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How US Foreign Aid is Used in Foreign Policy

A Policy Tool Since 1946

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An Afghan girl receives medical care from a USAID-sponsored nurse.

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US foreign aid is an essential part of American foreign policy. The U.S. extends it to developing nations and for military or disaster assistance. The United States has used foreign aid since 1946. With annual expenditures in the billions of dollars, it is also one of the most controversial elements of American foreign policy.

Background of American Foreign Aid

Western allies learned the lesson of foreign aid after World War I. Defeated Germany received no help restructuring its government and economy after the war. In an unstable political climate, Nazism grew in the 1920s to challenge the Weimar Republic, Germany's legitimate government, and ultimately replace it. Of course, World War II was the result.

After World War II, America feared Soviet communism would creep into destabilized, war-torn regions as Nazism had done earlier. To counter that, the United States immediately pumped $12 billion dollars into Europe. Congress then passed the European Recovery Plan (ERP), more commonly known as the Marshall Plan, named after Secretary of State George C. Marshall. The plan, which would distribute another $13 billion over the next five years, was the economic arm of President Harry Truman's plan to combat the spread of communism.

The United States continued to use foreign aid throughout the Cold War as a way to keep nations out of the communist Soviet Union's sphere of influence. It has also regularly disbursed humanitarian foreign aid in the wake of disasters.

Types of Foreign Aid

The United States divides foreign aid into three categories: military and security assistance (25% of yearly expenditures), disaster and humanitarian relief (15%), and economic development assistance (60%).

The United States Army Security Assistance Command (USASAC) manages military and security elements of foreign aid. Such aid includes military instruction and training. USASAC also manages the sales of military equipment to eligible foreign nations. According to the USASAC, it now manages 4,000 foreign military sales cases worth an estimated $69 billion.

The Office of Foreign Disaster Administration handles disaster and humanitarian aid cases. Disbursements vary annually with the number and nature of global crises. In 2003, United States disaster aid reached a 30-year peak with $3.83 billion in aid. That amount included relief resulting from America's March 2003 invasion of Iraq.

USAID administers economic development aid. Assistance includes infrastructure construction, small-enterprise loans, technical assistance, and budget support for developing nations.

Top Foreign Aid Recipients

U.S. Census reports for 2008 indicate the top five recipients of American foreign aid that year were:

  • Afghanistan, $8.8 billion ($2.8 billion economic, $6 billion military)
  • Iraq, $7.4 billion ($3.1 billion economic, $4.3 billion military)
  • Israel, $2.4 billion ($44 million economic, $2.3 billion military)
  • Egypt, $1.4 billion ($201 million economic, $1.2 billion military)
  • Russia, $1.2 billion (all of it economic aid)

Israel and Egypt have usually topped the recipient list. America's wars in Afghanistan and Iraq and its efforts to rebuild those areas while countering terrorism have put those countries at the top of the list.

Criticism of American Foreign Aid

Critics of American foreign aid programs claim that they do little good. They are quick to note that while economic aid is intended for developing countries, Egypt and Israel certainly do not fit that category.

Opponents also argue that American foreign aid is not about development, but rather propping up leaders who comply with America's wishes, regardless of their leadership abilities. They charge that American foreign aid, especially military aid, simply props up third-rate leaders who are willing to follow America's wishes. Hosni Mubarak, ousted from the Egyptian presidency in February 2011, is an example. He followed through on his predecessor Anwar Sadat's normalization of relations with Israel, but he did little good for Egypt.

Recipients of foreign military aid have also turned against the United States in the past. Osama bin Laden, who used American aid to fight Soviets in Afghanistan in the 1980s, is a prime example.

Other critics maintain that American foreign aid merely ties truly developing nations to the United States and does not enable them to stand on their own. Rather, they argue, promoting free enterprise within and free trade with those countries would serve them better.

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