The retreat from aid is a costly mistake

Washington Post

17-06-2025

It has been easy to dismiss efforts to raise the prospects of the world's poorest as an abject failure. The United Nations reported 712 million people living in extreme poverty in 2022, 23 million more than in 2019. The share of the world's population suffering hunger rose from 7.9 percent to 9.2 percent over the period. And 2.1 billion people still cook with dung, wood, charcoal and the like.
But, if you zoom out, the track record of some of the world's poorest nations in improving the living standards of their own people has been surprisingly robust — better than anyone could have guessed just a quarter-century ago, when the United Nations laid out its Millennium Development Goals.
'There has been a tremendous amount of progress,' noted Esther Duflo, the economist who co-directs the Abdul Latif Jameel Poverty Action Lab at the Massachusetts Institute of Technology. 'Often without much outside money.'
Much of that progress is at risk. Still picking themselves up from the devastation of the covid pandemic, and trying to work themselves out of a mountain of debt, the world's low-income countries are now being walloped by President Donald Trump's trade war. Trump's trade policies will likely dim the world's economic prospects, increase uncertainty, trigger tighter global financing conditions and weigh on demand for commodities — the poor world's main export.
As the World Bank Group's chief economist Indermit Gill noted this month, 'Outside of Asia, the developing world is becoming a development-free zone.'
To top this all off, some of the world's most affluent countries have decided they have had enough with development aid. It's not just the Trump administration, which tossed USAID into the wood chipper. Britain cut its aid budget to 0.3 percent of its gross domestic product, from 0.7 percent before the pandemic. Belgium, Finland, France, Germany, the Netherlands, Norway and Sweden have also cut their development assistance budgets.
Justifications for the cuts include the emergence of other fiscal imperatives, such as the need for additional defense spending. But they are often wrapped up in a blunt proposition, most famously articulated by Elon Musk, formerly of the Department of Government Efficiency: that foreign aid is either wasted or frittered away by fraud.
This is not only cynical posturing. It is based on the popular-yet-flawed proposition that aid fails because it cannot make poor countries un-poor. This ignores how aid actually improves the lives of people in the world's poorest countries. Leaders in Washington, London, Paris, Helsinki, Amsterdam, Oslo and Stockholm might want to observe what the world stands to lose if the efforts to improve the prospects of the poor were to falter.
Consider maternal mortality. In Malawi, one of the poorest nations on earth, at the turn of the century 942 mothers died for every 100,000 births. By 2016, the number had fallen to 451. In Mongolia they declined from 200 to 49. Between 2000 and 2023 life expectancy at birth in sub-Saharan Africa increased from 52 to 63 years. In Bolivia, the share of adults who completed at least primary education rose from 51 percent to 76 percent over this period. Across all low-income countries, the share of people aged 15-49 with HIV declined from 2.7 to 1.7 for every 1,000 uninfected people.
Regarding poverty, the share of people living on less than $3 per day (in 2021 dollars at purchasing power parities) across the set of low-income countries declined from 68.8 percent in 1995 to 51.8 percent in 2014. Since then, however, abject poverty's footprint has rebounded to 55.4 percent of the population.
The most important upshot from these numbers is that while there still is a long way to go to provide for a decent living for hundreds of millions of destitute people around the world, there is a plausible path to get there. While most of the progress has been funded from the budgets of low-income countries themselves, disappearing aid will make their road harder. Aid plays an indispensable role, providing the sorts of things that poor countries cannot. It will be difficult, for instance, for governments in sub-Saharan Africa to replicate PEPFAR, launched in the George W. Bush administration to provide broad access to antiretroviral drugs, saving tens of millions of lives from the scourge of AIDS.
It's easy to point the finger at 'waste and fraud.' One reason it is difficult to assess the value of aid programs is that their effectiveness is not usually measured carefully. Another is that the goals are often muddled, mostly by donor governments that want to please a variety of constituencies — such as, say, U.S. farmers who see food aid as a tool to increase sales.
'Corruption and waste is maybe a fourth-order issue,' said Abhijit Banerjee, the other co-director of MIT's Poverty Action Lab.
But there are numerous, well-documented examples of how aid can help the prospects of the poor. Indeed, the broad story of aid, in recent decades at least, has been a felicitous one. The effort to help millions out of destitution cannot be sacrificed to the flawed idea that spending money on the poor somehow doesn't work.