The story of USAID’s swift demise is well known. When Donald Trump became US president in January, subverting the institution became an easy target, and by July 1, America’s bilateral aid agency had virtually ceased to exist. The way it was done was chaotic, arbitrary, cruel and incredibly wasteful. An avalanche of criticism described how the country was losing its main tool for projecting soft power and garnering friends. Democratic Party politicians have led the opposition but many who had been working on USAID programs for decades were also very vocal, including those who had made development careers in government or with American NGOs, consulting firms, contracting companies and universities.
What seems to have gone unnoticed in the commentary surrounding Trump’s assault was the profound unease that had been underlying the record of foreign assistance for many years. American aid programs have been disbursing tens of billions of dollars a year for decades but in many cases the actual impact has been hard to identify and even harder to measure. Since development aid became a serious business after WWII, money has gone mostly to countries that have stubbornly remained poor, become nasty dictatorships, turned into paradigms of highly concentrated wealth or become bastions for military elites and their friends. Prime examples include Somalia, Pakistan, Haiti, Egypt and the Central African Republic.
Of course many reasons complicate political and economic reform, not least the lasting effects of colonialism and proxy conflicts. But US foreign assistance has become a good example of the frustrating difficulties facing Western institutions that wish to stimulate economic growth and deliver basic services to the poor in developing countries. That has been recognized by many articulate critics, including some from within the development industry. Even the World Bank these days talks about a “middle-income trap” of slow or stalled economic expansion in which practically all countries that had once been considered growth models now seem to be stuck.[1]
Globally, the development industry spent some $226 billion on Official Development Assistance (ODA) in 2023, of which US foreign aid represented some $68 billion. Other major bilateral donors included Japan, Germany, Britain, France and recently China, but multinational banks and a plethora of development finance institutions were also included. Those other donors have all found similar frustrations. Why?
The postwar game of “catching up” to Western countries since the Cold War has many structural problems and frequently been faced with unfair global business environments. But the main obstacle to rapid shared growth in developing countries (“inclusive prosperity” is the preferred phrase these days) is the dominance of self-serving recipient governments and their crony elites.
Aid agencies almost never cancel programs to specific countries due to gross government incompetence, however. Foreign assistance is typically dressed up in diplomatic formulae whose driving construct is the existence of a seamless partnership between the donor agency or bank and recipient government ministry or agency, based on high-level agreements and protocols.
Donors have constructed serious bureaucracies to identify, design and manage projects and programs, to procure goods and services, and to monitor and track expenditures over the life of each project. Training, technical assistance and evaluations are often important parts of those packages (which, by the way, can be wonderful pastures for Western professionals and academics to graze in). For donor agencies, the overriding imperative is to spend allocated money more-or-less on time while also searching for more fields to conquer. That is crucial for the survival and health of the donor: If allocations are not spent, the ultimate sources of money (usually parliaments or super-ministries or both) begin to question the need for future funds.
Development agencies constantly work to advance more projects and activities in both their standard partner countries and new countries, and also develop new areas of expertise to broaden their portfolios. Even though plates are usually full, there always seems room for more activities, which can create overlapping donor initiatives and duplications, something aid critics call “fragmentation,” which can confuse and overwhelm beneficiary governments, whose capacities are typically already stretched thin.
The fact that any kind of development aid almost certainly results in waste and inefficiency isn’t in itself a reason to stop it. But the tendency does contribute to another major fixation among donors, the strict control of funds and maintenance of squeaky-clean images. In environments where corruption is rife, immense efforts are exerted to ensure that “no mud sticks to us.” That results in thickets of zero-embarrassment safeguards in procurement, financing agreements, contracts, covenants, and evaluation and oversight arrangements. Donors mobilize external communications departments to ensure no awkward news leaks and that the desired image is spread throughout the development world.
Partly to justify their large budgets but also show they are on top of things, aid donor agencies have become enthralled with numbers, indicators and the veneer of technical objectivity. It’s as if working in development requires a kind of scientific clarity for projects and programs, and various models have been devised to track and assess interventions and derive numerical indicators and sub-indicators for every goal and objective. Because USAID had become one of the leading lights in this, it came as a bit of a surprise to read some self-criticism in 2010 from the former USAID administrator Andrew Natsios: “Those development programs that are most precisely and easily measured are the least transformational and those programs that are the most transformational are the least measured.”
Belatedly responding to considerable criticism in 2021, USAID announced a policy aimed at increasing “localization,” direct funding to NGO and community organizations in recipient countries and increasing local leadership in the design and implementation of American aid programs. Based on what should have been obvious—that local actors should be at least partly in control of local development—the programmatic goal was to raise the amount of local funding from a paltry 5 percent to 25 percent. In 2024, USAID announced that it had reached roughly 12 percent despite stiff opposition because of the agency’s long-standing concern about control and preference for American contractors. Still, one would have thought USAID and other donor funds should have long ago been passing through more local institutions to develop their own capacities for managing service delivery and community development.
Other foibles of development agency bureaucracies include tendencies toward creating elitist bubbles inside recipient countries, a penchant for lengthy texts laden with the latest buzzwords and development jargon; a predilection for conferences, seminars and other acts of congregation to advertise themselves and mark their presence in donor arenas; and preoccupation with apparent change and trendy concepts.
In just two months during 2018, for example, 21 world development summits and global conferences took place, each of which had hundreds if not thousands of attendees, working out to a rhythm of one mega-event every three days. Over the same period, there were also untold thousands of smaller regional and country seminars, technical workshops, symposiums, roundtables, panels and colloquia, all on some aspects of development.[2]
In short, Western donor agencies have been smothered under their own attempts to appear relevant and on the cutting edge of development. Institutional delusions of grandeur have increased dramatically in the last 20 years with the adoption of the UN’s Sustainable Development Goals, climate change and renewable energy imperatives, and exhortations for improved aid effectiveness at all levels. Those trends have been absorbed into huge and complicated development aid mechanisms that are best designed for Carrying On Carrying On, steam-rolling bureaucratic machines with large chunks of money that must be designed and budgeted year after year after year.
Critics call the phenomenon “moving the money,” something even donors themselves have deplored. Famously, World Bank President Paul Wolfowitz proclaimed in 2006 that managers would in the future be rewarded “as much for saying no to a bad loan as for getting a good one out the door,” but there was no follow up and nothing more was heard of the bank’s attempts to change its internal imperative to spend culture.[3]
Donor behavior has also been swayed by ideology and a sense of Western superiority. Perhaps the best example took place in the 1990s, when triumphant neoliberal prescriptions for reforming the economies of former Soviet countries were prescribed wholesale by USAID and other donors, quickening the destitution of large populations, and helping fuel a backlash that is still felt today, not least in support for Russian President Vladimir Putin.
What frequently confuses the public’s perception of foreign assistance is that humanitarian aid is usually lumped together with donors’ larger economic and social development efforts. The aim of saving lives and providing for the needs of those suffering from wars, natural disasters and civil strife gives humanitarian aid visibility and sympathetic public support, compared to the more complex world of official development assistance that aims for more programmed and systematic investments, loans and technical assistance to governments for shoring up long-term economic and social advancement.[4] Humanitarian aid efforts are usually much shorter than development initiatives, although there are cases, such as in Somalia, where it can extend over decades.
Much of the criticism of Trump’s abrupt cancelling of American health programs in Africa has been centered on the virtual death sentences for many who suffer from treatable illnesses such as HIV, malaria and TB. There are no easy ways out of such humanitarian quandaries, but many observers agree that a first step would be to clearly split humanitarian work budgeting from mainstream development aid.
What of the countries on the receiving end of donor largess? For development aid (as opposed to humanitarian assistance) recipients are almost always host governments that are nominally equal partners, with a relevant ministry or agency as the focal point for infrastructure projects, health, education and other assistance. That is where things especially tend to go wrong, mainly because governments want the money but are loathe to bend to donor stipulations, impositions, and bespoke and intrusive technical advice. A major result is the fostering of symbiotic dependency that encourages both donors and recipients to just keep on playing the same game. The beneficiary wants the money to keep coming with the fewest strings attached, and the donor—desperate to maintain good relations with its “development partner”—agrees to compromises that keep the funds flowing even though everyone knows the agreements contain lots of fluff and very little in the way of effective targeting.
Recipient countries naturally much prefer grant aid to loans that must eventually be repaid, but America is one of the sole donor countries whose programs are funded mainly by grants. Elsewhere, multi-year program loans dominate foreign assistance allocations, especially from the World Bank and other development finance institutions, although small repayment capacities and fear of credit default have increasingly become acute limiting factors.
Technical and financial arguments can still be made that specific kinds of foreign assistance efforts in particular countries make good sense, but it is hard to promote such programs in the face of stiff competition from the plethora of bureaucratic interests within donor structures as well as outside pressures from corporations, foundations and NGOs that have their own pet programs.
In any case, the fact is that official development assistance of the kind USAID dispersed is becoming less and less relevant, with direct foreign investment, private capital blending, leveraging remittances and trade-plus-finance deals becoming dominant levers for future international development. However, cash-strapped poorer countries find it difficult to participate in such newer forms of financing, and the benefits must be shared with private sector actors not known for their altruism. Although humanitarian and crisis aid remain at least somewhat popular in donor countries, it is increasingly harder to sell standard development assistance to electorates in the West. Trump’s killing of most American development aid—however disastrous for projecting soft power or for those who have made livings from it—may be simply going with the general trend.
All this is not to say that all foreign aid is worthless. Some efforts have been very successful, especially those that are more traditional, providing basic services, sound legal frameworks, capacity-building (both institutional and personal) and basic infrastructure development. That’s especially true for programs designed to build fiscal sobriety and local resource generation. But many in the industry now see such work as old-fashioned compared, for example, to more trendy approaches such as climate change adaptation and mitigation, even though the older approach promotes the building of dynamic economies.
A return to basic approaches is needed when it comes to Western aid aimed at poorer countries. Less cluttered initiatives would also be welcome, emphasizing self-reliance and rewarding fiscal discipline and restrained borrowing, especially to curtail over-indebtedness for the sake of ridiculous vanity projects.
Egypt is a good illustration of a profligate approach, where the government has recently taken out huge loans for high-tech, high-speed railways and the world’s longest monorail system, as well as gleaming office towers, an enormous presidential palace and a defense ministry much larger than the Pentagon. As a result, it is now required to devote over 50 percent of its annual budget to just repaying the interest on outstanding debt. Egypt as well as Pakistan are also examples of developing countries forced to rely on what seems like endless IMF debt restructuring to stave off insolvency. The IMF has granted Pakistan nine loan facilities in less than two decades.
Could Trump’s dramatic cuts to American foreign aid shake things up in Washington and wake other donor countries to the reality that no amount of concessionary funding from abroad is a substitute for a country’s own responsibility for development? The development industry has become so complex, and aid agencies so hooked on moving money that without such an impetus, no amount of reform would have much impact.
With a different American administration in four or eight years, perhaps wise souls will oversee a much slimmed down, more effective, bipartisan and ideologically neutral foreign assistance agency that could also serve as a model for other donors. However, resisting the temptation to simply resurrect the same kind of bloated nonsense seen in recent foreign aid programs would be highly challenging.
So, is it not possible, starting now, to prepare for the future by contemplating something leaner and better?
[1] These include major economies such as Brazil, India, and Turkey. See World Bank, 2024 World Development Report: worldbank.org/en/publication/wdr2024.
[2] David Sims, Development Delusions and Contradictions. Cham, Switzerland: Palgrave Macmillan, 2023, p. 158.
[3] Michaela Wrong, It’s Our Turn to Eat: The story of a Kenyan Whistleblower. London: Fourth Estate, 2009, p. 263.
[4] The difference between humanitarian aid and official development assistance is well described by the Humanitarian Coalition: humanitariancoalition.ca/from-humanitarian-to-development-aid.
David Sims is an international consultant with over 45 years of experience in developing countries. He has advised governments in Asia, Africa and especially the Middle East on economics and urban development, about which he has written extensively. His latest book is Development Delusions and Contradictions: An Anatomy of the Foreign Aid Industry (Palgrave Macmillan, 2023). He resides in Egypt and France.
The opinions in this article are the author’s and do not necessarily reflect the positions of Compass or the Institute of Current World Affairs.
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