US foreign aid has collapsed. How should philanthropy respond?

On Friday afternoon, nearly three weeks after the Trump administration announced a pause on foreign development assistance, the Rockefeller Foundation issued a statement. In addition to being one of the top development funders in the world, the foundation is helmed by Rajiv Shah, who served as the head of the newly-gutted U.S. Agency for International Development between 2009 and 2015. The statement came from Shah himself, who emphasized the significance of USAID’s work in everything from lifting global literacy rates to tempering the spread of Ebola. “The Rockefeller Foundation is dedicated to doing our part, and we will continue to work with anyone committed to the same,” the statement concluded. It’s been a deeply turbulent three weeks for foreign aid, with the abrupt dismantling of USAID sending shockwaves through the sector. Funding for lifesaving programs has evaporated overnight, leaving many to wonder whether foundations will step in to fill the void. So far, help has not been forthcoming, with foundations staying largely silent on what plans they have in place. As a cascade of executive orders began pouring from the Oval Office on Jan. 20, only a few foundations have responded publicly: Bloomberg Philanthropies, founded by the businessman and former New York City mayor Michael Bloomberg, was quick to announce its intention to cover the funding gap left by the U.S.’s departure from the Paris Climate Agreement. A strongly-worded statement made by Richard Besser, president and CEO of the Robert Wood Johnson Foundation, condemned Trump’s slashing of diversity, equity, and inclusion initiatives. Novo Nordisk Foundation, one of the world’s largest charitable organizations, explicitly said it had no plans to prop up the global health sector in the absence of U.S. funding. While the Rockefeller Foundation’s statement broke a veil of silence on the part of the sector, the lack of specifics has left some feeling frustrated. “You have $6.2 billion in assets. What specifically are you doing to meet this moment and catalyze change,” one commenter wrote in response to Shah’s statement on LinkedIn. “Otherwise this just feels like ‘thoughts and prayers.’” The role of philanthropy now Trump’s antipathy for foreign aid spending has been well-documented. In 2018, his first budget to Congress proposed cutting aid by one-third. “Moving forward, we are only going to give foreign aid to those who respect us and, frankly, are our friends,” he told the United Nations at the time. Once in office, Trump wasted no time making good on these promises: The executive order to freeze aid was signed within hours after he was sworn in. Tatyana Margolin, a former director at Open Society Foundations and co-founder of Stroika Inc., which supports and funds global resistance movements, told Devex that despite the writing on the wall, foundations have found themselves unprepared to meet the current moment. “I don’t know why anyone would have thought that somehow the second time around would have been the same or better,” she said. “All indicators were pointing to the fact that it was going to be a lot worse.” Philanthropy’s apparent paralysis, Margolin said, is due partially to the fact that foundations are not structured to be emergency responders, and partially because it was “truly very difficult to imagine what’s happened over the past [three] weeks [...] here.” Regardless of their preparedness, a looming question remains: What role should philanthropy play in filling the funding gap that may — or may not — be left by the American government? In 2023, USAID spent $40 billion across 130 countries; the U.S.’s official development assistance that same year totaled $65 billion. While these numbers represent a minute fraction of America’s federal budget, experts say it’s unrealistic to expect philanthropy to generate such sums. “There’s no way private philanthropy can fill the USAID funding gap,” said Gillian Caldwell, a consultant who advises foundations and nonprofits, who until December served as the chief climate officer and a deputy assistant administrator at USAID. That’s not to say there has been no response. While foundations have not been publicly forthcoming about their plans, Caldwell said there were early discussions of what she referred to as a “nerve center” — a small, central hub likely housed within an existing organization, where foundations could mobilize communications responses, liaise with congress, and support litigation. But the situation has evolved rapidly, first with the aid freeze, followed by a stop-work order, then the announcement that USAID would be abolished and absorbed by the U.S. Department of State. A federal court judge has temporarily blocked USAID’s dissolution, but at present, Caldwell is unsure where the plan for the nerve center stands. “We’re at a point where organizations are just going to start folding like a house of cards because they don’t have the resources,” she said. A more resilient aid model While the legality of Trump’s orders is debated in the courts, the fact is that the sudden cessation of funding has taken a heavy toll on the organizations with whom USAID was partnered. Those organizations have said that they urgently need support from elsewhere — whether from philanthropists or another source. But beyond that, the events of the last several weeks have also thrown into sharp relief how fragile — and unsustainable — the current model of dependence really is. Such is the case for the Uganda Key Populations Consortium, or UKPC, an organization that, among other things, contracted with USAID to lead to engagements with the U.S. President’s Emergency Plan for AIDS Relief, or PEPFAR, and the Global Fund to Fight AIDS, Tuberculosis and Malaria, as well as provided rapid response in light of the country’s 2023 Anti-Homosexuality Act, which calls for the death penalty for offenders and ranks among the harshest such laws in the world. Richard Lusimbo, UKPC’s director-general, told Devex that the stop-work order has already had devastating consequences for its participants. Of the 35-person team, 28 contracts have been terminated — the majority of whom were working directly with communities to provide urgent medical support, safe housing, legal aid, and food. “On a monthly basis, we receive over 100 people who need support. And now that is totally gone,” he said. Lusimbo is heartbroken that the fate of so many lives hangs in the balance. In the immediate term, he’d like to see foundations set up emergency funding before the devastation compounds further. But perhaps more than that, the turmoil with USAID has crystallized the need for a different path. “What has happened … with the Trump administration has really shown that we cannot have people’s lives dependent on which party is in [the] White House,” he said. Instead, philanthropy should have a hand in helping communities to become more resilient themselves. “We have learned so much from what is happening now, and I think we need to start having that conversation,” he said. “And philanthropy should be part of the conversation of sustainability, not just leaving the burden to community organizing.” Solange Baptiste, executive director of ITPC Global, which advocates for affordable community access to medicines and health care in South Africa, agrees. The U.S. has not been the only wealthy country to slash overseas aid — France, Germany, the Netherlands, and Sweden have all cut funding as the European Union increasingly turns its interests inward. “We have relied on one country, one group of countries, one person, to bankroll an entire system,” she said. “And when they change their mind, there’s collateral damage everywhere.” “To think that some philanthropy is going to come in and save us, or that another government, or block of governments, will come in to replace what the U.S. is doing, I think, is completely unfounded.” What comes next So where does philanthropy go from here? In the short term, many feel that foundations can — and should — mobilize their endowments, if only as a stop-gap measure. “[Foundations] are still able to do their work, and they shouldn’t take it for granted,” said Stroika’s Margolin. The impulse of philanthropy in times of crisis is to pause, map, and restrategize — and all the while, funding is paused. “We don’t need another mapping of the problem,” she said. “We know what the problem is. It’s here. You have to walk and chew gum at the same time.” In the long term, the time is ripe for a reimagining of how aid is structured — and the role philanthropy can play. While Baptiste stops short of calling the situation a blessing in disguise, she does think now is the time to restructure the global financing architecture. As of now, she said, many nonprofits tend to work on a shoestring budget with few reserves, thanks to funding structures that finance a specific project and not a cent more. “That’s why philanthropy has always been a little bit behind the curve,” Baptiste said. A recent move toward trust-based philanthropy has helped change that paradigm. Trust-based philanthropy involves making longer-term grants with fewer restrictions and therefore more scope to cover overheads. But it has yet to be adopted on a wide scale. “Many donors have been moving in that direction, but I don’t think the entire field is there yet,” she added. Of course, the question of how to decolonize aid, both in the philanthropic world and beyond, has been swirling for years. Ironically, shifting away from traditional aid and toward economic empowerment was a priority for former USAID Administrator Samantha Power, who in December recalled the refrain she heard over and over from the leaders of USAID-partnered countries: “We want trade, not aid. We want to grow our economies. We do not want to be dependent, in any fashion, on foreign support.” One of USAID’s significant roles was as a provider of catalytic funding, nonrecoverable support grants that reduce risk for investors in frontier and emerging markets. These grants pave the way for blended finance deals, one of the key tools for funneling private capital toward the pursuit of development goals. While even in this space it’s unlikely that philanthropy can replace USAID, it’s certainly an area where philanthropy is better placed to step into the breach. Baptiste thinks there is room for it to assume more risk in the interest of catalyzing bold ideas. Philanthropy is not generally known for its agility — critics say that funders often prioritize donor agendas over community needs, with rigid compliance requirements placing outsized burdens on grassroots organizations that force them to divert their resources away from their work. A more meaningful move toward trust-based, unrestricted funding is one way philanthropy can start to change the harmful status quo. Despite this reputation, and everything happening, Baptiste is optimistic that philanthropy will become more willing to take bigger swings. “I am really hopeful that philanthropy does see its role in fixing the gap, in funding bold new ideas, in funding things that have a little more inherent risk,” she said. “Because what we ultimately need is a new system that works for the majority world.”