The dissolution of USAID signaled a sea change in America’s approach to global development. This realignment mirrors a broader trend among global donors to focus on market-led development and enhanced bilateral commercial ties.
A greater focus on deals, infrastructure, and bilateral commerce is a pragmatic shift. But transactions only succeed when countries also strengthen the business environment that supports them.
As Under Secretary of Commerce William Kimmitt argued, free markets are not self-executing; they require institutions, credible rules, and committed partners.
This emphasis is not unique to the current administration. In 2023, the United States and its regional partners reaffirmed the same core principles in the Joint Declaration of the Americas Partnership for Economic Prosperity: “We support stronger governance and adherence to the rule of law, driven by principles of transparency and accountability. We recognize that fairness and competition in open markets are vital.” Together, these statements underscore a consistent point across administrations: free market principles matter, but they deliver results only when supported by institutions, rules, and a business environment that allows firms to compete and invest with confidence.
Nations with greater freedom tend to enjoy higher levels of prosperity.
Transactions are exceedingly difficult to close, sustain, or scale without the right business environment underneath them. Where enforceable contracts, regulatory predictability, and protection from arbitrary state action are absent, even well-structured deals tend to stall or fail to attract the follow-on investment that makes them meaningful.
If igniting private-sector growth were easy, we would have done it everywhere long ago. The private sector demands predictability: rule of law, market stability, free capital flows, a reliable labor force, and customers with purchasing power.
At the Center for International Private Enterprise (CIPE), our forty-plus years of experience offer a clear lesson for the new foreign assistance architecture: the key is creating growth conditions that are rooted in domestic political realities.
A Brief History
We don’t have to guess what drives sustained private-sector growth—we have the data. The Atlantic Council’s Freedom and Prosperity Center has built one of the most rigorous empirical records on this question, tracking political, legal, and economic conditions across 164 countries since 1995. Their findings are clear: a strong rule of law, political freedom, and a market economy provide the surest path to durable prosperity.
The aggregate numbers are striking. Across all 164 countries in their 2024 dataset, the indexes show a clear positive correlation of 0.71 between freedom and prosperity: nations with greater freedom tend to enjoy higher levels of prosperity. Countries that improved most in their freedom scores also experienced the largest prosperity gains.
The United States has a direct commercial stake in these outcomes. The same conditions identified as drivers of prosperity are precisely what the United States has long required of its closest trade and investment partners. Countries that have undertaken serious governance and market reforms have become better customers for American goods, more reliable partners for American firms, and more attractive destinations for American investment.
How Can Foreign Assistance Foster Prosperity?
Given this history, U.S. private sector-led development assistance should focus on building good investment climates. Three categories of effort should form the core of the aid architecture:
Reinforce the Foundation
The most durable reforms are those that business communities fight for on their own. Foreign assistance should build the coalitions that make that happen by supporting chambers of commerce, business associations, and public-private dialogue platforms that can advocate for pro-market reforms from the inside. This includes funding convening power, technical research, and international connectivity, and sustaining that support over time.
Incentivize Governments to Change
Local changemakers often welcome external incentives that make their work easier. The United States can build on an already solid toolkit of trade policy, aid conditions, and investment incentives, deploying them as a mutually reinforcing package. Trade agreements, development finance, and regional compacts can work together to reward reform momentum and send a clear signal: the United States supports those who build fair, open markets.
Deliver Advice at the Speed of Business
Traditional technical assistance remains valuable but has too often arrived late and reflected outdated assumptions about commercial reality. A more effective model draws on private-sector expertise in areas such as digital commerce, fintech, and platform-based trade. This approach prioritizes speed, relevance, and demand-driven engagement, ensuring reform advice keeps pace with real-world conditions.
Operationally, experience suggests that clarity of roles across U.S. federal agencies is decisive. Trade policy and technical assistance are most effective when they reinforce the same commercial development goals.
Zooming In: Reinforce the Foundation
CIPE’s expertise lies in reinforcing the political foundation for reform through private-sector engagement. Three principles should guide foreign assistance in this area:
Build Coalitions for Better Business Environments
All politics are local. Local partners and champions must lead the push for competitive, transparent economies. International expertise can amplify their voices and add technical credibility. CIPE supported Uzbek businesses in advocating for e-commerce rules and simplified tax mechanisms, resulting in more than 8,000 online businesses registering in a single year.
Activate International and Local Capital
Some reforms open the door to investment in ways that create a virtuous cycle. Pro-market change attracts capital, which in turn builds constituencies for further reform. Trade facilitation, e-commerce, and digital payments are especially effective in linking local small and medium-sized enterprises (SMEs) with international technology companies. CIPE facilitated a network of Egyptian business associations to accelerate the shift to a cashless economy, contributing to a rise in financial inclusion among SMEs.
Address Unfair Competition
Sometimes the objective is not just enabling good investment but protecting economies from corrosive practices. CIPE’s BRI Monitor project in the Philippines supported advocacy for reforms to the Public Service Act, helping open the telecommunications sector to broader participation and improve connectivity outcomes.
A final caveat: the private sector cannot replace government. It generates jobs and tax revenue and can advocate for rule of law, legal certainty, and an educated workforce, but it cannot provide public goods or ensure a level playing field on its own. Where democracy and public-private collaboration function well, growth outcomes improve.
Conclusion
As U.S. foreign assistance pivots toward local investment and bilateral trade, it is essential to recognize what drives commercial success: strong governance and the political coalitions that sustain it over time.
Where democracy and public-private collaboration function well, growth outcomes improve. Empowered corporate citizens strengthen democracy – and stronger democracy drives better business outcomes.
Capital, on its own, does not deliver development outcomes. Deals cannot substitute for the rules, institutions, and accountability mechanisms that allow markets to function. Without these foundations, even the most well-structured investments struggle to take root or scale.
A more effective approach to foreign assistance must therefore go beyond financing transactions and focus on strengthening the systems that make those transactions viable. That means empowering private-sector actors to advocate for reform, aligning public and private incentives, and ensuring that support reaches the local coalitions capable of turning policy commitments into real change.
Economic reform is never purely technical—it is political. It requires sustained engagement with those who benefit from openness, competition, and transparency, as well as the ability to navigate resistance from those invested in the status quo.
If the United States wants its growing emphasis on trade and investment to succeed, it must invest just as seriously in the governance environments that underpin them. Supporting local reformers, strengthening institutions, and advancing the rule of law are not peripheral tasks—they are the foundation of durable prosperity.
That is where markets are built. And that is where long-term development success begins.
Andrew Wilson is CIPE’s executive director.
Published Date: June 01, 2026