Those of us who work in the field of international development should be focused on putting ourselves out of a job. We want to be so successful in helping countries tackle poverty that our jobs become unnecessary. So, as countries lift themselves out of poverty, what will happen to the so-called “aid industry?”
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In collaboration with the Brookings Institution, the Overseas Development Institution recently published a report attempting to answer this question. The report, Horizon 2025: Creative Destruction in the Aid Industry, noted that in order for development agencies to remain relevant in the changing circumstances of the developing world, they need to shift their strategies. New methods for alleviating poverty are making a major impact. Though not all development solutions have been successful, many development and aid agencies, domestic policies in developing and middle-income nations and philanthropic organizations have achieved positive results. The legacy of these new approaches will alter the tactics of future development organizations.
The report bases its projections on what it anticipates will be accomplished by 2025. Among other things, by 2025 income inequality in middle-income countries will decrease as per-capita income increases and population growth decreases. The report optimistically predicts that the patches of poverty in countries such as India and China will be eliminated by 2025. This means that most global poverty will be concentrated in low-income countries. Specifically, most of the world’s most poor will live in Africa. In 1990, one-sixth of those living below the poverty line lived in Africa. Right now, over 50 percent of those living below poverty live on the continent. If this trend continues, five-sixths of the world’s poor will be residents of African countries by 2025.
The report anticipates several “disruptors” which will compel aid and development agencies to adjust their plans and alter their methods:
1. For social welfare, private sources of aid are beginning to make up a larger portion of the aid industry. Private philanthropy has increased exponentially, both through bigger organizations such as the Gates Foundation and through individual donations and micro-loan organizations like Zidisha. These models are becoming more and more successful, which will put pressure on public aid institutions to alter their methods to keep up with the standard of effectiveness.
2. For economic growth, cooperation between countries in the developing world will alter the role that the developed world plays in trade. Developing countries’ portion of world trade increased from 30 percent in 2000 to 40 percent in 2010. Trade between countries in the developing world is increasing much faster than overall trade.
3. For climate change, the report anticipates that by 2025 resolving the issues surrounding climate change will be much more urgent. There will need to be more multinational cooperation as well as more financing. For this reason, climate change runs the risk of diverting funds from other development initiatives.
The authors ran tests to see which multilateral institutions and Development Assistance Committee (DAC) countries will be most affected by these disruptors. The scale below shows the results, with those in red running the highest risk and green being the lowest. Interestingly, organizations such as the Global Alliance for Vaccines and Immunization and the Global Fund for Aids, Tuberculosis and Malaria displayed very little risk for being swayed by the disruptors. This is because these organizations provide global public goods and their activities are focused on low income and fragile countries. The organizations and DAC donors, which focus on social welfare as opposed to growth, are much more vulnerable to the effects of the aforementioned disruptors.
We don’t know if development will pan out the way that Horizon 2025 has predicted. But this report has initiated a dialogue about what recent changes in aid and development will imply. It is important to note that the report does not say that development agencies will become obsolete by 2025. Instead, it points out that the new and creative delivery methods and policy chances that have been coming into play may change the entire field for the better. Because fewer and fewer people across the globe are facing absolute poverty, there will be an opportunity for more aid money to be spent per poor person. Instead of cutting aid and declaring the war on poverty a victory, the aid industry in both developed and developing nations should refocus and streamline its efforts based on the changes that the world stands to face before 2025.
With the end of the Millennium Development Goals just around the corner, and as the opportunity for re-prioritizing development objectives arises, it will be interesting to see the creative changes that aid and development agencies make in order to continue making useful contributions to eradicating poverty. If these agencies succeed, they will end up exactly how they want to be: they will find themselves looking for a new job.