Governments of rich countries are increasingly reducing development budgets. The massive cuts by the current US administration to USAID, amounting to a sudden reduction in global aid budgets by over 20%, are echoed by cuts in other traditionally generous donor countries such as Germany, the UK, France, the Netherlands, Sweden, Switzerland and Australia. Although both development and humanitarian aid budgets are hit, the following text focuses on development assistance.

These budget decreases respond to the ascent to power of nationalist populist political movements in rich countries, and they could theoretically be reversed by future governments more aligned with international solidarity. But by then, the damage to the current aid system will have been wrought. And a return to the current status quo is unlikely.

It is also undesirable. As practitioners with each over twenty years of experience in humanitarian and development assistance, we (the writers of the present) know that much of the donor-driven system currently being dismantled is unhealthy:

1. A very large percentage of Western aid budgets accrue to Western organizations, companies and individuals, so government funding keeps afloat a global industry that often seems more focused on maintaining its own position and benefits than on helping people in need.
2. Insofar funding does reach people in need, it often fuels aid dependency while disrupting existing mechanisms of solidarity and resilience. Food aid, for example, can undermine incentives for local agricultural production. Refugee camps are maintained for decades with foreign aid.
3. The autonomy of the ‘non-governmental’ sector has been reduced by donor governments seeking to achieve specific aims – such as fighting terrorism, stopping migratory outflows, pushing democratization or establishing secular rule of law. Hence, NGOs are no longer seen as neutral by local populations, increasing their vulnerability.
4. Risk aversion has caused international NGOs to become bureaucratic (box-ticking to comply with contracts) and ‘bunkerized’ (minimizing contacts with beneficiaries to avoid danger). Programs are often subcontracted to profit-oriented local implementing partners who are rarely trusted by local populations, further reducing overall impact.

Taken together, the value obtained for money invested in this donor-driven approach is very low. Even among supposed beneficiary populations criticism of the aid sector runs high. The aid system must be reformed, and the current funding crisis could provide an opportunity.

Why can aid not be entirely discontinued, as populists in rich countries claim? What are the arguments for maintaining financial transfers from rich countries to the poor? Self-interest of rich countries may be an argument, for example compensating the most vulnerable for the continuous transfer of wealth from poor countries to rich ones, reducing migration from desperately poor areas to the global North, or consolidating export markets for Northern products (e.g. weapons).

These arguments are however tainted by cynicism and therefore lack appeal. The idealistic argument behind international solidarity does retain enduring appeal. A world torn apart by vast differences in wealth, where the capacity of the rich to continue extracting wealth from poor countries while avoiding migration is maintained with violence and walls, as populists suggest, is unhealthy for humanity as a whole, and seems to speed up the prospect of environmental collapse.

The question is thus: how can the aid system be reformed to achieve the objectives of international solidarity, and which new funding mechanisms can be identified to make this possible?

Let us first draw some lessons from successful development programs in the global South:

1. a local government (whether democratically elected or not) determined to improve living conditions and capable of strategically directing assistance flows is helpful. Examples include Vietnam, Bangladesh, Ethiopia, Rwanda and Costa Rica. Key in all these cases is local ownership (instead of donor-driven approaches), strong public institutions and community involvement.
2. where local authorities are not interested or capable of directing development, cooperative ventures among local communities can facilitate sustainable development. Think of Indian women agroforestry initiatives in insurgent areas, waste collectors in Cairo, pastoralists in Northern Kenya, and development initiatives in the slums of Mumbai, Nairobi, Port-au Prince or Lima. Women-led cooperatives seem to be particularly sustainable.
3. Private entrepreneurs concerned with their country or community have successfully initiated development schemes, often based on the production and trade of sustainable and fairly priced local products, sourced from nature and/or produced by local people. These often target local and international markets, and can be supported by foreign entrepreneurs.

What these successful approaches have in common is: local initiatives addressing specific needs, community involvement, use of development aid without becoming reliant on it, and scalability, allowing an initially small project to end up having a sizeable impact.

Decentralization

We suggest an aid system based on international solidarity where funding decisions are made in a decentralized manner, based on local initiatives and community involvement. While governments may still be inclined to support their allies (case a), private donors, whether individuals or companies, may be more inclined to support cooperatives and private ventures (cases b and c). This does not need to take the form of charity, but can simply entail paying fair prices for products that benefit local communities and ensure environmental sustainability.

This would require a network infrastructure where local cooperatives and entrepreneurs can pitch projects or present activities in an easily accessible way, and where donors can monitor progress and receive goods or services, or perhaps social credit points, in exchange for their contribution; a network where the transparency of financial flows and traceability of products reaches high standards; a network capable of handling small initiatives as well as grand, complex projects such as establishing new infrastructures.

Optionally, this network could also facilitate the transfer of knowledge and expertise. A capable retired technician may be able to provide more useful support to a project than a bag of money.

This network would need to be established by a trustworthy, neutral operator that monitors financial and product flows, prices and the trustworthiness of projects.

Our premise is that much more can be achieved with overall lower levels of funding, and that fair market mechanisms can achieve much more than charity.

Banner image: partial installation view of Uffe Isoloto: We Walked the Earth. Denmark pavilion, Venice Biennale 2022