Cutting US foreign assistance bad for economy, Arab democracy

Everyone knows US foreign assistance is slated for spending cuts, but recent aid authorization bills show the major differences already forming between the House and Senate. Never has there been a better opportunity and greater need for democracy promotion and US aid than the Arab Spring. But if the House gets its way, that will mean a sharply decreased US role abroad — and, as I will argue, to the detriment of the US economy.

First, let’s start with the facts. The foreign assistance fund — which includes food aid, supporting stable democratic institutions and the like — is not in any way related to the defense budget. Politicians usually lump the two together, whether intentionally or not, because our military missions in Iraq and Afghanistan have undertaken the ostensible role of democracy promotion. But when you look at the numbers, foreign assistance accounts for a mere 1 percent of the US budget. That still hasn’t stopped people like Rep. Paul Ryan, R-Wisc., from suggesting cuts of 44 percent by 2016. By comparison defense budget — cuts to which the House has tried to avoid — is the largest spending item in the US budget, comprising 24 percent of total spending this fiscal year.

Many people believe the US should turn inward — some argue the nation cannot project itself abroad when it cannot take care of its economic issues at home. I don’t buy that argument. US-based nongovernmental organizations will continue to do a lot of the heavy lifting overseas when it comes to international aid, but they will need government grants to keep major operations going. Denying those funds could lead to job loss, so keeping foreign assistance at current funding levels will keep Americans at work.

Also, it is in US economic interests to promote healthy governments and citizens because it will lead to economic rewards in the future. Corrupt, undemocratic governments will generally operate at the expense of their own people largely by keeping growing wealth for the government elite. That means people have less money to spend on more expensive American goods, which in turn dampens US overseas profits.

Curbing corruption will also ensure future US investment is not wasted. Billions of dollars of US investment — both from the federal government and private citizens or corporations — get lost among red tape or swindling politicians in corrupt foreign nations. Some of those nations — such as Afghanistan, Mongolia and India — sit on treasures of natural resources the US lacks, so US business interests are more than happy to invest. Cleaning up those states would produce a greater return on that investment.

In terms of the hopeful new Arab democracies, US foreign assistance can help build trust between those governing in Arab nations and the US officials with whom they will be communicating. It’s no secret that Egyptians oppose US meddling, a fear the military there is exploiting. But it’s not the Arab street the US must win over — it’s the new, democratically-elected leaders with whom the US must curry favor. The US already is training potential political leaders in Libya, Syria and Egypt — certainly a good start. The US wants to be the nation those new leaders look toward for guidance, but cutting foreign assistance will imperil the US ability to help guide new Arab democracies through the troubles they will encounter during nascent stages. In turn, that will dampen the ability to do everything from strike bilateral trade agreements to establishing and supporting sound human rights protections.

On top of the general budget malaise, a Foreign Relations Authorization bill currently going through the motions on Capitol Hill makes it more difficult for the US to use international aid in corrupt nations:

The corruption indicator has a range of uncertainly (especially around the median) and can have time lags of up to two years.  Using the control of corruption indicator as a hard hurdle for all U.S. economic and development assistance without addressing the inherent problems in the indicator could prove highly challenging.

That bill, pushed by the House (there also is a less restrictive Senate version) is not likely to pass in the Senate. But the writing is on the wall for US foreign assistance. If this debt ceiling fiasco proved anything, it’s that the House and Senate are beholden to very different interests and views. The House will champion spending cuts abroad because, rhetorically, it sounds good. The House will stomach defense cuts, but it will not digest those cuts easily. Still, it’s the assault on foreign assistance that should induce gagging.

 

Lebanon gets 3G, elevates its business attraction

Lebanon probably hasn’t paid too much attention to 4G iPhones, as the country just got 3G capability nationwide this week.

The new network should make Lebanon a more attractive destination for investment. It still has to get over the whole being a puppet of Syria and constant tension with Israel things, but this can only help — especially since Iraq and Syria are the only other 3G networks in the region.

The Middle East and Africa as a region had just 7 percent 3G cellphone penetration in 2009, one of the worst regions in the world for cellphone service. That number is expected to grow to 35 percent in 2014.

The Middle East has been a little slower than many regions on communications technology, but it is trending toward modernization. More Middle Eastern residents have cellphones than ever before, and it is one of the fastest growing regions for cellphone adoption.

Lack of economic diversity certainly has played a role in the Middle East’s slow adjustment to 3G. With so much of the Middle East dependent on the oil industry, there was little incentive for governments to make that investment because the oil industry could get along fine without it. Everyone needs oil, and production efficiency isn’t a big concern for buyers.

The 3G technology also could help protest movements, if Lebanese feel so inclined to join other Arab nations. Faster and more reliable communications technology would make Twitter even more viable.

From the Lebanon Daily Star:

The state-owned GSM operator is set to launch one of the latest versions of the 3G technologies, 3.9G, granting users Internet speeds of up to 170 MB per second, more than a 100 times maximum bandwidths of current 2G networks.

This is like bringing Lebanon out of the cellphone stone age. That alone should make it a more attractive place for business. It has the aforementioned shaky governance and political atmosphere issues to overcome, which will definitely inhibit investment. Still, businesses couldn’t have liked the idea of operating in a rapid-paced global world on a 2G network. This will certainly pay off.