Pursuing Economic Growth

The U.S. can maximize its support for positive economic outcomes with a diverse portfolio approach to economic assistance that promotes political and economic stability and expands the middle class worldwide; decreases youth unemployment and wealth inequality; promotes gender equality; increases access to electricity; provides pathways out of poverty; and increases government accountability. In essence, this is the same approach taken by any investor who diversifies his or her assets to ensure some level of return. To be effective, it requires more purposeful application of analysis, transparent evaluation and reporting, and a willingness to add legislative authorities that would allow existing assistance mechanisms to be responsive to global economic changes. Finally, given the ever-deepening relationships among global economic, political, and societal changes, it remains in the U.S. national interest to provide both economic development assistance and other types of support.

InterAction Recognizes

  • Drivers and constraints to inclusive economic growth vary by country, but persistent inequality and a shortage of decent work worldwide are undermining global progress on poverty reduction and equitable social development. No single type of foreign assistance intervention is the silver bullet for producing sustainable, inclusive economic growth in all countries. However, we know inclusive economic development is not possible without decent work—jobs that produce equal opportunity and sustainable livelihoods, respect worker rights, provide social protection and space for social dialogue—at its foundation. In policy terms, over the last 10 years there has been a clear recognition that inclusive growth fundamentally underpins a variety of foreign assistance and therefore foreign policy goals. Practically speaking, this sentiment also informs the way providers of economic development funds structure their programs. Specifically, the last 10 years brought greater use of preliminary economic assessment as a means of designing assistance programs that better contribute to sustainable, inclusive economic growth.

  • As an investor, the U.S. needs a strategically defined, diverse, economic assistance portfolio. Because the drivers and constraints to inclusive economic growth vary by country, the U.S. can maximize support for positive economic outcomes with a diverse portfolio approach to economic assistance. Maintaining a diverse economic assistance portfolio means recognizing the value of different tools and using them where they can be most effective. At the fore of these efforts should be investments that build the social, governance, and labor market institutions that enable citizens to access and share in the benefits of economic growth.

  • Economic and noneconomic issues are evermore intertwined. Economic development assistance is only one part of the broader U.S. foreign assistance toolbox, which also includes humanitarian relief, security assistance, and support for democracy and governance. There is a compelling case to be made for each of these of investments, from maternal health, to water and sanitation, to post-conflict community development. What may be less immediately intuitive is that there are also economic rationales for supporting the broader range of U.S. foreign assistance. Because there are fewer economic opportunities for traditionally marginalized populations, many development programs designed to support these groups have an economic dimension to them. Consequently, a variety of development programs that appear noneconomic at first glance may in fact directly support economic goals. 

Upcoming Opportunities

  • Respond to proposed authorizations that would allow U.S. aid agencies to better align operations with the dynamism of today’s economy [Ongoing]: Virtually all U.S. aid agencies managing any piece of the U.S. foreign assistance portfolio express a desire to mirror the speed, agility, and investment outcomes of our dynamic private sector. Many of them are seeking specific incremental adjustment in their authorities that allow for greater efficiency or flexibility. Whether considering a proposal for Overseas Private Investment Corporation to re-deploy the income it generates, for the Millennium Challenge Corporation to make regional investments, or for USAID to have resource flexibility to support the implementation of key country strategies, practically approaching these incremental changes could quietly revolutionize the effectiveness of U.S. economic assistance. 

  • Support and expand Inclusive Models—including Country Development and Cooperation Strategies (CDCSs) [Ongoing]: Development programming is often impacted by economic volatility. As a result, efforts to incorporate inclusive economic growth in the overarching policy and development agenda must continue. Many federal agencies incorporate policy focused on inclusive economic growth—one of four strategic priorities outlined in the Department of State and USAID’s 2015 Quadrennial Diplomacy and Development Review—so that the marginalized and impoverished see the benefits of economic growth. USAID includes inclusive growth policy in many of its CDCSs (the five-year strategies that guide its assistance programming) and the Department of State is committed to advancing the Shared Prosperity Agenda, an effort to recognize the role that economic factors have in many foreign policy challenges. The incoming administration and Congress can have impact by ensuring inclusive models are retained and expanded in the CDCSs and that they receive the proper funding and oversight.

  • Implement the Power Africa Initiative to support critical investments in economic infrastructure [Ongoing]: Unreliable access to electricity foils the economic productivity of families, businesses, and entire economies. This unreliable base of economic activity further undermines the sustainability of many other U.S. development and humanitarian programs. Over the past several years, the United States has taken great steps to establish and make use of mechanisms to invest in core energy infrastructure. Doing so with eyes to economic, social, and environmental sustainability should deliver strong, calculable returns. In addition, ensuring that energy and infrastructure programs include mechanisms for citizen monitoring and oversight, participation, and capacity building for grassroots citizen and worker groups can strengthen transparency and democratic governance as a secondary outcome of infrastructure investment. This could be complemented by the implementation of legislation such as the Digital Global Access Policy Act (GAP).

  • Elevate mutually reinforcing trade and development goals in the AGOA reauthorization process [Ongoing]: The African Growth and Opportunity Act (AGOA) is a preferential trade program between the U.S. and qualifying nations in sub-Saharan Africa. First signed into law in 2000 and most recently reauthorized in 2015, AGOA works to expand U.S. trade and investment in Africa; stimulate economic growth; and facilitate sub-Saharan Africa’s integration into the global economy. The reauthorization extends the original mandate of AGOA. This includes substantive language expanding the authority of the Millennium Challenge Corporation to sign concurrent compacts with neighboring African countries to promote regional integration; and amendments recognizing the need for trade capacity building in sub-Saharan African nations to help overcome barriers to trade. The major international opportunity to engage on AGOA is the Annual AGOA Forum. The forum, mandated in the AGOA legislation, is an annual convening of U.S. and African government leaders, private sector actors, and members of civil society to discuss current trade and relations, new opportunities, and trade-related challenges. The forum takes place each September, often at rotating locations. The 2016 forum was held in Washington, D.C. on September 26.

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