The Theory Behind USAID Is Wrong…And in Practice It’s Worse!

by | Apr 4, 2014


USAID (United States Agency for International Development) announces its theory as follows: “USAID says that its work helps ensure American security and prosperity – arguing that the world is more stable if there is less poverty and strife.”

If the U.S. government props up client states with aid, floods their markets with American agricultural goods, underwrites military purchases, introduces Keynesian economic practices, and provides disaster aid, this is supposed to make the people wealthier and reduce political strife. If the country becomes more indebted to the IMF and World Bank, building unprofitable signature projects, this is supposed to raise living standards, making people content and happy. And all of that improvement, which actually doesn’t happen, is supposed to make Americans more secure and prosperous, a very far-fetched theory.

Intra-domestic wealth transfers in the U.S. likewise have done more harm than good, producing greater dependency, worse education, more red tape, and higher debt while undercutting private capital growth that might have involved job creation. Why are we not to expect that foreign wealth transfers are likewise doing more harm than good?

USAID was enacted under the theory that reducing poverty would reduce the appeal of communism. That theory was wrong even when communism was viewed as a threat to America. It’s completely out of date now.

This USAID theory is all wrong because government to government aid is absorbed by venal governments, propping them up. Inefficient and corrupt enterprises absorb funds that usually cannot be accounted for by either the U.S. as donor or those on the receiving end. With U.S. government personnel disbursing the funds and introducing Keynesian ops, how likely is it that the U.S. government can build a healthy society and economy in America much less create one in Port-au-Prince, Cairo, Bangkok, Mombasa or Rangoon?

Ron Paul has it exactly right to have opposed USAID for decades and to be criticizing extending it to Ukraine.

Matters are even worse nowadays what with the NGOs promoting revolutions in countries.

“USAID operates all over the world – with its two biggest programs in Afghanistan and Pakistan. It operates primarily in developing countries in Africa, Asia, Latin America and the Middle East. It currently has 1,801 projects around the world – from Paraguay to South Sudan to Turkmenistan and Myanmar.”

If the U.S. government gives us unbelievably huge amounts of fraud courtesy of Medicare and finds it impossible to provide laws that allow free markets in the many facets of health care, if it produces militarized police forces here at home, and if it produces immense government debts, why should we not expect the worst of such far flung projects as are administered by USAID around the world? Is it really to be expected that some committee in Congress, made up of members who do not even read the most important laws upon which they vote, is carefully monitoring the expenditures made by USAID and seeing to it that they are doing good within those countries? What Congressman even knows what’s going on in these 1,801 projects or what their effects are?

Reprinted with permission from LRC.



  • Michael S. Rozeff

    Rozeff has published articles on stock market pricing, earnings forecasting, corporate dividend policy, corporate divestiture, insider trading and the Asian stock markets. He has been associate editor of several finance journals. Rozeff's recent articles on economics and politics are archived at

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