- I read a small paragraph on the last page of the April 9th issue of The Economist, ranking a number of rich countries according to the proportion of their GDP that represents their Net Official Development Assistance – which is defined as (a) being undertaken by the official sector; (b) with promotion of economic development and welfare as the main objective; and (c) at concessional financial terms.
- I saw the film God Grew Tired of Us – which I would highly recommend.
- I read Josh Weinstein’s blog on US intentions to cut foreign aid to try to balance their budget.
- I finished my consulting project, and found myself with 12 minutes of free time.
- I received an overwhelming flood of e-mails from avid fans and followers imploring me to take up my pen again, and re-inject my “unique blend of wit and poignancy” into the humdrum of their daily lives*.
* OK, so I might have made point 5. up, but the first four did actually happen.
The thrust of this blog is this – that the United States gives an embarrassingly small amount of Official Development Assistance (ODA) to the poorest countries in the world.
In 1970, a UN General Assembly Resolution pledged that “each economically advanced country” would “exert its best efforts” to give at least 0.7% of its GDP to “developing countries” as ODA “by the middle of the decade”. By my maths, the “middle of the decade” would have been 1975.
It is now 2011.
Some countries have risen to the challenge of this UN target. Norway and Sweden devoted 1% of their GDP to ODA in 2010. And of the other countries mentioned in the Economist article, the Netherlands has also met the UN target of 0.7%.
Then come Britain (0.6% of GDP), Ireland and France (0.5%), Spain and Germany (0.4%), Canada and Australia (0.3%), and the United States, Japan and Italy (0.2%).
Josh’s article discusses whether US government plans to reduce ODA spending even further might have potential detrimental long-term impacts on US foreign policy interests. I think this is an interesting and important question. I could certainly be persuaded otherwise, but my personal belief is that poverty breeds civil unrest and terrorism, and that foreign aid strengthens a country’s long-term diplomatic standing in the world. The best example that I know of US development assistance strengthening its long-term geopolitical interests is in the case of the Marshall Plan. As I foggily recall from an all-too distant history degree, huge amounts of US investment in Western Europe in the aftermath of the Second World War helped to stimulate an astonishingly fast economic recovery, and prevent the westward expansion of Soviet influence, at a time when the Communist party posed a very credible threat in Germany, France, Italy and other Western European nations.
But for me, there is an even more fundamental issue at stake – which is that, regardless of US self-interest, it is not right that the US gives such a small proportion of its GDP as ODA.
It is not right that one third of American children are clinically overweight or obese, while 22,000 developing world children die from poverty every day.
And it is not right that the US spends 4.7% of GDP on military expenditure, and only 0.2% on Official Development Assistance.
I believe that the income gap between the developed and the developing world is so obscene, that we in "the west" have a moral obligation to try and do something about it.
But does it do any good?
There is significant scepticism amongst academics that ODA actually has any / a positive impact on economic development.
This is a scepticism that I most definitely share. The story of NORAD and the Turkana is a prime example of how aid budgets have been mis-spent and wasted over the last 50 years.
But there are many other examples of foreign aid success stories, and I would see citing its failures as proof that “it does not work” as akin to citing the thousands of SME bankruptcies every year as evidence for the failure of capitalism.
At the end of the day, I just do not believe that building a Tanzanian hospital, school or highway network will not have a positive impact on that country’s people in the short-term, and economic development in the long-term.
We absolutely need to get smarter about how we spend ODA. But let’s invest time, effort and resources in determining what types of ODA are most efficient and effective, and focus investment in these areas, rather than abandoning hope and limiting what little efforts we are currently making.
Public vs. private philanthropy
I have heard several friends cite US private philanthropy as being extremely high, and reason that official, government development assistance should, and must, be lower as a result.
I do not have, and would welcome, more information on this point, but if US private giving is very high compared to the rest of the world, it would be my suspicion that a lot of this is going to colleges, churches and domestic institutions, rather than to the poorest countries in the world.
More importantly, even if my suspicions are misplaced, and US private giving to developing countries more than compensates for the paucity of official aid, I believe that the US government should still be significantly increasing its ODA. I would accept arguments that the 0.7% target could equally be a target for the proportion of government spending dedicated to ODA, rather than the proportion of GDP. But even allowing for differences in government spending between OECD countries, the US still ranks down at the bottom of the list of donor countries (see chart below).
But we can’t afford it!
“We are struggling to balance our own budget and keep our own government functioning – how can we be expected to give anything to anyone else?”
The US was the sixth richest country in the world on a per capita basis in 2009, according to the World Bank (and the richest in terms of total GDP). US GDP per capita was $45,989. The average GDP per capita of the poorest 50 countries in the list was $1,519 – that is 30 times less. Imagine dividing your annual income by 30…
It is not that the US “can’t afford it”. It is that we don’t want to spend it.
An embarrassment of riches
According to NationMaster.com, in 1960, US GDP per capita was 40 times bigger than the average for the 20 poorest countries in the world. In 2006, that figure had increased to 169 times. That is, already vast income inequalities have significantly increased over the last 50 years.
If this difference in growth rates had occurred despite significant attempts to redress this imbalance on the part of OECD countries, that would have been one thing.
But when even such a low target as 0.7% of GDP is being consistently unmet, I think we should feel collectively embarrassed and ashamed by our laziness and apathy – as Brits, as Frenchmen, as Italians, and as Americans.
The US is the number one country in the world at the moment – economically, militarily and politically. In the sphere of Official Development Assistance, it is time she started acting like it.