The Foreign Service Journal, June 2006

Challenges of the 21st Century.” In it the agency commits itself to transformational development and notes, among other things, that “institutions, not resources, matter most;” that “countries not committed to reform conven- tional development programs are unlikely to advance development;” and that “aid is essentially supportive, while local leadership, ownership and participation are critical.” The paper underscores the need to pay attention to absorptive capacity constraints and emphasizes the con- cept of “selectivity,” meaning that aid ought to go where it has the best chance of making a lasting difference. So framed, U.S. foreign aid policy could be said to rec- ognize officially the following four principles: 1) the impor- tance of time, implying that any expectation of quick and easy solutions is unrealistic; 2) the primacy of institutions over resources, implying that money is not the answer (or at least not money alone); 3) the key role of commitment and political will on the part of the developing countries, implying (along with the related notion of selectivity) that it does not really pay to provide much development aid without them; and 4) the role of aid as a support, implying that instead of conventional delivery (directed packages and projects loaded with “cargo”), aid might be recon- ceived of as more indirect and strategic, aimed at catalyz- ing and fostering host-government initiatives. Even if these interpretive add-ons might be less than fully intended by official policy, the new emphases still add up to a conceptual framework that is surprisingly on the mark. I say “surprisingly” because the aid establish- ment (U.S. and worldwide) has been agonizingly slow in saying openly what thousands of veteran aid practitioners have known for decades. And “on the mark” because, indeed, these are pretty accurate distillations of over 50 years of lessons — lessons that, as others and I have lamented, were apparent but never clearly articulated, much less acted upon. Is there any evidence that these sound principles are being translated into action? What would foreign assis- tance programs based on them look like? And, more important, what are the prospects that they will become the basis for development aid in the future? Before addressing these questions, it is useful to review how we got to this point. The Aid Dilemma The 1961 U.S. Foreign Assistance Act can be seen as the practical beginning of “modern” American develop- ment-oriented foreign aid; namely, aid aimed at helping the many new nations (then called “underdeveloped”) as opposed to post–World War II relief, Marshall Plan aid in Europe or aid tied to “mutual security.” Worldwide, offi- cial development assistance from the advanced industrial nations to the developing nations grew fairly steadily until about 1990, when it leveled off at about $60 billion per year. ODA stayed in that range until 2002, but since then has been growing steadily again. USAID economic assistance (which does not include food aid, State Department programs such as the HIV/ AIDS Initiative, the Peace Corps or military assistance) was $12.9 billion in FY 2001, $16.1 billion in FY 02, $20.8 billion in FY 03 and $26.6 billion in FY 04. Not surpris- ingly, target countries and sectors have varied consider- ably over the last 50 years: the 1960s saw large infrastruc- ture projects; the 1970s, Basic Human Needs; and the 1980s, appropriate technology, with microcredit becom- ing popular in the 1990s. Today debt relief and Iraq reconstruction are major budget lines. Altogether, about $2 trillion dollars have been spent on aid for the develop- ing countries since 1961. But for those of us who have been “out there” for any length of time during the past five decades, a private dis- comfort has grown as we have seen how little we have to show for the trillions of dollars. Let’s leave aside budget support to certain preferred countries, as well as disaster and humanitarian relief; those aid categories are basically unrelated to long-term development and poverty reduc- F O C U S J U N E 2 0 0 6 / F O R E I G N S E R V I C E J O U R N A L 29 Tom Dichter’s career in international development spans 40 years of life and work in over 50 developing countries. He was a Peace Corps Volunteer in Morocco in the early 1960s and, much later, a Peace Corps country director in Yemen. He was vice president of the American NGO TechnoServe, a program officer at the Aga Khan Found- ation in Geneva, a researcher on development issues for the Hudson Institute and a consultant for many interna- tional agencies, including the United Nations Develop- ment Program, the International Fund for Agricultural Development, USAID, the Asian Development Bank and the World Bank, as well as for the Austrian and Philippine governments and several private companies. He is the author of Despite Good Intentions: Why Development Assistance to the Third World Has Failed (University of Massachusetts Press, 2003) as well as numerous op-eds, articles and policy papers.