At the annual summit of the Clinton Global Initiative, held in New York City on September 25, Mitt Romney unveiled his vision for foreign aid. At the core of his proposal were “prosperity pacts”—public-private partnerships intended to link foreign aid directly to trade and private investment. The provision of financial assistance from the United States government would be conditional upon economic reforms that lower barriers to trade and attract private investment, bolstering prosperity for the recipient nation’s citizenry. The program would rely on input from the private sector about local entrepreneurial freedoms and the status of trade in the target country.
“The best means of benefiting the community is to place within its reach the ladders upon which the aspiring can rise,” noted Carnegie.
“The aim of a much larger share of our aid must be the promotion of work, and the fostering of free enterprise,” Romney said. “Nothing we can do as a nation will change lives and nations more effectively and permanently than sharing the insight that lies at the foundation of America’s own economy—free people pursuing happiness in their own ways build a strong and prosperous nation.”
The spirit behind Romney’s proposal is the very same one that has animated much recent private philanthropy in developing countries. The last decade has brought a new style of international charitable assistance. Givers have moved away from unconditional aid and towards a smart investment model.
For that matter, smart American philanthropists have been trying for generations to foster enterprise and self-reliance as the most effective sources of uplift. In 1889, Andrew Carnegie declared that “the best means of benefiting the community is to place within its reach the ladders upon which the aspiring can rise.”
Private giving has long been one of the most efficient ways that Americans improve the lives of others abroad. Christian missionaries brought literacy, hygiene, and medical care 100 years ago, and are now supporting Third World development as never before. (See “Unto the Nations,” Winter 2012, Philanthropy.) American churches contributed $13 billion in overseas development and relief in 2009, while private foundations sent $5 billion abroad, and corporations donated $9 billion.
It’s not adequately appreciated that U.S. private philanthropy now far exceeds overseas development aid from the U.S. government. In 2010, the American government gave $30 billion to developing nations, compared to $39 billion donated by private philanthropy.
In addition to their anti-poverty work, major donors like Ford, Carnegie, MacArthur, and Rotary International have operated international fellowship programs that support the work of scholars from other countries. George Soros built the first institution of higher learning in Eastern Europe after the fall of the Berlin Wall and helped intellectual life of all sorts recover. For decades, the Rockefeller Foundation has fueled overseas development through advanced agriculture and biotechnology, supporting the research of scientists abroad and training farmers throughout Latin America, Asia, and Africa on irrigation and cultivation methods. The Bill and Melinda Gates Foundation, operating at unprecedented scale, has fundamentally transformed the health of millions of individuals through vaccinations, sanitation, anti-AIDs work, and other global health initiatives.
The problem that Romney identifies in the U.S. government’s current foreign aid ethos—unconditional charity with unmeasured results—is something wise philanthropists have been battling for a generation. The methods and principles of free enterprise and economic growth drive many of the most exciting overseas projects in so-called venture philanthropy and mission investing today. Grant-makers are looking for market feedback that shows results, business-like standards for the administration of grants and assets, and clear benchmarks to track progress. Romney’s proposal blurring the lines between the public and private sectors mirrors the way that our most progressive philanthropists have been marrying for-profit disciplines to nonprofit goals in order to achieve results.
The laggard in this revolution toward market discipline yielding individual empowerment has been government-to-government aid. So it’s high time Federal policy caught up.
Keep in mind, however, that when it comes to Americans offering help to poor citizens abroad, the Federal government is now the smallest kid on the block. Today’s $30 billion in Federal overseas aid is dwarfed not only by the $39 billion in U.S. private philanthropy sent abroad, but even more by the $96 billion that individual Americans (most of them immigrants) remit to families in poor countries to help them with living expenses, and the $161 billion of private capital that is poured into poor countries by U.S. investors in search of commercial success. (These figures from the invaluable “Index of Global Philanthropy and Remittances” published by the Hudson Institute’s Center for Global Prosperity.)
The principles underlying Mitt Romney’s proposal are already hard at work in the $296 billion of private money that Americans send every year to poor countries. So if the next president—whether Romney or Obama—wants to make the government’s $30 billion of foreign aid more effective, he will find many models to build on from the worlds of philanthropy and business.
Cindy Tan is a history Ph.D. student at Yale and is completing a historical study of overseas philanthropy for The Philanthropy Roundtable.