Thursday, 21 August
After decades of bipartisan support, US foreign aid architecture is undergoing significant structural and political shifts. Recent developments include a restructuring of USAID, growing support for institutions like the U.S. Development Finance Corporation (DFC), and changing perspectives on multilateral engagement. With this in mind, we’re asking what are the Trump administration’s priorities when it comes to foreign aid? And where is U.S. policy on foreign assistance going from here?
Executive Director Emily Slater is joined by Daniel Runde and Pilar Frank O’Leary to unpack these critical questions. Daniel Runde is a senior advisor with BGR Group. He was a former senior vice president at CSIS and former director of USAID’s Office of Global Development Alliances. Pilar Frank O’Leary is the Founder and President of PFO Advisory Group, where she advises Fortune 100 companies, leading foundations, and multilateral institutions on their strategic engagement across Latin America.
Stream Macro Matters on all major podcast streaming platforms
Apple Podcasts | Spotify | Amazon Music / Audible | iHeartRadio | YouTube
Transcript:
Slater: Welcome to Macro Matters, a podcast where global experts offer clear-eyed analysis on global economic policy. I’m your host, Emily Slater, Executive Director of the Bretton Woods Committee. Each episode, I sit down with BWC’s diverse network of members, from global policymakers to private sector leaders, to discuss timely topics in economics, geopolitics, and finance. In a media landscape full of noise, these conversations offer clarity. We go beyond the headlines to explore not just what’s happening in the global economy, but why it’s happening, what it means, and what might come next.
Welcome, everyone. Welcome to today’s episode of the podcast. And today, we’re going to be diving into what’s going on with the US policy towards International Development. So, you know, after decades of kind of bipartisan support, the US foreign aid architecture now appears to be undergoing kind of a major structural and political change. It was sort of long a symbol of American leadership. It’s I think recently in past decades become, you know, kind of a target for criticism really on both sides of the aisle here in Washington.
We’ve seen a restructuring of USAID. We’ve seen an executive order to review US participation in institutions like the UN and some of the other international organizations like the World Bank, IMF, and other MDBS. So, you know, all of this is suggesting that there’s, you know, a broader foreign policy rethink that’s going on here in Washington. So, what we want to do today is kind of dive into that to try to understand what’s going on, what this current Trump administration’s priorities are when it comes to foreign aid, and where U.S. policy on foreign assistance is going from here.
To kind of unpack these questions, I’m joined by two experts today who I’m delighted to have on the podcast, two BWC members.
We have with us Dan Runde, who’s a Senior Advisor with the BGR Group and was a Senior Vice President at CSIS for many, many years and is still with them but has recently taken on the new role at BGR Group.
He’s also a Former Director of USAID’s Office of Global Development Alliances, held leadership roles at the World Bank Group, was helpful in contributing to the reauthorization of the USExim Bank in 2018, and is really an influential voice on development and US global leadership here in Washington. So, thanks Dan, for joining us.
Runde: You’re welcome.
Slater: We also have Pilar Frank O’Leary, who is the founder and president of PFO Advisory Group, where she advises Fortune 100 companies, leading foundations, and multilateral institutions on their strategic engagement across Latin America and the U.S.
She is a former executive at JP Morgan, Fannie Mae, and other organizations, and she brings deep expertise across the social impact landscape and public private partnerships. I think joining us from abroad today. So thank you, Pilar, very much for for joining us today.
So why don’t we dive in and love to hear from you both.
But let’s just start with a little bit of a state of play and maybe a little bit of a postmortem on where we’re at with USAID and sort of how we got here.
I mean, this was one of the very first actions that were taken by President Trump and Elon Musk’s Department of Government efficiency in the very first few days of the Trump administration.
We saw sort of the dismantling of USAID, the the letters coming off of the building, right?
So you know what what happened, right? How did how did we get here and what do you think is the future for US Official Development Assistance, also known as as ODA.
So maybe, Dan, we’ll start with you, someone who has sat in the USAID building, kind of what’s your take?
Runde: For many years, we’ve had a policy towards supporting foreign assistance.
We had the Marshall Plan.
We had the creation of USAID in the early 1960s, which merged 4 agencies together.
This was deemed to be a pretty, an okay arrangement.
There were any number of different, there were some successes. Plan Colombia, I think is an example of a success where the combination of security and development and governance was seen as sort of helping put Colombia in a different path.
I think many people regard the significant improvements in Africa on HIV through the President’s emergency plan for AIDS response, PEPFAR, as it’s known, was also seen as a success.
There was also, I think after the fall, the Berlin Wall, any number of different countries, Poland or the Czech Republic or the Baltic states, who transitioned to democracy and market economies were seen as this was a contribution of, of foreign assistance. So that’s on the plus side.
The, and there was, there’s been sort of a fragile support. After the Cold War, there was a need to kind of reconstitute a constituency for assistance, and there were a number of steps made to do that. It was always a little bit fragile and there were a series of long-term criticisms and concerns about foreign assistance, both multilateral but also particularly bilateral foreign assistance. And I think many of those were things that came about that those things kind of came to the floor, and I think were sort of brought brought in a more salient way. Those concerns were the things that prompted the new Trump administration to take action.
Slater: Yeah. Pilar, maybe, you know, diving in on this a little bit more. Some of the actions on the dismantling of USAID are being contested in court. We saw a resuscitation of some of the programs, given some of the industry pushback. We might see some of the programs come back underneath of the State Department rather than as its own independent agency. But the State Department’s not really set up to do program management for sort of humanitarian assistance and International Development type of projects. They’re set up to process visas and passports and whatnot. So, you know, what do you think is going to come back under the State Department? How do you think that transitioning some of the project management piece from an independent agency to the State Department might impact actual outcomes?
O’Leary: Yeah. Well, I would just say, I mean, I think we’re all still reeling at how fast this all happened. Not the why, because I think there was a lot of consensus that there needed to be reform as you noted. But you know, the question here is both strategy and implementation. And I think part of the criticism was that, I mean, again, even under AID, they’re not implementers per se, they were terrific facilitators. But you know, a lot of that implementation was in the hands of the so-called Beltway Bandits. You had a lot of large contracts in the hands of a very few.
And there was also a bit of a disconnect between often in some of our partner countries as to what, you know, some of these countries and their governments wanted and what we were actually implementing.
There’s a a study by a guy named Samuel Hamlin at Swarthmore that said that there was a consequential disjuncture between intermediary organizations like USAID and the populations that they were supposed to serve, right. So, I think the move to the State Department could be good in aligning our interests in one sort of cohesive strategy. But again, you know, you’re going to need people on the ground to be able to carry that out. And you really need some smart thinking about how you’re going to implement, if it’s not going to be the, you know, the large implementers that were personally getting these huge contracts, then are you going to work with local organizations and give them that power? That’s what a lot of philanthropy has been moving towards, some of the large foundations that I work with. Or are you going to be able to open the playing field to more faith-based organizations, other, you know, smaller US contractors? So there really needs to be both a strategy, and I think it goes beyond the the simple strategy that’s been outlined now and the implementation.
Runde: I think there were a series of critiques that I implied were were part of the were were part of the narrative about assistance. One was, I think there were several on the right. One was, does foreign aid really work in quotes? And so you could say, OK, well, I listed sort of three examples of what I would say are kind of obvious ones. But oftentimes these programs are done in really complicated contexts where there is shooting going on or they’re very weak governance, which is sometimes a polite way of saying kind of a pretty corrupt environment or weak states or no functioning state. And so there were series of concerns about, OK, well, what are we doing? I think related to that, I think post- really starting in the 1990s, but also post 9/11 was: are we using our assistance to try and do quote unquote nation building? And what was our track record with quote unquote, nation building? And sort of that I think is an important function. I think a lot of poor people are now not living in countries that are growing or stable. They’re living in really broken, failed states or fragile states. And so those are particularly harder to work in and more, the problems are more intractable. So it makes it harder to just demonstrate progress in some of these tougher places.
Then there were other critiques. One was: why are we giving money, our foreign aid to countries who then turn around in the United Nations and other international fora and quote unquote, vote against us? This is an understandable critique, but there are also many countries that we have diplomatic relations with. I can think of, say, Jordan or Egypt, who get a lot of foreign assistance from us, but at the same time do vote in, in ways, you know, that are counter to what we would hope they would do in the United Nations. And so, you have these conundrums around this issue as well. This was something that Ambassador Nikki Haley spent a lot of time talking about in the first Trump administration. The other issue that came up was people described it as a corrupt enterprise. I think for the most part, there are a lot of controls and systems that also, I think make the system of bilateral foreign systems really inflexible, really bureaucratic, and really difficult. That’s in response to trying to control for various forms of corruption. So, I think there were, there were critiques that, well, this is somehow corrupt. In my experience, I think that’s less the case.
But then I think the other, which I think had significant traction this time around was some of the programming or some level programming was going to what might be described as highly controversial activities in the social issues realm. And so, you had very memorable examples of this sort of a thing described, whether by President Trump or Elon Musk or others, others criticizing aid, that many people who don’t pay attention of foreign assistance had kind of very memorable and know about this, and so had serious concerns. And so, I think this particular critique is particularly devastating for people who maybe are like, “Okay, maybe I’m kind of okay with this stuff.” But then they hear about something that might be deemed as pretty controversial or maybe even for many people described as wasteful and almost offensive to many people. And so, as a result, it was very hard to defend it.
And the response to that critique was, well, it was only a small amount of money or really, oh, it really wasn’t USAID, it was those, those silly people at the State Department or it really wasn’t USAID, it was some project out of a Fulbright program or this sort of a thing. When you’re having those kind of responses, you’re losing.
And so, I think as a result, in many ways, I think of this particular, this last critique was particularly difficult. I do think one other thing that Pilar alluded to, which is, and you’d use the term industry, I think this is important. I think there’s like multiple ways to deliver aid. You could say, okay, I’m going to write a check directly to a government, so you can write a check to the Ministry of Education to deliver education programming. It’s hard to put an American flag on it. It’s hard to tell the education minister do X or Y with the money,
Slater: Spend it. Yeah.
Runde: Yeah. Or if it’s the money stolen, it’s hard to say, hey, I’m going to put an Interpol watch list out on the education minister. So, there’s pluses and minus to that. Then another option is to say, well, I’m going to write a check to a UN agency or I’m going to give it to the World Bank or, you know, one of the Multilateral Development Banks that, you know, Bretton Woods Committee members are familiar with. The World Bank could use that money to deliver technical assistance or the International Finance Corporation to deliver technical assistance. Again, you don’t get to put your American flag on it. You’re often paying World Bank rates, and those folks are paid a lot higher than say US government civil servants or the folks in the, in the consulting community. So, you have less kind of influence. You don’t get to share. You have to share in the credit. Or sometimes they’re kind of less enthused about giving you the credit, if you’re the US government and you have the unpleasant experience of writing a check to somebody who might be making two or three times what you’re making and send your kid to, you know, to private school on the American taxpayer dime to deliver this work. That’s their take on it.
There’s a third option, which is to say, okay, we’re going to create a system of nonprofits and for-profit consulting firms described aptly. And so there’s pluses and minuses to that. You’re giving money to American institutions. A lot of it goes to higher levels of overhead, sometimes 25, 30 or higher in over indirect cost is what it’s called, but basically overhead. And so many people find that quite unpleasant and offensive. But if there’s some corruption of some kind, you can have what I might describe as a performative accountability. So, you can say I’m going to shut down this NGO or I’m going to shut down this for profit. I’m going to bar this person from working in the business anymore. I can put that person in jail because they’re an American citizen. So, I’m going to describe it as some kind of accountability.
Then there’s a fourth option, which is there’s been a movement in the last 15 or 20 years to say, okay let’s try and have local organizations deliver this work, often times at a lower indirect cost rate. You have several problems. One is because of all this bureaucracy that’s come up and how hard it is to implement this stuff. Maybe their English isn’t that great. Maybe they’re not hip to kind of the the bureaucratic lingo of AID or the State Department, and that requires kind of a higher level.
Slater: Capacity is an issue.
Runde: Yeah, there’s a capacity issue, but there’s also, you’re writing smaller checks.So instead of writing a billion dollar check to one of these big NGOs or big for-profits in Washington, you’re writing, I’m making this up, you know, 50 or 100 $10 million checks.Well, that means you got to have bureaucrats in Washington babysitting or out in the field babysitting these $10 million checks to make sure that everything’s legit.So, there’s pluses and minuses to that as well.And again, it’s the similar thing where, okay, they may or may not want to put the American flag on something.They may or may not be as responsive.Or the issue is you have to have a higher level number of bureaucrats deliver it.So, each of these models has pluses and minuses.So, the default has been option three that I described, but there’s been significant, at least I’m going to call it rhetorical support for option 4, which is to say localization.There’s been lots of terms for it, localization.Some people have used the term, which I find kind of odd, decolonizing aid.But you, you’ve heard that, you’ve also heard kind of local solutions.And I think that each of these models that I’ve described to you are things that people can look at.And so one of the things that Pilar alluded to is how are we going to, we will have foreign assistance in the future.How we deliver it I think is an open question.And I think this issue of kind of making these trade-offs is one of the things that hasn’t been sort of fully thought through or adjudicated yet.
Slater: Yeah, that’s I think a really kind of thorough description of some of the different models that have been tried out over the last several decades really in terms of bilateral assistance. And some of the criticisms about sort of where we, you know, how we got here in terms of the, option 3, the aid industry just becoming this huge complex bureaucratic machinery, right. And therefore, really the impact of the actual dollars, you know, to improving lives, improving livelihoods, became a little bit more difficult to follow that kind of linear impact, right.
So I guess, you know, to kind of wrap up on the bilateral front here, where do you think we should go from here? What is the best model? Is it a streamlining of option three? Is it a combination of three and four, you know, and where do you think the U.S., you know, current administration is, is what do you think they’re thinking about in terms of this?
O’Leary: Emily, I, I think we probably needed to back up too. And we, we talked a little bit about strategy. I mean, right now the mandate is that every dollar of foreign assistance needs to make America safer, stronger, and more prosperous, right? Those are our buckets that the Trump administration has passed down. So that really points to like an investment forward strategy. Some of these more of these private Public Partnerships would, and again, in the philanthropic world, I’ve seen work extremely well. We can’t totally axe humanitarian aid because, not only is it a bad thing for the world, but it really is something that will affect our national interests. And right now we happen to be involved in a number of global conflicts.
So there is, and we can talk about this a little bit later, but you know, there is this sort of geopolitical shift that has happened, the influence of China and so forth.
So I think that, you know, looking at these three buckets the State Department and other agencies in our government have to be looking at how they’re going to carry that out. But personally, I think that they have to be also looking at what they’re going to do on the humanitarian front. So it’s kind of a bifurcated strategy, I think.
Runde: I think a couple of things. I think one of the things that you mentioned, Emily, that I think is interesting is I think, let’s say you want to deliver, we’re spending $6 or $8 billion a year on HIV response. There’s a whole series of really complicated, really high stakes things that have to happen if you want to deliver a cold chain to rural Uganda. So, you need to have, you know, medicines that are cold at a certain temperature and they have to be taken on a certain date at a certain time. So I think having a large set of, band of, consulting firms and NGOs where you say, I need, you know, 6000 vials of medicine delivered at 6 PM at this time at this temperature, there’s a reason why it’s built up and grown up. And I think one of it is sort of the stakes involved in some of these, these enterprises, whether it’s a health or otherwise. And so I think that’s been kind of one of the trade-offs is that, and I’ve argued maybe, and I think I have a minority view on this, that we have a defense industrial base. We have people in think tanks who get up every morning and think about rebuilding and strengthening the US defense industrial base. I’ve said, and many people don’t like this, that we have a development industrial base that is a strategic asset of the United States. And some people dislike this. They don’t like to think of it and compare it to the defense industrial base. But if you want to deliver $6 billion of HIV meds into rural Uganda at a certain temperature at a certain time, it assumes certain levels of capacities and abilities and accountability to deliver that or creating a cold chain or logistics, etcetera. I think that’s kind of one of the points on the last conversation.
But, I think even still there are these trade-offs and understandable critiques of that system. I’ve been a more of a defender of it than I’d say most in Washington. I think Pilar put her finger on something really interesting, which is this issue of disjunctions. And I think there’s a failure in our political economy. I think for 50 years we got out of the infrastructure business after the 1960s in terms of our bilateral assistance. There was a concept put forward by the Nixon administration, called the New Directions in Foreign Aid in the mid, early 1970s. It was very attractive to many folks in Congress. It was about focusing on basic human needs, basic education, health, things like that. What’s happened is a lot of that has been pretty successful. You’ve had countries starting to spend more money on their own basic education and spending money on their own health. But for a bunch of reasons, there’s a series of interest groups that have sprung up who’ve said we need to keep spending X amount of money on basic education and we need to spend X amount of money on health. And now I think these are important investments and important things, but what you want is for countries to pick up the tabs themselves. For example, in the context of PEPFAR, which has been 20 years in the making, there are about 14 or 15 focus countries. I think 1 country has gotten off the dole of PEPFAR in the last 20 years. So one would think perhaps you’d want to have a plan for getting countries to pick up the tab themselves for funding their own assistance. But for a bunch of reasons, including the fact that there are advocates or folks that are, I wanna almost describe it as a self-interest who say we want to keep at these levels because we’re either implementing it or else. Otherwise, that’s become politically difficult. So, the political economy of delivering assistance, it gets caught up in terms of interest group politics, some of the bureaucracy and their concept of you learned in political science called iron triangles of Congress, the bureaucracy, and interest groups has come about in foreign assistance as well and has made it difficult for change to happen. So if you say okay, well really as Pilar was saying, okay well, if we do a survey of what countries really want, they want X, Y, and Z, but our political system is delivering A, B, and C and they say well, we want X, Y, and Z. But it’s like, no, no, we’re only giving you A, B, and C because our political process is the only thing that is what we’ll deliver.
So I think we have this problem. And so I think this sort of this disruption that’s happened, how it’s been quite abrupt, quite sudden, and surprising may create an opportunity to rethink sort of and kind of break some of these, the some of the systems in the political economy that we’ve had for really almost 50 years. There is a potential opportunity to rethink some of that and if done the right way.
O’Leary: I agree. I mean, it’s somewhere, it’s probably a combination of three and four to go back to the other, you know, the buckets that Dan outlines. But it’s… it’ll be tricky.
Slater: You both mentioned a couple things I want to pick up on. Dan mentioned a bit about the multilateral institutions and and Pilar, you mentioned more of an investment driven strategy. So the White House just came out with its Presidential Budget Request to Congress where we actually saw funding. I mean, despite what’s happening with USAID and sort of bilateral and ODA being slashed and despite, you know, a lot of budget cuts across the board, of course. The multilateral institutions, the World Bank, Inter American Development Bank, the other MDBs were actually funded at very standard levels historically, right?
We also saw a scaling up of funding for the Development Finance Corporation, which is the US fund that partners with private sector to invest in projects and in emerging markets. So, I guess my question is, you know, kind of for an administration and a president who has seemed to favor a more bilateral approach to diplomacy. I mean, obviously everything that’s going on with trade, we’ve seen some of the criticisms of NATO on the defense side, you know, we’ve seen the withdrawal of the U.S. from The WHO and, and you know, the Paris climate accords. So, you know, kind of what do you make of of this strategy in terms of their appearing to be support for multilateralism in International Development?
Runde: If you go back and look at the first Trump administration, the first Trump administration agreed to a capital increase in 2018 for the World Bank.
And then they also, I’m not sure if they supported one for the African Development Bank at, maybe if they did, they did so reluctantly. But I would say that I would also say that the, we’ve had a series of strong secretaries of the Treasury, whether Secretary Mnuchin or Secretary Bessent. And so part of me thinks, you know, the multilateral development banks are seen as separate from the conversation or related to a conversation about international economic policy or great power competition.
I also think there’s a perception that the multilateral development banks have an ability to potentially finance infrastructure in ways that are harder for our our bilateral system to carry out. There are significant concerns. Secretary Bessent gave an important speech maybe about two months ago, right before the Spring Meetings, talking about some of their concerns and criticisms about the World Bank and the IMF. I think there are a series of things to the extent that the leadership at the World Bank and IMF and these regional multilateral development banks can answer the mail on with the Trump administration, I think they’re gonna have pretty constructive working relationships.
One is around nuclear energy, one is around gas, potentially oil. There may even be, I think they’ll be pressure on the multilateral development banks to buy more goods and services from the United States. I think this is a perennial concern, but I think there’ll be significant concerns about that. There will be concerns about how to dilute, reduce the influence of China. Who will fill the void if we don’t participate in these institutions? I’m sure was one of the arguments that was a winning argument.
But I also think as they looked at things like ports, telecom systems, subsea cables, minerals, these institutions are well positioned to potentially be a force multiplier of the things that the Trump administration wanted to carry out.
The final thing is, I think if we look at the Trump administration, both its first term and a second term, one way to think about what the Trump administration is thinking about is they’re looking to renegotiate burden sharing across security and development. And arguably the World Bank and the IMF and the regional development banks are vehicles of collective action that help for kind of cost sharing and burden sharing. And so I think that was probably also a potential argument to say, like, look, we’re going to get them to do a little bit more. We’re going to get our European allies to kick in more money or we’re going to get these institutions to use some of the profits that they generate to cover the cost of some of the softer stuff that these institutions do. And we’ll we’ll spend less money or overtime, we’ll get off, you know, the program of having to always constantly do IDA replenishments—that your listeners know what those are—sort of soft loan replenishments over time. And we’re on track to do things like that.
I think those are the sorts of arguments that were made and some of that must have had made a mark or, you know, made an impression.
Slater: Yeah, I certainly think that kind of burden sharing and the leverage effect, as you pointed out, Dan, were in line with what we see from from this administration in terms of what it’s, it’s said in terms of what its priorities are.
You said something that’s really interesting to me though, that sort of the multilaterals are seen as sort of part of maybe a foreign policy tool, kind of soft power, broader international economic strategy in a way that bilateral assistance is not. I think you’re right.
And just want to understand a little bit more, you know, why you think that is. And maybe that’s a bit of what has led to, I mean, you mentioned the criticisms earlier and what what led to some of the USAID dismantling. So, tell me more.
Runde: So, I think we will continue to spend more on a bilateral basis. And if you look at the amount of money for the Presidential Budget Request, I’m, I’m guessing it’s like $4 or $5 or $6 billion or something like that for the multilateral system.
Maybe it’s a little bit more than that. We were spending as much as, I don’t know, $50 billion bilaterally. And I think even with these reductions, we’ll still end up spending, I don’t know, $25, $30, or $40 or something like that.
It’s not 0, I think what I’ve encouraged American administrations to do is like we built the World Bank, we built the IMF, we stood up the Inter American Development Bank after an 80 year debate starting in the late 19th century about an Inter American Development Bank because of the fall of the government in Cuba and the rise of Fidel Castro and the fear of communism because Richard Nixon was almost killed in a trip to Venezuela in I think it was 1958, we helped stood up the Asian Development Bank, I think because of concerns about the domino effect in Southeast Asia and the Vietnam War and the rise of potential communism in Southeast Asia. And then I’d say in the EBRD, the regional Development Bank for the post Soviet space was set up to try and consolidate the gains after the fall of the Berlin Wall.
So I think these all were set up for because of a geopolitical push or impetus.
And so I think my recommendation for American governments is like we have built these things. It’s never going to be, it’s going to be sort of a derivative of the American interest. But if you mind the store and you kind of ride herd on these institutions because there is a principal agent problem with them, that they can be a force multiplier for an American form of globalization.
If we don’t mind the store and let China fill voids, buy more shares, put people in key positions, it will not be that way.
Slater: As you said, I think the geopolitical element in terms of the utility of the multilaterals for a very small investment, right, the return on investment is very high for the multilaterals, maybe not quite as high on the bilateral side. And maybe that’s a bit of yeah, kind of like you said, how we’ve gotten here a little bit or one of the contributing factors. But Pilar, I want to pick up on sort of the investment forward strategy because I mean, just as we’ve talked about this sort of ROI that you get on the multilateral or MDB investment. And also, you know, kind of the DFC scale up, which also was a major initiative of of Trump one right was really transitioning, right, transforming the, the EXIM bank to the DFC and now scaling that up even further. So I want to kind of hear your thoughts on what you think is driving the investment strategy? What motivating that? How would you think we’ll see that play out going forward?
O’Leary: Yeah, I mean, I think in the same way that, you know, I was very pleased to hear Secretary Bessent say that, you know, he felt that the IFIs delivered fairness to the international economic system. So there’s there’s really clearly an appetite for this kind of a structure, a financing structure, right. So if you’re, if you’re stripping USAID of a lot of the, the soft power and sort of the, the way of delivering influence or gaining influence and delivering aid, the DFC would be the other model. And of course, Dan has been extremely involved with that.
And I think that’s why there’s certainly the perception that DFC is going to get a huge increase in its, in its funding, in its reauthorization bill. I think that, you know, they’re poised to have a huge influence in this sphere. With aid going over to state investment ready sort of out-of-the-box thinkers, they need to staff up, they need to be able to engage with middle income countries. That’s sort of like our low hanging fruit, right? So, with MCC and DFC, we haven’t been making debt or equity transactions with a lot of these countries that we should be engaging with. First of all, because it makes economic sense, but also because a lot of times these are our partner countries.
So, I think that that’s another, I mean, that’s what we’re hearing is that they are going to be looking at a wider pie of countries that can engage in these types of lending transactions. And, you know, I think if their strategy and their imperatives are clear, they can make a big impact.
Slater: I guess maybe kind of final question is, you know, I mean a lot of people, as we said, everyone was still was, you know, very shocked at how abruptly all of the USAID dismantling was, happened. And I think people thought that there was a lot more bipartisan support and a lot more support on Capitol Hill for USAID, that there would be more pushback.
And that, and I mean, we have seen some, but I think maybe the industry that we’ve talked about here several times, just we thought there were more champions who would be able to stand up and kind of be vocal for the bilateral assistance, you know, but I think what we’re talking about here today is maybe we’re just seeing a little bit of a shuffling, right? We’re taking some stuff out of AID. We’re putting it into DFC and to multilaterals that we’re not maybe the US isn’t abandoning International Development completely, right? But there’s just a little bit of a recalibration of the investment equation. I guess that’s one: Is that what you think, that there’s a recalibration or is this really a huge step back and an abdication of US leadership in International Development?
And then question 2 is kind of how do we rebuild support for International Development going forward across the aisle?
Runde: If you look at the Development Assistance Committee, which is a committee of some of the OECD, which brings together aid agencies. I think of the 32 members of the OECD, I’m guessing 30 or 28 of the 32 have an aid agency that’s directly within or more kind of joined up with their foreign ministry. So it’s not totally crazy to say, okay, AID, having a foreign aid function within the State Department. I think to many of the points Pilar made, there’s like a series of things, it’s not, and you made too Emily, about are they set up to do contracting or program management or have expertise to do these sorts of projects? No.
So, I think as a result, there’s gonna be a significant, in addition to a reshuffling, there’s going to have to be a series of capacities developed or shifted. I think that the collapse of the bilateral consensus, some of it had to do with that, as I said earlier, I think some of the critiques really cut ice. And so when I talk to US Republican US senators about our soft power. The kinds of people that came forward, Ilhan Omar went to the protest and she’s not super popular in the Republican Party. And so like, if you have people like that as your as your champions, it’s problematic. When I talked to one US senator, he said, you know, I’m supportive of foreign assistance. I worked in the American government. I understand what it does, but it was sort of like being in a Michelin 3 star restaurant and the candles were great and the food was great and the service was great. And then I lifted the plate up and I saw cockroaches.
And so what he was referring to was some of this woke stuff that I was different referring to earlier. And I think your listeners need to understand that for non inside the Beltway people, they’ve really heard about these critiques of some of the social issues, the more controversial things I described earlier. And so as a result, it’s made it very difficult. If you say, well, we saved 5 million people, like, yeah, but you spent $50,000 on an opera in Columbia that nobody understands why they’re spending money on this opera, you know, that was sort of unusual. And so they focus on that. And so you could say, well, that’s only a little bit of money or it’s just the State Department or it’s those idiots at the Fulbright. Doesn’t matter. If you’re having that argument, you’ve lost.
And so I think there’s been a problem. And I think the Biden administration went overboard on some of the stuff. And so, as a result, there was a lot less support because and then, you know, and the argument as well, people can go too far one way or the other. All I was saying is it’s really teed up a situation, made the whole project vulnerable. And so I think this is a problem. I don’t know what the number is in terms of the actual cuts, but I’m guessing it’s 20 or 30% overall. It’s not 0.
And so as I said earlier, we’re going to remain. Now are there some areas because we’re going to be doing less that others could step in and fill voids? Yes, I think that’s possible. In every context, I don’t think it’s possible, but in some contexts, I think it is.
And so, I think as your listeners think about this, I think they need to understand, if we’re going to invest in some things that are more controversial, we’re going to put the project at risk. I do think one of the things I’m concerned about is that we’re going to sleepwalk our way. I think there have been attempts since the 1970s to do series of reforms, whether it was in the Nixon administration, the Reagan administration, Bush 41 and Clinton and W, there were significant attempts.
There was an attempt in the first Trump administration, and I think this one has, you know, succeeded, if we can put it that way, at least at first. During the W administration, when I was in the Bush administration, there was a look at, okay, let’s try and reform foreign aid. And people just said this is too hard.
So maybe this major disruption, I lament the name calling. I think there are a lot of really good people in the foreign service. I don’t think that AID was a corrupt enterprise. I think most people were trying to do the right thing in most instances and much of it was good. But there have been a series of long-standing concerns about foreign assistance. Given this major disruption, if thought through properly, there could be an opportunity to make real reforms that were basically kind of punted on after the Cold War, punted on after 9/11 and have not been kind of fully priced in great power competition with China and Russia.
And so there, if it was done right and you’ve seen some movement on the Hill with the House Foreign Affairs Committee, particularly interested in sort of a reauthorization of the State Department and looking at foreign assistance as part of that. So, I do think there’s a window of opportunity even in this very abrupt disruption that has been a shock.
Slater: Yeah. I mean, maybe with the shock there, you know, kind of will jolt people into really rethinking more broadly. But you put your finger on something that I think is really important, which is, you know, we have to make sure that farmers in Iowa understand that foreign assistance is important. And I think that’s been a lot of the issue, as you alluded to, Dan, right. No one outside the Beltway really understands the importance or the impact. And they just hear the bad stories and then latch on to that. And then are supportive of, yeah, why are we spending money on those things, right. So I think sort of our mandate, part of our mandate going forward is to make sure that people understand the importance, the impact, why it’s important to the U.S. and really rebuilding that consensus on a bipartisan basis, as we said, because it really did enjoy bipartisan support for a very long time.
Runde: I think the problem’s in the Republican Party. And so I think the challenge is, so I do think there’s been a fragile support in the Republican Party, but many of the folks have, are backed off a little bit when they learned about some of these critiques. So I do think there’s not been a full, I don’t think there’s been a full reckoning by the aid community of some of these critiques. I don’t think there’s been a full, I don’t want to call it a mea culpa, but there’s not been self criticism, which, you know, there hasn’t been some kind of recognition of maybe there’s some things that need to be fixed.
And so, I think if it’s, they’re wrong and we just need to get them to think differently about this, we’re going to have a problem. And so, I think one of the things the commute, the industry or the community needs to take on board is like, maybe there’s something to some of these critiques. Maybe there’s some things we need to kind of take on and say, I’m going to cop to this, but I haven’t seen it yet. And I’m in, I’m a dues paying member of the development community. But I just think there’s been a reluctance, there’s been historically a reluctance to take ownership of kind of some of the—some of the criticisms are not invalid.
There are, sometimes they’re exaggerated, sometimes they go overboard, but they’re not invalid. And so, if there’s not some reckoning with the criticisms and also a willingness to think about, okay, how are we going to rethink where we’re going to put our people, time ,and money? We’re going to have this happen again.
That’s what I’m worried about.
O’Leary: Yeah, I think that’s right. I think, Emily, there’s a communications problem, right? I think writ large, we have woken up. We live in this sort of very bicoastal kind of environment where, you know, a lot of smart people, but we’ve really had a disconnect with the farmer in Iowa, as you point out.
And then so really being able, I think from now going forward is being able to articulate why investing in this project in this country is important for our country, right. And really articulating that yes, there there is the reckoning part. But I think going forward also that sort of the, I don’t want to say justification, but the communication of our goals in foreign assistance.
Slater: Yeah, I completely agree. I think it’s a communications issue, and I completely agree with Dan’s point as well that the starting point has to be okay, what are your concerns?
Let me hear them from both sides of the aisle. Let me hear what the concerns and the criticisms are. And then how can we address those? How can we move forward so that we’re all moving forward together. It can’t just be this, I want to convince you to come to my side, right? I want to convince you that you’re wrong. And I think that has been a lot of, I mean, I’ve been at BWC for 11 years. And in my experience, that’s been a lot of the conversation between the development community and the politicians is let me, let me try to convince you why you politician are wrong about your position.
And it needs to come from just more of a constructive, I think a constructive place of how do we address both of our issues, right? Both of our concerns, both policy positions and how do we move forward. And so I think, you know, Dan has really put his finger on something that I’ve certainly lived in my experience as well.
But Pilar, I just want to finish with one final question for you. I mean, on this whole calibration of the equation, versus real abandonment of US leadership or giving up on International Development. I mean, what do you think? Are we recalibrating right now, or do you see this as a significant kind of step backwards in terms of US investment in development?
O’Leary: Well, we’re certainly recalibrating. I don’t know if I see it as a step backwards because I think so much is yet to be determined.
And so that’s why I was talking about, you know what is the strategy for foreign assistance under aid, you know, under the DFC and the kinds of lending taking place? How is that really going to extend our influence and make us more prosperous or safer or stronger? You know, what I was going to say before was, you know, there’s a lot that can be financed. But again, when we’re in conflict zones and we’ve been directly involved, it’s hard to finance, it’s not impossible, humanitarian assistance in a way that’s real time.
So, if we don’t have that some form of flexibility there, I think it’s a mistake. I also think that there is, as Dan alluded to, there was a lot of great work done on the ground by USAID and the State Department in different realms. Again, because I work very closely in the implementation world and in the global south, you meet with people who are doing great things and who had gained a lot of institutional knowledge, and those people are not there yet.
So that’s a shame and I think a loss if we don’t take advantage of that learning as we recalibrate going forward. And I think that’s why we have a role to play in helping hopefully shape the the future.
Slater: Yeah, I think the loss of institutional knowledge can’t be discounted, right? I mean, we’ve talked about it kind of being this machinery and becoming this big complex machinery, but it’s hard to just break it and then kind of put it back together. And depending upon how it’s put back together. But the loss of institutional knowledge, no matter what, is going to play, is going to be a factor.
Yeah, there’s going to be, yeah, some some loss of knowledge and a lack of transfer of skills as well as a result.
O’Leary: Yeah, I really think so. And I think even just in the kind of investment forward stratosphere, I think that there, you know, I was in Colombia last week and I met with some former USAID folks that were working with local companies that, you know, would be great companies to actually put into the, to the multilateral ecosystem.
And maybe there’s a way to build those bridges too. Again, DFC has a larger mandate, it has more funding is really kind of tapping into that expertise that there was on the ground for projects that can be financed and making those connections in the the DFI and the bilateral, you know, finance institution space.
Slater: Yeah. And I mean, maybe just on the calibration question, right, recalibration versus step back. I mean, maybe it’s not an either or it could be both, right. There’s a recalibration and maybe a scaling backup investment as well.
O’Leary: Yeah, remains to be seen. Hopefully not.
Slater: Yeah, yeah, exactly. Well, thank you, Pilar very much for joining us, Dan as well. I thought this was a really helpful wide-ranging conversation to kind of try to take stock of how we have gotten here and where we’re going with US International Development policy and foreign assistance going forward. As you said, a lot remains to be seen, but also maybe there’s opportunity in moments of crisis like this. And so I think all of us who are in the industry and trying to move forward, are trying to look at it constructively and think about how we do really seize the opportunity to rethink, make it more efficient, more effective, more impactful going forward.
O’Leary: Absolutely, absolutely. Well, thank you so much, Emily, for having me.
I’m really proud to be a BWC member and glad that you’re facilitating these conversations. I think they’re an important exercise in this process.
Slater: Well, we’re very happy to have you as a member. It’s our members who make BWC, you know, thrive and make us what we are. We have such a wonderful network of experts like you and Dan, and thank you very much for coming on today and sharing your views with us.