A Brief History of U.S. Foreign Aid
Where and why the United States gives foreign aid has changed over time.
According to opinion polls, many Americans believe about one quarter of the federal budget goes toward foreign aid. But the truth is foreign aid makes up less than 1 percent of the U.S. budget.
These overestimations may reflect a misunderstanding of foreign aid in general. For example, a 2013 survey found that, even though about half of Americans think the foreign aid budget should be cut back, as many as 82 percent support foreign aid when asked about its specific programs or goals.
So what is foreign aid?
Foreign aid is the money, services, or physical goods that a country sends to another to help it in some way. Foreign aid might support the recipient country’s economic growth, strengthen its social programs, respond to a crisis, or improve its defense capabilities. For example, during a health crisis, a country might send money to fund local hospitals, services in the form of doctors to administer medication, and goods in the form of those medicines themselves. (A country doesn’t need to be poor to receive aid—the United States regularly gives aid to countries with relatively high gross domestic products [GDPs] such as Israel.)
Foreign aid typically falls into four general categories:
- Humanitarian aid consists of materials or other forms of assistance for people in need due to manmade or natural disasters such as war, famine, and extreme weather. This type of aid often aims to address the immediate needs of a population in crisis.
- Development aid includes investments in the long-term economic development of a country or community. This type of aid aims to give people the building blocks to develop their own businesses and continued sources of income into the future.
- Military aid includes arms, training, money, or other forms of assistance for the explicit purpose of defense.
- Political and economic aid supports political stability, economic policy reforms, and democratic institutions. It can provide general budget support in countries where the United States has strategic interests; it can also support activities such as peace talks, human rights organizing, political and criminal justice reforms, and treaty implementation.
The United States is the largest single provider of foreign aid worldwide in total dollars. But most developed countries spend a higher percentage of their GDP on foreign aid than the United States does.
Almost half of U.S. foreign aid is coordinated through an independent government agency, the U.S. Agency for International Development (USAID). Depending on the project, about twenty other departments or agencies, such as the Department of Defense, Peace Corps, and economic development-focused Millennium Challenge Corporation, can be involved as well.
The United States uses foreign aid as a foreign policy tool to further its interests abroad.
One belief that drives foreign aid is that investing in other countries creates a more stable, prosperous, and democratic world. In practice, multiple types of aid can be used to achieve this goal:
- In 2020, the United States committed $4 billion in humanitarian assistance to an international partnership aiming to provide COVID-19 vaccines to ninety-two low- and middle-income countries.
- In 2016, USAID focused on providing economic development aid to Bangladesh by partnering with local banks to give loans to low-income farmers to build their businesses.
- In 2014, following years of accusations of election corruption in Georgia, USAID sent targeted political development aid to local organizations there to train and deploy election monitors.
In 2020, the United States spent an estimated $33 billion on foreign aid—less than 1 percent of the federal budget. Dozens of countries typically receive some form of U.S. foreign aid; a handful of them stand out as the biggest recipients: countries in the Middle East, global counterterrorism partners, and countries with critical global health needs.
Does foreign aid work?
There is no simple answer to that question. Some experts note a lack of accountability for programs and places that receive aid to demonstrate effectiveness in achieving its goals; the accountability issue fuels criticisms that foreign aid is a waste of money. And in some cases, it’s difficult to determine whether foreign aid has achieved its goals: when, for example, the long-term goals include such things as sustainable development or a more peaceful world, measuring outcomes is difficult, especially in the short term.
Sometimes the effects of foreign aid can be more easily identified. As of 2020, the President’s Emergency Plan for AIDS Relief (PEPFAR) has delivered care to more than 17 million people (including 6.7 million children) and provided training for 290,000 health workers in sub-Saharan Africa. (When the program launched in 2004, only fifty thousand people in Africa had access to any antiretroviral treatment.) Projects like PEPFAR that distribute humanitarian and development assistance demonstrably save lives and promote long lasting development.
But other programs are more of a mixed bag. Despite having received more than $100 billion in U.S. aid since 2002, several USAID projects in Afghanistan remain unfinished, with corruption a pressing issue. When misused, foreign aid can perpetuate graft, reward mismanagement, and prop up authoritarians. The bottom line is that foreign aid can help but it can also be wasteful or even harmful.
What is true is that U.S. foreign aid has a far reach: economic and development aid that helped rebuild Europe after World War II, humanitarian aid in Africa, and more recently military and development aid to Afghanistan. Only a few places in the world haven’t felt the influence of U.S. aid in some way. The graphs below chart the ebb and flow of U.S. foreign aid into different countries and regions at different times. By looking at the aid flows in the context of what was happening in the world at the time, we can explore how the relationship between foreign aid and foreign policy priorities has evolved.
U.S. Foreign Aid to Regions Over the Years
1947–53: Rebuilding Europe
The modern era for U.S. foreign aid began after World War II, when the United States sent Western Europe one of the largest foreign aid packages in history. The Marshall Plan had two primary purposes: to rebuild Europe after the devastation caused by World War II and to prevent the Soviet Union, the United States’ main postwar rival, from spreading its communist ideology and influence in Western Europe. U.S. politicians thought that if European countries could avoid mass poverty as they rebuilt, their citizens would be less likely to launch a communist revolution. The Soviet Union and Eastern European countries in its orbit were offered the same aid package. But it was refused, with the Soviet Union condemning the program as U.S. interventionism. The Marshall Plan is especially significant because it influenced the national security focus of future U.S. foreign aid projects.
1946–77: Fighting Communism in Asia
The Vietnam War was waged from the mid-1950s to 1975 between communist North Vietnam, supported by China and the Soviet Union, and South Vietnam, supported by the United States. In the years leading up to and during the war, the U.S. government poured money into South Vietnam to support the military and promote stability. But following the North Vietnamese victory, the U.S. Congress severed diplomatic relations with and restricted most aid to the country. The United States only resumed providing aid when U.S.-Vietnamese relations began to normalize in the early 1990s.
The United States also sent significant amounts of aid to South Korea and Taiwan during the Cold War. In South Korea, U.S. economic and military aid helped fend off a communist North Korea during the Korean War. It also helped jumpstart a dormant economy. In fact, some historians credit South Korea’s economic ascendancy in part to U.S. assistance. Similarly, U.S. aid to Taiwan in the 1950s and 1960s helped keep the government of communist China at bay. It also helped lay the foundation for the island’s economic growth.
1961–68: Containing the Communist Threat
After leftist revolutions sprang up in Latin American countries such as Cuba, stopping the spread of communism across the Western Hemisphere became an important U.S. goal. In 1961, President John F. Kennedy established the Alliance for Progress, an assistance program intended to relieve poverty and social inequality in the participating Latin American countries. Foreign aid spiked immediately after that. The goal was to apply the logic of the Marshall Plan to Latin America; economic stability would theoretically curtail the threat of revolution. The program was dissolved in 1973, largely due to a failure to address the social and economic issues it was meant to.
1982–2000s: Stopping the Flow of Drugs
Starting in the 1980s, one of the priorities of U.S. foreign aid in Latin America was to stop the flow of illegal drugs into the United States. At the beginning of his first term, President Ronald Reagan declared a war on drugs both at home and abroad. Much of the United States’ cocaine supply came from Latin America. Any country in the region that the U.S. government determined was “doing its part” in the war on drugs would receive U.S. foreign aid. Colombia in particular received military aid and training in an attempt to reduce the quantity of drugs originating from the country. Although Colombia has seen some success in curtailing coca production, the UN Office on Drugs and Crime (UNODC) reported in 2017 that the country still accounted for an estimated 70 percent of the world’s cocaine supply.
2004–present: Fighting AIDS in Africa
Starting in the early 1990s, sub-Saharan Africa became the center of the HIV/AIDS pandemic. In 1999, HIV/AIDS was the leading cause of death across Africa. Even though testing and treatment for HIV/AIDS existed, they were not widely available in many African countries. After years of little global action, the United States established the President’s Emergency Plan for AIDS Relief (PEPFAR) in 2004 in select, mostly sub-Saharan African countries. The program allocated funding to provide medicine, money, and personnel to combat HIV/AIDS in affected countries because President George W. Bush believed extending humanitarian aid around the world was an important show of U.S. values. These values, he believed, would lead to more trust in American leadership. When PEPFAR launched, only fifty thousand people in Africa had access to any lifesaving antiretroviral treatment. As of September 30, 2020, PEPFAR had provided that treatment to more than seventeen million people. PEPFAR quickly became the largest health initiative ever undertaken worldwide, and the U.S. government continues to contribute billions of dollars annually to its funding.
1976–present: Establishing A Stronghold in the Middle East
During the Cold War, when the United States and the Soviet Union were competing for global power and influence, the oil-rich Middle East rose in geopolitical importance to both countries. Several Arab states were aligning with the Soviet bloc, and the United States began to see its ally Israel as an important buffer against Soviet influence in the region.
In part to bolster its ally, the United States provided Israel significant military aid during the Cold War. It also helped broker discussions that resulted in the 1979 Egyptian-Israeli peace treaty, after which it increased aid to Egypt. Even after the collapse of the Soviet Union in 1991, the United States saw Egypt and Israel as important promoters of regional stability. It continues to send billions of dollars in aid to both countries today.
2003–present: Fighting the War on Terror
After al-Qaeda terrorists killed almost three thousand people in an attack on the United States on September 11, 2001, the United States declared a “war on terror” and invaded Afghanistan, which had provided sanctuary to the terrorists. Although the Iraqi government was not involved in the 9/11 attacks, the United States also invaded Iraq in 2003, in part on the incorrect assumption that the Iraqi government was developing weapons of mass destruction. After coalition forces toppled Iraqi leader Saddam Hussein and his government, U.S. troops fought insurgents and worked to support democratic institutions.
1959–70: Fueling the Green Revolution
Because of a postcolonial focus on industrialization over agriculture, India was in the midst of a massive famine by 1961 as farmers were not producing enough food to feed the population. The United States sent foreign aid in the form of wheat to help alleviate the famine; in 1965, one-fifth of all U.S. wheat production went to India. USAID also helped fund agricultural development, including by helping to institute university programs that studied agriculture. This helped fuel what became known as the green revolution—the rapid development of new agricultural techniques that dramatically increased how much food countries could produce.
2001–present: Fighting the War on Terror
After 9/11, the United States invaded Afghanistan and toppled its ruling group, the Taliban, which had been accused of hiding and protecting al-Qaeda operatives. What followed was two decades of aid packages aimed at creating some kind of stability in Afghanistan amid an active war, to mixed results. USAID programs continue to work to strengthen civil society, expand economic opportunity, and stabilize conflict zones in the country.