Briefing Papers Number 8, November 2009 | Page 4

Reforming Foreign Aid Richard Leonardi So where does this lead us on foreign aid? We need a very radical change indeed. Success in reducing aggregate poverty and food insecurity in low-income countries requires explicit recognition that the majority of poor people live in rural areas or a re being pushed into cities by rural poverty. (It is not a coincidence that cities are growing faster in poor African countries than in prospering Asian countries). In our efforts to reduce poverty and hunger, we must also recognize that rapid agricultural growth increases employment and reduces poverty and hunger by increasing the demand for rural non-farm goods and services that are produced by poor people. The lack of a development strategy and operating procedures that recognize these two realities has hampered the effectiveness of U.S. foreign aid. discontinuing its support for agriculture, our country lost a major opportunity to win global respect and influence a new generation of leaders in the field of agriculture and food security. A minimum reasonable level of support for agriculture would be 25 percent of U.S. foreign assistance, given that agriculture is the basic engine of poverty reduction and food security and that our country has a great deal of expertise in the field. It will be a major undertaking to raise our agriculture assistance to anything close to 25 percent. Focus on Improving National Aggregate Measures When donors shifted attention from large-scale national impact to smaller projects, they also changed how they measure success. When progress is measured in terms of improvements in total poverty rates, food security rates, the degree of women’s participation, or agricultural growth, Return to Agriculture there must be a focus on the “big picture.” But evaluating Donor and developing countries must invest in only project-specific inputs and outputs rather than broad smallholder agriculture. The World Bank’s influential 2008 results allows assistance to become unfocused. U.S. development assistance should aim to accelerate World Development Report made a strong case for this. In the 1980s, the United States led the donor community out the agricultural growth rate of low-income countries from of agriculture. Perhaps the World Bank will now lead the less than 3 percent (which is not even 1 percent faster than population growth) to the 4-6 percent growth rate achieved way back. But there is no reason why USAID should not quickly by fast-growth middle income countries.4 The combination of globalization and rapidly rising reassume its leadership role in agriculture. The United States is still greatly admired for its knowledge and incomes in much of the world—and hence more demand experience in virtually all aspects of agricultural production, for high-value agricultural products—makes such higher particularly in research, extension, and higher education. By growth rates more achievable than in the past. Access to international markets would help low-income countries determine priorities for conducting research, for establishing cooperatives and other methods of realizing economies of scale, and ultimately for attracting private sector investment. Accelerating growth rates through such a broad, agriculture-based approach would address the bulk of a country’s hunger and poverty, leaving focused programs to deal with the smaller but all too real remainder. Focusing on national aggregate results such as reducing the poverty level will require a shift back to older indicators of success. The targets now set for individual projects are removed from an aggregate context, so they do not reflect the opportunity cost of investments. Will an investment Small farmholders in Nicaragua are beginning to diversify their crops to provide food and in primary education have a greater additional income. 4  Briefing Paper, November 2009