On the day of his inauguration, President Trump issued an executive order on “reevaluating and realigning United States foreign aid” that said the “U.S. foreign aid industry and bureaucracy are not aligned with American interests and in many cases antithetical to American values” and that they “serve to destabilize world peace.” Since that order, which froze all U.S. foreign development assistance, the Trump administration has moved to shut down the 60-year-old U.S. Agency for International Development and fire thousands of workers. The moves, which are being challenged in courts, also affect tens of thousands of workers outside the federal government, and millions around the world who depend on U.S. funds for everything from daily food rations to vaccines to economic development assistance. We asked HKS experts—all affiliated with the Harvard Center for International Development—to explain the issues, challenges, and opportunities presented by the changes in the world of international aid and development economics.
- Fatema Sumar: USAID’s history should matter to its future
- Celestin Monga: A deficit of leadership
- Zoe Marks: The game plays on
- Akash Deep: The development finance outlook
- Asim Khwaja: The sector stands at a crossroads
- Juan Jimenez: A new global context
USAID’s history should matter to its future
Fatema Z. Sumar
Where did USAID come from? And what does it look like today?
We can trace the history of USAID back to the aftermath of World War II. The creation of the Bretton Woods institutions, which aimed to shape a new global financial system for a more stable and prosperous global economy, and the Marshall Plan, which provided critical resources for Europe to rebuild its infrastructure, strengthen its economy, halt the spread of communism, and stabilize the region from threats of future world wars, played a fundamental role. Efforts like the Bretton Woods system and Marshall Plan significantly influenced the modern-day concept of international development, prioritizing free markets and capitalism, social protection to help the poor and vulnerable cope with crises and shocks, and foreign assistance programs for countries at risk of instability.
These efforts also firmly intertwined U.S. development efforts with foreign policy goals. For instance, in 1950, President Harry Truman formally proposed an international development assistance program called the Point Four Program, which focused on creating markets for the U.S. by reducing poverty and increasing production in developing countries, diminishing the threat of communism by helping countries prosper under capitalism. It also laid the foundation for the creation of USAID.
During the 1950s, as Africa and Asia experienced the breakup of colonial empires, fears of a communist takeover in developing countries dominated U.S. foreign policy interests. Then-Senator John F. Kennedy seized upon a novel making waves at the time: “The Ugly American.” It critiqued the heavy-handed approach of the United States in Southeast Asia and called for grassroots efforts to improve poor people’s lives to successfully counter communism.
According to Daniel Runde, Kennedy sent a copy of the book to his Senate colleagues: “Once he became president, Kennedy used ‘The Ugly American’s’ ideas as the blueprint for the Peace Corps and for the Foreign Assistance Act of 1961, which founded USAID.”
Each decade in the post-WWII era brought a different focus for U.S. development efforts. In the 1950s and 1960s, the United States focused on massive capital and technical assistance to rebuild Europe and other poverty hotspots to fight the spread of communism. In the 1970s, USAID invested in a basic human needs approach centered on hunger, population planning, health, education, and human resource development. In the 1980s, the United States used foreign assistance to stabilize currencies and financial systems and promote free-market principles. With the fall of the Berlin Wall and the breakup of the Soviet Union, the top priority in the 1990s centered on establishing functioning democracies with open, market-oriented economic systems and responsive social safety nets.
“Given this storied history and complexity of its work in so many places, tearing down [USAID] overnight will not be easy nor cost-free.”
In the 2000s, at the height of U.S. conflicts in Afghanistan and Iraq, USAID shifted to a war footing, investing billions on massive nation-building efforts to fight counterterrorism and focusing on other high-priority conflict areas. In the early 2010s, the Obama administration moved away from large, contractor-based models of development to support localization efforts where power and resources could be given to those on the ground. This shift turned into the first Trump administration’s “Journey to Self-Reliance,” emphasizing an expansion of partnership and decision-making closer to those directly affected. The Biden administration went further, increasing locally led development by allocating a quarter of USAID funding directly to local organizations by 2025 and putting local partners in the lead in designing, implementing, and measuring results for the majority of USAID’s programs by 2030.
Prior to the second Trump administration’s dismantling of USAID, the agency was the U.S. government’s primary development agency working in about 130 countries to alleviate poverty, disease, and humanitarian need and support U.S. commercial interests through economic growth and capacity building programs.
According to the Congressional Research Service, USAID managed more than $40 billion in FY2023. Seventy of the world’s 77 low-income and lower-middle income countries received USAID assistance with 40% of its funds allocated for Europe and Eurasia, mostly for Ukraine. Other top recipients of USAID funds include Ethiopia, Jordan, the Democratic Republic of Congo, Somalia, Yemen, Afghanistan, Nigeria, South Sudan, and Syria. The largest sectors to receive USAID funds were the governance sector (largely driven by Ukraine), the humanitarian sector (due to the COVID-19 pandemic), and the health sector, including through the President’s Emergency Plan for AIDS Relief (PEPFAR).
Until last month, USAID had a workforce of more than 10,000 people with about two-thirds serving overseas, and implemented its projects through thousands of its development partners, both American and foreign, who in turn employed tens of thousands of people across the world in nonprofit organization, for-profit companies, universities, international organizations, and foreign governments. Given this storied history and complexity of its work in so many places, tearing down the agency overnight will not be easy nor cost-free. Millions of people around the world will be impacted.
Fatema Z. Sumar is an adjunct lecturer in public policy at Harvard Kennedy School and the executive director of the Harvard Center for International Development. Parts of this piece were excerpted from her book, “The Development Diplomat: Working Across Borders, Boardrooms, and Bureaucracies to End Poverty.”
Who is really helping whom?
Celestin Monga
The first thing I felt was pain. Millions of people around the world depend on U.S. funding for life-saving social services: medicines, vaccines, security, education and training programs, and more. The brutality of the decision to suspend USAID is therefore unnecessarily cruel.
But, speaking as an African, I'm astonished that 65 years after independence, our leaders are still waiting for the messiah from Washington D.C., Brussels, Paris, or other exotic capitals. We cannot continue to subcontract the states' regalian functions and hope that the United States, Europe or China will assume them. Vulnerable citizens then become hostages to political volatility in the West and other foreign places.
That said, President Trump should not be the scapegoat for shortsighted and incompetent African leaders. Indeed, his unpredictability and insensitivity should prompt Africans to rethink the nature of their relationship with America. First, we need to identify and demystify the net volume of financial flows between Africa and the world. Aid is a semantic fiction and an accounting artifice. In 2023, the United States paid less than $20 billion to Africa, out of a total of less than $60 billion for all Development Assistance Committee countries. This represented far less than the profits of a couple of Wall Street firms. More importantly, that same year, Africa sold $610 billion worth of exports, the proceeds of which were deposited in Treasury accounts and Western banks, at negative interest rates!
“No American president should be expected to check with Africa before deciding how best to spend U.S. taxpayers’ money.”
And then there are the $88 billions of illicit financial flows that leave the continent every year (according to U.N. Trade and Development estimates); the costs of speculation in Africa; the artificial fall in commodity prices; undeclared oil or uranium extraction publicly acknowledged by the leaders of Western multinationals that engage in these practices; the so-called technical assistance contracts that allow certain industrialized countries to enrich themselves in African state companies that are nevertheless declared to be loss-making. Who is really helping whom?
The African Union needs to get the heads of state together and start thinking afresh about what would be a pragmatic strategy for massively financing productive infrastructure and creating jobs for the mostly uneducated youth on the continent. The priority should be access for African-manufactured products to Western and Asian markets. This is far more important than aid. In September, the African Growth and Opportunity Act (AGOA), which allows 1,800 African products to enter the United States tax-free, expires. Accessing the U.S. market with locally-produced manufactured goods and tradable services—including in the cultural and creative industries—is more important to any African country than debating about the future of the USAID. After all, no American president should be expected to check with Africa before deciding how best to spend U.S. taxpayers’ money, Africa’s major challenge is its deficit of leadership, which is fatal.
Celestin Monga is an adjunct professor of public policy.
While the U.S. sidelines itself, the game plays on
Zoe Marks
The 38th annual African Union Summit took place in Addis Ababa last week and on the sidelines, everyone was talking about political tensions. Not those arising from political turmoil in the United States, the slashing of foreign aid and U.S. investment in multilateral institutions like the WHO, or the whipsaw of American foreign policy, but tensions in Africa’s own foreign relations. At the forefront of people’s minds and political divisions was the rapid advance of the March 23 Movement, a rebel military group, in Eastern Congo, once again pitting Congo against Rwanda; the destructive and destabilizing civil war in Sudan; the ambiguous attendance of junta leaders whose countries are currently suspended from African Union membership. And still constructive collaborations continued. African heads of state and AU priorities were unruffled by overnight funding cuts that have cost tens of thousands of jobs and denied millions of dollars’ worth of basic development and humanitarian aid to communities throughout the region. They carried on with their priorities: health and infrastructure financing; the herculean implementation of the African continental free trade area; and elections for the next chair of the AU commission (which went seven rounds, indicating some of the divisions on the continent).
Against this backdrop, U.S. politics came up in conversation only when I raised it. In keeping with the times, views are mixed. There are murmurs—some eager and others fearful—that now is the moment for authoritarian power grabs and opportunistic military actions. Many people see the drastic unilateral changes the Trump administration is ramming through as an opportunity for Africa. I’ve heard diverse voices, including from some of the highest levels of African governments, say it is good for African countries to be forced to stand on their own two feet, to develop self-sufficiency, to finally command African solutions to African problems without Western meddling.
“What novel coalitions can emerge now to fill the gap in delivering basic healthcare, emergency nutrition, and support for human rights where America has walked away?”
What remains missing is a careful accounting of who is being harmed by American absenteeism. Women and children, refugees and displaced persons, rural communities, and minority groups have often been prioritized in development work because they are not seen as politically or economically profitable audiences to serve. What novel coalitions can emerge now to fill the gap in delivering basic healthcare, emergency nutrition, and support for human rights where America has walked away? These are multi-actor spaces with diversified funding. They must endure. But leaders in the field are being abruptly laid off. Aid is not flowing. Partnerships are evaporating. And African leaders are continuing to lean on the private sector and other powers, China and Russia, as well as UAE, Turkey, the EU, India, Saudi Arabia, and more. In South Africa—where I write this, and perhaps the one place in the region where the spectacle of U.S. politics looms large—President Cyril Ramaphosa is focused on the task at hand: setting the agenda for South Africa’s presidency of the G20 and convening its foreign ministers. Notably absent from that convening will be U.S. Secretary of State Marco Rubio. As the United States sits on the sidelines, the game plays on.
Zoe Marks is lecturer in public policy and the Oppenheimer Faculty Director of the Harvard Center for African Studies.
The development finance outlook
Akash Deep
The shuttering of USAID has left a significant gap in the Official Development Assistance (ODA) mechanism, a channel for more than $200 billion in assistance from developed countries to developing ones of which the U.S. provided almost a third. U.S. ODA has largely taken the form of bilateral funding, with almost all of it provided as grants.
Closely linked to ODA, the international development finance architecture consists of bilateral development finance institutions and multilateral development banks (MDBs) that have mobilized over $400 billion annually in recent years toward economic development, poverty reduction, and private sector growth in developing countries. I will be watching how U.S. participation in development finance evolves in three key areas: the development institutions with which the United States continues to engage, the instruments and mechanisms it promotes, and the sectors towards which it targets development assistance.
The U.S. International Development Finance Corporation (DFC) uses market-based financial tools to mobilize private investment in development. Its mandate was expanded just five years ago, partly to counter China’s global infrastructure investments through the Belt and Road Initiative. At this stage, the future of the U.S. DFC is unclear. On the one hand, the announcement of new leadership signals support for the catalyzing role of development finance. On the other hand, some fear that the Trump administration may be planning to convert it into a sovereign wealth fund for acquiring U.S. strategic assets abroad.
“A significant U.S. withdrawal from multilateral Development Banks would be complex and is considered unlikely by market observers. It would also make way for other countries, especially China, to take on a more central role in these institutions”
The United States also plays a leading role in shaping development policy at MDBs. The United States is a major shareholder in the World Bank (International Bank for Reconstruction and Development), the International Finance Corporation, the Inter-American Development Bank, the Asian Development Bank, and the European Bank for Reconstruction and Development. The Trump administration has called for a review of all intergovernmental organizations in which the U.S. is a member, which includes MDBs.
A significant U.S. withdrawal from MDBs would be complex and is considered unlikely by market observers. It would also make way for other countries, especially China, to take on a more central role in these institutions, which could undermine U.S. strategic interests abroad. As a result, the U.S. might seek to actively reshape the role of these institutions from within. For example, it is likely to emphasize development interventions that promote private investment abroad, particularly in infrastructure. Furthermore, with the U.S. withdrawing from the Paris Agreement and halting related funding commitments, global climate finance could see a significant reduction, affecting the ability of MDBs to support climate mitigation and adaptation efforts in developing countries.
Akash Deep is a senior lecturer in public policy.
The future of international development
Asim Ijaz Khwaja
The international development sector stands at a crossroads, facing challenges that demand a fundamental shift in approach. For many years, traditional models of aid have been under increasing scrutiny as geopolitical shifts, economic instability and growing calls for local ownership reshape the landscape. As I reflect on key changes that must be considered for the sector moving forward, three key things come to mind.
First, it is evident that we must build new and more resilient models, for we cannot be dependent upon an individual country or agency. We shouldn’t have models of financing that can crumble on one’s person’s whim but must withstand future shocks to the system. Funding sources therefore must be diversified, particularly in an age in which new ways of living appear a given, with non-traditional approaches and technological change promising to forever alter the landscape of our world.
Second, we need the development workforce to move from an employee to an entrepreneurial mindset. In order to do so we should equip our students and current development professionals with the skills, networks, and resources they need to pursue innovative and socially impactful ideas—much like business schools enable their students to do so. To realize a new future for our sector, we need to build, convene, and deploy the talent of such dedicated professionals, creating a spirit of entrepreneurship and sustained innovation that liberates development for generations to come.
“Every crisis presents an opportunity, and while there may be no blank check, there is a blank slate onto which we can re-write and re-build our sector, where people can be the driving agents of change.”
Third, we need to create collaborations which meaningfully engage with local experts and context while drawing in the best global talent and knowledge. This equal partnership entails building a process that avoids taking a paternalistic approach to development. It ensures we involve people on the ground in how we might help solve their problem rather than assuming the solution. In altering our horizons, we move from providing people with a handout to ensuring they have a true hand up; one that guarantees their stake in a future of their choosing.
While the immediate future may well appear bleak, with people uncertain about both lives and livelihoods, I take comfort in the fact that people still care about helping each other. People began careers in international development because they wanted to make a difference in the world; people who were determined to tackle untold hardships. It is now incumbent upon this sector’s leaders to help protect and preserve that resilience, unlocking their potential and catalyzing their opportunity.
Every crisis presents an opportunity, and while there may be no blank check, there is a blank slate onto which we can re-write and re-build our sector, where people can be the driving agents of change.
Asim Ijaz Khwaja is the Sumitomo-FASID Professor of International Finance and Development and the director of the Center of International Development.
Development in a New Global Context
Juan Jimenez
For a long period of time, the free flow of goods, money, and people has been thought of as a cornerstone of economic development. Open markets have allowed developing nations to access larger consumer bases, achieve economies of scale, and integrate into global business networks. Foreign investment, facilitated by globalization, has provided the capital necessary for industry and technology development. However, the benefits of globalization have been uneven, and its drawbacks—economic volatility, inequality, social tensions, and political backlash—have led to a growing wave of skepticism worldwide.
The days of "open borders" and "increased globalization" may be over, or at least on hold. Recent policy decisions emphasizing economic nationalism, trade protectionism, and migration restrictions have altered the global landscape. However, this trend predates the current U.S. administration and has emerged in various regions worldwide, particularly in Europe. The pressing question now is: what does development look like in an era of declining globalization?
In policymaking, balancing realism with optimism is crucial. Developing nations must rethink their strategies as traditional Western markets and societies become less accessible. This shift could mean redirecting focus toward Asian markets—China and India, for example—which provide vast consumer bases and expanding investment opportunities. Similarly, Latin American and African economies, which have historically looked westward, may need to deepen their ties within the Global South to foster greater regional integration and economic resilience.
“The world is changing, and so must our development strategies and ideas.”
Migration, long a crucial development tool through remittances and knowledge transfer, is also being redefined. As movement across borders becomes more restricted, remote work may emerge as a vital alternative. For this to materialize, however, developing nations must invest significantly and effectively in education, digital infrastructure, and electricity access.
Another often-overlooked opportunity lies in diaspora engagement. Many skilled professionals from developing countries reside in wealthier nations. Given shifting migration policies and global uncertainties, some may consider returning home. Governments should actively create conditions that make returnees’ reintegration smooth and beneficial, leveraging their expertise and international networks to spur innovation and entrepreneurship.
Finally, resilience must be a top priority. Economic shocks from geopolitical shifts require robust buffer mechanisms: strong macroeconomic fundamentals and flexible institutional mechanisms that facilitate adaptation.
The world is changing, and so must our development strategies and ideas.
Juan Jimenez MPA/ID 2010 is a lecturer in public policy.
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Banner: Officials from USAID and WFP inspect a donation of $11 million worth of food aid at a ceremony in Harare, Zimbabwe, Wednesday, Jan 17. 2024. The U.N. World Food Program said Wednesday that it was working with Zimbabwe's government and aid agencies to provide food to 2.7 million rural people in the country as the El Nino weather phenomenon contributes to a drought crisis in southern Africa.
Image credit: AP Photo/Tsvangirayi Mukwazhi