Jul 172011

Given the current situation in Eastern Africa, it is about time to come up with a few words about foreign aid … specifically the amount that each country contributes towards foreign aid. There is plenty of suspicion that some countries are not contributing their fair share – indeed some countries have promised aid and then failed to deliver.

There are those who criticise the uses to which foreign aid is put – and there may be valid criticisms there, but whilst your country is being stingy, you don’t really have the right to criticise. Stump up the money to at least the average, and then you may criticise away. Indeed some of the criticisms are in the end due to a lack of money – for example paying for emergency aid to keep starving people alive doesn’t solve any long term problems, but solving the long term problems takes money beyond that for emergency aid.

I’ll be using percentage of GDP as a metric of how stingy countries are when it comes to foreign aid. Some may criticise this metric, but it is the only sensible metric to use … and indeed someone has already looked at the percentage of GDP question and more or less come down on the side of saying that it’s probably the best metric available. See here.

When looking at the figures, it is worth bearing in mind that the UN has a target of getting the rich to contribute 0.7% of their GDP towards foreign aid. This is a target that was agreed by the rich countries way back in 1970, and has rarely been met. Stealing an image from another web page :-

Graph of foreign AID by GDP

I would rather have included just the second graph which is the important one, but the first allows me to make a point about absolute aid monetary values. It allows the US to hide it’s stinginess behind it’s absolute value of donations – it looks generous, but the true story is hidden behind the size of the US. For instance, you could more accurately compare (in absolute terms) the donations by the US with Europe as a whole – if you add up the value donated by the next three largest contributors (all in Europe), you get a value of approximately $39 billion – way more than the US, and the contributions from less wealthy European countries would make the US even more stingy.

I’m picking on the US here simply because it is one of the stingiest rich countries around, but very few countries reach or exceed the UN target of 0.7% of GDP. Only 5 out of 23 countries (22%) meet or exceed the UN target. Or in other words, 78% of the listed countries have not met a target they are obligated to have met by the mid-1970s!

And before anyone mentions that this is because of the current economic climate, bear in mind that foreign aid budgets have increased since the banking crisis – over time, the rich countries have accumulated a “debt” of some $4.1 trillion dollars representing the shortfall between what they have promised and what they actually give.

Or in other words it’s not “enough already”, but we have fallen a long way short of what we promised to do – except for a tiny minority (that 22% who exceed the target are all quite small countries). It may well be that some foreign aid is wasted, but that is a topic for another time – a time after the UK has reached the 0.7% target (it is currently 0.56% of GDP).

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