Last Updated on January 25, 2026 by Chicago Policy Review Staff
If you were born in the year 1820, your odds of living in extreme poverty, defined as surviving on less than $1.90 per day in today’s dollars, were greater than 75%. Today, that likelihood is just 10%. The world has made significant improvements in quality of life over the past few centuries, thanks in part to coordinated efforts by developed nations to contribute funds to the developing world and by international organizations that have taken on these challenges. Despite this positive track record, the developed world is shifting its stance on foreign aid — more formally referred to as foreign assistance. Earlier this year, USAID closed its doors, signaling a new era of foreign aid. This trend is not limited to the United States. Other high income countries — including Belgium, France, the Netherlands, Sweden, Switzerland, and the United Kingdom — have begun cutting their budgets for foreign aid, either directly following the United States’ lead or realigning strategic priorities, such as allocating more funds toward defense. To remain an effective force for positive change and development, foreign aid must adapt to the new environment or risk becoming obsolete.
The foreign aid community did not ask for a restructuring, but now that its funding is set to decrease by 15-22%, it faces a period of reckoning. Perhaps the best corroboration of foreign aid’s efficacy is the drastic effects these cuts have had already — recent budget proposals in the United States may put as many as 1 million African lives at risk. The current structures were built in the 20th century and tend to be bureaucratic and fragmented across agencies, and they are too often donor-driven rather than recipient-owned. To survive this period, the foreign aid system must shift its stance to sustainable, long-term projects, led by local communities.
The modern foreign aid system first arose in response to reconstruction needs following World War II and continued to evolve throughout the Cold War. While the United States has been the most significant volume contributor to foreign aid, it has been a global effort — in 1970, the United Nations set a contribution target of 0.7% of countries’ gross national income. Although few countries have consistently reached this target, the benefits of foreign aid are clear. Developmental programs focused on global health have played a key role in halving the number of people living in extreme poverty since 1990. Examples include the President’s Emergency Plan for AIDS Relief (PEPFAR) and emergency assistance to combat COVID-19. With greater access to healthcare, child mortality rates dropped, life expectancy rose, and diseases such as AIDS and malaria were abated. Other, less obvious benefits include educational and environmental improvements, as well as trends toward democratic institutions in recipient countries. Overall, the percentage of the global population living in extreme poverty fell below 10% for the first time in 2015, and by March 2023, the figure stood at 8.5%, according to the World Bank.
Foreign aid programs delivered results, but long-term, sustainable solutions have been challenging to implement, such as those focused on capacity-building or governance. The data underpinning the successes of foreign aid could easily be used to justify maintaining the status quo. With excellent results in global health and poverty reduction, it’s clear that bipartisan international efforts to provide foreign aid have yielded positive returns. Yet the weakness in the system is the most significant argument for reform — improvements contingent on continuous funding will always be at risk to the politics of those providing the funds. The rapid deterioration in foreign aid funding since the beginning of the year has underscored the importance of self-sustaining programs with long-term impact.
The solution is a collective reframing of the foreign aid model. On the ground, there needs to be a greater emphasis on projects with longer impact horizons, led by the aid recipient — for example, a hospital system run by and serving a local community, or developing infrastructure that both addresses basic food security and promotes climate resilience. When local communities share responsibility for project implementation, outcomes better align with their needs, and the resulting development can outlast the time horizon of the foreign aid commitment. However, it’s vital that donors and NGOs, as the experts in this field, continue to bring the expertise needed to successfully implement these projects and ensure that budgeted dollars are maximized.
A reframing is also needed in the nations contributing funds. It’s an uphill battle to convince citizens or policymakers that foreign “aid” is how their tax dollars should be spent, especially when domestic problems are salient. For nations contributing, aside from providing additional funds, the best course of action is to reframe foreign aid as an investment. While there is an altruistic aspect to foreign aid, nations would not contribute without strategic benefits. By providing aid to address food insecurity, economic development, or other initiatives, global conditions improve, creating greater stability and boosting economic prosperity in those countries and the world at large. These investments are often hard to quantify and the returns may not be immediately visible, but as former Secretary of State Robert Gates noted, “Development is a lot cheaper than sending soldiers.” Support for “strategic investment” with clear and high returns — preventing pandemics, stabilizing fragile regions, and reducing forced migration, supporting domestic industry by creating future trading partners, and boosting global and national security — should certainly garner greater support.
Contributing nations must also recognize that foreign aid to the developing world has perhaps never been more influential in how global power may shift over the coming years and decades. While competing global powers, such as China, are unlikely to fill the gap left in foreign aid, they will continue to exert soft power through infrastructure and industrial support across the developing world. A retreat by Western donors would therefore accelerate shifts in global alliances and economic power toward rival states. In an increasingly transactional political environment with tight budgets, it’s time to reframe foreign aid under a more appropriate title that conveys its strategic value. It just so happens that a tangential benefit is that the world’s least able and most at risk will receive the greatest reward.
There are grim realities facing the developing world. Conflicts are escalating across the globe, climate change will continue to cause displacement, and funds previously shared from the developed world have been depleted in favor of other strategic alternatives. However, the foreign aid community has been given a period of reckoning, and it must reframe itself away from short fixes toward longer-term solutions led by local communities, and from “aid” to “investment.” The world has achieved unprecedented progress over the past 200 years, and humanity possesses the technological know-how and resources to address health care and food insecurity, promote economic development and build climate-resilient infrastructure. Approaching programs with a goal of self-sustainability not only lifts nations out of poverty with funds from the developed world but also prepares them to continue addressing issues without the uncertainty caused by global politics.