On July 1st, the US Agency for International Development (USAID) officially stopped providing foreign aid. This marks a significant and sudden shift for the country, ending a major chapter in its foreign aid efforts that have been ongoing since 1961.
It’s essential to take a step back and reflect on this development. Having served as a foreign service officer at USAID for 11 years, I’ve witnessed the impact of foreign assistance firsthand. It has saved millions of lives and helped alleviate poverty while improving health, education, and nutrition across the globe. Contrary to some critical views, like those expressed by Elon Musk, my colleagues have been dedicated, intelligent, and nonpartisan. But there’s also a chance here to rethink and improve the existing structure. The reality is, USAID has often operated below its capabilities. The framework for designing, managing, and securing programs has been riddled with inefficiencies. One of my colleagues even tracked his time and found he spent a mere 2% of it on what he considered valuable work. Clearly, there’s room for improvement. Even the most effective staff often struggle to navigate a system filled with conflicting demands and overwhelming paperwork.
As the State Department brings in new staff and develops its systems, it has an unprecedented opportunity to reshape foreign aid. It’s important not to recreate the same cumbersome structures that have historically misdirected efforts. The previous systems heavily relied on a patchwork of small aid contractors and didn’t effectively grasp the intricacies of rules and registrations. The focus should be on simplicity and clarity. A leaner, more entrepreneurial approach could leverage the private sector effectively and steer us toward greater independence.
There are a few things that could really make a difference:
First, aim for greater ambitions. Many past USAID programs have targeted minor improvements instead of transformative change. While some programs did help subsistence agriculture, they didn’t bring about the kind of economic dynamic that fosters growth. Instead of convoluted and expensive initiatives, the State Department should align with the Millennium Challenge Corporation, tackling fundamental barriers in education, health, and private sector development. Local nonprofits should manage community-level programs, while only the US government can push for necessary policy reforms in partner countries. Scaling up successes to reach thousands of businesses and millions of people should be the true aim.
Second, prioritize innovation. The US is a leader in innovation, and one program at USAID, called Development Innovation Ventures (DIV), reportedly yielded an impressive return. Its secret? It focused on grassroots ideas rather than strictly top-down solutions. The State Department should build upon DIV’s legacy by creating a database of proven, cost-effective interventions and streamlining procurement processes. Drawing inspiration from the rapid advancements in vaccine development during the Trump administration, it could publish a list of sought-after innovations to drive progress.
Next, we should fund outcomes rather than just efforts. Development initiatives can be challenging, and despite years of work, America struggles to eradicate deep-rooted poverty. It’s vital to celebrate successes; just because a program starts with good intentions doesn’t guarantee effectiveness. Many USAID programs were funded regardless of their actual impact. The State Department needs to shift to a model where outcomes drive funding. While not feasible for every situation, this approach reduces bureaucracy, fosters experimentation, and ensures that taxpayer dollars support true effectiveness. Aid contractors should be competitive, but they must demonstrate positive results.
Finally, while it’s crucial to support the private sector, the time for top-down planning has passed. US foreign aid has often tried to foster private growth while acting too much as a planner rather than enabling an entrepreneurial environment. For too long, USAID selected winners without facilitating a diverse entrepreneurial landscape. With decades passed since communism’s end, the US should now focus on mitigating risks for first-time investors and letting market dynamics determine success.
This moment presents a unique chance to establish a functional aid system. By collaborating with reformers, emphasizing transformative growth, structuring for innovation, rewarding tangible results, and keeping bureaucratic processes manageable, we can achieve significant strides in foreign aid effectiveness.
