Six Actions for Business in the World after USAID

What does the dismantling of USAID and decrease in overseas development assistance more broadly mean for businesses and their social performance managers in developing and transition economies?

USAID is gone.

The implications of this change were perhaps too big to imagine beforehand – although the signs were there in the run-up to the US election. And the trend from other donors like the UK is of decreasing aid rather than filling the gap.

The immediate humanitarian consequences are real. Some of the aid sector’s biggest successes have been in helping tackle humanitarian crises like HIV, climate-induced famine and ever-increasing numbers of refugees.

Now, thousands of communities in poorer and developing economies will be directly affected by the disappearance of aid budgets in the local economy.

But the development challenges faced by these economies were not being solved by aid. Violent conflict, underdevelopment, poverty and weak public services are never going to be solved by aid.

The development aid sector needed a shake up and probably has needed one at least since the publication of Dead Aid in 2009.

Now the shake-up is happening, whether desired or not, whether planned or not – and in the most extreme ways.

We need to be creative to come up with ways to fill the gaps that are now emerging. But to do so, it is worth considering the fundamentals of sustainable development.

The Size of the Task

As of 2024, approximately 8.5% of the global population, or about 700 million people, live in extreme poverty, defined as surviving on less than $2.15 per day.  Additionally, a broader measure indicates that nearly 3.6 billion people, or 44% of the world’s population, live on less than $6.85 per day (Associated Press, 2024; Elliot, 2024).

Over the last decade, global poverty initially declined but has stagnated since 2020. By 2019, extreme poverty (living on less than $2.15 per day) had fallen to 8.5%, yet recent crises—COVID-19, conflict, debt, and climate change—have halted progress (Elliott, 2024).

Poverty persists due to a range of interconnected barriers:

• Low human capital development, including poor education and healthcare, limits economic mobility (Banerjee and Duflo, 2011).
• Labour market inefficiencies, such as unemployment and informal employment, further entrench poverty (Todaro and Smith, 2015).
• Institutional weaknesses, including corruption and weak property rights, discourage investment and hinder growth (Acemoglu and Robinson, 2012).
• Financial exclusion remains a major challenge, as limited access to banking services and credit restricts opportunities for wealth accumulation (Collins et al., 2009).
• Social inequalities, especially gender discrimination and ethnic exclusion, further marginalise vulnerable populations (Sen, 1999).
• Climate change exacerbates poverty through extreme weather events and environmental degradation, disproportionately affecting low-income communities (Sachs, 2005).
• Conflict and political instability displace populations and disrupt economic activity (Moyo, 2009).
• Unfair global trade policies and external debt burdens restrict economic sovereignty in developing nations (Rodrik, 2011).
• Inadequate infrastructure, including poor transportation and energy access, prevents economic integration and technological advancement (Easterly, 2006).

Addressing these barriers requires investment in human capital, structural reforms, and inclusive policies that empower disadvantaged populations. But fundamentally, for millions of people to come out of poverty and for sustainable development to happen, these issues must be addressed at scale.

Responsible Business in an Aid-Poor Era

For a business (and the social performance manager in such a business) operating in a developing economy, what does the sudden drop of public sector aid mean?

First, whatever your company actually does – mining, power, oil and gas, services, etc. – the overall economic impact of what you do (including employment, taxes and procurement) is small in comparison to the development needs of the communities around you.

Second, if your social investment budget is also small, then you must be smart and strategic in how it is used.

And third, in any change there are always opportunities. What do you, your partners, suppliers, and peers see as innovation and adaptation opportunities in your footprint area now that the development aid economy has changed so much?

This all involves a few things:

• Understanding the needs and approaches taken by the communities around you to address their development challenges
• Engaging with the most important stakeholders on these wider issues and not just the noisy and demanding ones focused on you and your business
• Leveraging not only your social investment budget, but also local content, procurement, and other parts of your business that can improve lives
• Advocating (where possible) with partners, peers, suppliers, communities and other stakeholders to target real needs, however small

Six Things To Do

So, as the dust settles, and the USAID offices stay shut, public sector donors have less money and global geopolitics continues its helter-skelter ride, what should you do?

1. Talk to all your partner organisations, NGOs, civil society organisations, and consultancies in the community, particularly your current partners, but also ones that you have not worked with. Find out how they are being impacted and how they see the communities around you are being affected.
2. Keep your government contacts close, informed of what you and your company are doing and checking their priorities as they change.
3. Sit down with your community hosts (and not just the loudest voices) and work with them on their changing priorities. Find out how they see businesses, SMEs and start-ups being affected.
4. Make sure that your formal and informal community engagement mechanisms are working well, focused on community priorities and including a wide range of stakeholders.
5. Work with other parts of your business (procurement, contracting, etc.) to make sure that what they do helps address shortfalls, needs, and emerging community priorities.
6. Have a good hard look at your community programmes to check that they still make sense in the light of all the change – and probably think about designing and implementing new ones.

Sources Consulted

Acemoglu, Daron, and James A. Robinson. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown, 2012.

Associated Press. “More than 1 Billion People Live in Acute Poverty. Half Are Children and Many in Conflict Zones.” AP News, 2024, https://apnews.com/article/6368254d305025d69925a86b75aeb6f6.

Banerjee, Abhijit V., and Esther Duflo. Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty. PublicAffairs, 2011.

Collins, Daryl, et al. Portfolios of the Poor: How the World’s Poor Live on $2 a Day. Princeton UP, 2009.

Easterly, William. The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. Penguin, 2006.

Elliott, Larry. “Wars, Debt, Climate Crisis and Covid Have Halted Anti-Poverty Fight - World Bank.” The Guardian, 15 Oct. 2024, https://www.theguardian.com/business/2024/oct/15/wars-debt-climate-crisis-covid-poverty-world-bank.

Moyo, Dambisa. Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa. Farrar, Straus and Giroux, 2009.

Rodrik, Dani. The Globalization Paradox: Democracy and the Future of the World Economy. Norton, 2011.

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

Sen, Amartya. Development as Freedom. Knopf, 1999.

Todaro, Michael P., and Stephen C. Smith. Economic Development. Addison-Wesley, 2015.