Redesigning the Foreign Aid Architecture

by Diana Ohlbaum

Donald Trump is hardly the first U.S. president to call for bureaucratic reorganization to improve government efficiency and effectiveness. But his demand for crippling and disproportionate cuts in international spending, his attacks on multilateral cooperation, and his aversion to “soft power” make it clear that his agenda is to sideline, not strengthen, U.S. foreign policy institutions. Thus when Secretary of State Rex Tillerson announced his intention to conduct a “complete and comprehensive review” of aid effectiveness, development advocates jumped to preempt what they feared might be a bid to dismantle the U.S. Agency for International Development (USAID) by putting together proposals for evidence-based, results-oriented reform.

The first of those proposals is now in: a discussion draft of a new foreign aid architecture released by the co-chairs of the Modernizing Foreign Assistance Network (MFAN). The draft has much in common with the 2016 recommendations of former USAID Administrators Brian Atwood (Democrat) and Andrew Natsios (Republican): a highly empowered development agency whose head reports to the president, sits on the National Security Council, and has authority over all development-related activities of the U.S. government.

Like the Atwood-Natsios plan, the MFAN co-chairs’ proposal would give the development agency control over the Millennium Challenge Corporation (MCC), currently an independent agency, as well as the AIDS relief and refugee assistance programs now overseen by the State Department. Unlike the Atwood-Natsios plan, however, the MFAN co-chairs’ proposal would eliminate USAID’s regional bureaus and consolidate all development programs into five “centers” based on broad functional categories.

In addition, the MFAN draft would merge the Overseas Private Investment Corporation (OPIC), the U.S. Trade and Development Agency, and the market-based financing offices at USAID into a new Development Finance Corporation. This recommendation, which seeks to bring U.S. tools and capacities for engaging the private sector into line with those of other donors, resembles earlier proposals from the Center for Global Development and President Obama’s Global Development Council.

The MFAN draft is intended to open a conversation around the value that a more robust and streamlined development agency would bring to U.S. foreign policy and national security. Toward that end, it has many strengths:

  • It’s bold and sweeping. This is not a plan that simply nips at the edges, moving a few boxes around to create more streamlined organization charts. It represents a “blue sky” vision of what an empowered development agency would look like and provides substantive material for further discussion and debate.
  • It would bolster the voice and role of development in U.S. foreign policy. By consolidating authority for all development-related activities in one place, the plan would create a high-profile and influential body working to end poverty and promote prosperity and well-being for all. The amped-up Global Development Agency (GDA) would no longer have to rely on the State Department to represent its views to the president and the National Security Council.
  • It would reduce fragmentation and incoherence. With fewer agencies carrying out foreign aid programs and clearer distinction in their roles, the proposal would reduce gaps and overlap and improve policy consistency. Under the new arrangements, each agency would carry out programs in accordance with its strengths, and cede control over those that don’t play to its comparative advantages.
  • It would improve cooperation with the private sector. In an era when only a tiny fraction of the resources for development come from official aid flows, the United States needs modern tools to encourage responsible, equitable, private-sector-led growth in poor countries. OPIC has been perennially misunderstood and attacked from right and left, so re-branding it and revising its purpose and authorities could help to build support from business, labor, and development professionals.

Yet as currently described, the plan could also have some unfortunate and unintended consequences:

  • It would create conflicting lines of authority. Instead of turning USAID into a Cabinet-level department, as Atwood and Natsios proposed, the MFAN co-chairs’ proposal creates a strange new hybrid: an agency whose head reports to the president, but “receives guidance from” the secretary of state and “is supported by” a whole-of-government, public/private advisory board. So many competing directions could complicate decision-making and limit accountability.
  • It would undermine USAID’s influence in the interagency. Demoting the regional bureaus would leave the GDA without high-level, Senate-confirmed representatives to participate in policy discussions with their State and Defense Department counterparts. Field programs are USAID’s long-standing strength, and this reorganization would leave them without a voice in Washington.
  • It would subject successful programs to new layers of bureaucracy. The MCC and the president’s Emergency Plan for AIDS Relief (PEPFAR) are highly effective and well-regarded programs, yet under the MFAN proposal they would be tucked underneath the GDA’s management structure. Although the authors state that both units would be permitted to “retain their brands and operating procedures,” it is difficult to imagine how their innovative, data-driven cultures would be preserved under new management, policy direction, technology systems, and personnel rules.
  • It would omit large swaths of aid. The discussion draft barely mentions security assistance, which is also in desperate need of an overhaul. Reform of security assistance programs and structures must be undertaken in conjunction with that of development assistance, because both must address the ever-growing, and often inappropriate, role of the Department of Defense (DOD) and the proper balance between military and civilian aid. In addition, U.S. efforts to prevent conflict, stabilize fragile states, counter violent extremism, and respond to crises must involve greater coordination and a clearer division of labor among USAID, the State Department, and DOD, rather than being wholly subsumed within any one department.

Most of the objections above could be resolved through further elaboration and revisions of the discussion draft. The one thing that can’t be changed, however, is the reality that the State Department is far more powerful than USAID and will do whatever is necessary to thwart encroachments on its jurisdiction. MCC and PEPFAR also have strong bases of support, especially in conservative and Republican circles. If anything, President Trump and Secretary Tillerson are likely to push in the opposite direction from the MFAN proposal. And Congress—although perhaps ready to resist a diminution of USAID’s role—has neither the desire nor the ability to impose a major bureaucratic reorganization upon an unwilling administration.

Note: Diana Ohlbaum is a member of MFAN’s Executive Committee. She did not participate in drafting the proposal, and the Executive Committee has not taken a position on it. Photo: Hospital Corpsman 3rd Class Eric Chiarito and Marine Sgt. Jonathan Thornton load supplies onto a forklift at Tacloban Air Base in support of Operation Damayan. U.S. Navy photo by Mass Communication Specialist 3rd Class Ricardo R. Guzman courtesy USAID.

Diana Ohlbaum

Diana Ohlbaum is senior strategist and legislative director for foreign policy at the Friends Committee on National Legislation, and chairs the board of the Center for International Policy. She previously served for nearly 20 years as a senior professional staff member of the House Foreign Affairs Committee and the Senate Foreign Relations Committee. Dr. Ohlbaum holds a Ph.D. in political science from Johns Hopkins University and a B.A. in Russian studies from Amherst College. Follow her on Twitter: @dohlbaum