Models of alternative service delivery arise any time non-state actors perform services that are typically part of the government’s domain. This phenomenon can result in relatively benign, and even innovative, public-private partnerships—a corporation assuming responsibility for building a toll highway, for example. Of course, it can also be less innocent, for example, Hezbollah delivering social services in southern Lebanon because the central government is too weak to do so.
Soon foreign aid may also be increasingly provided by non-state actors. Since the end of World War II, Western governments—and the United States in particular— dominated this function. But now massive cuts to U.S. overseas aid (and the country’s diplomatic presence) are on the horizon, so we are likely to see alternative service delivery models for aid. As a result, the United States will seem weaker, less credible, and less influential to key stakeholders in the developing world.
The international development landscape is no longer simply made up of Western governments dispensing Official Development Assistance (“ODA,” the OECD-blessed term for foreign aid). The rise of globalization and individual hyper-wealth in the United States (and other wealthy countries) has encouraged many non-state actors to take roles on the world’s stage. Multinational corporations like Unilever and Coca-Cola are noted players in sustainable development. The Gates Foundation’s global health programming already rivals that of the U.S. government—and in some areas likely exceeds it. Individual and corporate donors with named foundations aren’t the only stateside actors currently influencing international development. Private donations to the ten largest internationally-focused non-governmental organizations (NGOs) outweighed USAID’s entire budget in 2016.
Most corporations, private foundations, and NGOs are vigilant in signaling their independence from the U.S. government. However, for audiences in poor countries, that separation is not so obvious. Beneficiaries know where Mark Zuckerberg, Bill Clinton, World Vision International, and ExxonMobil call home.
A balanced public-private sector approach toward international development offers an opportunity for immense good. For example, major private foundations have the ability to support critical contemporary issues in international development—like protecting the environment and vulnerable populations—even if these issues are occasionally at odds with the priorities of the ruling party in the country receiving the philanthropy. It is reasonable to assume that the private sector will continue operating in these spaces regardless of political calculations in the public sphere.
However, optimism for unbridled private sector-led international development should be cautious at best. We identify below three key likely consequences of its expansion.
Fragmented Influence: If the U.S. government’s “seat at the head of the table” is instead occupied by many non-state development providers, its agenda-setting and messaging will be inconsistent, as will the extent of our country’s influence abroad. In the face of ambitious rising powers focused on using foreign assistance as a diplomatic tool, such a retreat brings American soft power under threat.
A fragmented American foreign assistance front, primarily led by a diverse group of private sector actors, increases opportunities for challengers to Western foreign policy leadership. Many experts have tapped China as the most likely candidate to fill such a void. Bloomberg recently reported on a CIA brief warning that the Chinese government was “working to undermine the U.S. alliance network and the global promotion of American values.”
U.S. cuts to foreign assistance and public diplomacy align with a broader Chinese narrative of a declining West and a new era of non-Western donors, led by China but including India, Brazil, and others. The philanthropy of the American private sector—with its widely varying agendas—is insufficient to counteract the perception that the United States has abdicated its leadership position.
Calculating the exact extent of China’s aid portfolio and resulting influence is difficult. The Chinese government focuses on infrastructure projects, supporting its investments both directly and through multilateral institutions like the Asian Infrastructure Investment Bank (launched by China in 2015).
Infrastructure funding often blurs the lines between what is considered aid and what is intended for the eventual profit of the home country. For the moment China still lags behind the United States in terms of its official financing of other countries, and it delivers these funds differently: from 2000 through 2014 the United States devoted almost all (93 percent) of its spending to ODA, whereas China provided only about one-fourth (23 percent) of its financial support in this manner.
The true scale of Chinese development financing is also unknown in part because China has opted out of international reporting regimes like the OECD’s Development Assistance Committee, which sets precise definitions for what counts as aid and tracks such financial flows systematically. Regardless, the available data suggests that China is investing heavily in foreign assistance as a means of strengthening its soft power (and trade) in Asia and around the globe.
Much of China’s assistance is for brick-and-mortar ventures, like the “One Belt, One Road” mega-project, that are commercially based and profit-motivated. Such projects are also grand gestures, immense changes to the physical landscape, and potential winners of hearts and minds. They are public diplomacy gold mines (alongside a good number of actual gold mines providing resources directly to China).
Threatened Sustainability: In addition to fragmenting Western influence, free-market international development that outguns the public sector will also lead to the provision of aid according to private priorities. The motives of private foundations—while often noble—are determined by their self-appointed leaders, without public accountability or scrutiny.
A key question is whether the private sector can respond to critical development issues, support for which is soon to be scaled back by the U.S. government. Many of these sectors are not donor or PR darlings—think budget support, good governance, democratic reform. The U.S. government is historically the primary source of support for such essential services in many of the world’s poorest countries, whether channeled through bilateral aid agencies, non-profit U.S. development firms, or multilateral bodies like the World Bank.
It is difficult to imagine independent philanthropists providing heavy subsidies to the domestic budgets of developing countries as the U.S. government has done for years. Such infusions of cash are unfortunate, but necessary to maintaining stability in the world’s most fragile and impoverished regions. The U.S. government has the tax dollars and the consolidated influence that such actions require. Private philanthropists, multinational corporations, and international NGOs do not.
Consider a country like Liberia, almost entirely reliant on ODA. In FY2015/2016 Liberia was projected to receive $899.2 million in overseas assistance; by contrast, its entire national budget for the same fiscal year was $622.7 million. The Liberian government is largely incapable of delivering services like K-12 education without international support.
Perhaps even more importantly, Liberia relies on sustained international and U.S. governmental support to avoid becoming a failed state. The U.S. government committed itself to supporting Liberia both via direct spending and through organizations like the United Nations Mission in Liberia—by contrast, funding for Liberia from the charitable sector has waxed and waned.
Equally detrimental to the American- and European-dominated aid order (and to U.S. credibility among its allies) is the planned reduction of U.S. funding for UNESCO and the UN Population Fund. The elimination of support or steep cuts—relatively small in absolute dollar terms to be sure—will signal an American retreat from the foreign-assistance playing field. Twenty years ago, Ted Turner made a memorable $1 billion pledge to establish the UN Foundation, in large part because the United States was behind on its dues to the international body. Turner’s pledge comes to an end this year, and should be regarded an exception as billionaires don’t typically relish the idea of providing operational support, even to the UN.
Globally, the U.S. government provides massive amounts of essential humanitarian aid, delivered in the wake of natural disasters, conflict, and famine. The vast majority of foundations, wealthy individuals, domestic NGOs, and corporations do not have the logistical capabilities, infrastructure, or eyes and ears on the ground to be able to pull this off. The reduction of U.S. foreign assistance spending will leave a void. If the U.S. government makes significant spending cuts to development and diplomacy while increasing its defense budgets, other states will perceive U.S. foreign policy as all-in on hard power.
Weakened Accountability: Unlike government agencies, private and corporate philanthropists lack accountability and transparency. U.S. foreign assistance efforts are overseen by the Executive Branch, Congress, and the GAO, not to mention internal Inspectors-General. Data is made public through various portals pursuant to the Open Government Initiative. Aid agencies conduct rigorous evaluations to measure the performance of the projects they fund, and are pressured to make these evaluations public. Foundations and corporations are under no such obligations and are subject to less stringent oversight.
When foreign assistance originates from a philanthropic foundation, the American public has no way of knowing how appropriately the assistance is apportioned, or any way to independently measure its impact. This opens the door for initiatives of dubious value, including ones driven by a profit motive. In early 2017, Congress passed legislation rescinding requirements for U.S. natural resources firms to disclose payments from foreign governments. There is a similar lack of mandated transparency for corporate social responsibility (CSR) activities and contributions overseas.
Additionally, U.S.-based foundations with presences in authoritarian countries tend to shy away from criticizing the policies and actions of their hosts. While prepared to implement programs and advocate health or educational reforms, for example, they rarely attempt to reform the host country’s political system. Take China for example. Foundations and NGOs operating in the country tend to tread carefully and are reluctant to endorse organizations critical of the government, for fear that their own offices in the country will be disbanded or their registration applications denied. By contrast, the U.S. government possesses the diplomatic clout necessary to make independent and open criticisms of regimes like Beijing’s. This, too, however, may be changing as China grows in power relative to the United States.
The sun may indeed be setting on U.S. governmental leadership of the international order. If the retreat becomes extreme enough, the growing influence of “free market” development initiatives could open the door to an increasing array of less benevolent private sector actors with their own agendas. How will we respond to pharmaceutical companies building clinics in poor countries in the name of public health, while secretly testing drugs on people under clinical trial rules that are less stringent than in the United States? Or what happens if a mining firm decides to help ease fiscal woes in Venezuela in exchange for drastically reduced labor and environmental regulations? Who will step in when profit incentives begin to outweigh social gains in private sector-led development?
Even if the worst-case scenarios never occur, unrestrained private sector influence in international development could undermine a global agenda that includes economic growth, social empowerment, environmental protection. To be sure, in dollar terms, we are a long way from a single billionaire replacing the official U.S. presence overseas. The U.S. government provides roughly $30 billion annually in foreign aid (not including security assistance). By comparison, the Rockefeller Foundation makes grants totaling under $200 million annually; in 2015, Coca-Cola and the Coca-Cola Foundation gave roughly $117 million to organizations around the world. Even the Gates Foundation, the largest private foundation in the world, disbursed “just” $4.2 billion in 2015.
But rising inequality at home, coupled with a tax regime friendly to the rich, may mean that American philanthropists have more money to spend in the next few years. Along with a booming market, these factors will incentivize lightly regulated corporations to invest more in CSR. As in the markets themselves, the uncertainty of this new delivery model in foreign assistance is both a risk and, if managed properly, an opportunity.
Corporate and philanthropic aid groups will continue to pursue their missions as the size of their endowments or budgets permit, regardless of the scale of U.S. foreign assistance, presidential tweets, or congressional pushback. The question remains one of strategy. Does the U.S. government want to continue projecting its influence and core values overseas? If the answer is yes, it must continue to invest globally.