Making a Better Case for Foreign Aid

Nilima Gulrajani

LONDON – Foreign aid is being slashed across the Global North, nowhere more so than in the United States. Within his first month back in the White House, President Donald Trump dismantled the US Agency for International Development (USAID) and froze foreign aid, calling it wasteful and fraudulent. The United Kingdom recently followed suit, trading off its international-aid budget for higher defense spending.

Advocates of official development assistance (ODA) rightly argue that it saves lives and serves national interests. But that does not change the fact that the system has been hemorrhaging credibility and resources for years and lacks a convincing narrative.

The upcoming United Nations Conference on Financing for Development, set for mid-2025 in Seville, Spain, will likely reiterate the long-held but rarely met target for high-income countries to spend 0.7% of their gross national income on ODA. What is really needed, however, is an independent commission on the future of the international aid system that can forge a new political consensus on the rationales for foreign aid, while also articulating a vision for the post-aid world many are now demanding. Without an effort to recalibrate and reset foreign aid, the system will face death by a thousand cuts. Its ambition of catalyzing sustainable development will be left unrealized, and an eighty-year international cooperation regime will likely collapse with no robust alternative in its place.

The modern global aid regime has looked brittle since the 2008 financial crisis. But America’s withdrawal is a massive blow to a system whose purpose is laid out in Article 55 of the UN Charter: “the creation of conditions of stability and well-being which are necessary for peaceful and friendly relations among nations.” The US was the foremost champion of these goals: in his 1949 inaugural address, President Harry Truman called for a “bold new program” for sending technology and capital to help nations afflicted by poverty, disease, and misery.

By the 1950s, America was actively promoting foreign aid as a universal obligation, both to avoid shouldering the financial burden alone and to find common cause with anti-communist allies. That led, in 1961, to then-US President John F. Kennedy creating USAID. A decade later, nearly all European countries had some kind of aid program, and being a donor had become synonymous with being a modern, “developed” country.

Even so, spending flagged almost immediately. To reboot donor support, in 1968, the World Bank invited former Canadian Prime Minister Lester B. Pearson to lead an independent commission tasked with finding a new rationale for foreign aid. In other words, the Pearson Commission sought a persuasive argument for why affluent countries beset by domestic challenges should be concerned about the plight of low-income countries.

The question remains relevant today. Even before Trump set his sights on US foreign aid, the rationale for such assistance had become increasingly tenuous. In recent years, Global North countries have directed their aid budgets toward a range of foreign-policy priorities, many of which follow the letter but not the spirit of ODA, as defined by the OECD’s Development Assistance Committee. This includes directing development assistance to Ukraine, a middle-income country which in 2023 became the largest-ever recipient of foreign aid, while the share of aid reaching the poorest countries had declined, and hosting refugees at home, which now consumes at least one-quarter of the aid budget in seven countries. With other public-policy priorities gobbling up resources earmarked for development assistance, the OECD’s claim that a record amount of foreign aid was spent by donors in 2023 rings hollow.

Meanwhile, foreign aid has become an easy target in high-income countries that face growing fiscal deficits, cost-of-living crises, and new security concerns. Right-leaning governments, in particular, often portray this foreign assistance as inefficient and ineffective. In 2024, seven national governments and the European Union announced $17.2 billion in cuts to ODA to be implemented sometime between 2025 and 2029. Now, the Trump administration has slashed some $60 billion in foreign assistance, while the UK will shrink its aid budget by roughly £6 billion ($7.6 billion) per year. Given that the world’s second-largest donor, Germany, spent $27 billion less than the US on foreign aid last year, it will be difficult for any country to fill such a large gap. And the UK’s decision suggests that there is little interest in picking up the pieces left by Trump’s wrecking ball, likely leaving us at the tipping point of “peak aid.”

Many have suggested using this foreign-aid crisis as an opportunity to reduce African dependency on politicized external finance through changes to global trading rules and by lowering the cost of capital, or by building a new cooperation paradigm focused on global public investment.

Yet in his drive to “Make America Great Again,” Trump has shown no desire to advance such alternative visions and little understanding of the value of the soft power that USAID spent decades trying to cultivate. This is why the elimination of USAID cannot be described as a normal merger between the diplomatic and development branches of government, as in Canada or the UK, but only as an attack on America’s role as global benefactor. This offensive comes with few domestic political consequences but with a high immediate human cost for those reliant on aid-funded goods and services.

America’s abrupt inward turn underscores the need to reimagine a global aid system built for a world order that no longer exists. One way to do this is to commission an independent, high-level review of the global aid regime that can articulate a new paradigm that does not rely on the benevolence of any single donor. A Pearson Commission 2.0 could outline several new rationales for international transfers, present alternative financial and policy frameworks, and explore new global institutional arrangements to minimize aid dependency and reduce fragmentation, while still providing for the most vulnerable and helping future generations prosper.

As these massive aid cuts take effect, the risk of contagion is real. Unless the international community undertakes a systematic effort to understand the root causes of the current crisis and explore plausible solutions, countries still investing in ODA may start to worry that they are just rearranging the deck chairs on a sinking aid ship.

Nilima Gulrajani is Principal Research Fellow at the Overseas Development Institute, where she leads the Donors in a Post-Aid World program, and an associate at Trinity College, University of Toronto.