America Can Do Good—and Do Well

Foreign Affairs | Andrew Natsios

United States Agency for International Development programs prevented over 90 million deaths between 2001 and 2021 before the 2025 dismantling of the agency triggered more than 700,000 excess deaths within a single year. Research published in Science linked this termination to immediate surges in armed clashes, civil riots, and localized economic contraction.

The subsequent shift of foreign aid management to the State Department transferred $3.8 billion to the UN Office for the Coordination of Humanitarian Affairs and $15.9 billion directly to foreign government treasuries. Over 90 percent of beneficiary governments face systemic corruption. Annual U.S. foreign aid disbursements fell by $26 billion between fiscal years 2023–24 and 2024–25, leaving $2.5 billion in allocated funds unspent by late 2026. This domestic structural vacuum expands operational opportunities for rival state actors. China is rapidly accelerating alternative development financing across the Global South while Russia expands security partnerships.

Comment

Substituting structured agency oversight with direct treasury transfers alters the primary function of foreign assistance from institutional capacity-building to immediate transactional access. When state funds bypass conditional monitoring frameworks like the Millennium Challenge Corporation, recipient governments face reduced structural incentives to execute anti-corruption reforms or maintain fiscal transparency. This trade-off prioritises short-term diplomatic alignment at the direct expense of long-term state resilience.

A similar structural trade-off occurred under the 1951 Mutual Security Act, where unmonitored financial transfers to sovereign treasuries in Southeast Asia generated severe fiscal inflation rather than political stability. The 1951 Mutual Security Act ultimately demonstrated that direct treasury infusions without field-level audit controls accelerate governance failure rather than contain external political influence.

Strategic Question for Discussion

If direct treasury transfers replace conditional frameworks like the Millennium Challenge Corporation, does financial assistance retain its value as a tool for political leverage, or does it merely subsidise elite corruption in recipient states?

The historical pattern suggests that unconditioned treasury transfers rapidly lose strategic leverage as recipient regimes absorb funds without fulfilling diplomatic or governance expectations. When audit oversight from frameworks like the Millennium Challenge Corporation is removed, capital inflows tend to reinforce domestic patron-client networks rather than align state policy with donor security priorities. Donor influence diminishes precisely when regional competitors offer competing financial or security agreements.

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