The Complex Role of Aid in Shaping Global Development Outcomes

Wang Yaqi | Agence France-Presse

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International aid has long been seen as an important tool for helping countries handle humanitarian crises and strengthen their economies. In 2022, the United States Department of State and USAID allocated around 11 billion US dollars for foreign aid aimed at boosting growth. This effort reflected a global trend in which aid was viewed as a quick and effective way to stabilise communities facing natural disasters, conflict, or economic collapse.

Aid today generally falls into three categories: emergency, military and development aid. Emergency aid responds to urgent situations (as its name suggests) and helps communities meet basic needs. Military aid helps to stabilise regions in or affected by conflict. Development aid - the most consistent and long-term form of aid - aims toward economic capacity, country resilience, and the prevention of future crises. The OECD Development Assistance Committee (DAC) formalised this idea in 1969, defining development aid as concessional financial flows intended to promote the welfare and economic growth of developing nations, with Official Development Assistance (ODA) forming the bulk of these contributions.

ODA has grown quickly since the early 2000s. By 2019, DAC members delivered about US$152.8 billion in ODA, more than twice the amount in 2000. This increase has renewed debate on whether sustained aid actually helps developing economies or risks creating dependency.

Historically, aid has never been a neutral instrument. After World War II, it was closely tied to geopolitical interests. The International Bank for Reconstruction and Development’s first loan to France (in 1947) came along with a clear political condition: removing communist elements from its government. The Truman Doctrine poured US$400 million into Greece and Turkey, acting as support for threatened democracies but also aimed at containing Soviet influence. The Marshall Plan, although widely praised for reviving Western Europe, similarly advanced US strategic interests while rebuilding broken economies.

The collapse of the Soviet Union changed aid priorities again. With Cold War ideological battles fading, donors could no longer overlook governance failures in post-Soviet states, leading to higher emphasis on transparency and anticorruption measures. International bodies moved to standardise and improve the effectiveness of aid: the UN urged developed countries to direct 0.7% of their GNI toward ODA, the Monterrey Consensus highlighted the need for better global cooperation, and the Paris Declaration of 2005 highlighted principles such as local ownership and accountability.

The early 21st century also saw renewed commitment to Africa. The G8’s Africa Action Plan, the creation of African Personal Representatives, and the Blair Commission for Africa highlighted a shift towards long-term development rather than short-term political goals. Reports such as “Our Common Interest” argued that meaningful progress required economic growth, modern infrastructure, and stronger institutions.

Yet despite these, concerns about aid dependency continue. For instance, South Sudan has warned that large-scale humanitarian assistance risks creating a “dependency syndrome”, where local institutions lack incentives to develop their capacity. Research by the UN Development Programme (UNDP) has also found that technical support alone is not enough to build the strong administrative systems needed for sustainable development. This raises the question: in the first place, how important is economic aid for development? Supporters argue that aid has helped reduce poverty, improve health, and expand access to education. Humanitarian responses after large disasters, including rescue operations, medical support, and relief distribution, show how international aid can save lives and stabilise vulnerable communities.

But critics say development aid targeted at economic growth is too rigid to respond to changing conditions. Economic development requires flexibility, and investments change frequently. However, aid programmes often continue funding projects even when demand changes. The result can be acting without meaningful progress.

A simple analogy proves the point. If a lemonade stand has no customers in winter, the owner would switch to selling hot chocolate. But aid programmes (once planned and approved) usually fund the lemonade stand regardless of the low demand.

This rigidity may explain why, as economist Andrei Shleifer argues, modern aid is no longer driven by growth. Instead, the objective has shifted toward rescuing and improving lives, regardless of whether these efforts produce long-term economic improvements.