A Half Penny on the Federal Dollar: The Future of Development Aid

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Brookings Institution Press, 2010 M12 1 - 120 pages

Spending on U.S. foreign affairs, which constitutes only about one percent of the federal budget, is being sharply reduced. Under the President's 1996 budget plan, it will decline by just as great a percentage as defense between 1990 and 2002—and by substantially more than defense over the 1980-2002 period. No other major category of federal spending will undergo a real cut over either time period. The shrinking budget, totaling about $19 billion in 1997, will still have to fund the State Department, international broadcasting and educational exchanges, trade subsidies and investment guarantees for U.S. business overseas; United Nations operations including peacekeeping, and all types of foreign assistance.

In this book, O'Hanlon and Graham focus primarily on this last component of international spending. Specifically, they analyze U.S. official development assistance (ODA) to poor countries. The authors place U.S. ODA in a broad historical, international, and economic perspective. They then recommend an alternative approach to ODA for the United States as well as other donors. They favor continuing to provide humanitarian and grass-roots aid to most poor countries, but providing ODA to promote macroeconomic growth only to those countries that maintain coherent, market-oriented economic policy frameworks. The authors argue that to provide effective aid, as well as to maintain U.S. leadership in world affairs, net resources for ODA and the international account need to increase only modestly.

 

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Contents

Introduction
1
Why Is This Subject Important?
7
Development Aid in Perspective
11
US Official Development Assistance
14
US Assistance in International Perspective
23
Uses And Effects of Development Assistance
36
Aid Effectiveness How to Define It? How to Achieve It?
42
The Conditionality Paradigm
44
Reconstructing Societies Ravaged by Conflict
63
Environmental Programs
65
Social Safety Nets
67
Summary
68
Constructing an Alternative Budget for Development Aid
69
Desirable Global Aid Levels
72
The US Foreign Assistance and International Affairs Budgets
75
Other Reforms in Existing Aid Approaches
76

Does Aid Tend to Lead to Economic Growth?
47
Reevaluating Conditionality
49
Do Policies or Initial Conditions Determine Economic Performance?
53
Implications for Future Assistance
55
Budgetary Implications of Aid Selectivity
56
Aid for General Economic Development and Nationwide Programs
58
Debt Relief
62
Conclusions
82
Aid Selectivity
84
Aid and Americas Role in the World
87
Notes
88
Index
99
Copyright

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About the author (2010)

Michael O'Hanlon is the director of research and a senior fellow in the Foreign Policy program at the Brookings Institution, where he holds the Sydney Stein Jr. Chair. His books include The Science of War (Princeton University Press, 2009) and numerous Brookings books.

Carol Graham is a senior fellow in the Economic Studies program and codirector of the Center on Social and Economic Dynamics at the Brookings Institution.

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