Reforming Foreign Aid
Richard Leonardi
So where does this lead us on foreign aid? We need a
very radical change indeed. Success in reducing aggregate
poverty and food insecurity in low-income countries requires
explicit recognition that the majority of poor people live in
rural areas or a re being pushed into cities by rural poverty.
(It is not a coincidence that cities are growing faster in poor
African countries than in prospering Asian countries). In our
efforts to reduce poverty and hunger, we must also recognize
that rapid agricultural growth increases employment and
reduces poverty and hunger by increasing the demand for
rural non-farm goods and services that are produced by poor
people. The lack of a development strategy and operating
procedures that recognize these two realities has hampered
the effectiveness of U.S. foreign aid.
discontinuing its support for agriculture, our country lost
a major opportunity to win global respect and influence a
new generation of leaders in the field of agriculture and food
security.
A minimum reasonable level of support for agriculture
would be 25 percent of U.S. foreign assistance, given that
agriculture is the basic engine of poverty reduction and food
security and that our country has a great deal of expertise
in the field. It will be a major undertaking to raise our
agriculture assistance to anything close to 25 percent.
Focus on Improving National Aggregate Measures
When donors shifted attention from large-scale national
impact to smaller projects, they also changed how they
measure success. When progress is measured in terms of
improvements in total poverty rates, food security rates, the
degree of women’s participation, or agricultural growth,
Return to Agriculture
there must be a focus on the “big picture.” But evaluating
Donor and developing countries must invest in only project-specific inputs and outputs rather than broad
smallholder agriculture. The World Bank’s influential 2008 results allows assistance to become unfocused.
U.S. development assistance should aim to accelerate
World Development Report made a strong case for this. In
the 1980s, the United States led the donor community out the agricultural growth rate of low-income countries from
of agriculture. Perhaps the World Bank will now lead the less than 3 percent (which is not even 1 percent faster than
population growth) to the 4-6 percent growth rate achieved
way back.
But there is no reason why USAID should not quickly by fast-growth middle income countries.4
The combination of globalization and rapidly rising
reassume its leadership role in agriculture. The United
States is still greatly admired for its knowledge and incomes in much of the world—and hence more demand
experience in virtually all aspects of agricultural production, for high-value agricultural products—makes such higher
particularly in research, extension, and higher education. By growth rates more achievable than in the past. Access to
international markets would help
low-income countries determine
priorities for conducting research, for
establishing cooperatives and other
methods of realizing economies of
scale, and ultimately for attracting
private sector investment. Accelerating
growth rates through such a broad,
agriculture-based approach would
address the bulk of a country’s hunger
and poverty, leaving focused programs
to deal with the smaller but all too real
remainder.
Focusing on national aggregate
results such as reducing the poverty
level will require a shift back to older
indicators of success. The targets now
set for individual projects are removed
from an aggregate context, so they
do not reflect the opportunity cost
of investments. Will an investment
Small farmholders in Nicaragua are beginning to diversify their crops to provide food and
in primary education have a greater
additional income.
4 Briefing Paper, November 2009