In its early days, the World Bank often was associated with large projects, such as dam-building efforts. In the 1980s and 1990s, however, it took a broader approach to encouraging economic development, devoting a growing portion of its funds to education and training projects designed to build "human capital" and to efforts by countries to develop institutions that would support market economies.
The United States also provides unilateral foreign aid to many countries, a policy that can be traced back to the U.S. decision to help Europe undertake recovery after World War II. Although assistance to nations with grave economic problems evolved slowly, the United States in April 1948 launched the Marshall Plan to spur European recovery from the war. President Harry S Truman (1944-1953) saw assistance as a means of helping nations grow along Western democratic lines. Other Americans supported such aid for purely humanitarian reasons. Some foreign policy experts worried about a "dollar shortage" in the war-ravaged and underdeveloped countries, and they believed that as nations grew stronger they would be willing and able to participate equitably in the international economy. President Truman, in his 1949 inaugural address, set forth an outline of this program and seemed to stir the nation's imagination when he proclaimed it a major part of American foreign policy.
The program was reorganized in 1961 and subsequently was administered through the U.S. Agency for International Development (USAID). In the 1980s, USAID was still providing assistance in varying amounts to 56 nations. Like the World Bank, USAID in recent years has moved away from grand development schemes such as building huge dams, highway systems, and basic industries. Increasingly, it emphasizes food and nutrition; population planning and health; education and human resources; specific economic development problems; famine and disaster relief assistance; and Food for Peace, a program that sells food and fiber on favorable credit terms to the poorest nations.
Proponents of American foreign assistance describe it as a tool to create new markets for American exporters, to prevent crises and advance democracy and prosperity. But Congress often resists large appropriations for the program. At the end of the 1990s, USAID accounted for less than one-half of one percent of federal spending. In fact, after adjusting for inflation, the U.S. foreign aid budget in 1998 was almost 50 percent less than it had been in 1946.
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Next Article: Reviewing the American Economic System
This article is adapted from the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.
