Foreign Aid Looks Good Now That It's Gone

Foreign Aid Looks Good Now That It's Gone

May 24 , 2025. By Jeffrey Frankel ( Jeffrey Frankel is a professor of capital formation and growth at Harvard University, who previously served as a member of President Bill Clinton’s Council of Economic Advisers. )

The stakes could not be higher as foreign aid faces corrosion under the current US Administration. Aid efforts have fortified US soft power post-Cold War, enabling global leadership and promoting global stability. In this commentary provided by Project Syndicate (PS), Jeffrey Frankel, professor of Capital Formation and Growth at Harvard University, and a research associate at the US National Bureau of Economic Research, warned that the shift in US policy risks reversing these gains, potentially to the strategic advantage of emerging global powers like China.

When Joni Mitchell sang the line "Don't it always seem to go, that you don't know what you've got 'til it's gone" in 1970, she was lamenting the destruction of the environment, but the sentiment applies to many issues. Today, we can add official development assistance (ODA) to the list.

For some 80 years, the United States (US) spent more on humanitarian assistance, economic development programs, and other types of foreign aid than any other government. In the 2023 fiscal year, the US government disbursed 72 billion dollars, with much more coming from private NGOs and individual citizens.

But, the US does not spend the most as a share of its income. By that measure, the US contributes only 0.24pc, a quarter of what northern European countries give, putting it in 24th place globally. Foreign aid accounts for a mere one percent of total US government spending, a far cry from the 25pc many Americans believe the US allocates.

Many Americans, including some prominent scholars, believe that foreign aid has a negligible impact, with some, such as Dambisa Moyo and William Easterly, arguing that it does more harm than good. Critics highlight examples of misguided aid programs falling prey to mismanagement, government overreach, or corruption, including Vietnam in the 1960s, Zaire in the 1980s, and Afghanistan in the 2000s. While some economists, such as Paul Collier, insist that foreign aid is useful, especially when certain conditions are met, the dominant message seems to be that foreign aid is suspect.

But now foreign aid is gone, or at least going fast. Soon after Donald Trump returned to the White House, his administration, and, in particular, his unelected billionaire crony Elon Musk, began frantically dismantling the US Agency for International Development (USAID). Almost immediately, reports began flooding in. What was being defunded were often life-saving and high-return projects.

Since George W. Bush launched the President's Emergency Plan for AIDS Relief (PEPFAR) in 2003, the program has saved millions of lives from HIV and AIDS, especially in Africa. The President's Malaria Initiative has prevented two billion cases of malaria over the last 20 years, and halved the mortality rate.

Gavi, the Vaccine Alliance, which receives US government support, has vaccinated more than a billion children against measles, diphtheria, tetanus, whooping cough, and other potentially fatal diseases, preventing an estimated 19 million deaths. Polio has been eliminated in all but two countries, and smallpox has been eliminated everywhere. These efforts have contributed to a steep decline in child mortality globally. Today, four percent of children die before their fifth birthday, compared to 40pc a century ago.

Foreign aid also enabled the development and diffusion of improved crop varieties, as well as synthetic fertilizers, new pesticides, and modern irrigation, in the second half of the 20th Century. This Green Revolution in agriculture doubled cereal crop yields in Asia; enabled many countries, such as India, to become self-sufficient in food; and raised incomes in many developing economies. This contributed to a reduction in infant mortality by two to five percentage points, from a baseline of 18pc, in the developing world.

The US Marshall Plan achieved spectacular success in helping European economies recover from World War II, and in laying the groundwork for 80 years of relative global peace and prosperity. More recently, foreign aid has played a key role in enabling Ukraine to withstand the worst attack on a European country's sovereign territory in the postwar era.

The US reaps massive benefits from the aid it provides. One need only recall the COVID-19 pandemic to see that participation in global health initiatives is not pure charity, especially when it comes to infectious diseases like Ebola, HIV/AIDS, and Tuberculosis.

More fundamentally, international assistance, including for causes like disaster relief and support for human rights and democracy, has been a pillar of US soft power. That soft power has been at least as important as military might, which costs far more to maintain, in sustaining US global leadership since the Cold War. But now, the Trump Administration is assiduously undermining it, to China's benefit, no doubt.

The effect of foreign aid on economic growth is difficult to quantify, because so many other causal factors are involved. Much of US aid is designed to advance political or military objectives. The top recipients of US foreign aid, after Ukraine, are Israel, Jordan, and Egypt.

Nonetheless, we know that reduced morbidity and mortality and improved nutrition can boost an economy's performance. It thus stands to reason that foreign aid is a contributor to development, even if not the most important one. The US undoubtedly benefits from having more developed, higher-performing trading and commercial partners.

Why, then, has the pessimistic view of foreign aid dominated public discourse for so long?

One explanation is that the pessimistic view of everything, especially what governments do, has prevailed for years. A 2018 survey showed that a substantial majority of people in rich countries believed that the child-mortality rate in poor countries had either risen or stayed the same over the previous 20 years; in fact, child mortality had been halved. And a whopping 80pc of people in rich countries believed that the share of people in extreme poverty had either plateaued or risen, even though it fell steeply from 1990 to 2013.

If people are so wrong about these trends, how can they possibly know about foreign aid's role in driving them?

Of course, foreign aid has its flaws and limitations, including instances of inefficiency, mismanagement, or unintended side effects. But, whatever the limitations of foreign aid in the past, it is clear that Trump's destructive approach is making things far worse.

PUBLISHED ON May 24,2025 [ VOL 26 , NO 1308]