The Portfolio Model of Foreign Assistance

How U.S. Policymakers Can Maximize the Value of Aid

A Philippine army soldier counts boxes containing tent material from U.S. relief organisation USAID as he prepares the load to be deployed by airlift by the U.S. Air Force to victims of super typhoon Haiyan, at a Manila airport, November 2013. Wolfgang Rattay / REUTERS

In the first half of this year, U.S. President Donald Trump’s administration began to call for reform of the various agencies, offices, and programs that provide U.S. foreign assistance. In response, the foreign policy community produced several structural bureaucratic proposals. Organizations such as the Center for Strategic and International Studies, the Center for Global Development, and the Modernizing Foreign Assistance Network, as well as coalitions like InterAction and the Advisory Committee on Voluntary Foreign Aid all made various recommendations, ranging from the immediate incremental step of a multilateral foreign assistance review to a fundamental redesign that would integrate all smaller agencies into a single US global development structure.

If the United States wants to maximize the value of its foreign aid, it needs a fresh paradigm that supports the purpose of foreign assistance, acknowledges the aspects of international aid that it can alter through structural change, and acknowledges that there are global or market forces that remain beyond Washington’s control.

The best way to approach the issue is to recognize that foreign assistance is an investment that sustains the United States’ global leadership in the long run. Whether responding to international crises, encouraging positive economic and social change, or supporting growth in countries that share U.S. values and security concerns, money spent today is a down payment toward a future in which the United States remains a superpower because the benefits of its leadership are visible around the world. The future-oriented nature of foreign assistance makes it complicated to manage, but also suggests an organizing principle: in short, Washington should take an approach to its foreign aid programs similar to the way investors manage their portfolios.  

Both U.S. foreign assistance and personal investment portfolios share the common aim to produce a specific long-term effect of great magnitude, the requirement of a small but regular inflow of resources, and the understanding that they are only successful when the portfolio is appropriately diversified. The logic of portfolio

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