Generosity of a Rich Nation

I was reading the NY Times yesterday (May 2nd, 2008) and a statement made by President Bush caught my eye. He said, “The American people are generous people, and they’re compassionate people. We believe in a timeless truth: to whom much is given, much is expected” in response to a proposal to increase spending in emergency food assistance to poor countries raising the total to $2.6 billion in foreign food aid for the next year.


I decided to investigate if it is really true that the richest countries generally provide the largest amount of foreign aid. I looked at the OECD (www.oecd.org) database for some clues as to the nature of foreign aid from the richer, more industrialized nations of the West and Japan. OECD (Organization for Economic Co-operation and Development) was formed in 1961, has 30 member countries and is one of the largest and reliable sources of comparable statistics, economic and social data.

Here’s a graph of 2007 net official development assistance (ODA).

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Source: OECD, April 2008

It is true indeed that in absolute terms the US is the largest donor providing around $21 billion per year, while the next four largest industrial nations (Germany, France, UK and Japan) are the next biggest donors.

ODA is basically aid from the governments of the wealthy nations, but doesn’t include private contributions or private capital flows and investments. The main objective of ODA is to promote development. It is therefore a kind of measure on the priorities that governments themselves put on such matters.

Now, when the same numbers are viewed as a proportion of the country’s economy, specifically as a percentage of the Gross National Income (%GNI), a whole different story emerges.

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Source: OECD, April 2008

United States is at the bottom and well below the 0.7% target set by the millennium development goals in 1970 by UN. Only 5 countries, out of which three are Scandinavian countries, meet the target.

Recently, there was an EU pledge to spend 0.56% of GNI on poverty reduction by 2010, and 0.7% by 2015. However, The donor governments promised to spend 0.7% of GNI on ODA (Official Development Assistance) at the UN General Assembly in 1970. The deadline for reaching that target was the mid-1970s. By 2015 (the year by when the Millennium Development Goals are hoped to be achieved) the target will be 45 years old!!

Even though these targets and agendas have been set, year after year almost all rich nations have constantly failed to reach their agreed obligations of the 0.7% target. Instead of 0.7%, the amount of aid has been around 0.2 to 0.4%, some $100 billion short. See chart below:

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Source: OECD, April 2008

Furthermore, the quality of the aid has been poor. As Pekka Hirvonen from the Global Policy Forum summarizes:

“Recent increases [in foreign aid] do not tell the whole truth about rich countries’ generosity, or the lack of it. Measured as a proportion of gross national income (GNI), aid lags far behind the 0.7 percent target the United Nations set more than 35 years ago. Moreover, development assistance is often of dubious quality. In many cases, aid is primarily designed to serve the strategic and economic interests of the donor countries or to benefit powerful domestic interest groups. Aid systems based on the interests of donors instead of the needs of recipients’ make development assistance inefficient. Too little aid reaches countries that most desperately need it, and all too often, aid is wasted on overpriced goods and services from donor countries.”

Source: http://www.globalpolicy.org/socecon/develop/oda/2005/08stingysamaritans.htm

However, the generosity of the American people is far more impressive than their government. The Center for Global Prosperity, from the Hudson Institute, published its first Index of Global Philanthropy (http://gpr.hudson.org) in 2006. The total of US private giving, was a massive $71 billion in 2004. Page 16 of their report breaks it down as follows:

* International giving by US foundations: $3.4 billion
* Charitable giving by US businesses: $4.9 billion
* American NGOs: $9.7 billion
* Religious overseas ministries: $4.5 billion
* US college scholarships to foreign students: $1.7 billion
* Personal remittances from the US to developing countries: $47 billion.

Many economists point out that personal remittances are effective. They “don’t require the expensive overhead of government consultants, or the interference of corrupt foreign officials. Studies have shown that roads, clinics, schools and water pumps are being funded by these private dollars. For most developing countries, private philanthropy and investment flows are much larger than official aid.”

To quote Adelman (the director of the Center for Global Prosperity) – “Americans are clearly the most generous on earth in public—but especially in private—giving”.

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