Monday, 25 April 2011

Banned Aid

Several inter-connected things have happened over the last couple of weeks, to provoke me into resurrecting this blog:
  1. 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.

  2. I saw the film God Grew Tired of Us – which I would highly recommend.

  3. I read Josh Weinstein’s blog on US intentions to cut foreign aid to try to balance their budget.

  4. I finished my consulting project, and found myself with 12 minutes of free time.

  5. 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, 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.


  1. Jonny,

    You raise some good points, however, I think you all but gloss over the most relevant detail: private philanthropy is a huge differentiator and MUST be taken into account when considering relative levels of giving, for at LEAST two big reasons:

    1) Governments, especially liberal democracies, are notoriously inefficient allocators of capital, and therefore less likely to be successful in providing direct foreign aid. As an individual who regularly (and I hope generously) gives to charities, I can tell you that it makes a difference to me where I donate my money and how it will be used, so I am careful to understand both before donating.

    2) Compulsory giving (i.e., through tax monies confiscated from productive citizens) are rarely, if ever, appreciated by those who give as much as they would be if those same individuals were allowed to give directly to the same or slightly different organisations doing the same work, and often with less waste, fraud, and abuse than the NGOs and government-sponsored charities delivering aid.

    You might want to look up the 2006 report from the Charities Aid Foundation (CAF), which I believe is the same UK organisation that lets you designate a portion of each paycheck to donate to charity directly and automatically. Their report can be found at:

    This report found that not only did the US far exceed the rest of the world in terms of its charitable giving, but it also gave a greater percentage of its GDP to charities than the next two most generous countries combined! (1.67% of GDP for the US, 0.73% for the UK and 0.72% for Canada). Even after correcting for religious-related giving (33% of charitable giving in the US is religiously-motivated, compared to 13% in the UK), the US still exceeds it's companions in its levels of charitable giving.

    Now, some have argued with me that the only reason that the US has such a high level of charitable giving is that our tax code effectively subsidises that giving and that if there were no tax deductions for charitable contributions, greed would mean that people would just refuse to donate to charities since there was "nothing in it for them." I don't know how to test that assertion in a short period of time without a control group and a test group that could be exposed to a tax-free state and one that is subject to a corporate income tax. However, the existence and massive philantrhopy of the Bill Gates' and Warren Buffet's of this world would seem to suggest that there is something more than just a financial incentive that causes wealthy people to forego wealth and donate to charity, espcially when they can direct some or all of those funds through private philanthropy.

    Another report from the same CAF organisation found that when "giving" is defined as more than just "giving money" but expanded to include "volunteering time" and "helping a stranger", the US falls to a tie for 5th place with Switzerland, and the UK falls to 8th place. Still, by either of these measures, both the US and the UK are more than just casual bystanders when it comes to giving.

    Anyway, hope that provides some additional food for thought.

    Hope all's well,
    Chris Taber

  2. Interesting Pricey, very interesting. Lots of arguments that I'm hearing all day currently at Oxfam. No time to make a long, considered comment, but I like where you're heading.

    On a side note, an interesting piece about supporter/individual engagement here -


  3. Sorry,

  4. Hi Jonny! How's Cali? Hope you and Al are doing great.

    You encourage the US to increase giving as a public entity rather than relying solely on private persons to do this charitable work. However, when you talk about the US as one of the the wealthiest countries in the world, you cite private persons' data (wealth per capita), which is the happier data to look at since public data shows our wealth is somewhere around negative $14 trillion.

    In practical terms, I don't see how the US or any responsible steward of money could increase expenditures being that far in the hole. Am I missing something?

    Our staggering public debt warrants staggering measures to correct it. I'm not sure how generous we can be to help others in need while we ourselves are drowning. (I am speaking of the US as a public entity - private individuals have different responsibilities, I think, especially if they follow Christ.)

    I won't pretend to know all in this area. Just my thoughts.

  5. Chris, Jessica, thanks for the comments – very interesting additions to the debate.

    Firstly, let me just state that while my post focused on US foreign aid, I could easily have written the same piece about Italy, Japan or Britain. I just focused on the US because it is the biggest economy in the world. And because, happily, I find myself living here!

    Chris, I have heard this argument about the US being very generous in terms of private philanthropy before, and I definitely take the point. I would agree that the US is very generous when private giving is taken into account – and apologies if my post implied I thought otherwise. However, I would counter on a couple of grounds:

    1. I do not know how much of the 1.67% that you and the CAF report quote goes to the poorest countries in the world as foreign aid, vs. going to other recipients – as far as I could tell, the report doesn’t break this out(?). My suspicion would be that a large part of this would be giving to alma maters and domestic organisations, but that is just a hunch. If anyone has any information showing this suspicion to be wrong, I would welcome it. But addressing the income inequality between the developed and the developing world was the focus of the UN General Assembly Resolution target of 0.7% of GDP, and my post.

    2. Even if a significant proportion of these high levels of private philanthropy in the US are going to the poorest countries in the world, I still believe that governments have an important role to play in bolstering this – for three main reasons. Firstly, I believe it is the right thing to do. Again, this is just my personal morality, so please feel free to discard it, but if the UN target is for 0.7% of GDP (and this seems like a good place to start), I believe that it is right that this should come from both the private and the public sectors. Secondly, although me and you and Bill Gates might give more than 0.7% of our income to the developing world, not everyone does. I think it should be the government’s responsibility to ensure that this happens. Thirdly, I believe that the US government should set an example in terms of philanthropy – both to its own citizens, and to the world’s other developed nations.

    As I mentioned in my post, I think there is a lot of work to be done in improving the efficiency and effectiveness of foreign aid (from both the public and the private sectors), but I think this would be a preferable outcome to a further reduction in US ODA.

    Jessica, the $14 trillion debt that you mention is certainly a significant and growing problem. However, I don’t agree with you that it means we can not afford to be generous. If I earn $200,000 per year, and go out and spend $300,000 on a Ferrari, I will be $100,000 in debt. Does that mean I can not afford to give $1,400 to charity? No, it means I should not have bought the Ferrari.

    According to the World Bank, the GDP per capita of Burundi was $392 in 2009. The GDP per capita of the US was $45,989. Government expenditure in the US was 39% of GDP, so around $17,900 per capita. Until the $17,900 is closer to the $392, I don’t think we have the right to say that we can not afford to address this staggering inequality – we just need to stop buying Ferraris.

    In fact, even if the $17,900 was a lot closer to the $392, I still think we should be prioritising giving to the poorest of the poor. In Mark 12:43, Jesus commends the poor widow for her offering of two small copper coins. If this woman was able, out of her poverty, to give all of what she had, how much more can we, living in more affluence than ever before seen in the span of human history, be expected to meet the Bible’s target of 10%, or the UN target of 0.7%.

  6. Ruh Roh....Father and Law and Son in Law finally disagree. While I do agree with your overall premise....I would also add that the US has been, is, and will always be the flag bearer in regards to coming to the aid of countries and people groups in need around the world. I'm not sure, but I doubt your figures include church, philanthropic, and red cross giving as well as "as needed" donations to hurricanes, tornados, and tsunamis victims around the world. I do believe the country could give me around the world, but I feel stronger that the people of God could give much more than they currently do. Cheers! Sir.

  7. I like your Ferrari analogy. The US govt must indeed stop funding Ferraris because it has no money to do so. However, until our leaders make the hard choices they must in order pay off our debts, we as a country cannot give away what we don't have.

    The widow gave her two copper coins out of what she had, not from a loan. Our government must do the same. True charity is giving from what you have, not from what you've borrowed from someone else.

  8. Jess, I completely agree with you. I am not advocating that the US should steep itself further in debt. What I am advocating is that the "hard choices" you mention should be around cutting other parts of government expenditure (e.g. free Ferraris for government employees), and increasing foreign aid donations, rather than cutting ODA.

    According to a one minute Wikipedia search, US Federal tax revenue was $2,674,007,818,000 in 2007. This is the income (not a loan) from which I would love to see an increase in the copper coins.

  9. Whilst we all find it easy to point out and whinge about how little our various governments are giving to aid the poorest countries, are we unconsciously harbouring an attidue of "of course, I would never be like that myself"?
    If "my" country is giving less than the recommended 0.7%, why don't "I" personally establish a precedent of making up the 0.3% shortfall myself? Not for the whole country, of course, because that would mean I might have to sell some of my fleet of Ferraris, but just for me. In fact, because we are wealthier than average (and I hope we all agree that the wealthier you become the higher percentage you should give), why don't we resolve to give a whoppingly generous 1% personally, in addition to whatever our government gives? For starters. And while we are doing this, let's encourage others to do likewise.