Set to Lead Again? New U.S. Engagement on Global Development

Last week, President Obama unveiled his administration's global development policy. Much of the announcement focused on the reform of U.S. governmental systems and the strengthening of America's multilateral capabilities.
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Co-written with Homi Kharas , Senior Fellow and Deputy Director, Global Economy and Development, BrookingsThe Obama administration's foreign policy began with a mission to refashion America's international image and influence. Last week, alongside a speech to the U.N. Summit on the Millennium Development Goals and nearly two years after he was elected, President Obama unveiled a critical component of that effort: his administration's global development policy. The policy announcement marks a significant and welcome step in advancing a strategy Obama first put forward during his presidential campaign.

While the policy aims to support sustainable development outcomes worldwide, much of the announcement inwardly focused on necessary reform of U.S. governmental systems. It is critically important to modernize the U.S. approach to development and the capacity to successfully support that approach. Additionally, the policy emphasizes support for economic growth by strengthening multilateral capabilities, leveraging non-governmental development actors, coordinating more closely with development partners, and working in better alignment with developing nations' priorities. With such aims at the core of a new operational model of development support, and with the president's policy launch timed to coincide with the United Nations review of the MDGs, it seems the U.S. could be setting itself up to once again be the international leader on development issues.

Renewing Multilateral Development Cooperation

U.S. leadership in international development has taken a hit in recent years--largely due to the unilateral (or at best, bilateral) approach that marked the George W. Bush administration's efforts. Through the President's Emergency Plan for AIDS Relief (PEPFAR) and the Millennium Challenge Corporation (MCC), the Bush administration worked with Congress to invest heavily in focused, innovative, and results-oriented development programs designed and implemented by the U.S. alone. United States multilateral cooperation sank precipitously as a consequence. Since 2000--even as U.S. development assistance increased nearly 10 percent per year in real terms--the share of foreign assistance channeled through multilateral organizations dropped by more than half (down to 11 percent today compared to an average of 30 percent for other rich countries). Also during this period, the U.S. ceased to be the largest donor to several multilateral development funds. The U.K. surpassed the U.S. in contributions to the International Development Association, the World Bank's concessional fund for the poorest countries; and in contributions to the African Development Fund, the U.S. now ranks behind the U.K., France and Germany. Beyond lower relative funding to multilateral agencies, the U.S. also implemented its development programs in relative isolation. According to the OECD's Development Assistance Committee, only 12 percent of U.S. aid missions are effectively coordinated with other donors.

To the extent that the U.S. engaged in broad international dialogue on development cooperation during the Bush administration, it seemed to do so grudgingly. Through Ambassador John Bolton, the U.S. permanent representative to the United Nations at the time, the Bush administration even sought to excise all references to the MDGs in a 2005 U.N. summit document. At the 2008 High-Level Forum on Aid Effectiveness in Accra, the U.S. could not even agree to be a signatory to the International Aid Transparency Initiative even though transparency is central to U.S. domestic values.

In contrast, the Obama administration's new policy positions the U.S. to embrace international efforts to promote more effective development, allowing for the opportunity to shape that open dialogue in a way that reflects American values, such as market-driven approaches to growth. Serious, rather than dismissive, treatment of the Millennium Development Goals, for example, gives the U.S. a chance to promote good governance, better measurement of outcomes, sustainability through the development of country systems and other key themes. In his speech at the MDG summit, Obama made a point of noting that broad-based economic growth "turned South Korea from a recipient of aid to a donor of aid." It so happens that South Korea will host two upcoming meetings that will further test the U.S.'s willingness and ability to influence international development strategies: the upcoming G-20 Summit in November that will debate development issues for the first time, and the Fourth High-Level Forum on Aid Effectiveness in 2011.

Also in his speech, the president emphasized scaling up development efforts in places where countries themselves have made good governance and economic development a priority. Without abandoning crisis response and humanitarian relief efforts, Obama has committed to steer the U.S. system to become more selective and deliberately focused, "where we have the best partners and where we can have the greatest impact." This high-impact approach also has implications for multilateral development cooperation. While the new policy acknowledges the need to "make hard choices about how to allocate attention and resources across countries, regions and sectors," such decisions invite political costs as certain programs and country missions are closed down in favor of others. However, the policy explicitly includes a commitment to renew U.S. leadership within multilateral development organizations, and widespread multilateral engagement can provide a balance to more narrowly selective and focused bilateral efforts. With greater leadership at the multilateral development banks, the United Nations, the Global Fund to Fight AIDS, Tuberculosis and Malaria, and other multilateral organizations, the U.S. can still influence resources deployed across many countries worldwide while also sharpening its focus on development results.

A Lead Development Agency

A key element of development leadership under Obama's new policy will be the elevation and strengthening of the U.S. Agency for International Development (USAID). The MCC and PEPFAR initiatives of the Bush administration were intentionally established apart from USAID, because the latter was viewed as weak and, in some ways, too broken to fix. That approach to USAID shifted late in Bush's second term when the administration sought to reform the agency by integrating it into the U.S. State Department. Under Obama's leadership, USAID's status has been unclear.

The president's policy, however, seeks to "reestablish the United States as the global leader on international development" by "rebuilding USAID as the U.S. government's lead development agency." This is significant because the White House included 16 different agencies across the bureaucracy to review the U.S. approach to development, which fed into the creation of the new policy. Additionally, in his speech on the MDGs, President Obama emphasized that development policies and strategies are about more than foreign assistance. To be the leader for development, USAID, must be able to guide more than just aid. To do so requires clout, capacity and creativity. If implemented well, the new policy could provide for all three:

  • Clout: Rajiv Shah, the leader of USAID, now has an explicit role on the National Security Council. He must promote a strong development viewpoint; and USAID mission directors in embassies and developing country capitals worldwide must be empowered.
  • Capacity: Given many years of bureaucratic fragmentation of development-related responsibilities and operations across the government combined with severe losses of in-house technical expertise, USAID needs to rebuild. Already, Shah is taking steps in this direction by pushing policy, budget, planning and evaluation capabilities. The president's approach points toward new "development impact" assessments of policy changes affecting developing countries (such as shifts in trade policy). As it is rebuilt to be the U.S. government's lead development agency, USAID should augment its capacity to spearhead such assessments.
  • Creativity: Tension lies in the combination of renewed multilateral development cooperation and the President's commitment to making USAID the U.S. government's lead development agency. An elevated lead development agency should have a more prominent role in affairs concerning multilateral development organizations. This has implications for U.S. policy toward the multilateral development banks, which is led by the U.S. Treasury Department, as well as policy toward the U.N. humanitarian and development agencies, generally guided by the U.S. State Department. Subject to statutory reforms, which may or may not emerge from current Congressional interest in the modernization of development legislation, existing laws establish some of the current divisions of responsibility among agencies. Even so, USAID could take on a bigger role with regard to multilateral development issues not assigned to a different agency by law. In other cases, creative arrangements could emerge unless and until the law changes. For example, working in conjunction with the Treasury Department, USAID could establish closer collaboration with multilateral development banks.

A Bit of Evolution, a Bit of Revolution

In certain ways, the new strategy represents a significant shift in how the U.S. manages its development operations, while in other ways it demonstrates consistency and continuity. Obama is building on the good aspects of his predecessor's aid programs by: retaining the MCC and its approach to good performers, transparency and measurement; advancing PEPFAR as a dominant component of a results-oriented global health program that is focusing increasingly on sustainable health systems; and ramping up resources and human capital at USAID and the State Department even in a very trying budget environment. Rather than creating new aid institutions to execute new initiatives, the Obama administration is wary of fragmentation and focused instead on strengthening core systems. The strategy also suggests that elements of selectivity, public-private partnership, and an analytically-based results orientation will apply to development aid efforts more broadly. Development's place in the U.S. national security strategy is similarly more evolution than revolution, as this trend developed in the last administration.

What is more revolutionary, is the clear recognition that U.S. development policy must be about more than aid. Organizationally, alongside its long-term commitment to build up USAID to be the nation's lead development agency and the world's premier development agency, the White House has recognized the need to oversee a coherent global development strategy that factors in the broader array of development policy instruments in areas such as trade, investment, migration and agriculture. The administration's strategy indicates a commitment to a more comprehensive and coherent approach to supporting development outcomes. To the extent that President Obama succeeds in truly elevating USAID in a manner that lasts beyond his tenure, this might also represent a revolution. If the administration's shift in tone on multilateral cooperation translates into real resources for engagement through such institutions, and through cooperation on the ground, then this too could be a revolution. The degree to which these revolutions succeed through policy implementation will determine whether the U.S. can lead on global development.

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