Wednesday, September 14, 2005

The U.S., the U.N., and Foreign Aid

In an earlier post I had on UN reform, I noted that the US is losing public relations points for not agreeing to target 0.7% of GDP (as opposed to the current 0.16%) towards overseas development assistance. George Morris commented:

This argument is a total red-herring. While these "poorer" countries may, in theory, give more as a percentage of overall GDP, when non-U.S. governmental charitable aid is totaled up the U.S., per capita, winds up giving substantially more than virtually every country year-in and year-out. That we don't want to sign on to the EU's fuzzy-headed method to send vast set amounts of our GDP down the governmental and UN sluiceway is both understandable and hardly a mark of a flinty, cold-hearted cheapskate.

While the development assistance issue is not central to the UN reform topic, it is central to the Millennium Development Goals and to how the US is perceived more generally. (For a good collection of overseas development assistance stats gathered from the OECD and other sources, see this.)

First of all, this argument is not at all a red herring. I point out that the issue here is percentage of GDP and, of course, a country with a larger GDP can give a larger absolute amount even though that is a smaller percentage of their GDP.

But that is not the issue. There are two factors that prevent the “red herring” argument from persuading me.

First, given the incredible levels of poverty around the world is it actually a bad idea for the US to commit to giving the equivalent of 0.7% of its GDP to poverty alleviation by the year 2015? Note that this goal is not some new idea only forwarded by the EU; rather it is a central part of the Millennium Development Goals that the US has supported. There is now a question as to whether the US had ever objected to this number prior to the last week or two.

Regardless as to whether it did, the problem, in the eyes of countries not as well off as us (read: just about every other country), is that they are willing to devote more of their resources to address global poverty than we are. Of course, global poverty will be solved by neither 0.1% nor by 0.7% as a benchmark. What is needed is a concerted effort to attack the problem with the seriousness that it requires. Consequently, simply saying "our total is more than theirs" is not an adequate response if we could give a significantly larger amount without harm to ourselves. If all the countries of the EU, for example, can commit to giving 0.7%, why can’t we?

A second problem with the “red herring” argument is that it misses the issue of who the current aid goes to. Much of U.S. nonmilitary foreign assistance is actually related to national security concerns or military partnerships. Consider, for example, the top ten recipients of US nonmilitary aid in 2002-2003:

Democratic Republic of the Congo

As I said in my post, as a security matter I understand prioritizing these countries, but as a matter of poverty alleviation it doesn't really address the key problems. If we want to keep countries like this as our main aid recipients, fine, but let’s at least have a real discussion about increasing the size of the pie so truly poor states can get a slightly larger slice than they do now. In other words, keep these funding priorities but increase our total commitment to 0.7%. Anyway, poverty alleviation makes sense for national security reasons. So yes, while we do give a larger absolute amount in foreign aid, it is not being targeted as it should if we are actually concerned about addressing poverty.

A couple of closing thoughts: I haven't heard anyone else calling 0.7% “a vast amount” of GDP. Foreign aid is (and, even at the o.7% GDP benchmark, would still be) a small part of the US budget. Moreover, that money doesn't have to go to the UN or disappear due to recipient mismanagement. Rather, the 0.7% is simply a target for development aid in general. We can give it to whom we want and under whatever conditions we think best, assuming they forward the goal of poverty alleviation.

That is not fuzzy-headed. That is smart.

So… why not commit to devoting 0.7% of GDP to overseas development aid by the year 2015?


Anonymous Eric Mortensen, from Oslo, Norway said...

Because few governments can actually point to a country where foreign aid has been successfully applied to generate long-term or even short-term growth. Foreign aid on the scale 0.7% of GDP simply doesn't work. Actually, it's harmful because it entrenches corrupt regimes. It's not about not wanting to help the poor, it's about not wanting to help corrupt regimes.

BTW, if you go to Europe and listen to most people talk about foreign aid, invariably they talk as if more always equals better. America is the only country where the idea that corrupt regimes don't deserve aid gets any traction.

That more equals better is just like saying the more money you pour into a falling stock the better. It's not about the amount of money, it's about whether the stock actually performs. Few countries that receive EU's foreign aid perform. In fact, those countries that perform do so because they do not rely on foreign aid (China is the prime example here.)

9/14/2005 4:24 PM  
Blogger Paul Stephan said...

I though the comment was directed to the distinction between government directed aid, on the one hand, and private aid encouraged by the charitable contribution deduction, on the other hand. Professor Borgen does not respond to the claim (I don't know if it's true) that, when private giving is taken into account, the U.S. is a leader.
Another consideration is whether government policy is inimical to foreign development. The deleterious effects of the EU's Common Agricultural Policy on poor countries far exceeds the gross amount of foreign aid coming from that region, even if the foreign aid were well spent.

9/15/2005 6:21 AM  
Blogger Chris Borgen said...

Paul Stephan makes a good point in highlighting the note in George Morris' post that one should also keep in mind private giving. I didn't reply to that because, even without taking charitable giving into consideration, the U.S. gives more in governmental assistance than any other country.

My concerns, though, are (a) that every country, including the U.S., may need to give a bit more--and via more effective means--if we want to seriously attack global poverty, and, (b) the focus of U.S. governmental giving is not tied to poverty alleviation so much as to national security concerns and political alliances.

That being said, it could be that charitable giving tends to flow more towards "the neediest of the needy" and makes up for the poltical focus of government-based overseas development assistance (ODA). Perhaps, but I am dubious.

First, I have the impression (though I do not know this for a fact) that majority of U.S. private charitable donations goes more towards things like immediate food aid and disaster relief than good governance reform, agricultural modernization, and the like. (Although I do know there has been an upswing in charitable donations being targeted towards developing small enterprises and to microfinance in general and I believe that is a good thing.) So, yes, we as a people are generous in our charitable donations, but this is generally the type of assistance focused at keeping people alive; governmental (and development bank) ODA tends to be for the more mundane areas needed for long term poverty alleviation, such as institutional restructuring.

Second, U.S. private charitable assistance is fickle. One year we may give primarily to drought victims in the Horn of Africa. The next year to tsunami victims in South-East Asia. While the effects of these crises may take years to resolve, we tend to be distracted after a shorter period and our money flows to the newest problem galvanizing our attention. This is perfectly understandable as a function of human psychology but it means that private charitable giving is not a reliable method of addressing long term problems in the absence of other constant sources of funding.

Finally, on Prof. Stephan's point that there are governmental policies (such as the EU's CAP) that hamper trade from the South to the North, I absolutely agree. Taking down such barriers surrounding the EU, the US, and other countries could help trade flows from poorer countries. (I do wonder, though, whether the usual suspects, like the CAP, would merely be replaced by non-tariff barriers, especially in the case of agircultural products.) But more trade isn't a sufficient answer. Long term poverty alleviation still needs domestic reforms, the opening of credit to the poor, regulatory transparency, and the like. This is best accomplished through governmental or development bank assistance programs.

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