Should rich countries focus aid on fragile states? Drop development and just fund humanitarian work? Make aid a tool of soft power? The current debate on how to spend dwindling aid budgets is a depressing read, says Neil McCulloch. Let’s stop thinking about how to “buy results” and instead look at how best to support domestic initiatives for progressive change.
Since the deliberate and malicious destruction of USAID in early 2025, and the UK’s further dramatic downscaling of aid funding, there has been a great deal of discussion about new paradigms for UK aid, and aid in general. This blog maps out some of the options currently being considered for change. It then puts forward a radical approach, different from mainstream thinking, for how to shift the nature of aid from buying results to supporting more lasting transformation.
The current debate
The current debate on how rich countries should spend their dwindling aid is a depressing read. Much of the discussion can be boiled down to four ideas.
1. Multilaterals
Some argue that, if funds are limited, we should focus resources on multilateral institutions. Such organisations, it is argued, are more efficient. They have scale and scope. Smaller bilateral donors should not bother with the expense of trying to do projects in far flung places. Instead, just give the money to the World Bank and others. This, it is said, minimises risk and maximises value-for-money. Unfortunately, this is nonsense. The multilateral system is the epitome of an external, top-down approach to development. Meaningful long-term change does not come through conditionality in an International Monetary Fund or World Bank loan. While there are some excellent multilateral development projects that really try to “work with the grain” of the local context, there are some real stinkers too. Focusing only on the multilaterals means continuing a model that has yielded rather little for decades, and which enables local elites to maintain their power regardless of the needs of their populations.
2. Fragile states
Others say that what really matters is fragile states. Most of the world’s poor live in fragile or conflict affected states. Those that are more stable, the argument goes, can look after themselves; we should instead focus resources on states that are crumbling or that have fallen apart entirely. Of course, the motivation here is not altruism. As we saw in Iraq and elsewhere, getting access to natural resources – oil, gas, minerals – is a prime motivation. In addition, the argument, formerly implicit and now stated openly, is to stem the flow of migrants to rich countries. If aid can buy stability, then this is good for development and helps to address the migrant crisis afflicting the West. Except it does not. The academic evidence shows that developmental progress increases international migration, rather than reducing it – something that is quietly ignored since it does not fit the narrative. And, sadly, it is not possible to buy stability. If it was, Iraq and Afghanistan would be the world’s most stable countries. Western countries do need to worry about fragile states, but mostly because such fragility is terrible for the people in them.
3. Humanitarian aid
A third stream of thinking is that we should not bother with development at all. Since we do not wish to appear to be heartless, aid, it is argued, should focus on humanitarian responses to disasters of various kinds. This conveniently fits with domestic politics in donor countries: many people support humanitarian work, while support for promoting wider development is more limited. The challenge of this approach is that it effectively admits defeat. It gives up on even trying to support positive long-term change and instead simply tries to save lives today. Yet, in so far as such disasters are induced by human behaviour, a failure to address the causes of humanitarian disaster ensures that they happen again.
4. Soft power
Finally, some argue that we should give up on the idea of aid helping others altogether, whether through development or humanitarian interventions. For this group, aid is just a tool of soft power; a way of persuading other countries to buy our goods and services or support our political agenda. Musk and Trump represent the most extreme version of this, but they are not the only politicians in donor countries who would like to capture aid to serve purely domestic interests.
While some of the above perspectives have merit, in my view, they miss the point. A focus on multilateralism is an easy way of reducing the transaction costs of aid for individual donors, but it does not improve efficiency or effectiveness. Focusing on fragile states can support positive change; but it can also encourage dependency and dysfunctionality. Humanitarian response is needed for sure, but doing nothing else means missing opportunities for progress in other areas. And there is nothing wrong with cultivating soft power, but pretending it is developmental aid is just a lie.
Instead, we need a completely new paradigm for aid. One that is more ambitious, not less, yet one that can be achieved with the reduced funds now available. It is a paradigm that respects the roles and skills of bilateral donors, multilaterals, and NGOs, rather than preferring one over the other. It acknowledges the need for stability in fragile contexts, and for humanitarian response, but looks beyond this to a wider agenda. It can be summed up in one word: transformation.
The new paradigm of transformational development aid
If we take the evidence from analyses of historical change seriously, change comes from within. Countries that have built stable, successful economies and functioning states that deliver for their citizens achieved this through a variety of different paths, depending on their unique histories and context. But almost all did so primarily through the efforts of domestic actors. Outside actors certainly play a role – but effective states are created and maintained by bargains between domestic elites and between those elites and the rest of their society.
Moreover, we already have the analytical tools to analyse how change happens in any given context. By identifying the key actors, mapping out their objectives, ideology, interests, capabilities and power, we can begin to piece together how different coalitions of actors might form the basis for progress. In other words, we can begin to understand possible pathways to progressive change. Of course, we don’t know whether such pathways will transpire in practice – change can go in many different directions. And even if progress is made, it may not be precisely the change that outside actors might like.
But approaching development in this way completely changes the nature of aid. Instead of arriving with solutions and money, aid becomes a journey of exploration and experimentation. Identifying potential domestic allies, coalitions and networks; finding out how they propose to solve the problems that are salient to them; and then lending support to their agenda, through a variety of tools. These include the traditional aid tools of technical assistance, knowledge sharing, capacity building and financing. But they also include diplomatic initiatives, and defence and security support where appropriate. The question shifts from “how to buy development results” to “how best to support domestic initiatives for progressive change” – in other words – transformation.
There are several advantages to this approach.
- It costs very little – far, far less than the finance heavy approach of traditional aid. This means that it is possible to apply it in many countries, even with a reduced aid budget, avoiding the need to damage diplomatic relations by shuttering aid in dozens of countries, as the US has done.
- It is a much lower risk approach. If it fails, as it will from time to time, then far fewer resources are wasted.
- It blends the skill sets of diplomacy, defence, and development, working together to support long-term transformational change for the benefit of both beneficiary and development partner countries.
The tragic irony is that the demolition of aid, while doing much harm, might make possible a completely new approach to aid, one that is aligned with how positive change has actually happened in the past, and that aims for sustainable change led by local actors. That would be a pathway to real transformation.
Dr. Neil McCulloch is an economist and a Director of The Policy Practice. His main area of focus is on the political economy of reform in the energy sector. This has included work on corruption in the electricity sector in Lebanon; power sector reform in Kyrgyzstan, Pakistan, Nigeria and Yemen; energy access in India; aid to power sector reform in several countries in Africa; and fuel subsidy reform in Indonesia, Nigeria and Zambia. Previously, he was Director of the Economic Policy Program at Oxford Policy Management and, before that, the Lead Economist of the Australian Aid program in Indonesia.
This article is adapted from a post on LSE’s new Activism, Influence and Change blog, run by our FP2P Blogger Emeritus, Professor Duncan Green.
This all sounds right, but it shouldn’t be an either/or. The huge missed opportunity of recent years was Sudan, where a popular movement that took in wide civil society including trade unions and professional associations changed their own government for the better, only to face indifference and a lack of support from the wider world. I remember meeting NGO and UN reps from the country team prior to the coup and regretfully telling them that for all our efforts to mobilise attention and resources, donor states simply weren’t interested in supporting either via aid or diplomatic and political support. The current conflict, famine and devastation is a result.
Thank you, Adrian. Your steadfast clarity, eloquence, and fearless precision are deeply appreciated.
The pot is indeed present. It always has been. Aid, though marginal in the vast ledger of global wealth, yields disproportionate benefits to its recipients—benefits that resonate not only in empathy but also in pragmatic mutual interest.
Let us be unequivocal: aid is not mere sentimentality or charity. It constitutes a deliberate, astute investment. The returns—economic, political, and moral—are incontrovertible, awaiting recognition like an inconvenient truth we cautiously sidestep.
Yet, aid cannot shoulder this burden alone. Should governments supplement their token contributions with decisive actions—such as debt forgiveness, the cessation of predatory conditions, and the basic fairness of equitable trade—we would possess a lever substantial enough to bend the arc of justice itself.
Perhaps then, we might discern trickles from torrents. Perhaps then, equality would no longer linger as a deferred promise.
I agree with the approach presented, but the challenge is overcoming the perception that, in a time of diminished funding, the bilateral donors are going to invest their now limited resources on hiring and training folks who can apply the analytical tools to identify the actors and to map out how change is most likely to occur. Isuspect that most politicians and public would rather use their money to address the core needs of the poor living in fragile states or facing humanitarian crisis. Hence, we must appreciate the political economy of the donor countries and work from there.
Philanthropy today has a negative connotation. Time for Philanthropy to Confront Ableism
If philanthropy is to build a more just and equitable society, it must combat ableism in its institutions and practices.
Philanthropy invests in and behaves as if those most affected by the systems we want to change are not knowledgeable and trustworthy planners and decision-makers.
External agendas and imposed priorities force local leaders to ignore their own knowledge, which is the panacea for local conditions, and instead adopt strategies that are driven more by the desires of donors than by the actual needs of communities.