[Congressional Record Volume 146, Number 90 (Thursday, July 13, 2000)]
[Senate]
[Pages S6672-S6673]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        FOREIGN DEVELOPMENT AID

  Mr. FRIST. Mr. President, since the end of the Second World War, the 
United States has provided billions of dollars in development 
assistance worldwide--foreign aid. The goal of that aid has been to 
bring recipient countries out of poverty.
  That is an admirable goal, but in those 40 years, aid has failed to 
even come close to meeting it.
  The most telling regional example is sub-Saharan Africa, home to the 
greatest number of aid recipients. The countries of the region have 
received over $200 billion in aid from donors since 1980 and $27 
billion from the United States alone in the past 40 years.
  As a percentage of Gross Domestic Product, the average of current aid 
recipient countries in the region far exceeds that of the beneficiaries 
under the Marshall Plan--the intellectual basis for modern development 
aid programs and a resounding success for recipients and donors alike. 
Those percentages are 13.2 percent to 2.5 percent, respectively.
  Yet almost every country in Africa that has received aid--some of 
them since the early 1960s--are no better off now than when they began 
an aid program. Some are considerably worse off than at any time since 
their independence. Clearly, no positive link exists between foreign 
aid--even massive amounts of foreign aid--and bringing recipient 
countries out of poverty and off dependence on foreign donations.
  We must come to the uncomfortable but obvious conclusion that, 
although very well intentioned in most cases, aid has neither ended 
poverty on a reasonable scale nor has it supported our policy goals.
  But why such a difference in results?
  The World Bank itself has concluded that development aid can be 
effective only in an environment of sound economic policies and good 
economic management. Economic freedoms, rule of law, and governmental 
and regulatory transparency are essential elements in providing an 
environment in which aid can reasonably be expected to promote economic 
growth.
  While many internal and external factors contribute to poverty and 
quality of life for the people in recipient countries, the governments 
of those recipient countries determine the degree of economic freedom, 
economic management, and regulatory and transparency which dictate 
whether development assistance can reasonably be expected to help 
promote sustained economic growth.
  Foreign assistance can improve the lives of individual recipients and 
institutions to which it is directly applied, unless it brings about 
necessary changes in the bigger picture, the economy and welfare of the 
recipients will not change on a nationwide scale to any meaningful 
degree.
  Recipient countries which do not provide economic freedom, sound 
management, and regulatory transparency do not provide an environment 
where development assistance can be expected to eliminate poverty and 
promote economic growth. In some cases, it can even constitute a 
``moral hazard,'' where it weakens pressures for necessary changes by 
supporting institutions or governments that should otherwise be allowed 
to collapse and clear the way for real reform.
  Thus, the provision of development assistance into unreceptive 
environments does not promote United States' interests nor the people 
of recipient countries' welfare. Those efforts and funding would thus 
be more effectively committed elsewhere, or to programs which, over 
time, will help the intended beneficiaries (the citizens of the 
countries) change their governments and other factors that contribute 
to the perpetuation of poverty and support American goals of democracy, 
economic development and peaceful coexistence.
  Congress must be frank and recognize that well-intentioned aid has 
not worked, and that special interests and those who depend on aid 
programs for contracts and employment are a great barrier to necessary 
change.
  In recognition of the fact that foreign development aid has not 
reduced poverty and has not made reasonable progress toward America's 
goals overseas, I will today introduce legislation which aims to end 
our spending on programs which, over 40 years, have achieved too 
little.
  The legislation directs the Secretary of State to establish an index 
of recipient countries which evaluates their degree of economic 
freedom. The index will be based on trade policy, including the level 
of tariffs and other barriers to foreign goods and services as well as 
the extent of corruption in their customs service; taxation policy, 
including individual and corporate earnings tax rates; the degree of 
government intervention in the economy; the country's monetary policy; 
the degree to which the recipient country allows foreign investment, 
including foreign ownership of business, land, etc., and the extent to 
which it allows the investor to use the earnings outside the country; 
the recipient country's banking policies; whether the country has price 
controls; the degree of property rights and rule of law and whether the 
government retains ``rights'' to seize property without just cause and 
due process; the regulatory environment and whether it is just and 
truly designed to protect consumers, the environment, and economic 
freedom; and the state of the black market and the response by the 
recipient government.
  The index will rate economic freedom for each country and sets a 
timetable to phase out or terminate accordingly to governments who do 
not provide a free environment for economic development. It is 
constructed to provide incentives for reform and ends support for the 
undemocratic and predatory governments which often benefit from our 
assistance.
  In addition, Mr. President, the Secretary will also have to provide a 
description of the total amount of assistance the country receives from 
all foreign sources; the total revenues from all sources; the total of 
its own revenues each recipient government spends on eliminating 
poverty; and the total they spend on military expenditures and whether 
a legitimate security threat warrants them. From this and the index, 
Congress will be able to clearly judge the viability of countries as 
recipients and the degree to which the recipients share our priorities 
in combating poverty.
  This legislation will allow for a degree of honesty about heavily 
defended aid programs. It will allow Americans to use those resources 
for other national priorities we know to be effective, or to simply 
relieve the burden on taxpayers overall. It will set the stage for 
testing new strategies to combat

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poverty and pursue American interests across the globe. After 40 years, 
it's an idea whose time has come.

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