Giving Foreign Aid Helps America’s Economy
In April, the Trump administration proposed a 31 percent cut to U.S. foreign aid. Immediately, voices from both the public and private sector spoke out in protest against drastically decreasing funding that comprises less than one percent of the $3.8 trillion federal budget and helps provide lifesaving services to people in developing countries. On Tuesday, one of America’s most successful entrepreneurs continued the discussion, saying why he’s a big fan of the U.S government’s investments in the well-being of the world’s poor.
Microsoft Founder and CEO Bill Gates wrote in his blog on gatesnotes.com that cuts in foreign assistance would be “a terrible mistake” because not only does it help keep Americans safe, but smart development programs also promote America’s economy. As an example, Gates cites VEGA Member Land O’Lakes International Development’s program in East Africa that helps dairy farmers raise their productivity, increasing the value of Land O’Lakes’ exports to places like Kenya and Uganda.
I start from the simple premise that everyone is better off when there are more middle-income countries in the world. As a country climbs up the economic ladder, you see concrete improvements in the lives of its people. Richer countries are less likely to go to war and more capable of preventing global epidemics. And they can afford to buy more products from other countries, including the United States.
The Kenya Dairy Sector Competitiveness Program, implemented by Land O’Lakes International Development through VEGA, helped create 36,450 new jobs and supported 338,210 smallholder dairy farmers who experienced a 208 percent increase in household income. This $9 million United States Agency for International Development (USAID) -funded program made significant and lasting contributions to local capacity development in the Kenyan dairy sector and helped producers gain access to global markets. In his blog, Gate’s quotes Land O’Lakes CEO Christopher Policinski on the global impact of the program.
This benefits not only the farmers in Africa, but food producers and their workers in the United States and it promotes goodwill in a part of the world that can be a market for more American good in the future.
Gates notes that these and other efforts are “part of America’s global economic leadership” and that “pulling back now would mean retreating from the world stage at a time when other countries are doubling down on their investments.” Drastically scaling back on foreign assistance would not only harm American companies by making them less competitive and isolating them from potential new markets, but it would also harm some of the poorest people in the world, depriving them of the opportunities to reach their full potential.
After making the argument that it’s good for the American economy when other countries join the middle class, Gates begs the question, “How much credit does aid deserve for making that happen?”
Many in the development community also struggle with how to fully measure this kind of impact, especially long-term growth. Gate’s own conclusion is that although aid may not directly cause growth, there is a strong indirect connection between the two.
Moving to the middle class requires a strong education system and good infrastructure, nutrition and healthcare—and smart, targeted aid can promote those things pretty effectively.
You can read Bill Gates’ full blog post here.