In 2022, the World Bank raised the international poverty line, or minimum survival requirement, to $2.15 a day – or $785 annually. This coincided with nominal global gross domestic product exceeding $100 trillion allowing each of us about $12,500. There was, therefore, more than enough wealth to meet everyone’s basic needs. Yet 648 million people – or 8 per cent of the world – struggled in extreme poverty.
This insults our common humanity at a time that the world has never been richer. Covid-19, climate disasters and endless wars are invoked as excuses. But crises are also great for enrichment, by those who can invest to adapt and use their dominance to profit from the dependency of the vulnerable.
Accordingly, a staggering $42 trillion of new wealth has been created in the crisis-affected 2020s, with half captured by the richest 1 per cent. As world problems intensify, we continue to get richer with global GDP projections accelerating towards $139 trillion in 2030.
That is when the Sustainable Development Goals intend to eliminate poverty. It will not happen with 600 million of the 8.5 billion people in 2030 projected to remain extremely poor. A further three to four billion people will stay deprived in one or more aspects of poverty such as lacking health care, water, food, shelter, or education and jobs.
Seeking silver linings in dark clouds is a favourite pursuit in the development sector. To keep donors motivated, they are constantly reminded that a billion people have been lifted out of extreme poverty since 1990, and more are surviving childhood, getting educated, and living healthier and longer. So, give more aid.
However, can progress be attributed primarily to foreign aid? Besides, the achievements of some such as China, India, Indonesia, Nigeria and Kenya mask the lacklustre journey or even back-tracking by 75 poor, aid-dependent countries.
Meanwhile, donors are accused of stinginess despite official development assistance from governments growing by 34 per cent in real terms since 2019, reaching $223.7 billion in 2023.
Covid-19 and humanitarian crises have driven recent ODA flows. Assistance to Ukraine rose by 9 per cent last year to reach $20 billion, including $3.2 billion of aid. ODA, meanwhile, increased by 12 per cent on 2022 to the West Bank and Gaza, to $1.4 billion, including $758 million in the form of aid. The common accusation of western bias is debatable as numerous other crises such as Afghanistan, Sudan and many African hotspots have received significant help that pushed up global humanitarian volume by 4.8 per cent to reach $25.9 billion in 2022, although this is outstripped by needs.
All this data mostly represents the West, specifically the 32-member Development Advisory Committee of the Organisation for Economic Co-operation and Development, which contributed 0.37 per cent of their gross national income as ODA last year. That is below the UN target of 0.7 per cent, a figure with little logic and much political baggage.
Last year’s largest ODA contributors were the US, Germany and EU institutions that accounted for more than half of western aid. Another $100 billion or so comes from 20-plus non-DAC donors, the largest being China, India, UAE and Turkey, as well as Saudi Arabia, Qatar and Russia.
Philanthropic aid is also expanding with the top 10 funders, led by the Gates Foundation, contributing $11 billion in 2021. Myriad NGOs and charitable individuals are also helping, such as $3 billion from Mike Bloomberg. Nevertheless, official and private aid is small compared to diaspora remittances estimated at $669 billion, touching families directly in developing countries. Market flows from trade and investment add about $46 billion.
Although dwarfed by other resource transfers, foreign aid is still important because it is taxpayer-funded via donor governments and so expresses solidarity from richer publics towards poorer ones.
It is under-recognised that the art and science of foreign aid have improved significantly. Over three decades of my development career, I have seen greater data standardisation, tracking and transparency, stronger programme monitoring, many research insights into aid effectiveness, and increased intolerance of misbehaviour and misconduct by aid workers. This is in addition to the necessary agency regulation accompanied by stronger standards and professional training, and game-changing organisational and technological innovations.
There is better policy harmonisation and co-ordination, and a drive towards beneficiary accountability. After much criticism of cumbersome aid bureaucracies, efficiency is slowly improving. Initiatives such as the Paris Declaration on Aid Effectiveness and DAC peer reviews have upped the game.
But these are technical improvements and aid’s noble aim to create a better, fairer world is crowded-out by self-serving objectives. Aid is justified to gain business and generate employment when preferential market access for own products and services accompanies aid packages. That can hamstring developing economies as also concessional loans and skewed trade deals that increase indebtedness or require mortgaging the recipient’s precious land or raw materials.
The spirit of ODA is further eroded when foreign aid is retained at home. That happens when aid is tied to buying products and services from donor countries. At least 16 per cent of DAC assistance – $175 billion – is tied this way, and the proportion is higher for new donors.
Meanwhile, less than a tenth of ODA goes directly through organisations of the Global South – the rest being channelled via donors’ own agencies. Much-hyped aid localisation has largely foundered. Parallel critiques of globalisation translate into hostility for multilateral aid organisations, undermining shared global good solutions, for example, in pandemic control or ecosystem repair.
The migration-aid nexus is the most contentious. Nearly 14 per cent of DAC members’ foreign aid in 2023 was sequestered for in-donor country refugee care. Meanwhile, donors use aid as an instrument of border control with, for example, the European Commission making deals with Mediterranean neighbours to stop migrant flows. This is despite evidence that aid does not affect decisions by migrants fleeing war and other adversity.
A complementary concern hovers over aid securitisation, by conditioning development assistance to security co-operation or increasing defence aid at the expense of ODA. A close nexus between the two sends negative signals at a time of historic trust deficits. For example, with the large interconnected economic and military package for Ukraine or military aid to Israel alongside humanitarian provision for Gaza.
Such instrumentalisation undermines the moral consensus underpinning aid. It coincides with record attacks on aid workers, and widescale obstruction or aid diversion. When this is combined with waste in misgoverned contexts where benefits are captured by corrupt elites, the original spirit of solidarity is severely tested.
This is not least when aid is little more than a panacea in contexts where solutions lie elsewhere and require expending political capital that is scarce in a world of geopolitical complexity.
The debate is further muddied by compensation demands for historic wrongs such as colonialism, slavery and climate loss-and-damage. Aid budgets are being asked to shoulder these obligations.
Where do we go from here? We can start by recognising that aid is over-hyped and can no longer be all things in all contexts.
Its development component should bear squarely – (perhaps 75 per cent of ODA) on human development only, specifically health and education, as enabler of all other progress – economic, social, infrastructure, governance, democracy and human rights.
It means focusing on 26 low-income (less than $1,135 per capita) and 54 lower-middle-income (up to $4,465) countries. The 54 upper-middle-income (up to $13, 846) states can buy and trade what they need. Their graduation out of aid could accelerate and they should become donors themselves, as several are already doing.
Second, we must make more generous humanitarian provision for mitigating conflicts and crises everywhere, and for as long as preventive will and solutions elude us. This probably requires doubling humanitarian aid to 25 per cent of ODA.
Overall, foreign aid remains important because it provides a critical connective strand in our divided world. The volume is less important than the trust with which it is given and received. To recover that trust requires re-discovering aid’s moral purpose and vanquishing self-interest in delivery.
In our needy and troubled world, compassion must be the only justification for aid.
