The Foreign Service Journal, June 2006

that any “poverty bureaucrat” can look forward to decades of steady work. A better, more precise, explanation is that people (including members of Congress) respond more to pic- tures than to theories. Any American who watches the local news knows this implicitly. Fires, murders and other disasters, followed by caught-in-the-act corruption and a couple of heartwarming human-interest stories, dominate. This is not a conspiracy by journalists. It is a response to what the American people want to see and hear. At the same time, there is ample evidence in the recent history of Japan, South Korea and Taiwan, among other countries, that economic growth — as opposed to the many humanitarian and aid initiatives — is the key to poverty reduction. There is, furthermore, a unique and vital role for USAID to play in helping to improve the environment for business in developing countries. For that to happen, however, economic growth must be reclaimed from its place as a residual category of USAID’s budget and made a priority. The Idea of Foreign Aid for Development When President Kennedy proposed the creation of the U.S. Agency for International Development in 1961, he offered a clear statement of its purpose: to lift countries out of poverty through sustained economic growth. Some of the original concepts were simplistic or naïve — notably Kennedy adviser Walt Rostow’s concept of “take- off,” whereby countries would soar into the wild blue yon- der of development once specific preconditions were met. In the ensuing years, some takeoffs were short helicopter rides; others were crash landings, sometimes with economies going up in flames. But the idea that poverty could be cured by rapid eco- nomic growth has been amply demonstrated. This has happened most clearly in Asia, where first Japan, then South Korea, Taiwan, Singapore and Hong Kong leaped from poverty to abundance in little more than a genera- tion. They were followed by Thailand, Malaysia, Indonesia and, more recently, China, Vietnam and India. Nobel Prize-winning economist Robert Lucas, after examining such successes and the possibility of repeating them in other poor countries, observed that once you have thought about this, it is “hard to think about anything else.” Yet sadly, USAID does spend most of its time thinking about other things: child survival, basic education, family planning, microfinance, environmental protection, women’s rights and HIV/AIDS. These are all worthy causes, but none are likely to be transformative. Much ink has been spilled by the proponents of these various pro- grams in justifying their role in sustained economic growth, but the data do not support a causal connection. For instance, basic education is claimed to speed eco- nomic growth. But the continent with the most massive increase in years of schooling between 1950 and 2000 — Africa — also had the most dismal growth record. HIV/ AIDS is argued to be a major cause of slower economic growth in countries with a high incidence of the disease. But Botswana, the country with perhaps the highest inci- dence of HIV/AIDS on the continent, continued its record as the only country in continental sub-Saharan Africa to experience rapid and sustained economic growth. Similarly, decades of effort to reduce fertility in Niger have produced almost nothing — the country’s women have an average of nearly eight children, just as they did in 1950. Meanwhile, Niger’s economy has alternated between stag- nation and decline. Indeed, in the case of family planning generally, it is easier to argue that the causality is the oppo- site of what is claimed: faster economic growth leads to lower fertility, not the other way around. All of the activities mentioned in the previous para- graph are important, worthy of U.S. support and impor- tant contributors to the well-being of people in poor coun- tries. But as far as the problem of poverty is concerned, they are not solutions. Only economic growth — as rapid as in the Asian countries discussed earlier if possible, but slower and more steady if necessary — can lead to an end to dependence on the largess of the United States and other rich countries. The United States itself has been a “slow and steady” country. Since 1820, it has grown in per capita terms at only about 1.7 percent per year. But that rate, maintained over 181 years, produced a 22-fold increase in average incomes and turned the United States into the most economically powerful nation on earth. Retired former FSO James W. Fox served with USAID in Costa Rica, Uruguay and Colombia, and was later the agency’s chief economist for Latin America. He also served two stints at State and worked on developing coun- try issues at Treasury and for the Senate Foreign Relations Committee. Before joining State, he was a Peace Corps Volunteer in El Salvador. He is currently a consultant to the World Bank’s Independent Evaluation Group. F O C U S 36 F O R E I G N S E R V I C E J O U R N A L / J U N E 2 0 0 6