What Makes a Successful Foreign Aid Plan?

I. Introduction

Foreign aid is a tool of soft power that advances U.S. interests abroad, aiming to both create a more prosperous world economy and make foreign countries more inclined to cooperate with the U.S. The goals of foreign aid often align with those of the post-WWII international order and those of the U.S.'s realist interests. While humanitarian and development aid directly benefits recipient nations, they also enhance the U.S.'s global reputation. Military aid has sought to preserve stability against terrorist groups and defend against aggression by U.S. enemies, strengthening the U.S.'s global military presence.

The concept of foreign aid became a central part of U.S. foreign policy after World War II. USAID was founded during the Cold War to promote economic development and counter the Soviet Union, demonstrating its utility in both realist and liberalist senses: it emphasized cooperation among international institutions while supporting U.S. soft power and security abroad.¹ USAID now accounts for about three of every five foreign-assistance dollars, with the rest being distributed by the State Department and the Treasury, Health, and Human Services departments. Foreign aid supports economic development, peace and security, humanitarian assistance, and health initiatives abroad.² But what makes a successful foreign aid plan?

Policymakers would like their foreign aid missions to achieve their declared goals within the posted timeframe. They want to create political systems that are self-sufficient and become more independent over time. A successful mission leaves the region stable, but as seen in Somalia, Iraq, and Afghanistan, where instability persisted despite attempts at political reconstruction, this is difficult to accomplish. Failures cost more than just wasted budget; they can damage the U.S.'s reputation abroad and exacerbate humanitarian crises. Certain conditions make some contexts more favorable for foreign aid than others, leading to varying degrees of success. The post-war foreign aid experiments offer clear lessons about what makes a foreign aid mission succeed, and what causes it to fail.

II. Post-WWII Case Studies

The Gold Standard of successful foreign aid policy is the nation-building operations in Germany and Japan after WWII. Both plans succeeded because of the context of their countries: both societies were homogeneous, industrialized before the war, and had been completely conquered by the Allied powers. This meant economic reconstruction was relatively straightforward because the U.S. could dedicate vast resources to aid, including 1.7 million troops in Germany and $13 billion for the Marshall Plan, given that the U.S. accounted for half of the world's GDP at the time.

With the continuity of personnel between the Roosevelt and Truman administrations, experienced leaders like MacArthur, Eisenhower, and Marshall could execute their long-term visions. However, Roosevelt and Truman's methods were opposed: Roosevelt was more informal, fostering cooperation among advisors, while Truman implemented formalized civil-military integration through the National Security Act of 1947. Both leaders enabled the occupations of Germany and Japan to be successful in achieving their goals for economic reconstruction and creating powerful allies.

III. Post-Cold War Case Studies

Throughout the Cold War, the U.S. funded hotspots of military intervention against communist expansion, but its soft power was constantly constrained by the Soviet sphere of influence. After the Cold War, the U.S. emerged as the single, dominant nation in what was called unipolarity. It could restart nation-building and secure international support for efforts to preserve ceasefires and impose peace.³ However, as discussed in this previous article, institutional failures and a lack of cooperation between departments led to many foreign aid failures.

Between 1992 and 1994, the U.S. funded a limited humanitarian mission in Somalia that seemed achievable, only requiring 20,000 troops. However, after his inauguration, Clinton reduced the force to 2,000 troops and expanded the project's goals to include grassroots democratization. These changing objectives and limited resource capacity led to the mission's failure and a U.S. withdrawal. In 1994, the same administration attempted to restore the elected president in Haiti and oversee elections. It was successful to the extent that it preserved democracy, but it failed to address the country's root societal issues. The scope of foreign aid missions needs to match the scale of the problem and be supported by quality planning and sufficient resources.⁴

IV. The Conditions for Success

The most successful post-Cold War mission was the air campaign in Kosovo, which achieved every objective without a single allied casualty. Through the NATO bombing of Yugoslav infrastructure, Serb forces were pressured to abandon Kosovo in 1999, and NATO troops came in to reestablish security in the country. Within a few weeks, all 1 million Muslim refugees were returned to their homes in Kosovo. Clinton built on his administration's past mistakes in Somalia, Haiti, and Bosnia, and was careful to establish a cohesive plan of action and to explore every downside of intervention. He leveraged relatively small U.S. troop and financial commitments to secure international assistance. This meant lower costs and increased legitimacy with international institutions.⁵

None of these examples has been nearly as transformative as the post-WWII occupations of Germany and Japan. Many have failed to achieve basic goals or have misjudged the scale of the project. Even those considered successful, such as Bosnia and Kosovo, have not yet developed self-sustaining policies, though both nations are on track to join the EU.

Since the Cold War, foreign aid has become a political field of unarmed conflict in which the U.S. demonstrates its commitment to preserving peace and democracy. The international order looks very different from the post-WWII era, complicating any foreign intervention. This means the success of foreign aid plans now depends heavily on regional stability, the resources deployed, and the quality of decision-making. If the U.S. is to maintain its role as the unipolar power responsible for distributing aid, it needs to reexamine the faults within its own system that limit aid's effectiveness.

V. Recommendations

The U.S. faces a structural problem that makes achieving long-term aid goals and learning from past mistakes difficult. Each presidential administration replaces staff, therefore losing experienced workers, and carries with it a new decision-making structure. This is the concern with political appointments, known as the spoils system; they undermine the efficiency and professionalism of bureaucratic governments.⁶ Many of the failures of modern foreign aid, including weak coordination and a focus on short-term action rather than long-term goals, stem from the spoils system.

In After the War: Nation-Building from FDR to George W. Bush, RAND published its recommendations for reforming U.S. foreign policy in the modern era of foreign aid.⁷ First, it should establish a permanent civilian capacity for nation-building to help counter the problem of each administration losing experience. The U.S. military is heavily funded, compared to the non-military organizations that implement foreign aid. The U.S. should have permanent civilian experts on hand to work on-site in post-war nations. Currently, the DoD and State Department are responsible for projects that they lack the competence to execute effectively.

Next, it should establish clear rules for the DoD, the State Department, and USAID, and strengthen Presidential Decision Directive 56 (PDD 56). The PDD 56 was the government's first attempt to institutionalize nation-building under Clinton, and it should be further developed to make it a more repeatable process. This will reduce wasted costs from failed reconstruction attempts and allow for greater continuity between missions, limiting recurring mistakes.⁸

Learning from Somalia, Haiti, Bosnia, Kosovo, Iraq, and Afghanistan, these broad measures will aim to increase the effectiveness of the institution of nation-building as a whole. Successful aid programs are instrumental towards protecting international peace and human rights, developing active trade partners for the U.S., and increasing U.S. soft power abroad.