People’s Republic of China. For African leaders, China represents a different influence: one that has no interest in pushing inconvenient Western demands for democracy and good governance. More disturbingly, the idea of a highly centralized authoritarian government is one that many an African dictator can appreciate.

Obama talked a good game on this front, but progress in actually engaging Africa and developing ties with African states has been little and less. Rapid militarization has taken precedence over the infrastructure projects intended for the continent. Even so, this imperfect relationship prevents the United States from losing Africa to China entirely.

Already, Beijing’s ability to bankroll African leaders with minimal strings is catching the West flatfooted. When over sixteen trillion cubic feet of LNG were discovered off Mozambique’s coast in 2012, bumping the total known reserves to over 85 trillion cubic feet, Italy’s Eni was quick to announce plans to begin harvesting from a portion of the known reserves. Insiders say ExxonMobil has successfully negotiated for a spot at this natural gas smorgasbord as well. The companies stand to profit immensely, after Mozambique moved to shore up its maritime security in order to exploit its natural resources.

Of course, things aren’t quite so simple. Having invested in upgrading its ability to protect its waters, Mozambique is facing searching questions over why it has since failed to deploy the additional maritime security measures, a vital factor in being able to monetize its offshore wealth and pay off debts. The failure to take economic advantage of the increased security – alongside combatting rampant (and largely Chinese) illegal fishing – has exacerbated the problems in Mozambique’s finances, already hobbled by regional drought and the fall in energy prices.

In the new Africa, pressure from Western banks and development agencies left Mozambique’s leaders with one natural place to turn: China. Given the cold shoulder in Brussels and Washington, Mozambique’s President Nyusi headed to Beijing to plead the case of what China’s state-owned papers called their “golden gate to southern Africa.” Ironically, the same Chinese that invaded Mozambique’s waters are now acting as the country’s lifeline, pouring hundreds of millions of dollars into infrastructure projects that benefit Chinese companies. Beijing became Mozambique’s largest bilateral creditor as of last year, and that generosity comes with just a few strings attached: namely, the same commodities Eni and ExxonMobil are banking on. With the US and Europe raking them over the coals, why shouldn’t the Mozambicans look eastward instead?

Of course, that is just one example. It’s too early to speculate about President-elect Trump’s approach when the choice of Secretary of State (for one) is still up in the air. In any event, a fresh look at foreign policy questions like this one should offer significant advantages over the tired Washington consensus. As Trump shakes things up, though, he just needs to think carefully about how best American interests can compete with China.