Foreign aid does not prevent social breakdown.

• Author: Bandow, Doug

Few programs have consumed as many resources with as few positive results as has foreign aid. Since World War II, the U.S. alone has contributed more than one trillion dollars in bilateral assistance to various countries. Other nations, directly and through such U.S.-funded multilateral institutions as the International Monetary Fund (IMF), World Bank, and United Nations, have provided hundreds of billions of dollars more.

Yet, the recipients of that largess, by and large, have failed to grow economically and develop democratically. In many cases, it has underwritten brutal dictators as they have pillaged their peoples; in other instances, Western financial flows have subsidized the creation of disastrously inefficient state-led development programs. Often, Washington and other sources of aid have backed regimes that were both corrupt and collectivist.

Even many advocates of continued foreign assistance acknowledge the disappointing results of past policies. For instance, the U.S. Agency for International Development admitted in 1993 that "much of the investment financed by U.S. AID and other donors between 1960 and 1980 has disappeared without a trace." U.S. AID administrator Brian Atwood says of the assistance to Zaire, "The investment of over $2,000,000,000 of American foreign aid served no purpose."

Instead of dismantling failed programs and reducing ineffective aid flows, the Clinton Administration simply has concocted new justifications for more of the same. It wants to increase total foreign affairs spending by $1,200,000,000 for Fiscal Year 1998. As Secretary of State Warren Christopher stated before he left office, "The biggest crisis we're facing in our foreign policy today is whether we will spend what we must to have an effective American foreign policy."

The Administration argues that assistance can forestall social collapse -- the kind of disasters that occurred in Rwanda and Somalia, which triggered expensive American rescue efforts. In his 1997 State of the Union address, Pres. Clinton claimed, "Every dollar we devote to preventing conflicts ... brings a sure return in security and savings." That also has been a consistent theme of Atwood as he has attempted to defend his program from proposed Congressional budget cuts.

However, there is nothing in five decades of foreign aid experience to indicate that Washington has a unique ability to predict which nations are in the greatest danger of dissolving, let alone to use assistance to forestall such human catastrophes. To the contrary, most of the countries that have collapsed into chaos received significant amounts of aid over the years. Not only was that money used poorly, it often buttressed the very governments that were most responsible for the ensuing disasters.

U.S. economic assistance comes in various forms -- grants and loans for bilateral projects, primarily through U.S. AID, as well as credit from multilateral agencies, including the IMF, the World Bank, and such regional agencies as the African Development Bank -- to underwrite borrower development projects and provide aid for "structural" economic reforms. Other forms of foreign assistance include security programs. disaster relief, and subsidized crop shipments (primarily Food for Peace). Although there is no doubt some individual development projects have worked and that humanitarian aid can help alleviate the effects of crises, there is little evidence, despite the presumption of the term "foreign assistance," that official cash transfers, whether bilateral or multilateral, actually do much to advance growth or stability in the developing world.

The Clinton Administration has admitted that the record of aid has not been altogether good. A 1993 task force reported that, "despite decades of foreign assistance, most of Africa and parts of Latin America, Asia, and the Middle East are economically worse off today than they were 20 years ago." As a result, the Administration cut off funding to about 50 nations. mainly because they are, like Zaire, abject failures. It was even more critical of U.S. AID as an organization. Atwood admitted, "We were an agency on the road to mediocrity, or worse." This led to an intense Administration effort to "reinvent" the agency.

Nevertheless, there is little evidence that better targeting and management would enable foreign aid to assist poor nations in achieving self-sustaining economic growth. Steady financial transfers have not stopped developing countries from stagnating economically; indeed, many, particularly in sub-Saharan Africa. have been losing ground economically. The United Nations Development Programme calls the 1980s the "lost decade" for many poorer states. "Over much of this period," it reported in 1996, "economic decline or stagnation has affected 100 countries, reducing the incomes of 1,600,000,000...