U.S. is no cheapskate in foreign aid

  • Article by: JOHN NORRIS , Foreign Policy
  • Updated: December 29, 2013 - 4:53 PM

American stinginess is a myth based on measures that don’t measure completely.

Between the steady drip of Edward Snowden leaks about the National Security Agency and Syria’s slow burn, it’s easy these days to cast the United States as the villain when it comes to international affairs. That makes this holiday season an ideal one to debunk one of the longest-standing myths about the United States: that it is miserly when it comes to helping other nations through foreign aid.

Much of the myth of America’s stinginess traces its roots back to the 1970 commitment by the U.N. General Assembly that rich countries should dedicate 0.7 percent of their gross national income (GNI) to what is dubbed “official development assistance” (ODA). Although a number of European countries have embraced the target, the U.S. has never done so, arguing that it is a poor measure of America’s relative commitment to helping the poor in the developed world.

Critics are quick to point out that the United States, at around 0.02 percent, has one of the lowest rates of official aid to GNI of the major industrialized countries, which is true. But this statistic says more about the ridiculousness of how we currently measure ODA than it does about what the U.S. brings to the table.

The United States is not only the largest donor of ODA in the world, providing more than $30.5 billion in 2012, but it makes far and away the largest private contributions to development and poverty alleviation — more than 30 percent of all such giving on the planet. Because ODA only measures government spending on development, it totally ignores private giving — whether it be the year-end check you just wrote to the International Committee of the Red Cross or the billions poured into lifesaving programs by the Gates Foundation.

Those contributions deserve to count, and the U.S. deserves credit for setting up a tax structure that rather uniquely among nations rewards people for their charitable giving by making it routinely tax deductible.

A wonderfully detailed report by a British nongovernmental organization, Development Initiatives, offers a far more accurate picture of the state of development investments by countries. In the United States, private spending on international development — at around $30 billion annually — is already as large as government spending (and by some accounts larger).

That’s not even counting the money sent back to developing countries from the United States. Remittances from America to the developing world total more than $100 billion each year, almost 30 percent of all remittances received by developing countries. Then there’s U.S. foreign direct investment in developing countries — more than $40 billion. All told, more than $200 billion from the United States flows into the developing world each year. When that’s compared with the 2012 global total for ODA of $128 billion from all the bilateral aid agencies on Earth, you begin to get a sense that we are not really measuring the right things.

More perniciously, ODA also overstates the generosity of some European allies, because certain categories of loans are included as development assistance. But many of these loans are on terms that are not highly generous, and when repaid they end up representing far less of a transfer of wealth than ODA statistics would suggest.

Now consider that the United States has more than doubled its aid to sub-Saharan Africa over the last decade, made massive U.S. investments in PEPFAR and the Global Fund that have led to a historic turnaround in the HIV/AIDS crisis, and has long been the most generous donor to humanitarian crises around the globe.

For those who remain skeptical that the U.S. is actually relatively generous, here are the results from the recently released World Giving Index: Proportionally more Americans gave their time and money than citizens of any other country; they recorded the highest score in the index’s history last year.

What is perhaps most ironic is the gulf in how American aid and charity is seen at home and abroad. Most foreigners think the U.S. is a cheapskate. In contrast, most Americans think their country is wildly profligate when it comes to spending on international development. A recent poll found that most Americans estimated about 28 percent of the federal budget goes to spending on foreign aid, when in reality that figure has traditionally hovered around 1 percent.

Perhaps the idea that the United States has been a steady, consistent and largely responsible development investor is something that isn’t easy for anyone to get their head around. But a Grinch it most assuredly is not.

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