Mutual assured development destruction

NEW DELHI – Toward the end of the ancient Indian epic the Mahabharata, Krishna’s Yadava clan self-destructs. Many dark omens presage their downfall: nature behaves erratically and pests multiply. Sin, deception, and violence proliferate, eroding trust and solidarity. Clan members humiliate and insult wise elders. When Krishna’s extended family goes on a picnic, the men get drunk, argue, and attack each other, until eventually all of them are dead. 

This cautionary tale has gained new resonance as geopolitical tensions, including in South Asia, escalate, and many countries embrace protectionist policies. US President Donald Trump’s second administration has contributed significantly to the current fragmentation and disorder. But other wealthy countries have exacerbated the situation by failing to show any real solidarity in response to Trump’s hostile policies. 

The lack of development cooperation is a prime example of this growing appetite for mutual assured destruction. To be sure, aid from donor countries was already declining, and recent events have exposed the system’s injustices. The COVID-19 pandemic highlighted Western governments’ greed, undermining others’ trust in their global leadership. Moreover, the fact that these governments have directed most of their dwindling foreign-aid budgets to Ukraine since Russian’s 2022 invasion, diverting funds away from other war-torn and desperately poor countries, has underscored the largely self-serving approach to such “charity” flows. 

Still, it is surprising, and dispiriting, that other donor countries have not stepped up after Trump terminated almost all US foreign-aid funding and programming. This would have been the obvious thing to do, not necessarily out of solidarity, but simply because of geopolitical self-interest. 

For starters, Trump’s indiscriminate attacks on allies and rivals alike have demonstrated the necessity of coordinated action, which requires building alliances, supporting multilateralism, and cultivating soft power. One easy and relatively cheap way to do that is by continuing to support multilateral institutions. Such funding may also defuse some of the anger that many people in the Global South feel about the Western world’s complicity in the ongoing decimation and mass killings in Gaza. 

Moreover, the massive reduction in US direct aid and financing for international organizations will hinder the provision of global public goods, including health and climate stability. The concept of global public investment suggests that all countries have a stake in solving these challenges, and should thus contribute resources to addressing them, according to their means, and distribute the collected funds based on need and impact.

But the response of most rich countries has so far been appalling. Instead of scaling up foreign assistance, several European governments have slashed it, citing the need to channel funds to defense investment. As a result, some of the most immediate needs that fall under a global public investment framework are going unmet. 

This is especially baffling because the amounts required to plug the development-financing hole left by the United States are so small as to be trivial. For example, Trump’s withdrawal of the US from the World Health Organisation, which remains absolutely critical for managing global health threats, means that the WHO faces a $1.9 billion budget shortfall in 2026-27, a gap that rich countries and even most large middle-income countries could easily afford to fill. 

It’s a similar story at other international organisations. The United Nations World Food Programme faces an estimated 40 per cent reduction in funding, equal to roughly $4 billion. The WFP, which served more than 100 million people in 2024 and won the Nobel Peace Prize five years ago, must now downsize its staff by nearly one-third (around 6,000 positions worldwide) and reduce the amount of life-saving food that it provides, because no other countries have offered to offset the shortfall. 

Similarly, the Joint UN Programme on HIV/AIDS (UNAIDS), which relied on the US for more than 40 per cent of its financing, will need to cut more than half of its workforce and reduce or eliminate some of its essential programs. (Switzerland and the United Kingdom, two other major UNAIDS funders, have likewise reduced their contributions). That could lead to six times more HIV infections and a 400 per cent increase in AIDS deaths by 2029, as well as the emergence of new strains, which would have negative repercussions for all countries. But the organization’s budget gap is a modest $58 million, the same shortfall facing the UN Office for the Coordination of Humanitarian Affairs, which has to lay off 20 per cent of its staff. 

Given these minuscule sums, filling the gap left by the US would have a negligible fiscal impact on traditional donors and large middle-income countries. But only a handful of countries, like South Korea, have responded to the funding crisis, preventing essential organisations’ collapse and enabling them to function properly, for now. If wealthier countries refuse to provide for the global common good, the multilateral system as we know it will not survive.

Jayati Ghosh, Professor of Economics at the University of Massachusetts Amherst, is a member of the Club of Rome’s Transformational Economics Commission and Co-Chair of the Independent Commission for the Reform of International Corporate Taxation. Copyright: Project Syndicate, 2025. www.project-syndicate.org