The long term cost to the US may be comparable to that of tariffs
Most staff at the US Agency for International Development (USAID) will be placed on leave tomorrow as Elon Musk tries to shut the agency down. US Secretary of State Marco Rubio says he’s now the acting head of the agency, which distributes billions of dollars in aid around the world.
So what? USAID is a tool of American soft power and economic ambition. Created in 1961 to assist “strategically important countries”, it’s based on the idea that American security is tied to stability and economic advances in other nations.
Supporting evidence:
- Between 2005 and 2015, almost two-thirds of the growth in US goods exports was to major USAID partners – export growth that helped pull the US out of recession.
- By the agency’s estimate, the US generates $231 in exports of US-manufactured goods and services for every $1 spent on development projects in emerging markets.
Payoffs. US foreign assistance to South Korea helped it move from economic collapse after the Korean War to being the US’s 6th largest trading partner. The US exports goods and services worth over $40 billion every year to South Korea, which is more than it invested there between 1950 and the early 1980s.
Marshall magnanimity. According to Gérard Bossuat, professor emeritus at CY Cergy Paris Université, the effect of the Marshall Plan, a precursor to USAID, was “the emergence of a new society” – changing America’s image in Europe, opening the continent to Coca Cola, Hollywood and American pharma and helping to lay the foundations of a new European middle class.
USAID aids the US. Most of the food aid, medicines and equipment distributed by the agency is purchased in the US and shipped by US carriers.
- Since October 2023, USAID has paid $368 million in contracts and grants for activities in Haiti. Only 7.6 per cent of that money went to Haitian organisations.
You won’t pay for this. USAID has more than 1,600 public-private partnerships with US companies. For example, it persuaded the Ethiopian government to allow DuPont seeds in Ethiopia. DuPont’s Advanced Maize Seed Programme reached 250,000 Ethiopian customers by 2018 with USAID helping DuPont scale the initiative in Ghana, Zambia, India, Pakistan, Indonesia and Mexico.
Other examples include
- helping Walmart roll out across Latin America, and
- helping Starbucks trade with coffee growers in the Democratic Republic of the Congo.
Give and take. “USAID sounds like a charitable enterprise,” says Peter Taylor, director of the Institute of Development Studies at the University of Sussex. “The evidence is that USAID’s partnership with countries helped them become global trading partners, and helped many growing economies admire the US. The negative response [to the shutdown] is building really quickly. It will make it harder for America to get things done.”
Civil service civil war. USAID officials were put on administrative leave at the start of the week after blocking Musk’s DOGE staff from accessing servers carrying classified cables. The Heritage Foundation’s Project 2025 presented USAID as a pilot case for federal government overhaul.
What’s more… Senator Andy Kim, Democrat of New Jersey, warned: “This is just the beginning.”
