Statecraft Podcast Episode Summary
Title: How to Fix Foreign Aid
Host: Santi Ruiz
Guest: Dean Carlin, Former Chief Economist at USAID
Release Date: July 31, 2025
Introduction
In the episode titled "How to Fix Foreign Aid," host Santi Ruiz engages in an in-depth conversation with Dean Carlin, the former Chief Economist at the U.S. Agency for International Development (USAID). Dean served in this pioneering role for two and a half years, during which he championed the optimization of USAID’s foreign aid expenditures to maximize effectiveness. The discussion delves into the structural challenges within USAID, the impact of congressional earmarks, the pitfalls exposed by the DOGE team’s intervention, and strategies for reforming foreign aid to make it both more efficient and resilient.
Role and Authority of the Chief Economist at USAID
Dean Carlin begins by outlining his groundbreaking role as the first-ever Chief Economist at USAID, describing it as akin to running a startup within a vast, decentralized bureaucracy.
[02:51] Dean Carlin: “We were running a startup within a 13,000 employee agency... focusing on how to use evidence more effectively to maximize impact for every dollar spent.”
Carlin emphasizes that his office aimed to shift nearly $2 billion toward programs with stronger evidence of effectiveness, collaborating closely with eager and supportive colleagues across various missions.
Congressional Earmarks and Funding Allocation
A significant portion of the conversation revolves around the complexities of congressional earmarks, which dictate substantial portions of USAID’s budget.
[06:34] Dean Carlin: “Something in the ballpark of 150-170% of USAID funds were double earmarked... completely legitimate to double dip.”
Carlin explains how double earmarking works, using examples where funds allocated for specific sectors (e.g., education) could overlap with other earmarked purposes (e.g., rigorous evaluations). This overlapping of directives often constrains USAID’s flexibility in funding decisions.
Optimizing Funding for Effectiveness
The discussion shifts to Carlin’s strategies for enhancing USAID’s efficiency. His office was divided into two teams: Evidence Use and Evidence Generation.
- Evidence Use: Focused on applying existing research to guide funding towards the most effective programs.
- Evidence Generation: Aimed at filling knowledge gaps through new evaluations and contributing to global development knowledge.
Carlin stresses the importance of not just conducting rigorous evaluations but also ensuring that USAID utilizes existing research to inform its policies and programs.
[12:08] Dean Carlin: “It's more effective to incorporate existing research rather than conducting rigorous evaluations for every program, which could discourage innovation.”
Cultural Change and Internal Challenges
Carlin discusses the internal roadblocks faced while attempting to foster a culture of evidence-based decision-making within USAID. Despite significant support from both Republican and Democratic appointees who valued efficiency, bureaucratic inertia and competing priorities often hampered progress.
[14:04] Dean Carlin: “We had a lot of support and eager people within USAID who wanted to use evidence to achieve more of their goals efficiently.”
He highlights the challenge of shifting a consensus-driven organization to prioritize cost-effectiveness and evidence without alienating stakeholders or stifling innovation.
Procurement Processes and Contractor Dynamics
A critical issue addressed is USAID’s reliance on a limited number of well-connected contractors, a legacy of legislative decisions from the 1980s aimed at outsourcing.
[38:26] Dean Carlin: “A small set of contractors became highly skilled at dealing with USAID's bureaucratic requirements, leading to a few dominant players in the market.”
This concentration limits competitiveness and potentially inflates costs, as new or smaller organizations find it difficult to navigate the complex procurement process, resulting in lesser oversight and accountability, especially in challenging environments like Afghanistan.
Impact Evaluations vs. Accountability
Carlin differentiates between Impact Evaluations and Accountability Measures. His office focused on understanding the causal effects of interventions (e.g., randomized controlled trials) rather than merely auditing whether funds were properly spent.
[33:11] Dean Carlin: “Impact evaluations determine what changed because of the intervention, whereas accountability measures ensure that programs are delivered as intended.”
This distinction underscores the need for rigorous assessments to inform future policies rather than solely ensuring financial accountability.
Lessons Learned and Future Vision
Reflecting on the growth of development economics, Carlin underscores the exponential increase in randomized controlled trials and the importance of leveraging existing research to inform policies.
[39:28] Dean Carlin: “There are now about 4,000-5,000 randomized control trials in development... enabling much better policy formation based on aggregated evidence.”
He advocates for a future USAID that:
- Simplifies Operations: Focuses on effective, evidence-based interventions tailored to local contexts.
- Leverages Local Governments: Aims to enhance the efficiency of local institutions rather than being a dominant force in every country.
- Finds Common Ground: Builds bipartisan support by aligning foreign aid objectives with universally recognized goals.
Critique of the DOGE Intervention
The episode critically examines the DOGE team's approach to dismantling USAID, highlighting a lack of evidence-based decision-making.
[63:50] Dean Carlin: “DOGE never evaluated the actual impact of the programs they cut; they merely focused on reducing spending without assessing the benefits foregone.”
Carlin argues that DOGE’s actions led to indiscriminate cuts that undermined USAID’s effectiveness without a coherent strategy to maintain beneficial programs.
Soft Power and Measurement Challenges
Addressing USAID’s role in advancing American soft power, Carlin acknowledges the difficulty in measuring its impact compared to tangible interventions like cash transfers.
[58:31] Dean Carlin: “Measuring soft power is akin to measuring the impact of a relationship rather than a direct intervention. It’s complex and multifaceted.”
He expresses skepticism about relying solely on soft power as a defense for USAID, advocating instead for focusing on tangible humanitarian and development outcomes.
Vision for a Reformed USAID
In envisioning a revitalized USAID, Dean Carlin outlines several key priorities:
- Emphasize Evidence-Based Programs: Adopt interventions with proven efficacy and continuously adapt based on evidence.
- Leverage Local Institutions: Strengthen local governance and institutional capacities to ensure sustainable impact.
- Maintain Bipartisan Support: Structure aid programs around universally supported goals to safeguard against political volatility.
- Simplify Procurement Processes: Reduce reliance on a handful of contractors by streamlining procurement to encourage broader participation and cost-effectiveness.
- Innovate Responsibly: Foster a culture that balances risk-taking with accountability, allowing for scalable and impactful innovations.
[57:57] Dean Carlin: “USAID needs to be simpler, leverage local governments, and focus on common ground that has bipartisan support.”
Conclusion
The episode concludes on an optimistic note, with Carlin advocating for a USAID that is leaner, more effective, and deeply integrated with local governance systems. By prioritizing evidence-based interventions and fostering bipartisan support, USAID can overcome its vulnerabilities and enhance its impact on global development.
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This summary encapsulates the critical discussions and insights from the "How to Fix Foreign Aid" episode of the Statecraft podcast, providing a comprehensive overview for listeners and those interested in the mechanics of policy-making within international development.