Many people in developing countries still live in a culture of aid. Some in wealthy countries believe that giving alms to the poor is the right thing to do. Over the past fifty years, development aid has flowed from wealthy countries to a number of poor countries, most notably African countries. Thousands of programs and initiatives were launched under the names “Make Poverty History,” “Empowering Women,” “The Millennium Challenge,” and others, raising hundreds of billions of dollars. One sacred idea and one unshakeable belief were promoted: the rich should help the poor. This assistance should take the form of aid, whether loans, financial support, or technical assistance. Major international institutions promoted a culture of aid and giving based on these concepts. Charitable aid became part of the entertainment and media industries. In the words of former British Prime Minister Tony Blair, “aid has become a cultural commodity,” whether at the level of countries or individuals. Media figures, movie stars, and singers have been preaching about the need for aid, while criticising the wealthy and governments for not doing enough. Governments have responded by pushing back, fearing losing their popularity. During its 2019 election campaign, the Conservative Party promised that the government would increase its external aid budget to more than 0.7% if it won, a promise it quickly abandoned after its victory.
Over the past fifty years, Africa has received approximately $1 trillion, enough to generate significant economic growth if properly utilised. But has this aid money improved the conditions of African people? The answer is “No,” said Dr Dambisa Moyo, Head of Africa Strategic Research at Goldman Sachs. She added: “Around the world, recipients of this aid have become worse off; aid has almost entirely contributed to increasing the poverty of the poor and slowing growth. It has not been fully utilised.” Due to the spread of corruption, bribery, and favouritism, poverty rates have even risen from 11% to 66% in some countries, and the number of poor people in Africa is estimated at approximately 600 million.
Nevertheless, aid has been considered a cornerstone of development policy, and the idea that it alleviates poverty has become one of the most important ideas of our time. In reality, this is a myth. Millions in many poor regions are now poorer because of aid; misery and poverty have not ended, and aid has been, and continues to be, a comprehensive political, economic, and humanitarian disaster for much of the developing world. Let us remember that for the first time in the history of international relations, a state (the United States) has threatened all countries of the world with sanctions and the cutting off of aid if they vote in the General Assembly on December 14, 2017, against the resolution recognising Jerusalem as the capital of Israel, announced by President Trump.
Dambisa Moyo’s book, “Dead Aid” discusses how this happened, how the world was gripped by a seemingly correct but deeply misleading idea, and how aid policy failed as an optimal solution to poverty in poor countries. The evidence is astonishing and clear. The book compares countries that rejected aid and prospered with others that became dependent on it, trapped in a vicious cycle of corruption, market distortion, and increased poverty — and thus the “need” for more aid.
The idea of development aid originated after World War II to rebuild devastated European countries. The Marshall Plan was adopted to rescue Europe, costing $13 billion. Its primary goal was to “deepen American influence in Europe, protect it from communist states, and safeguard America’s national security,” as American aid expert Carol Lancaster points out in her book, “Foreign Aid: Diplomacy, Development, and Domestic Policy.” At the height of the Cold War and the Cuban Missile Crisis during the presidency of John F. Kennedy, the Foreign Aid Act of 1961 was drafted, providing aid from the U.S. Agency for International Development and the Departments of Defense and State. The aid exceeded $50 billion, equivalent to 1% of the gross domestic product. The administration of U.S. President Donald Trump announced it would cancel more than 90% of this amount at the end of last February.
Today, research has revealed that there are other factors at the heart of the renaissance in poor countries, especially in Africa. First, African countries’ natural resource wealth represents an opportunity to improve the sustainability of their public finances and keep debt within manageable limits. Commodity prices—oil, copper, gold, and food—have risen in recent years, and their export revenues have increased. In 2022, Kenya, Côte d’Ivoire, and Congo recorded growth rates of 5.2%, 6.7%, and 8.6%, respectively, as a result of the sound utilization of these resources.
Second, reducing dependence on foreign aid and loans and shifting toward innovative domestic financing. Several African countries have succeeded in this. In Tanzania, the share of the budget financed externally does not exceed 3.5%. In South Africa, this percentage is less than 2%. There are now numerous domestic sources of capital, including sovereign wealth fund assets. In 2024, African sovereign wealth fund assets exceeded $400 billion. Moreover, foreign exchange reserves in many African countries are not bad.
Third: Leveraging market policies to develop social policies and protect the poor, provided that macroeconomic fundamentals are strengthened (increased growth, reduced inflation, increased transparency, and financial stability). Some African countries have witnessed remarkable improvements in social indicators. Primary education enrolment rates in sub-Saharan Africa have improved dramatically, rising from 52% in 1990 to 80% in 2015, and child mortality rates have declined significantly.
Fourth, the rule of law and the democratic transfer of power. Governance across the continent has witnessed remarkable progress, exceeding expectations. Of the 48 countries in Africa, more than 50% hold regular democratic elections that can be considered free and fair. Corruption levels have declined in a number of countries, improving the investment climate.
The shifts in agendas are not only a result of Trump’s decision and the drain on European aid from the war in Ukraine. The decline and cessation of aid have undeniable factors. These same factors are driving the transition from “dead aid” to self-sustained development as a matter of life and death. There is no need to search for new donors, as there will be none. The era of aid is over and the era of forced independence has begun!
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Dr Atef El-Shabrawy is Professor of Entrepreneurship and international development expert.