Foreign Aid Should Reward Performance
March 29, 2004
The Bush Administration distributes foreign aid to developing countries based on three criteria: just rule, economic freedom and investment in a country's people, according to a new program, the Millennium Challenge Account, which will allocate $5 billion per year to developing countries who do best in these areas.
This "tough love" approach is crucial to the effectiveness of development programs throughout the world, says Andrew Natsios, administrator of the United States Agency for International Development, and Larry Diamond (Hoover Institution). It must replace the old "conditionality" approach, where money was doled out to developing countries in the hope that governments would comply with expectations.
- Foreign aid to countries should be made more selective, with good performing countries being rewarded with more assistance, such as debt relief and foreign investment incentives.
- If compulsive governments do not comply, the United States and other donors should recognize nongovernmental organizations within that particular country, trying to strengthen their influence.
- The international community must be consistent in restricting the flow of aid to oppressive regimes and in pressuring bad governments to shape up.
Challenges abound, however. Natsios and Diamond point out that government agencies and donors must work to strengthen institutions that monitor accountability, help to strengthen democratic parties, and among other things, help the media and democratic groups to become more effective in advocating reform.
Source: Andrew Natsios and Larry Diamond, "Foreign Aid and the National Interest," Hoover Digest, No. 1, 2004, Hoover Institution.
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