Foreign Aid Makes Corrupt Countries More Corrupt
Tuesday November 5, 2019
Counting on foreign aid to reduce corruption is like expecting whiskey to cure alcoholism. After closed House of Representatives impeachment hearings heard testimony on President Trump’s role in delaying US aid to Ukraine, Senate Majority Leader Chuck Schumer declared: “Numbers don’t lie. It’s even more clear now that President Trump is not the anti-corruption crusader he claims to be.”
Most of the press coverage has tacitly assumed that American assistance is vital to fighting corruption in Ukraine. But that ignores foreign aid’s toxic record and Ukraine’s post-Soviet history.
A 2002 American Economic Review analysis concluded that “increases in [foreign] aid are associated with contemporaneous increases in corruption,” and that “corruption is positively correlated with aid received from the United States.”
That was the year President George W. Bush launched a new foreign aid program, the Millennium Challenge Account (MCA). Bush declared, “I think it makes no sense to give aid, money, to countries that are corrupt.” But the Bush administration continued delivering billions of dollars in handouts to many of the world’s most corrupt regimes. By 2004, the State Department had codified what amounted to backtracking: “The MCA is an incentive-based supplement to other US aid programs.” The Bush team found excuses to give MCA aid to some of the world’s most corrupt governments as well, including Georgia.
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