Aid and Foreign Assistance Reform in the Obama Administration

Jenara Nerenberg's timely post on President Obama and the NextBillion.net agenda reminded readers that the new administration will make substantial changes in America's foreign assistance policies. Obama and his colleagues in Congress, most prominently Rep. Howard Berman (D-CA), chairman of the House Committee on Foreign Affairs, have promised an ambitious and large-scale reform of the U.S. foreign aid system.

In this effort, will they consider the growing influence of entrepreneurial philanthropy, social entrepreneurship, and private sector based development in U.S. policies for engagement with the developing world? And what role can the NextBillion community play in influencing these decisions?

The existing U.S. foreign assistance system is clearly antiquated, with 20th century bureaucracies attempting to confront 21st century challenges.

The existing U.S. foreign assistance system is clearly antiquated, with 20th century bureaucracies attempting to confront 21st century challenges, and there has been minimal effort to reshape legislation written almost five decades ago (the 1961 Foreign Assistance Act). At the AEI symposium, discussant Jonathan Greenblatt, CEO of GOOD Magazine and co-founder of Ethos Water, suggested that the United States could become an "investor" like many entrepreneurial philanthropists in the private sector. "We could use the power of leverage to put one dollar in and get ten dollars out," he noted.

But panelist Carol Adelman, director of the Center for Global Prosperity at the Hudson Institute, which produces the Index of Global Philanthropy, noted that private American contributions to the developing world--not including remittances--already trump that of official development aid.

Entrepreneurial approaches to development have flourished because of these private donors--from the individual lender on Kiva.org to large-scale philanthropies like the Skoll Foundation. If the U.S. government were to support private sector led development, would social entrepreneurs have to sacrifice flexibility and independence for oversight? How would funds be appropriated? If the government venture fund worked anything like other spending, would bureaucrats in Washington decide which efforts receive funds in Africa or South East Asia?

Nevertheless, NextBillion bloggers frequently discuss the challenge of scaling entrepreneurial approaches to development. As I wrote in a guest post last year, social entrepreneurs already operate in fields traditionally relegated to the public sector--health care, education, and electrification, for example. The U.S. could use aid money to help governments adopt the proven strategies of social entrepreneurs working in such fields and expand their impact.

In the end, the question is not about more or less aid, but whether our aid money achieves its intended purpose. Panelist Steven Radelet, senior fellow at the Center for Global Development, noted that there is almost unanimous agreement that the U.S. does not provide aid well. If the development through enterprise field can add more value to each aid dollar, then this is an ideal time to bring forth new ideas to the U.S. foreign assistance apparatus.

Unfortunately, too much of the debate in Washington has dwelled on foreign aid organizational structures (see HELP Commission or Modernizing Foreign Assistance Network) rather than best uses for the American aid dollar. In the end, it will not matter if there is a central development agency if the money we spend still does not support local entrepreneurs and private-sector-based approaches to development. Iqbal Quadir is right on the money.

The question now is: how can the NextBillion community get its voice heard in this debate? Partly, its work has already been done by showing rather than telling what works and what doesn't. What should be next?

Apoorva Shah is a research assistant at AEI.

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