by Hugh Hamilton
January 25th, 2009

As a candidate for the presidency, then-Senator Barack Obama told Americans repeatedly that he was running not only to end the war in Iraq, but to change the mindset that had taken the nation into war in the first place. As president, he must now direct his State Department to adopt a similar policy in addressing the challenge of development in the Global South. Washington must now “change the mindset” that for too long has misused the nation’s foreign-aid programs as a form of corporate welfare for U.S. business interests while doing little to improve the well being of the world’s poor.

Take, for example, the recent proposal by World Bank President Robert Zoellick, calling on Obama to lead the way in calling for the world’s richest nations to pledge 0.7 percent of their respective economic stimulus packages to establish a “vulnerability fund for assisting developing countries that can’t afford bailouts and deficits.” For the United States, that would amount to roughly $6 billion of the proposed $825 billion stimulus package.

Writing in The New York Times, Zoellick correctly noted that the global economic crisis has already pushed an estimated 100 million people back into poverty, and slumping exports have helped imperil the jobs of workers around the world. Moreover, other world leaders – including the leaders of Britain, France, Germany, Japan, Australia and Russia — have already signaled their interest in some variation of the idea.

Reasonable people might well disagree on whether or why we need to establish yet another “fund” for this purpose, rather than utilize any of the already existing and under-funded mechanisms in the international development bureaucracy to get the job done. But setting that aside for the moment, the single line in Zoellick’s piece that grabbed my attention was this:

There is an additional incentive for America to help: building projects abroad are likely to increase demand for American-made equipment.” [Emphasis mine].

This is precisely the mindset that has given our country a bad name abroad. There is nothing wrong with expanding opportunities for American industry in other parts of the world, but don’t call it “foreign aid.” In fact, advocates for the poor have a special name for this duplicitous practice: they call it “Phantom Aid.”

As the Institute for Policy Studies pointed out in a report last November, Skewed Priorities: How the Bailouts Dwarf Other Global Crisis Spending:

“Many advocates for the poor have justifiably criticized current aid policies. Action Aid, for example, reports that some 86 percent of U.S. foreign assistance is so ineffective in fighting poverty that they call it ‘phantom aid.’ This international development group charges that much of U.S. aid supports geo-strategic interests rather than poverty reduction.”

The IPS report continues:

“The U.S. government also continues to tie some aid to purchases of U.S. goods and services, which benefits U.S. corporations but lengthens delivery time and raises costs…Thus, the focus should not solely be on increasing the dollar amount of aid flows, but on increasing the quality of aid.”

And there’s more.

In a comprehensive study of how global aid money gets diverted from the people it is supposed to benefit in the developing world, Action Aid reported that one quarter of all aid — $20 billion a year – from developed countries is actually spent on “expensive and often ineffective western consultants, research and training.” This so-called “technical assistance” to developing countries “too often promotes donor interests and inappropriate northern solutions instead of the alleviation of poverty.” The typical cost of an expatriate consultant could amount to some $200,000, with more than a third of that spent on school fees and child allowances for the expatriate’s family.According to the report, in Cambodia, foreign consultants were earning as much as $17,000 a month while government workers were paid $40; in Ghana, even relatively inexperienced foreign consultants were being paid in one day what government officials earned in a month.

The absurdity of the situation was further underscored last year amid the global food crisis that triggered riots and protests from Haiti to Indonesia. Thanks to a system built on putting profits before people, multinational companies like Cargill, Archer Daniels Midland (ADM), Bunge and Monsanto were making money hand-over-fist while the hungry were reduced to fighting over scraps in some of the poorest corners of the world. As John Nichols reported in The Nation:

“The current global food system, which was designed by U.S.-based agribusiness conglomerates like Cargill, Monsanto and ADM and forced into place by the U.S. government and its allies at the World Bank, the International Monetary Fund and the World Trade Organization, has planted the seeds of disaster by pressuring farmers to produce cash crops for export and alternative fuels rather than grow healthy food for local consumption and regional stability.”

By imposing these self-destructive policies on the world’s poor as a condition for their receiving our foreign aid, we make the world secure for corporate capital at the expense of our international credibility.

Anuradha Mittal, executive director of the Oakland Institute and one of the leading experts in the field, explains:

“Over the last few decades, liberalization of agriculture, dismantling of state-run institutions like marketing boards, and specialization of developing countries in exportable cash crops such as coffee, cocoa, cotton, and even flowers, encouraged by international financial institutions backed by rich countries like the U.S., has driven the poorest countries into a downward spiral, directly threatening their food security and economic sustainability.

“Removal of tariff barriers has allowed a handful of Northern countries to capture Third World markets by dumping heavily subsidized commodities while undermining local food production. This has resulted in developing countries turning from net exporters to large importers of food.”

In fact, according to Mittal, developing countries have seen their food trade transformed from a surplus of US$1 billion in the 1970s, into an US$11 billion deficit by 2001.

In his inaugural address, President Obama spoke directly to the people of poor nations, promising that the United States will work alongside them to “make [their] farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds.” Now he needs to tell his State Department that we will no longer use our foreign-aid programs as a vehicle for infiltrating and undermining the economic and political sovereignty of the developing world. Foggy Bottom should cease to function as a shill for corporate interests abroad and instead live up to our promises to the poor.