- The Washington Times - Tuesday, March 19, 2002

The world was ready to cast President Bush as the skunk at the U.N. foreign-aid picnic this week in Mexico. The Europeans, of course, were fully prepared to play the gracious guests and bearers of foreign-aid goodies. But Mr. Bush spoiled these wistful plans when he pledged to increase America's foreign-aid budget by $5 billion over three years America's first sizable increase in aid expenditure in more than a decade.

Since Europeans won't have much opportunity for finger-wagging, world leaders will instead have to focus on the difficult task of helping the underdeveloped world overcome poverty's vicious cycle. Given the inefficiency of foreign aid in the past, this conference should be a week of creative thinking and reckoning. The developed world has spent about $1 trillion on foreign aid since World War II, and nearly half of the people in this world are still living on less than $2 a day. Many of the largest recipients of aid haven't even been able to meet their loan payments. In the wake of September 11, effectively addressing worldwide poverty has become more conspicuously urgent.

This point isn't lost on Mr. Bush, who said that "failed states can become havens for poverty" and "persistent poverty and oppression can lead to hopelessness and despair." The question remains, though: How can rich countries help?

The White House has proposed, quite intelligently, that the developed world should increasingly give poor countries grants rather than loans. This approach should apply not only to bilateral funding, but to World Bank aid as well. Many of the debts to poor countries have become uncollectible, and many are smothered in debt. The Europeans have inexplicably opposed giving grants, but they should reconsider, since many poor countries routinely spend more paying back their foreign debt than they do on health care or education. The White House has also maintained a critical point: that aid must be linked to reform, since good governance is the main catalyst for development.

Still, to a large extent, developed countries should try to sidestep foreign governments altogether when giving aid. They should focus on micro-lending to small businesses that would otherwise have no access to credit. This effective grass-roots approach will help to empower poor populations to hold their governments more accountable.

To be sure, U.S. foreign-aid contributions as a percentage of America's gross domestic product aren't as large as Europe's. But America has been the main locomotive for reform at lending institutions and has made valuable contributions to the war on poverty. The Bush administration has proven that it is committed to reform and development and should draw accolades in Mexico and beyond.

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