Foreign Aid Askew

THE Gulf war has focused discussion of United States foreign aid on rebuilding that area of the world. But a more pervasive, and perhaps more important, issue is now surfacing. Two generations of Americans have been told by their leaders that the rationale for foreign aid was anticommunism and security. Since the Marshall Plan in Europe following World War II, all administrations, Democratic and Republican, have sold the foreign aid program to Congress and the American people as a means of supporting the "free world."

True, aid did other things. It provided humanitarian relief to needy peoples and disaster assistance in times of calamity. The bulk of the aid, however, was to reward friends: to shore up shaky governments - a few democratic, many not; to prevent internal revolution or external aggression; and to encourage support for international policies felt to be in the US national interest.

IN contrast to Japan, foreign aid has never been popular in the US, either in Congress or among the people. To counter this, various administrations have combined the national-interest sales pitch with more locally directed selling: how much of every American dollar authorized for foreign assistance went back to the US, and indeed to individual congressional districts, for the purchase of local goods and services.

Often academic institutions that benefited from technical-assistance contracts or training programs have been encouraged to let their representatives in Congress know how important foreign aid was to them.

With the end of the cold war, the justification of foreign aid is palpably shifting. Humanitarian assistance, disaster relief, and a variety of other well-meaning and needed programs will certainly continue. The Bush administration has come up with a new configuration of priorities, including encouraging democracy, the private sector, family values, a better environment, and more effective management. These categories represent new packaging, but a continuity of previous emphases. Every administration w ishes to place its own public stamp on foreign aid.

The European Community and Japan in their foreign aid programs are also likely to stress democratic values.

The essential changes in the new approach lie not in the new categories - they are well-meaning, if somewhat simplistically appealing to an essentially American audience. The more fundamental issue is in the redefinition of the underlying national interest in the foreign-aid program away from security.

The national interest is now defined as economic - a strong appeal to immediate American concerns. A major portion of foreign aid is to be used to support the private sector overseas. This is nothing new; it was emphasized as long ago as the Kennedy administration, but had its full flowering under President Reagan. What is new in the Bush plan is an effort to assist directly American businesses that compete on certain world markets with exports in which the US has a distinct advantage: telecommunication s and transportation equipment, for example, and major infrastructure construction materiel.

Previously, administrations supported the private sector conceptually - that is, both foreign and indigenous private sectors. Now the emphasis has shifted to direct support to American corporations. This will be achieved through "mixed credits," capital provided both at commercial and at subsidized (through the aid program) interest rates.

Use of the foreign-aid program to help the US be competitive on world markets is based on a number of assumptions: that the volume of aid is significant even if targeted toward certain countries, that the US will be competitive in certain fields if interest rates are in part subsidized (as they are in other countries, so the argument goes), and that the US can provide goods and services that will help these societies develop.

There are major dangers in this approach. It once again emphasizes the short-term US need - now economic interests and greater exports instead of combating communism - rather than the longer-term goals of raising standards of living and thus promoting eventual markets and economic stability.

This approach also encourages greater expenditures on infrastructure, where the US has some advantage in the supply of heavy equipment, rather than on the alleviation of poverty.

If pursued, this plan could lead the US to abdicate the conceptual leadership of the world in foreign assistance.

THE Foreign Assistance Act of 1973 still focuses on the poor in developing countries. True, the act needs reform. It has so many different provisions for reaching the poor that any administration or agency may pick from a menu of priorities and do whatever it wishes. One of those approaches was to expand employment through the private sector as a means of alleviating poverty.

Now, however, the administration has explicitly indicated that the private sector is supported "as an end in itself."

Many in the US will not be comfortable with a foreign-aid program that will direct profits toward specific industries and businesses. First, it is one thing to uphold the virtues of local and international marketplaces, but quite another to skew these markets. This approach once again leaves the poor behind, as even secondary beneficiaries.

Further, US officials could be involved in assisting individual industries; this raises the specter of special interests, insider deals, and favoritism. There should be better means than the foreign-aid program to encourage exports through more responsive and competitive American businesses.