Myths and Misconceptions: Foreign Aid

by Mike Walker

February 18, 2014

Since the recession in 2009, the economy has been on every American’s mind. After watching thirty minutes of Fox News or MSNBC on any given day, you will feel like a PH.D in fiscal policy. Why not? Every autumn brings Washington to a screeching halt as Congress nears the edge of the fiscal cliff. Do we raise the debt ceiling? Do we cut wasteful programs? The conversation inevitably gravitates toward Foreign Aid. “What do America’s taxes go to and why should we spend so much on it?” is the question on everyone’s mind. Microsoft genius, Bill Gates, attempts to quell all apprehensions in his fourteenth annual letter.

Bill Gates addresses three myths about foreign aid: poor countries are doomed to stay poor, foreign aid is a big waste, and saving lives leads to overpopulation.  According to Gates theses myths are not only untrue, but they are also “harmful.” Although Gates convincingly dismantles each of these misconceptions, the myth that “foreign aid is a big waste” proves to be of particular interest to me.

To address the idea that foreign aid is generally wasteful, Gates attacks three specific imbedded attitudes:

Misperception:  Gates delves into the discrepancy between the amount of money citizens of wealthy countries believe that their countries spend on foreign aid and the amount that these countries actually spend. Most Americans believe that the U.S. spends 25% of its budget on foreign aid, while these same individuals say that we should be spending just 10%. Surprisingly, neither of these numbers come close to the actual figures. Gates points out that the U.S. spends, “less than 1%” of its budget on foreign assistance. According to the Office of Budget and Management, $47 billion dollars of discretionary funding was provided to the Department of State and USAID in 2013. While the U.S. does not spend nearly as much as the typical American believes, it also is far from the 10% mark that Americans think we should be spending.

Misappropriation:  Gates next addresses the issue of corruption. “One of the most common stories about aid is that some of it gets wasted on corruption.” Although Gates does not deny this challenge, he urges his readers to consider the relative size of the problem of corruption and likens it to a tax on foreign aid. However, Gates reiterates that corruption should be combated throughout his letter. The bottom line of Gate’s argument centers on the fact that corruption cannot be fully erased, and that a small amount of corruption shouldn’t be the reason to cut funding that saves millions of lives.

Dependency:  Finally,  Gates addresses the issue of aid dependence. Gates’s primary issue with the claim that aid can hold back economic development is that these critics do not, “differentiate aid that is sent directly to governments from funding that is used for research into new tools like vaccines and seeds.” Bill hits the nail on the head here. The goal of most foreign aid agencies is to create a sustainable lifestyle for those receiving aid. That sustainability does not just come from handouts of free food or money. It comes from the development of new technologies to capitalize on available resources. This approach has led to self-sufficiency in most countries that have received aided in the past fifty years, with only a few outliers. The reasons for this reality extend beyond the foreign aid conversation.

The fact of the matter is that the U.S. spends very little on foreign aid compared to other budgetary items such as the military or infrastructure. Clearly, those items are important to the maintenance and protection of our own country, but when foreign aid consists of just 1% of the budget, there is not much to cut from. The conversation on foreign should not be about how we can cut it, or its uselessness; rather it should be about how we can increase it and be more effective with it. Many of our political and economic allies, such as Mexico and Brazil, were once third world communities in need of our assistance. In order to thrive in a rapidly globalizing world, the U.S. should be a part of the success stories of the Third World. If Bill does not accurately capture this sentiment, USAID gives us a real example of how effective its work can be. Imagine the work that could be done if the U.S. budget on foreign aid was 10%, as most Americans believe it should be.

So, the next you tune into Fox News, and budget cuts are the topic of conversation, think about what Bill Gates has to say. Do we really need to cut back on U.S. foreign aid? Or should we improve upon it?

This article is contributed by Mike Walker, a sophomore Public Policy major at the College of William & Mary. Mike was born and raised in Northeast Philadelphia.