Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version, was published by Project Syndicate. 

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May 24, 2025 — Joni Mitchell sang, “Don’t it always seem to go, that you don’t know what you’ve got ‘til it’s gone.”   She was lamenting loss of the environment.  Aid to developing countries (Overseas Development Assistance) may now be in the same category.

1. How much does the US spend?

For the last 80 years, Americans have spent more on humanitarian assistance, economic development programs, and other foreign aid than any other country: $72 billion by the US government in 2024, and more by private NGOs.

One should note that other rich countries spend more per capita.  US foreign aid as a share of income is in 24^th place globally, at only 0.24 %, which is a quarter of what northern European countries give. Further, foreign aid as share of total US government spending is only 1 %. This number is far lower than the American public thinks it is — around 25 % according to various surveys.

2. Pessimism dominates

Many Americans believe that foreign aid has failed. More surprisingly, the impressions of the man-in-the-street have been seconded by some prominent scholars.  The critics call attention to the downsides of aid, argue that it doesn’t make a significant difference,[1] or sometimes even claim that it is harmful on net.  Dambisa Moyo and Bill Easterly have been two of the most prominent of such skeptics.  (Others include PT Bauer, Thomas Dichter, and Roger Riddell.)

Critics point out, correctly, that economic development depends on decisions that the country makes, more than on what well-intentioned experts from rich countries do.  They point to horror stories of misguided aid programs that have fallen prey to mismanagement, government overreach, or corruption.  Vietnam in the 1960s, Zaire in the 1980s and Afghanistan in the 2010s are three among many country examples in which foreign aid was misguided from the start.

To be sure, some economists have re-asserted the usefulness of foreign aid, such as Paul Collier and Jeff Sachs.  Some emphasize conditions[2] under which benefits tend to outweigh the costs. Nevertheless, an educated but casual reader in foreign affairs would likely have drawn the impression that foreign aid is not necessarily beneficial.

3. The many accomplishments of foreign aid

That is, readers would have drawn that impression up until February.  Soon after Donald Trump’s inauguration, however, when he and Elon Musk shut down USAID in a maximally destructive way, we suddenly began to hear of the critical life-saving high-return projects that the US had been funding.   Foreign aid, especially humanitarian assistance, is proving more popular with the majority than had been assumed.  The public attitude reflects genuine accomplishments.

Achievements have been especially striking in public health. PEPFAR (the President’s Emergency Relief Plan for AIDS Relief) has saved millions of lives from HIV and AIDS, especially in Africa, since the program was launched by President George W. Bush in 2003. The President’s Malaria Initiative has prevented 2 billion cases of malaria over the last 20 years, cutting the death rate in half.  GAVI (the Global Alliance for Vaccines and Immunization), which receives USG support, has vaccinated over one billion children against measles, diphtheria, tetanus, whooping cough and other potentially fatal diseases, preventing an estimated 19 million future deaths. Polio has been eliminated in all but two countries; smallpox has been eliminated everywhere.

These efforts are a major reason why child mortality has declined steeply.  In the 19^th century, 43 % of children died before their fifth birthdays, globally.  Over the last 100 years, the child mortality rate has been cut to only 4 %. Vaccines and other public health initiatives are responsible for much of that improvement.

Participation in global health initiatives that minimize the spread of infectious diseases like Ebola, HIV/AIDS, Tuberculosis, and COVID-19, not only save millions of lives in poor countries, but pay off even if one only considers the danger of contagion reaching rich countries.

Foreign aid has also improved agriculture in the developing world. International assistance made possible the Green Revolution – development and diffusion of improved crop varieties, used with synthetic fertilizers, new pesticides and modern irrigation — in the second half of the 20^th century.  The Green Revolution increased Asian cereal crop yields by 60 %, allowed India and other countries to become self-sufficient in food, raised incomes, and cut infant mortality by 2–5 percentage points between 1961 and 2000 from a baseline of 18 %.

Further, the US spends $ 4 billion per year on overseas food aid (though it is often designed to benefit American farmers).

Programs like the US Marshall Plan succeeded spectacularly after World War II in helping Europe and Japan recover and in laying the foundation for 80 years of relative global peace and prosperity, under US leadership. More recently, foreign aid has helped Ukraine withstand the worst attack on the sovereign territory of a European country since the 1940s.  Overseas assistance, including such worthy causes as disaster relief and support for human rights and democracy, has been an important component of US soft power.  It was soft power, at least as much as military power that won the Cold War — and military power is far more expensive.  It would still be sustaining US global primacy today, if the current government were not assiduously undermining it, as if deliberately seeking to cede the global competition to China. (The phrase soft power was coined by my hall-of-fame colleague Joe Nye, who passed away this month.)

4. Why is pessimism so dominant?

Econometricians have difficulty establishing a direct connection between foreign aid and economic growth because so many other causal factors are involved.  Also, much of American aid is designed in pursuit of political or military goals, rather than humanitarian, social or economic goals. The top recipients of US foreign aid, after Ukraine, are Israel, Egypt and Jordan. But only a fifth of US foreign aid goes through foreign governments.  Where feasible, it works through local NGOs, minimizing government corruption.

It would be unreasonable to imagine that improved morbidity and mortality and nutrition did not also improve economic performance, beyond the direct improvement in people’s lives.  It stands to reason that foreign aid is one contributor to development, even if not the most important one.

Why has the pessimistic view of foreign aid so dominated the media up to now? One good explanation is that the pessimistic view of everything dominates, especially everything that governments do.  We love to hear how things go wrong.

A substantial majority of survey respondents in the US and other rich countries wrongly think that the infant mortality rate in poor countries has either risen or stayed the same.  In reality child, mortality has fallen by more than half just since 2000.  Similarly, a whopping 80 % of respondents wrongly believe that the global rate of extreme poverty has either risen or stayed the same, whereas it in fact fell steeply from 1990 to 2013 (since which time it has stagnated). If people haven’t heard the news, then they can’t very well know that foreign assistance and vaccination have been responsible for a huge part of these improvements.

Whatever the limitations of foreign aid in the past, it is clear that Trump’s destructive approach is making things far worse.  You don’t know what you’ve got until it’s gone.

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References

Banerjee, Abhijit, and Esther Duflo, 2012, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Public Affairs).

Bourguignon, François, and Mark Sundberg, “Aid Effectiveness – Opening the Black Box,” American Economic Review, vol. 97, no. 2, May 2007 (pp. 316–321).

Burnside, Craig, and David Dollar, 2000, “Aid, policies, and growth,” American economic review, 90(4), 847-868.

Collier, Paul (2007). The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It, Oxford: Oxford University Press.

Doucouliagos, H. ,and M. Paldam, 2009, “The aid effectiveness literature: The sad results of 40 years of research”, Journal of Economic Surveys 23(3): 433–461

Easterly, William, 2002, “The tragedy of foreign aid is not that it didn’t work.” (CGD: Washington DC)

 

Easterly, William, and Tobias Pfutze, 2008, “Where Does the Money Go? Best and Worst Practices in Foreign Aid.” Journal of Economic Perspectives

 

Edwards, Sebastian, 2015, “Economic Development and the Effectiveness of Foreign Aid: A Historical Perspective,” Kyklos, vol 68(3), pages 277-316. NBER 20685. CEPR summary.

Moyo, Dambisa, 2012, Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa

Rajan, Raghu, and Arvind Subramanian, 2008, “Aid and Growth: What Does the Cross-Country Evidence Really Show?”, Review of Economics and Statistics 90(4): 643–665.

Sachs, Jeffrey, 2005, The End of Poverty: Economic Possibilities for Our Time, New York: Penguin Press.

[1]  Analyzing 97 studies, Doucouliagos and Paldam, 2009, find a statistically insignificant relationship between official aid and growth. This conclusion was also reached by Rajan and Subramanian, 2008, and Quibria 2014.  Rodrik considers aid virtually irrelevant.

 

[2] Banerjee and Duflo, 2012; Burnside and Dollar, 2000; Easterly and Pfutze, 2008; Edwards, 2015; Easterly,  2002.

 

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This post written by Jeffrey Frankel.