Biting the hand that feeds the world doesn't seem like a great strategy. But at the United Nations, it's normal. Last year, in a masterstroke, the UN General Assembly put Zimbabwe in charge of Sustainable Development. Yesterday, the world leaders who gathered at the UN in New York found a new excuse to rage against America, the world's biggest aid donor, for having the cheek to try to save the West from recession.

“Using the bailouts of the international banking system,” the Chilean President said, “the scourge of hunger on the planet could have easily been eliminated.” She moved straight on to complain that “financial instability is threatening to generate a worldwide recession in which, as always, those most affected will be the world's poorest”. Yup. The world is a complicated place. Sadly, you can't keep economics and poverty in separate compartments.

Aid officials understandably worry that wealthy nations are falling behind in their promises. But they need to remember the terms of the deal that was done at the G8 three years ago. A doubling of aid to Africa was supposed to be contingent on clean government, and respect for democracy. That deal has not always been honoured. Last November, to take one example, Britain announced a new partnership with Uganda worth “at least” £700 million. This is the country whose President changed the country's Constitution, so that he could stand for a third term. Who jailed the opposition leader. Who has been bankrolled by the West for so long that half of his Government's budget is now foreign aid. It beggars belief that we are still pumping money into the Swiss bank accounts of his cronies. But we are, because we fear it will hurt the poor more if we withdraw. Or is it because it will hurt the aid industry?

The past few years have been boom years for aid, just as they have been for banking. The aid industry has not been entirely free of reckless lending, nor even from moral hazard. When we wrote off Nigeria's debt in 2005, did we really want that country to think of debt as a free lunch? Did we know that it was about to become the world's sixth-biggest oil producer? If so, how could anyone have thought that a $1 billion write-off was value for money? Or was value for money not an issue?

When I graduated in the 1990s, I thought that my career would be in aid. I studied development economics in America. I did stints at the World Bank and in Bangladesh. I left the aid industry because I feared it was just that - an industry weighed down by vested interests.

In Bangladesh I met Muhammad Yunus, the founder of the Grameen Bank, which gave small loans to poor women to start businesses. It has since given eight million of the poorest people in the world the means to build and control their own lives. I naively offered some of my agency's cash. But Yunus didn't want my money. He didn't need our staff. He clearly thought it would be corrupting. And I feared he was right.

Humanitarian aid is different. In situations of desperate extremity, long-term economic considerations, or the morality of a country's leader, must be put aside. And humanitarian aid is relatively effective, because Oxfam, Save the Children and the World Food Programme distribute aid directly to those who need it. Yet only 16 per cent of Britain's aid spending is humanitarian. Most of the £5 billion spent by our Department for International Development each year goes to governments. Some of it is working - in places such as Zambia and Mozambique - but some is not. We need to ask why. And if we can justify nearly doubling the budget to £8 billion by 2010.

In recent years, British aid spending has shifted away from infrastructure projects towards health and schools. Vaccinations against malaria and treatments for HIV have a demonstrable and dramatic impact. They are powerful emblems of our obligation to our fellow human beings. They also offer the real hope of eradicating disease - one of the Millennium Development Goals set by the UN in 2000.

But when it comes to eradicating poverty, there is only one answer. That is to create jobs. For that you need to create businesses, which need access to credit, non-punitive tax regimes and recognition of contract law. If those conditions do not prevail, we should be calling governments' bluff rather than throwing in more cash.

The statistics on economic growth are staggering. The rise of China has lifted 400 million people out of poverty, more than have been helped by any aid programme. That is why the number of people below the poverty line is falling even while the world's population is booming. The average rate of growth in poor countries is now outstripping that of rich ones.

China is transforming the landscape that has dominated aid thinking for decades. Its hunger for natural resources is pushing growth in many African countries to unprecedented levels. In 2006, the Chinese President hosted the largest Africa summit held outside the continent. He promised to double aid to Africa, cancel much of its debt and - crucially - to lift trade restrictions, which will do more to help than any other single measure

Fareed Zakaria, in his book The Post-American World, tells an instructive story about the Nigerian Government negotiating a $5 million loan for railway systems with the World Bank. Before the deal was done last year the Chinese Government stepped in and offered $9 billion to reconstruct the entire rail system with no strings attached. That means no impact assessments or capacity-building workshops. It cuts the rug from under the World Bank. It also suggests that Nigeria should no longer be among the top ten recipients of British aid.

We can do a great deal to save people from starvation and infectious diseases. But we need to demand the same stringency about aid that we do about other government spending.

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