On March 6, 2025, The Economist published an article titled, Aid cannot make poor countries rich. The last line in the article is telling: “Nevertheless, that public life in many of the world’s poorest countries has ground to a halt on the whim of Mr Trump reflects how badly—rather than how well—much of the old system [of foreign aid] worked.”
The title of the article doesn’t do justice to the impact of aid in many poor countries. Not only does aid not make poor countries rich, but it also makes them dependent on the largesse of donors in wealthier countries. This phenomenon puts poor countries in a precarious position when it comes to both their long-term development and their more short term need to provide critical goods and services to their citizens.
For instance Botswana’s GDP per capita of more than $7,600 is one of the highest in Africa. Yet the country finds itself in the unenviable position of declaring a public health emergency due to its inability to properly source medicines for many of its clinics. All nonessential surgeries have been postponed as clinics struggle to get medicines for diseases such as cancer, hypertension, diabetes, tuberculosis, and several others.
Part of the reason for this is the slump in the global diamond market as Botswana remains the largest producer of diamonds by value. But another reason for the public health challenges is due to the cut in funding from USAID. From 2020 to 2024, Botswana received more than $280 million in foreign assistance from the United States, averaging approximately $57 million per year. In September 2025, it had received just $10 million. Much of this assistance was directed towards HIV/AIDs and general health programs.
The same pattern emerges in Lesotho. Lesotho’s struggles and the shock of the 90-day freeze on nearly all USAID programs, including President Trump’s tariffs, which have severely impacted the country’s textile sector, caused the country to declare a national state of disaster. The fragility of many countries’ health systems and economic models is becoming increasingly evident.
Botswana and Lesotho reveal the same vulnerabilities. Once aid dries up, the system falters.
One of the most disconcerting facts in all this is that, even with all this aid, the world’s poorest countries have experienced a brutal decade. The chart below is striking. For more than 30 years, the GDP per capita in Sub Saharan Africa, a major recipient of foreign aid, has barely budged. Although GDP per capita is an imperfect measure, it remains one of the best indicators for prosperity. Research from Lant Pritchett, a global development scholar, shows how no country with a high GDP per capita has a high rate of extreme poverty while none with a low GDP per capita has a low rate. In effect, as his paper notes, economic growth is enough and only economic growth is enough for the basics.
It is true that there are other ideas and interventions one could pursue. And many development economists are now pursuing controlled policy experiments. Randomized control trials have been popularized by Nobel Prize winning economists Abhijit Banerjee, Esther Duflo and Michael Kremer. But even those ideas are proving difficult to move the needle on meaningful change. As even Duflo has come to this “dispiriting conclusion: there is no reason why what works in one neighbourhood will do so in the rest of a district, let alone on another continent. In one Indian village, for instance, giving women pensions made their granddaughters (if not their grandsons) healthier; in another, handouts failed to improve health or even raise household consumption.”
The idea of creating prosperity is complex. But in some ways it’s quite simple. Life is a series of struggles marked by consumption or nonconsumption events. Most people in poor countries are nonconsumers. The question is: how do we transform billions of nonconsumers to consumers? The answer is by creating new markets that serve them. Every country that has become prosperous has figured out how to transform nonconsumption to consumption.
The real test for development is simple. Do we have more consumers today than we did yesterday? Is the number of nonconsumers for critical products and services dwindling? Are there new markets that serve nonconsumers? Until policymakers, donors, and entrepreneurs shift their focus to this fundamental task, the cycle of dependency and fragility will persist.
