So What’s Business Got to do with Foreign Aid?

March 2, 2010 By Joel Paque

A recent report by the Initiative for Global Development asks, “what does business have to do with foreign aid?”  The report’s authors make the case that the country’s interests are aligned with the interests of U.S. business in concerns about the expansion of economic growth worldwide.  “America’s health and security are inextricably linked with the prosperity and stability of the rest of the world,” the authors observe. The report concludes that economic growth in the developing world can be valuable to U.S. businesses on the supply side by helping to establish new and reliable supply chains and on the demand side by helping to grow markets.

The report draws connections between the economic growth of developing country markets and the economic health of the U.S., noting, “U.S. exports accounted for nearly all U.S. economic growth in 2008.” While economic growth in developing countries is not solely the result of significant foreign assistance (as in India and China), the majority of today’s developing markets, “do not possess the resources to jump-start growth.”

Unable to attract significant private investments, such countries must “rely upon the official assistance that comes from donor governments” to help build the capacities necessary to operate in the global economy. Through programs working to combat poverty, disease, corruption and the other myriad impediments to development, foreign assistance is not only improving the quality of life for the residents in developing countries but is also building markets for U.S. produced goods and increasing the number of potential economic partners for U.S. businesses.

The report also contains recommendations for making U.S. foreign aid more effective and efficient, including:

  • Increasing coordination and coherence of the numerous foreign assistance programs in existence
  • Updating the Foreign Assistance Act to reflect today’s political realities and globalized economy
  • An increased focus on program evaluation and effectiveness
  • A coordination of foreign assistance with other U.S. policies that carry development impact, such as trade