Chapter 16. Are Rich Countries Stingy with Foreign Aid?

16.1 Section Title

Chapter 16 HEADLINE: Are Rich Countries “Stingy” with Foreign Aid?

An Indonesian soldier thanks two U.S. airmen after a U.S. Navy helicopter delivered fresh water to Indonesian tsunami victims. The normal operating costs of military assets used for humanitarian purposes are not fully counted as part of official development assistance.
AP Photo/Andy Eames
An Indonesian soldier thanks two U.S. airmen after a U.S. Navy helicopter delivered fresh water to Indonesian tsunami victims. The normal operating costs of military assets used for humanitarian purposes are not fully counted as part of official development assistance.

The Asian tsunami on December 26, 2004, was one of worst natural disasters of modern times. Hundreds of thousands of people were killed and billions of dollars of damage was done. Some aftershocks were felt in international politics. Jan Egeland, United Nations Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator, declared, “It is beyond me why we are so stingy.” His comments rocked the boat in many rich countries, especially in the United States where official aid fell short of the UN goal of 0.7% of GNI. However, the United States gives in other ways, making judgments about stinginess far from straightforward.

Is the United States stingy when it comes to foreign aid? … The answer depends on how you measure… .

In terms of traditional foreign aid, the United States gave $16.25 billion in 2003, as measured by the Organization of Economic Cooperation and Development (OECD), the club of the world’s rich industrial nations. That was almost double the aid by the next biggest net spender, Japan ($8.8 billion). Other big donors were France ($7.2 billion) and Germany ($6.8 billion).

But critics point out that the United States is much bigger than those individual nations. As a group, member nations of the European Union have a bit larger population than the United States and give a great deal more money in foreign aid—$49.2 billion altogether in 2003.

In relation to affluence, the United States lies at the bottom of the list of rich donor nations. It gave 0.15% of gross national income to official development assistance in 2003. By this measure, Norway at 0.92% was the most generous, with Denmark next at 0.84%.

Bring those numbers down to an everyday level and the average American gave 13 cents a day in government aid, according to David Roodman, a researcher at the Center for Global Development (CGD) in Washington. Throw in another nickel a day from private giving. That private giving is high by international standards, yet not enough to close the gap with Norway, whose citizens average $1.02 per day in government aid and 24 cents per day in private aid… .

[Also], the United States has a huge defense budget, some of which benefits developing countries. Making a judgment call, the CGD includes the cost of UN peacekeeping activities and other military assistance approved by a multilateral institution, such as NATO. So the United States gets credit for its spending in Kosovo, Australia for its intervention in East Timor, and Britain for military money spent to bring more stability to Sierra Leone… .

“Not to belittle what we are doing, we shouldn’t get too self- congratulatory,” says Frederick Barton, an economist at the Center for Strategic and International Studies in Washington.

Source: Republished with permission of Christian Science Monitor, from “Foreign Aid: Is the U.S. Stingy?” Christian Science Monitor/MSN Money, January 6, 2005; permission conveyed through Copyright Clearance Center, Inc.

Question 1

Question

In what way does the United States give privately? Who are some of the larger private donors?

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The United States has a number of private organizations that give to countries in need. They range from the Red Cross supporting disaster zones to the Bill and Melinda Gates Foundation supporting health and education throughout Africa, Asia, and Latin America. Take a look at http://www.charitynavigator.org/ where you can find the large private donors.

Question 2

Question

Does aid necessarily improve growth?

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Not necessarily. This is an area of growing controversy. Skeptics argue that after decades of receiving foreign aid, many countries are no better off today. Proponents argue that aid has saved a number of lives.

Question 3

Question

Should the United States give more aid in times of extreme distress? Should we worry about rate of return and being paid back in periods of distress?

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This is a subjective question that does not have a correct answer. The question can be used to generate a fruitful class discussion.