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The War in Ukraine Shows the Need for Foreign Aid Reform
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The War in Ukraine Shows the Need for Foreign Aid Reform

Developing countries will suffer as the war leads to spikes in food prices, and that will leave them open to aid from adversaries like China.

As the Western world has poured military and humanitarian aid into Ukraine, the issue of what might become of other aid-dependent countries has been glossed over. The focus on Ukraine is understandable, but policymakers must be able to address multiple problems at the same time. Focusing solely on Ukraine risks undermining the U.S. standing in the rest of the world and leaves developing countries ripe for China’s taking. 

First, foreign aid needs to be increased. Several polls have shown that Americans on average believe the U.S. is spending 28 percent of its federal budget on foreign aid, and also that other countries are not doing their fair share. In fact, the U.S. spends less than 1 percent of its federal revenues on foreign aid, and it is not even among the top 20 donors in the world as a percentage of GNI. 

This was not always so, and no one denies the importance that U.S. foreign aid has had historically, particularly with the Marshall Plan after World War II. Today, though, the U.S. foreign aid budget is only 0.18 percent of GNI, far below countries like the United Kingdom (0.7 percent), France (0.43 percent) and Germany (0.67 percent).

One statistic is not the whole story. On an individual level, Americans are far more charitable than Europeans. But foreign aid is a source of soft power in a sense that private charities can never be, and insufficient funding for foreign aid projects inevitably decreases the amount of soft power America has. It should be noted that, after decades of decline, U.S. foreign aid began to increase as the war on terror made it necessary for America to rebuild the countries (Iraq and Afghanistan) that it had liberated. Still, spending is less than a third of what it was in 1962 as a percentage of GNI. Back then, the U.S. recognized foreign aid as an effective way to fight the advance of communism across the globe, one that would not risk escalation and war with the Soviet Union. 

As American foreign aid has failed to keep up with global developments, this has provided its competitors—mainly China—with the opportunity to ally themselves with developing countries desperate for foreign investment and resources. 

Second, we need to recognize the impact that the war in Ukraine is having and will have on the developing world. This ties into why more foreign aid is needed: Yes, the U.S. needs to aid Ukraine, but if it does so at the expense of other foreign aid beneficiaries, it will create a humanitarian disaster that will leave dozens of the least developed countries in the world scrambling for financial aid from anywhere they can get it, including China.

Ukraine is a global breadbasket, with some of the most fertile lands on the planet. It was not at all surprising that the outbreak of war caused spikes in wheat and other grain futures, but the effect on food prices isn’t the biggest issue. Ukraine makes up a large portion of the wheat that is exported around the world, but that is only a small portion of the total wheat that is grown around the world. The U.S., as one of the world’s largest producers and a net exporter of wheat, will not feel the worst of what is to come. The problem is that many developing countries import heavily from Ukraine and Russia, and they will feel the pinch. Any increase at all in food prices is more devastating for poorer countries where the share of household expenditure on food is higher. In some of the most Ukraine and Russia-dependent countries, actual food shortages are a real concern, a situation under which there would not be enough food available for everyone at any price. 

The war will no doubt be tough on supply chains and is already contributing to inflation in the U.S, and even more so in Europe. It is possible and indeed realistic that real wages will fall in many countries this year, but our ability to adapt and carry on is far greater than that of poorer countries who have relied on Russia and Ukraine for food supplies, and whose supply chains are less flexible and slower to adapt than ours. Many of these countries are in the already unstable Middle East and Northern Africa region. Of particular note are Yemen, which is already engulfed in war; Egypt, a country that since the Arab spring has had several weak governments and where social unrest is never far away, and Libya. European countries have a keen interest in Libya not collapsing into another civil war, as it has been and continues to be one of the main paths for asylum seekers and human traffickers to come to Europe ever since Turkey agreed to prevent asylum seekers from passing through its country. Speaking of Turkey, it too depends on Russian and Ukrainian wheat. More ominously, so does Georgia, a country that has already been invaded by Russia and struggles with two separatist regions.

Third, any and all foreign aid needs to be tied to sanctioning Russia. Like during the Cold War, no country should be allowed to receive American aid and help America’s enemies at the same time. Right now, the developing world is the weak link of the sanctions regime. Western sanctions have been effective, but may become less effective over time as Russia figures out how to bypass trade embargos by going through developing countries that the West trades with.

While it is crucial to recognize the impact the war is having on the developing world, any developing country that chooses to side with Russia and against the Western sanctions regime must be cut off. The West should offer to cover the economic losses from the sanctions regime for the developing countries, but no country should be allowed to double-dip. There are circumstances that call for pragmatism, such as with countries that rely on Russian oil exports, for which an immediate cessation may not be realistic. Fortunately, most of the countries that import oil from Russia are First World nations. Those that are not should be asked to wean themselves off Russian oil by a certain date in exchange for Western aid. If a country continues trade with Russia beyond an agreed-upon deadline, the aid should cease.

Fourth, all foreign aid to Russia and Belarus must be stopped. While the amount of aid the U.S. has provided to Russia and Belarus is minuscule, it is still important to cut it off. Many other countries are currently providing foreign aid to both Russia and Belarus, and this level of inconsistency is threatening to undermine the moral justification for the sanctions regime, and may lead to accusations of hypocrisy. At this point, any countries providing humanitarian aid to either Russia or Belarus should be made to understand that this will damage their relationship with the United States. This may seem harsh, but humanitarian aid is helping keep the Putin regime afloat. There is a real prospect of regime change in both Russia and Belarus, and given those circumstances, providing humanitarian aid must be considered propping up the Kremlin government. 

While we can and should empathize with the millions of Russians and the majority of Belarusians who despise their governments actions, their suffering will be worse if their regimes are left in place.

John Gustavsson is a conservative writer from Sweden and has a doctorate in economics.