In the final week of September, global delegates gathered in New York City for the UN General Assembly and the 20th Clinton Global Initiative (CGI), two of the world’s most influential convenings on peace, sustainability, and human development. This year, the mood was markedly darker. With the United States slashing funding to the United States Agency for International Development (USAID), and nations such as Canada, Germany, and Britain following suit, the world’s largest aid networks were forced to confront the challenging truth of, if the traditional model of international aid is collapsing, what will take its place?
As Rajiv J. Shah wrote in The New York Times (October 2025), “Over the past year, wealthy countries around the world have undermined a decades-old consensus that human dignity is universal and that nations have a responsibility to further it.” Shah, a former USAID administrator, called the current moment “a tragic retreat from a system of foreign aid that helped cure the sick, feed the hungry, and empower the poor,” warning that millions of people could die as a result. Yet, amid the crisis, new ideas that emerged from this year’s Assembly suggest a more equitable and sustainable model of development may be taking shape. One that is not built on dependency, but on shared power and local innovation.
The Old Model: Power Flowed One Way
For decades, the global aid system followed a familiar pattern where money and expertise flowed from donor nations in the Global North to developing regions in the Global South. The assumption was that solutions were designed in donor capitals and implemented elsewhere. While this model delivered undeniable progress in terms of longer lives, higher access to schooling, and a sharp decline in extreme poverty, it also entrenched dependency, inflated bureaucracy, and eroded local ownership (Niyonkuru, 2016).
Aid was also rarely unconditional, and donor governments routinely attached economic, political, or institutional requirements that recipient nations had to accept in order to qualify for funding (Guillaumont et al., 2023). Over time, countries became reliant on external budgets, international NGOs, and donor-led reporting systems rather than domestic resource mobilization or national ownership. The result was a maze of overlapping programs and fragmented initiatives, what one analysis described as “a thousand small bureaucracies all running in parallel” (Nanni & Strangio, 2022). The example the Fix the News team gave was Malawi, who must produce 50 strategic plans for 166 donors to sustain its healthcare system (Rose & Isaacson, 2025).
The burden of success rested heavily on recipient nations, who were expected to deliver outcomes on donor-defined timelines. And during this time, global realities were shifting with emerging economies rising, private capital diversifying, and issues like climate resilience, gender equality, and digital access taking center stage. Yet, the current aid model struggled to adapt. Donors continued to define the goals and measure the results, and those living the realities of poverty, health inequity, and environmental strain were rarely trusted with the power to lead (Martin, 2025).
The New Model: From Donor-Driven to Locally Led
As reported by Fix the News, the mood in New York was not one of despair but of renewal. Despite the sweeping funding cuts to USAID and other major donors, delegates spoke of “innovative financing,” “de-risking local investment,” and “shifting control.” The conversation was no longer just about where money goes, but how it moves (Rose & Isaacson, 2025).
Mechanisms such as debt-for-nature agreements currently in place in Ecuador and Belize, are turning portions of national debt into local investments environmental sustainability. These swaps reward reform and leadership rather than compliance. Similarly, blended finance, where philanthropic or public funds attract private capital, is unlocking infrastructure and energy projects once deemed too risky (Rose & Isaacson, 2025).
Shah (2025) writes, “Leaders in Africa, Asia, Latin America, and elsewhere are taking ownership of their countries’ development, leveraging technology and encouraging private investment.” He called this “a new way to advance human dignity — led increasingly by developing countries, not donors.”
Philanthropy, too, is evolving. Its role is no longer to swoop in and save, but to stand beside and support to amplify local capacity rather than overwrite it. The emerging model is participatory, technology-enabled, and built from the ground up.
Rethinking Mental Health Funding
In a previous Invested article, I discussed how mental health exposes the cracks in traditional aid and health systems. How around the world, and here in Canada, government funding has lagged far behind the growing need. With structural underfunding, jurisdictional fragmentation, and workforce shortages leaving millions without access to care. Mental health services were also excluded from the original federal government of Canada’s design of public health insurance in 1957, a decision whose ripple effects still define our system today. And while awareness has improved, funding levels have barely moved.
Globally, only 2% of health spending goes toward mental health with even less in low- and middle-income countries. The result is a treatment gap so wide that traditional grant-making and public budgets can’t hope to fill it. (Prospira Global, 2024). This is why turning to new models of financing is an important discussion to have.
The Coalition for Mental Health Investment, launched at last year’s General Assembly and CGI, is one example of this evolution. In response to chronic underfunding, the coalition is experimenting with innovative financing tools, including the aforementioned debt-for-nature swaps and outcome-based funding, inspired by the conservation sector. Over the past five years, debt-for-nature swaps have released billions of dollars for environmental protection, with Ecuador’s 2023 deal alone converting $1.6 billion in debt into $18 million a year for 20 years to protect the Galápagos Islands, and Belize cut its national debt by $250 million while establishing a US $180 million trust for marine conservation (Rose & Isaacson, 2025).
The coalition’s idea was to instead of trading debt for nature, countries could trade debt relief for commitments to invest in mental-health infrastructure to treat mental illness and to build resilience, creativity, and cognitive capacity. As Erica Coe of the McKinsey Health Institute told the Fix the News team, “A growing number of countries are realising the importance of investing in the brains of their future workforces. When you think about the economic nature of it, this is what will make our society run.”
This shift, from crisis response to capacity building, from service gaps to systems design, mirrors the broader evolution in global aid. Like AI-driven farming tools or community-led health tech, mental-health innovation is becoming localized, data-informed, and investment-oriented, and is being built by the people who live the realities every day.
It will be an interesting few years as the future of global development gets rewritten. It may not arrive with a blueprint or a single breakthrough but will likely emerge through the slow accumulation of local experiments in finance, governance, and care that reflect the realities of those closest to the problems. The old system of aid may be collapsing, but in its place, something more sustainable seems to be taking shape.
Bibliography
Dreher, A., Lang, V., & Reinsberg, B. (2024). Aid Effectiveness and Donor Motives. World Development, 176, 106501.
Guillaumont, P., Boussichas, M., & Dsouza, A. (2023). The Evolution of Aid Conditionality: A Review of the Literature of the last Twenty Years. EBA
Martin, F. (2025). Development Aid’s Future is Hiding in Plain Sight. Reuters. https://www.reuters.com/breakingviews/development-aids-future-is-hiding-plain-sight-2025-03-07/
Nanni, F., & Strangio, D. (2022). Mapping the Structure of International Aid Flows: A Network Analysis of Donors and Recipients (1960–2020).
Niyonkuru F (2016). Failure of Foreign Aid in Developing Countries: A Quest for Alternatives. Bus Eco J 7: 231.
Prospira Global. (2024). The power of giving: Global mental health financial insights 2024. [PDF].
Rose, A., & Isaacson, E. (2025) The End of Aid. Fix the News. https://fixthenews.com/p/the-end-of-aid?img=https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F789c438e-12fd-45e5-8699-48502fecc5e0_1170x530.jpeg&open=false
Shah, R. J., (2025). Foreign Aid is Mostly Gone. It Could Be Replaced with Something Better. The New York Times. https://www.nytimes.com/2025/10/13/opinion/aid-cuts-new-model.html?unlocked_article_code=1.uE8.pZva.m96rMl5YzAOS&smid=url-share&utm_source=substack&utm_medium=email