If you visit the outskirts of Nairobi, Kenya, you will come across Kibera, one of the largest slum dwellings in the world. Housing approximately 250,000 people across an area of only 2.5 square kilometres, you will find residents living in makeshift houses, amid extreme poverty, often without access to running water, electricity, sanitation, healthcare and adequate food provisions.
If you take a short car ride from Kibera, you will also come across the majestic UN Office in Nairobi, housing many of the UN agencies. In Nairobi, you will also find an all-encompassing NGO presence, often working on development projects and funded by international donors.
On the other side of the world, in classic Trumpian fashion, one of the first things President Donald Trump did upon coming to office was to announce a 90-day halt on foreign aid that would affect all financial support distributed by the United States Agency for International Development (USAID). He, then went onto dismantle 80 per cent of USAID’s programmes altogether, considering them to be not serving and in some cases, even harming the national interests of the United States.
It is to be said that the devastating impact of this decision would be felt far and wide, at least in the short term. The country was until recently, the world’s largest aid donor, spending a gargantuan $68 billion in 2023. The US also contributed almost half of all global food aid and spent more than $10 billion on health aid around the world in 2024. Many fear that these aid cuts will undo decades of progress against health crises such malaria, Ebola, tuberculosis and malnutrition.
In the past, the country’s PEPFAR programme has been notably successful in the fight against HIV/AIDs across the globe. Yet, these aid cuts aren’t just a US phenomenon either. Developing countries around the world have been cutting back aid as they face new pressures at home and come to terms with a new global order. It won’t be wrong to say that we are at the helm of a post-aid era.
To determine what a post-aid era would look like, some fundamental questions need to be asked.
Why is it that despite a large donor and NGO presence nearby, places like Kibera in Africa with their accompanying poverty and deprivation still exist in the twenty-first century? Has development assistance failed in its primary goal of unleashing development? When Princeton professor Angus Deaton was awarded the Nobel Prize in the Economic Sciences in 2015 for his analysis of consumption, poverty, and welfare, his less-celebrated view that aid cannot help poor countries escape poverty was the subject of much controversy and contention. Yet, despite his all sweeping, generalising statement, there is much wisdom in his view.
Let’s first look at growth statistics. The jury is still out there on the relationship between economic growth and foreign aid. William Easterly of NYU demonstrates that as the influx of aid increased in Africa through the 1980s and 1990s, African economies were faring worse than ever. This effect wasn’t distinctly an African phenomenon either. Many economists contended that an influx of foreign aid didn’t seem to lead to economic growth in countries around the world. Rather, lots of foreign aid coming into a country tended to be correlated with lower economic growth.
Arvind Subramanian and Raghuram Rajan found that countries that received less aid, tended to have higher growth, while those that got more aid, had lower growth. Axel Dreher, professor at Heidelberg University found no robust evidence that aid influenced growth. Burnside and Dollar, on the other hand, argued that aid positively impacted growth in developing countries with good fiscal, monetary, and trade policies but had little effect in the presence of poor policies.
What is perhaps less controversial is the way foreign aid interacts with local politics to undermine governance and accountability in recipient countries. According to Ken Opalo, a political scientist at Georgetown University, foreign aid creates the wrong incentives for those in power and weakens the relationship between the government and the governed. Opalo contends that aid partially causes ‘the atrophy of elite ambition’ which hampers economic progress, and it also makes the elites more responsive to donors than to their citizens.
In a similar vein, Todd Moss and coauthors corroborate that aid weakens governance and the development of good institutions in poor countries. It is perhaps unsurprising because historically governments that are less dependent on domestic sources of revenue, such as taxation, tend to be less accountable to their citizens and thus face weaker incentives to foster efficient
public institutions.
The statistics are even more haunting. As per 2009 data, two-thirds of the aid disbursed by the average official aid agency went to corrupt governments. The numbers for democracy were even more shocking, as 78 per cent of the aid from the average agency was traced to autocratic countries. While many in the rich world justify this by stating that the poorest parts of the world also happen to be authoritarian and corrupt, economist Dambisa Moyo passionately argues that this practice stems from a ‘authoritarian paternalistic mindset’ which considers the political freedoms of the poor to be of no great significance. Furthermore, many development scholars argue that corruption and politically motivated capture significantly curtail the effectiveness of aid.
Ryan Jablonski, associate professor of political science at LSE, demonstrates that governments often use aid to fulfil their political agendas. His research is particularly compelling as he demonstrates that the distribution of aid funds in Kenya is biased in favour of an incumbent’s political supporters. This, he believes happens due to the inefficiencies in aid allocation.
What should a post-aid development consensus look like? Stepping away from foreign aid doesn’t imply leaving poor countries to their own devices. Rather, it implies an understanding of the fact that historically the aid regime as we know it has done more harm than good, and there are better, less destructive ways to help the developing world. As Nancy Birdsall and coauthors argue, it also implies an acknowledgement of the fact that development can only come when poor countries themselves take charge, and while rich countries can aid them in the process, they can only play a limited role.
It also implies an understanding of the fact that both foreign aid and increased market openness by the developed world are not magic bullets, rather they are constrained in their ability to foster growth in the poorest parts of the world.
We need to first take a step back and understand why some countries remain poor while others turn out to be rich and systematically target the specific barriers poor countries face in escaping poverty. The developed world needs to transition away from capacity substitution and invest in long-term capacity building and accountability and strengthen inclusive institutions in poor countries.
Years of research within development show that locally led development may be the answer. And it is important to understand that greater localization doesn’t just imply transferring the power to make decisions and design development programmes from technocrats situated in cities such as London, Washington, Brussels or Paris to partner governments and local communities. It also implies an understanding that we need to move beyond symbolic and tokenistic actions and enable authentic country ownership where national governments are the helm of policy decisions and local stakeholders are at the forefront of all phases, be it outlining priorities, project design, delivery or evaluation of foreign aid sponsored programmes.
We have spent years chasing the illusion that development can be engineered from afar. It can’t. True development comes not from ‘templates of international best practice’ and one-size-fits-all solutions, but rather from listening to and working together with the people we want to help. That involves grappling with the local context, national institutional constraints, power dynamics, social networks, political and economic forces, and socio-cultural issues, and acknowledging that our development approach needs to be adaptive to the circumstances on the ground, aligned with national political economy constraints and flexible in the face of emerging situations.
The post-aid era is not a retreat from development but a chance to build something more sustainable, equitable, and truly transformative.
The writer is a graduate of the London School of Economics and Political Science. She tweets/posts MaheenRasul2 and can be reached at: https://www.maheenrasul.com/