Quite frequently you run across people claiming that the US is the most generous country when it comes to foreign aid. Dependent on how you look at it, this can be considered true to a certain degree, but as most people estimates such things it’s not.
It’s hard to get exact numbers for how much foreign aid different countries give, since things like debt relief are often included in the numbers. While it can be argued that debt relief lessens the burden on the 3rd world countries, and thus can be considered foreign aid, the money has often been transferred much earlier than the debt relief, and thus should not be counted as part of the foreign aid for the year when the debt relief happens.
The Center for Global Development makes an annual report, the Index of Donor Countries
, where they compare different donor countries. This comparison is based upon a number of factors, but among those, are the net transfers (i.e. foreign aid less dept relief).
Table 3, on page 12 of the Index of Donor Countries, contains the numbers of donations including and excluding debt relief.
From here it can be seen that in 2004 the US transferred 17,178 million dollars, while the second highest entity on the list, the European Commission donated 12,216 million.
If we consider debt relief as part of foreign aid, the US donated 18,639 and the EC 12,577.
Japan donated 10,847 millions with debt relief, but only 3,385 millions without.
The figure shows the total donations of all the countries in the index (sorry for the lack of values on the X-axis – Excel didn’t want to play along for some reason).
The problem with looking at the total numbers like that is that it doesn’t take into account the relative sizes of the economies and populations. If Bill Gates gives $100 to someone it’s not considered as generous as if a minimum wage worker gives $100 to someone, simply because $100 is much less of Gates’ capital. Similar, if ten minimum wage workers each gives $10, it’s not considered as generous as the one person giving $100, even if the amount is the same.
In other words, to judge if the US is the biggest donor, we have to take into account how large part of the GNP goes to foreign aid, and how big amount is used per capita.
To do so, I found the relevant data from the International Monetary Fund
and used that for comparison.
The numbers I got was the countries' population, total GNP and GNP per capita, both of the GNP values are relative to their buying power (GNP (PPP)).
After doing that, I did a little number crushing. First I found out who donated most compared to their total GNP (PPP). In this, and the following comparisons, I only looked at the transfers without debt relief (net numbers in the above figure).
As the figure shows, the position of USA is quite different when taking the relative economies into consideration (I’ve removed the donations from the international organizations from the figure). As a matter of fact, the US ranks 17th, just below Greece, and just above Germany. And this figure doesn’t take into consideration that the EU countries make considerable donations through the European Commission, which was ranked second in the total amount given.
To reflect how much difference these donations makes, I’ve made a different figure that groups the EU countries together. As the donations by the EC probably came from money paid by the member countries before 2004, I’ve made two groups – on called ‘Old EU’, which includes only the countries that were members before 2004, and one called ‘EU’ which includes all EU countries in the donor table.
Here the US is doing better than the EU as a whole, even when taking the EC donations into account, however the US is doing considerably worse than the old EU, especially when including the EC donations.
Again, looking at donations as a percentage of GNP (PPP) doesn’t show the whole picture. If you have ten people earning $1000 each, and one person earning $10,000, then it doesn’t make sense to look at how large a part of their total pay is donated. The $10,000 earned by the first group has to cover the expenses of 10 people, while the $10,000 of the second group only have to cover the expenses of one person.
To take this into consideration, I want to take a look at how much is donated per capita, and then hold that relative to how much each person earn. First I look at the donations per capita. Again, I’ve made two figures, to reflect that the EU countries also pay through the EC.
When we look at net donations per capita, the US is ranked 14th, but again, this is without taking the EC donations into account.
When looking at the EU as a whole, we can see that both the EU and the old EU are doing worse than the US when disregarding the EC donations, however when taking those into consideration, they are doing significantly better.
The donations per capita measurement has the same problems as the original total donations, that it doesn’t take the relative economic strengths into consideration. To make up for this, I’ve calculated the donations per capita as percentages of the GNP (PPP) per capita.
Here the US is ranked 17th, just below Greece and above Germany.
Interesting enough, the percentage of GNP (PPP) per capita used for donations is almost exactly the same as the percentage of total GNP (PPP) used for donations in all cases (only Norway, Luxembourg and Iceland shows minor differences).
As the above figure shows, the old EU does better than the US both with and without the EC donations. The EU as a whole does less well.
All in all, it can be said that while the US is an important contributor to foreign aid, it cannot be justified to say that the US is the most generous donator. When looking at the total amount, the EU donates twice as much as the US ($35,065 millions vs. $17,178 millions) without having a relatively larger population (446.39 million vs. 293.816 million).
When looking at foreign aid as a percentage of GNP (PPP), the US is ranked 17th, and when measured as dollars per capita, the US is ranked 14th.Note:
I know there are a number of issues with the EU measurements that I’ve made. The most obvious that I’ve only included the numbers for the donor countries, and that I’ve considered the donor countries from the EU the only source of the EC donations, and ignored the non-donor countries. However, as I said, the donations from the EC were probably paid pre-2004, which means that the EU members paying are all included on the donor country list.
Even if the EU numbers are problematic, it doesn’t change the US ranking compared to other donor countries.
Other issues that is relevant to this, is the target of the foreign aid donations (is it fair to consider the US donations to Israel part of their foreign aid donations?), what the donations are used for – 23.2% of the US aid program in 2004 was used for military aid.
And is private donations included? There is a tradition for private donations in the US, and it seems unfair to exclude that from an evaluation.
Many of these things are included in the Center for Global Development’s measuring of the donor countries’ commitment to development. Here the US ranks 13th
Labels: foreign aid