Global poverty > Tsumani
While not denying that the tsunami survivors need all the help they can get, there are many other places in the world that need aid just as much, and will still be in need long after the world forgets the tsunami. Listening to the radio the other day there was two economists discussing the global aid effort after Tony Blair said that the same outpouring of generosity shown for the tsunami victims should be continued for poverty-stricken people all over the world.
According to the radio, there was some kind of global effort to give a percentage of each country's GDP to aid efforts, the agreed amount being 0.7%. After the events of 911 and now Iraq this was forgotten. Now leaders such as UK Chancellor of the Exchequer Gordon Brown have called for this to be revived. Not all countries are living up to this estimate, particularly the richest ones, but the UK has made a commitment,
"Brown said Thursday that the UK's contribution would reach 6.4 billion, 0.47 per cent of projected national income, by 2008, and 0.7 percent by 2013"
The USA is lagging behind and "gives only about 0.15 percent of its national income".
So just how much money are we talking here? The GDP for the USA is $10.99 trillion, so if 0.7% we to be diverted to international aid, that amount would come to $76.93 billion, an increase on the current $16.485 billion at 0.15% of GDP. Australia's contribution would be a tick under $4 billion.
The two economists were less worried about the amount of money (one argued that the goals could be met with as little as 0.55% while the other was adamant at least 0.7% would be needed) than about how the money was being used. India is held up as an example of a country that has done well but even there (P)*"when you are in the south, it feels like South-East Asia [which is apparently a good thing?] but in the north it's still very much the third world." This is less of a problem about how much goes in, but more about having the people on the ground who are able to properly use the money to both feed the hungry and build infrastructure.
However not everyone is happy about this plan. I was having a discussion with an American IR major college student yesterday (which also branched in to other topics that will be covered in later posts and hopefully stimulate some discussion in the blogosphere). "Personally, I feel very iffy about foreign aid." she said, "...tax dollars are specifically for the purpose of benefiting the people who pay the taxes." "...that's over 70 billion dollars, for this government, do you know what we can do with that much money?." My response was simply that the starving people of Africa are far worse off than the poorest bum in a Detroit gutter. No one is saying that those below the poverty line in western countries, 12% of Americans for example, should not have money used on them, just that the need is greater for others and 0.7% is a small price to pay.
It does pose a point of contention though, should governments give aid from citizen's tax dollars as it does not benefit them directly? The other side maintains that only private donations should be sent. Now I thought that since people are inherently selfish pretty much no private aid goes out unless its in your face, apparently I am mistaken. Americans privately donated to overseas aid an amount equivalent to 2.2% of GDP.
There is also the economic benefit theory that is an incentive to government giving:
"...increased aid should spur growth in the developing world which would, in turn, benefit the developed world. A richer Africa would buy more American tractors, Japanese cars and even bottles of whisky from Brown's homeland. But this is true only if the aid works, and does spur development."
The question is, will it?
This is a large topic of debate, I'd much like to see what other bloggers, particularly economists, have to say.
Update: As John Quiggin has pointed out in comments, the 2.2% of GDP figure quoted in the Washington Times article encompasses all charitable giving by Americans, not just overseas aid which is closer to $4.6 billion.
Via Mark Bahnisch: "A 2001 poll sponsored by the University of Maryland showed that most Americans think the United States spends about 24 percent of its annual budget on foreign aid." Of course the figure is much, much lower. The article also points out: "A University of Maryland poll... indicated that 81 percent of Americans support increasing foreign-aid... the typical American would like to spend $1 on foreign aid for every $3 spent on defence." The current ratio is $1:$19.
Related: The Great Shark Hunt has a short related musing.
* (P) used to denote a paraphrase, for want of a better notation.
According to the radio, there was some kind of global effort to give a percentage of each country's GDP to aid efforts, the agreed amount being 0.7%. After the events of 911 and now Iraq this was forgotten. Now leaders such as UK Chancellor of the Exchequer Gordon Brown have called for this to be revived. Not all countries are living up to this estimate, particularly the richest ones, but the UK has made a commitment,
"Brown said Thursday that the UK's contribution would reach 6.4 billion, 0.47 per cent of projected national income, by 2008, and 0.7 percent by 2013"
The USA is lagging behind and "gives only about 0.15 percent of its national income".
So just how much money are we talking here? The GDP for the USA is $10.99 trillion, so if 0.7% we to be diverted to international aid, that amount would come to $76.93 billion, an increase on the current $16.485 billion at 0.15% of GDP. Australia's contribution would be a tick under $4 billion.
The two economists were less worried about the amount of money (one argued that the goals could be met with as little as 0.55% while the other was adamant at least 0.7% would be needed) than about how the money was being used. India is held up as an example of a country that has done well but even there (P)*"when you are in the south, it feels like South-East Asia [which is apparently a good thing?] but in the north it's still very much the third world." This is less of a problem about how much goes in, but more about having the people on the ground who are able to properly use the money to both feed the hungry and build infrastructure.
However not everyone is happy about this plan. I was having a discussion with an American IR major college student yesterday (which also branched in to other topics that will be covered in later posts and hopefully stimulate some discussion in the blogosphere). "Personally, I feel very iffy about foreign aid." she said, "...tax dollars are specifically for the purpose of benefiting the people who pay the taxes." "...that's over 70 billion dollars, for this government, do you know what we can do with that much money?." My response was simply that the starving people of Africa are far worse off than the poorest bum in a Detroit gutter. No one is saying that those below the poverty line in western countries, 12% of Americans for example, should not have money used on them, just that the need is greater for others and 0.7% is a small price to pay.
It does pose a point of contention though, should governments give aid from citizen's tax dollars as it does not benefit them directly? The other side maintains that only private donations should be sent. Now I thought that since people are inherently selfish pretty much no private aid goes out unless its in your face, apparently I am mistaken. Americans privately donated to overseas aid an amount equivalent to 2.2% of GDP.
There is also the economic benefit theory that is an incentive to government giving:
"...increased aid should spur growth in the developing world which would, in turn, benefit the developed world. A richer Africa would buy more American tractors, Japanese cars and even bottles of whisky from Brown's homeland. But this is true only if the aid works, and does spur development."
The question is, will it?
This is a large topic of debate, I'd much like to see what other bloggers, particularly economists, have to say.
Update: As John Quiggin has pointed out in comments, the 2.2% of GDP figure quoted in the Washington Times article encompasses all charitable giving by Americans, not just overseas aid which is closer to $4.6 billion.
Via Mark Bahnisch: "A 2001 poll sponsored by the University of Maryland showed that most Americans think the United States spends about 24 percent of its annual budget on foreign aid." Of course the figure is much, much lower. The article also points out: "A University of Maryland poll... indicated that 81 percent of Americans support increasing foreign-aid... the typical American would like to spend $1 on foreign aid for every $3 spent on defence." The current ratio is $1:$19.
Related: The Great Shark Hunt has a short related musing.
* (P) used to denote a paraphrase, for want of a better notation.
posted by Nic White at
3:13 PM
