In 1961, Western states established the OECD Development Assistance Committee (DAC) as part of a concerted effort to counter Soviet influence in the Global South. Today, however, this institutional cornerstone of the Western-led foreign aid regime faces mounting challenges. Externally, China now explicitly aspires to assume a leadership role in the global development agenda, signalling the end of the West’s monopoly over defining the means and ends of foreign aid. At the same time, individual Western donors have shifted their rationales for providing aid, often prioritising individual geopolitical and commercial interests over collective agendas. Consequently, in 2023 only 22% of foreign aid reached those who ‘need it most’ in low-income countries—a sharp decline from 35% a decade earlier—as donor nations increasingly channel funds to middle-income countries that are perceived as possessing greater strategic importance or commercial opportunity (UNCTAD, 2024). Has the Western foreign aid regime, once a collective project of the Western liberal international order, devolved into the fragmented pursuit of self-interest? And what does this shift mean for the future of global development?

The Foreign Aid Regime: Cold War Origins

In the 20th century, the foreign aid regime became a central pillar of the post-war order, shaped by the ideological and strategic imperatives of the Cold War. While the practice of concessional resource transfers between nations has deep historical roots, not least in practices of late-colonial maintenance and palliating unrest, the collective and institutionalised provision of foreign aid by Western countries in the post-war context was far from inevitable. This development can be traced largely to the strategic efforts of the erstwhile hegemon: the United States. After the Second World War, the U.S. sought to replicate the success of the Marshall Plan in the newly independent nations of the Global South. It sought to integrate these states into the post-war global economy, address chronic resource shortages at home, and do so without provoking anti-imperialist sentiment.

Recognising the costs and challenges of its ambitious foreign aid programme, the U.S. sought to ‘share the burden’ by enlisting other industrialised nations into the so-called ‘common aid effort’. This effort culminated in the creation of the OECD DAC, which became a pivotal institution for defining and shaping the norms and rules of international development assistance.

The DAC has since played a central role in defining foreign aid—formally known as Official Development Assistance (ODA), establishing the principles of ‘good donorship’, and determining the means and ends of what ‘development’ ought to entail. Foremost, ODA was designed as a public resource with a distinctly concessional and developmental character, explicitly differentiated from public financial flows motivated by commercial or security interests. By codifying these standards, the DAC effectively laid the foundation for the modern foreign aid regime, creating a framework for the collective engagement of industrialised nations in global ‘development’ efforts. Its success was reflected in the way it fostered a collective identity among Western states, framing aid provision as, in the words of the first OECD Secretary-General Kristensen, a ‘normal and stable function of an industrial state’ (in Schmelzer, 2016: 227).

The creation of the DAC must, however, be understood within the broader context of the Cold War. Just one month before the DAC’s establishment, the Soviet Union had launched the Permanent Commission for Technical Assistance to coordinate Eastern Bloc aid efforts in the Global South (Lorenzini, 2019: 82). As a result, the Western foreign aid regime—epitomised by the DAC—was neither an act of collective benevolence nor a gesture of reparations for colonial injustices. Instead, it served as a strategic tool for Western capitalist powers to compete with the Soviet Union in winning the ‘hearts and minds’ of the unaligned ‘Third World.’

The DAC’s design as an exclusive Western-donor forum, operating outside the UN, gave capitalist states a platform to dictate and shape the means and ends of ‘development’ on their own terms. A 1964 UK dispatch reveals this intent, describing the DAC as an:

…essential organ in which, untrammelled by hysterical speeches from the Afro-Asian bloc or subversive manoeuvres from behind the Iron and Bamboo curtains, the Western Powers can study the real substance of aid problems in all objectivity and think out a coordinated line to take at New York and Geneva (in Schmelzer, 2014: 180).

While foreign aid provided donor populations and Western states with a self-affirming narrative of generosity and benevolence, it also served as a key mechanism for securing consent to the post-war capitalist status quo. In essence, the foreign aid regime functioned as a vehicle for asserting Western ethical hegemony (Hattori, 2001). It offered recipients the promise of economic advancement, post-colonial independence, and—unlike the Soviet alternative—the prospect of liberal democratic freedoms.

Yet this narrative of progress came with an implicit hierarchy. Foreign aid subtly reinforced the perceived technological and material superiority of the Western donors, who were portrayed as being further along the ‘great arrow of progress’ (Hickel, 2017). By accepting aid, however, Southern recipients were tacitly cast as primarily responsible for their own underdevelopment—rather than attributing it to the legacy of colonial exploitation or the evolving structure of the post-war global economy.

Foreign Aid and the Post-Cold War Renewal

The end of the Cold War removed the explicit geopolitical rationale that had underpinned the early foreign aid regime, plunging the DAC into a crisis of purpose and legitimacy. Aid levels plummeted, in turn, halving between 1990 and 1997, as Western donors succumbed to ‘donor fatigue’. This downturn was compounded by the developmental failures of neoliberal structural adjustment programmes, which triggered economic and social regression in many recipient countries and concomitant backlash. By the mid-1990s, foreign aid had become a tarnished concept, widely associated with failure and disillusionment on both the political left and right.

Yet by the turn of the millennium, foreign aid experienced a striking revival, buoyed by increased resources and renewed enthusiasm. The DAC played a pivotal role in this resurgence, reinvigorating the foreign aid project and redefining its purpose. This renewal was exemplified by the publication of the DAC’s Shaping the 21st Century Report in 1996, which heralded a significant ideological shift. The report sought to move beyond the antiquated ‘donor-recipient’ hierarchy and advocated for horizontal partnerships with recipient countries, signalling a commitment to a more collaborative and participatory model of development.

The report also introduced a series of ambitious international development targets, which were subsequently endorsed by the United Nations and codified as the Millennium Development Goals (MDGs). Simultaneously, the DAC laid the groundwork for its reform agenda, known as the Aid Effectiveness agenda. This initiative sought not only to address the enduring challenges of achieving sustainable economic and social development but also to ‘broaden the tent’ of foreign aid governance. It aimed to transcend the exclusive, Western-dominated donor club by incorporating recipient governments, civil society organisations, the private sector, and emerging non-DAC providers beyond the traditional aid regime in ancillary processes.

While these shifts toward a less paternalistic and more participatory model of foreign aid governance appeared laudable, they did not signify an abandonment of neoliberalism or the pursuit of Western hegemony (Ruckert, 2006). On the contrary, they can be seen as a more pervasive and intrusive form of intervention, cloaked in the rhetoric of ‘partnership’. This language obscured the persistent—and in some respects, intensifying—hierarchies between North and South. Yet, these changes also highlight the adaptability of the Western aid project and the DAC in navigating the post-Cold War landscape. The rigid ‘us versus them’ dichotomy of the Cold War was replaced by universalistic appeals to the ‘global’, where the foreign aid project offered a compassionate veneer to accompany the seemingly inexorable expansion of global market forces.

Foreign Aid Today

Despite the revival of the Western foreign aid project in the early 2000s, it now faces profound challenges that threaten its coherence and relevance. Externally, the rise of South-South Cooperation (SSC), led by China, has fundamentally reshaped the practices and discourses of foreign aid. Although SSC actors are certainly not new—having provided technical assistance since the Bandung Conference in 1955, predating both the DAC and the Soviet Permanent Commission—their efforts remained relatively small-scale for much of the 20th century and largely escaped scrutiny from the traditional foreign aid regime. The Bandung origins of SSC are nonetheless significant, as they reflect a counter-hegemonic response to Western aid paradigms, driven by ideals of non-intervention, post-colonial solidarity, respect for sovereignty, and demands for a more equitable global order. Materially, however, China now provides approximately 2.5 times more infrastructure financing than the United States, United Kingdom, Japan, and Germany combined (CGD, 2022).

While some highlight a recent retrenchment in China’s development finance offerings, the more immediate institutional and ideational challenge to the DAC and the Western foreign aid regime comes from China’s Global Development Initiative (GDI), launched in 2021. Unlike earlier efforts to institutionalise alternatives in collaboration with other emerging powers—such as the Asian Infrastructure Investment Bank and the BRICS New Development Bank—the GDI is explicitly Sino-centric. It presents a blueprint for what China terms ‘true multilateralism,’ a thinly veiled critique of the DAC’s exclusive, ‘club-like’ institutional model (FMPRC, 2022). After rejecting the DAC’s Aid Effectiveness outreach and attempts to ‘hegemonically incorporate’ China during the 2010s (Xiaoyun, 2017), the GDI positions itself as a vehicle for advancing Xi Jinping’s vision of a ‘Community of Shared Future for Mankind.’ This normative framework promotes an alternative global order rooted in pluralist state relationships, UN primacy, state sovereignty, and an elevated leadership role for China in the global development agenda. 

The international community is currently grappling with the dismal progress of the UN’s 2030 Sustainable Development Agenda —in part attributable to failed effort to use ‘billions’ of foreign aid to unlock ‘trillions’ in additional private financial investment (Bernards, 2024)— and discussions are beginning to take shape on the contours of a post-2030 global development framework. Here, the GDI offers China a strong platform to advance its vision of development and world order: one that is already firmly embedded within UN processes. This vision emphasises collective over individual rights, non-interference, state sovereignty, and explicitly avoids the ‘mission creep’ associated with democratisation and other such polytheizing agendas associated with the Western foreign aid project. While some critics might dismiss the GDI as a vague or symbolic initiative, intended primarily to pivot China away from infrastructure-heavy projects towards less costly soft-sector initiatives, such interpretations fail to account for the scale of China’s financial commitments under the GDI framework. In 2021, this amounted to a $4 billion contribution from the Global Development and South-South Cooperation Fund, with an additional $12 billion in 2023 in special funds drawing on financing from domestic and foreign financial institutions (CIDCA, 2023).

China’s growing influence in the Global South further reveals the importance of the GDI’s strategic role. Repeated ‘Friends of the GDI’ meetings, held within and alongside UN processes and regularly attended by representatives from over 80 countries, highlight China’s ability to rally developing nations around its development vision in discussions on the post-2030 agenda. Although the GDI may still be in its formative stages—what could be described as ‘counter-hegemony on a budget’—it nevertheless poses an overt challenge to the prevailing norms and institutions of Western-led development governance.

Yet the DAC and the Western foreign aid regime have long contended with competing visions of development. In the 20th century, external pressures from the Soviet Union and Southern-led coalitions within the UN spurred the DAC’s creation and consolidation. Today, however, as China steps forward to claim a leadership role in the global development agenda, the DAC and the Western foreign aid regime appear unable—or unwilling—to mount a similarly cohesive or hegemonic counter-model.

Under the current Trump administration, the prospect of the United States withdrawing from the OECD looms large, compounded by anticipated cuts to the aid budget of the world’s largest donor. What remains of US foreign aid is increasingly likely to be deployed as a tool of bilateral geopolitical competition with China, leaving scant room for goals of poverty reduction, climate action, or gender equality (Regilme, 2023). 

Adding to this uncertainty is a broader transformation in Western donor rationales over the past 15 years: the explicit normalisation of self-interest as the primary driver of foreign aid provision. Once heralded as a ‘development superpower,’ the United Kingdom has similarly scaled back its commitments. Following the halving of its aid budget in 2020, which has yet to recover, the UK now allocates roughly 30% of its aid domestically to support in-donor refugee costs (Bond, 2023). Furthermore, the reorganisation of Blair’s Department for International Development (DfID) into the Foreign Office epitomises this shift. On one level, it signals the ‘downgrading’ of development and foreign aid as a priority, subordinated to broader geopolitical and trade imperatives. On another, it reflects the embrace of an ‘unashamedly commercial’ approach that redirects aid from its post-Cold War focus on poverty alleviation and aid effectiveness to projects aligned with national interests.

This trend extends well beyond the United Kingdom. Numerous other DAC donors, including the Netherlands and Australia, have similarly adopted interest-driven aid strategies. Even Scandinavian countries—long celebrated for their humanitarian and altruistic approach to foreign aid—are shifting toward more self-interested modes of provision (Puyvallée & Bjørkdahl, 2021). These shifts signify a broader realignment of donor priorities, where geopolitical and commercial interests increasingly overshadow the post-Cold War emphasis on development and poverty reduction. Consequently, foreign aid is being redirected away from countries and contexts that ‘need it most’, with donors instead prioritising projects where they stand to gain either commercial or strategic benefits (Craviotto, 2023). The result is a distinctly less ‘altruistic’ approach to foreign aid, one shaped by the preferences of individual donors rather than collective agendas.

On one hand, this trend reflects the Western co-option of rhetoric associated with SSC, particularly the argument that it is both warranted and legitimate for donors to pursue ‘mutual benefits’ with recipient countries, whether in commercial or geopolitical terms. On the other, it mirrors broader political and economic shifts within donor countries, where the austerity measures of recent decades and the rise of right-wing populism have amplified anti-aid sentiment. This changing political climate has reinforced the notion that foreign aid should prioritise the ‘national interest’ over the needs of ‘distant others’ abroad.

Of-course, self-interest has long cast a shadow over the operations of industrialised countries throughout the 70-year history of the foreign aid regime. While it was historically implicit, never before have self-interest rationales been so brazenly prioritised over ideals of altruism that—however superficial—once underpinned the regime’s legitimacy and sustained its effectiveness as a hegemonic tool. The fundamental issue with self-interest as a motive for Western aid provision lies in its perceived illegitimacy among recipients. Unlike SSC providers, who can invoke principles of ‘mutual benefit’ or ‘win-win’ cooperation on the grounds that both providing and receiving countries share the status of ‘developing’ nations, and whose aid is animated by the Bandung principle of horizontal partnership, Western aid framed by self-interest often reinforces historical inequities. Many recipients regard foreign aid from industrialised nations as a form of colonial reparation and view self-interest as an affront to their sovereignty. Moreover, self-interest tends to manifest in project-based aid rather than direct budget support, which undermines recipient countries’ ‘ownership’ of aid and their development agendas—a cornerstone principle of the now diminished Aid Effectiveness agenda.

In the 1990s, the DAC demonstrated a capacity for self-reflection, reviving the collective foreign aid project through initiatives such as the Millennium Development Goals and the ambitious Aid Effectiveness agenda. Yet its current trajectory reflects a far more defensive, anomic, and fragmented posture. For over a decade, the DAC has been consumed by technical —yet nevertheless political— debates over redefining the scope and content of ODA. These efforts—euphemistically termed the ‘modernisation’ of foreign aid—have focused on expanding ODA definitions to include non-concessional flows, private sector instruments, and funding for global public goods that are not necessarily ‘developmental’ in orientation, such as climate change mitigation and pandemic response.

This redefinition has allowed donors to incorporate elements such as private sector finance, debt relief, and expired vaccine donations into ODA calculations. While these changes have helped inflate reported contributions to record highs—reaching $223.8 billion in 2023—they have often reduced actual fiscal commitments (UNCTAD, 2023). Much of this increase reflects spending redirected toward donor-centric priorities, including in-donor refugee costs and allocations to Ukraine. Proponents argue that these changes align aid with contemporary global challenges, but critics contend that they undermine the credibility of ODA as a measure of donor generosity and as a public and concessional resource flow dedicated to realising ‘development’ (Cutts, 2022; cf. Moorhead, 2022).

The DAC’s preoccupation with rule revision exposes its declining capacity to shape the global development agenda. Historically, it served as a central forum for Western donors to define and advance both a shared identity and vision for development. Today, however, there is little appetite for fundamental reflection within the DAC, and neither are there concerted efforts to articulate a coherent, long-term ideological vision for development policy. Efforts to maintain its relevance, such as the introduction of the Total Official Support for Sustainable Development (TOSSD) metric, have been dismissed by Southern scholars as superficial and designed to serve donor interests (Besharati, 2017). Against the backdrop of an emerging Second Cold War, these internal debates have done little to counter, on the one hand, the ideational challenge posed by China’s ascendant leadership in global development. Moreover, strikingly absent within the DAC is a more fundamental reflection of the role of the institution in a more geopolitical and less Western-centric world.

As the OECD prepares to finalise its so-called ‘whole-of-OECD Strategy on Development’ later this year, it faces a critical opportunity to reinvigorate the beleaguered Western foreign aid regime. However, the most significant obstacle to this renewal does not necessarily stem from external pressures, such as China’s leadership aspirations in the global development agenda. Instead, it arises from within: the centrifugal forces of self-interest that fragment the unity and purpose of the Western foreign aid project in the current conjuncture.

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The opinions expressed herein are those of the authors; they do not necessarily reflect the views of the SCWO.