Will US abandon its leadership on world aid?
A little-reported failure by the United States to honor its international commitments is undermining America's role as a world leader at a crucial time. The failure is this:
In 1979 the US agreed to provide $3.2 billion to the sixth replenishment of the International Development Association (IDA-6), the World Bank's credit window for the leastdeveloped nations. The agreement negotiated with 32 other donors was to provide funds for IDA-6 in equal installments during 1981, 1982, and 1983.
From the beginning, the US reneged on its commitments. First, in 1981, the Reagan administration decided to make unequal payments, with the larger payouts coming later. Next the Congress appropriated less money than the administration requested, forcing the US to spread its payments over four rather than three years.
Now even that radically altered timetable may be upset. In order to fulfill the four-year schedule, the administration asked for $945 million for this year. Congress appropriated only $700 million and is balking at a $245 million supplementary IDA appropriation request. If Congress does not pass the supplementary measure, the US contributions to IDA-6 will almost surely slip over into a fifth year.
For many Americans, the response to this breach of faith has been, "So what? We have our own problems." Unfortunately that view ignores the lessons of the last 35 years, which show that US leadership in international economic development redounds to America's interest as well as the interest of the nations it helps. Those lessons are particularly important today when the world economy is receiving its greatest test in recent memory.
Following World War II the US pioneered the concept of international economic assistance. It started the first major bilateral foreign aid program, the Marshall Plan, and the first aid effort aimed at poorer nations, the Point Four program. The US was the driving force behind establishment of the United Nations Relief and Rehabilitation Administration, the International Monetary Fund, and the World Bank, including its IDA affiliate founded in 1960.
Inspired and sometimes prodded by the US, 34 noncommunist nations now have bilateral foreign aid programs of their own. These allies -- many once recipients of foreign aid themselves -- are shouldering an increasingly large share of multilateral assistance funding. In the twenty-odd years since IDA was founded, the US portion of contributions to replenishments has dropped from more than 42 to 27 percent of the total.
But just as the US has prompted other nations to assume more responsibility for third-world development so can it reverse this trend by setting a negative example. Only 26 of the 32 donors made their 1982 payments to IDA-6, and the delayed contributions and failure of other countries to ante up until the US fulfills its pledges reduced planned IDA activities last year by 35 percent.
As Treasury Secretary Donald Regan pointed out on Capitol Hill recently, US foot-dragging is hurting relations with developing and developed countries. European nations, who took the lead in providing a special $2 billion contribution to sustain IDA lending through 1984, have warned the State Department they will not bail out IDA again and that agreement for a badly needed seventh replenishment will not be reached until the US honors its current pledge.
Typically the debate over IDA has concentrated on whether development assistance works. My own firm conviction after more than 30 years of following aid activities is that it does. Some of the developing countries we helped in the past have turned into our fastestgrowing trading partners, such as Taiwan and South Korea.
But it is not enough to calculate the contributions of institutions like IDA in dollars and cents. IDA is part of an overarching international framework built up since World War II that helps to promote economic and political harmony.
The World Bank, for instance, consistently reinforces international codes of conduct essential for the growth and stability of global commerce. A Reagan administration Treasury study last year noted that the bank, through IDA and its other arms, emphasizes open trade and realistic exchange rates, and "maintenance of sensible fiscal and monetary policies" by recipient countries.
The inability of World Bank to provide assistance through IDA-6 may not only erase economic gains among the poorest countries, who cannot borrow from commercial banks but who desperately need external assistance to weather the current global recession. It may also prompt nations to defect from the international economic system by restricting trade or defaulting on loans to commercial banks.
Walter Bagehot once wrote, "The characteristic danger of great nations like the Romans or the English, which have along history on continuous creation, is that they may at last fail from not comprehending the great institutions they have created."
His warning applies no less today. Unless the US acts boldly to provide the necessary leadership, it will forsake not only an institution but the very ideas that have helped to build a better world.