Chris Blattman

The privatization of foreign aid

Private aid flows continue to out-pace official government assistance to poor countries, according to the Center for Global Prosperity‘s 2008 Index of Global Philanthropy.

I took a few snapshots from their PDF report (annoyingly, there’s no web page or summary). This is a breakdown of U.S. transfers to developing countries by donor type:

Private philanthropy is 50 percent greater than government assistance, and remittances are twice as great as private philanthropy. Religious organizations give about a third as much as the entire U.S. government.

The other big category is private capital flows–direct investment, loans, trade credit, etc. These are not aid by any stretch, but they’re at least as important.

We all have a tendency to focus on trends rather than volatility. But sometimes the cure is worse than the disease; unpredictable and variable aid could cause more harm than good. Take a look at the volatility of aggregate aid flows from all rich countries:

Remittances: slow and steady growth. Private foundations and religious organizations: come and gone with the wind. Official flows are somewhere in between. I wonder why the private charities and foundations are so volatile? (Also, I wonder how much of that jump after 2003 is just Gates and Buffet?)

What would be interesting is to look by country and sector. Probably all flows look jagged and unpredictable–a major source of recipient angst.

In per capita terms, the U.S. does better with all of these non-government flows included. Looks to me like they’d be ranked nineteenth (in per capita transfers) if we ignore private philanthropy and remittances. Counting them, the U.S. comes fourth, after the generous Scandinavians:

Eyeballing the graph, it looks like the U.S. would come 9th if we ignore remittances.

Two questions about the Scandinavians, though. First, why is private philanthropy almost zero? If you had a law against sending money to Africa, you couldn’t get it any lower. Second, who are these people sending remittances from Norway? Where to? I picture hundreds of thousands of frozen Somalian refugees cursing their fate in Hammerfest.

Another observation: by any measure, my Canadian countrymen have little cause for smugness. The Americans beat them at every measure. How is it that the entire nation deludes itself into thinking it is a prime mover in foreign aid and peacekeeping? Someone needs to tell them it is no longer 1960. Time to put your money where your delusions are, fellow Canucks.

(Hat tip: David Roodman)

8 Responses

  1. According to Statistics Norway:

    “In 2007, 62 000 immigrations and 22 000 emigrations were registered…Polish citizens made up the largest group of immigrants.

    Polish citizens had the highest net immigration with 13 400 (compared with 6 800 in 2006), followed by German and Swedish citizens with 3 100 and 2 100 respectively. In the five years from 2003, net immigration from Poland has increased from 300 to 13 400. In comparison, net immigration from Germany has increased by 3 600, from Sweden by almost 3 000 and from Lithuania by 2 000.”

    With Naunihal’s figures: Assuming a household size of 7 (from Euromonitor statistics), that would make roughly 4250 households, so 1500 men sent to Noway (roughly a third). Statistics Norway says 785 Pakistanis landed in Norway in 2007. Sounds about right…

  2. I would have thought that the high tax rates in Scandinavian countries may have something to do with it.

    If people are paying a lot of their income to tax, and know their country is spending a lot on ODA, maybe they don’t feel as large a pressure to give personally?

  3. From Norway:

    harian, a settlement of about 30,000 people and one of the most important army bases in the central Punjab, has become known as ‘Little Norway’ – at least one male member of virtually every third household from this area alone is working abroad, with over 60 percent of them going to Scandinavian countries, mainly Norway and Denmark.

    The Norwegian government has set up programmes to ensure that Norwegian-Pakistani children can adjust adequately when they leave for Norway, as most do after their schooling.

    Also, Filipinos
    United States, Japan, and Norway are the top three remittance points for Filipino seafarers and the manning agencies that remit 80 percent of seafarers’ salaries to Filipino families.

    In this latter case, they aren’t domiciled in Norway, they’re just passing through.

    I have no idea what percentage of remittances are coming from these two groups, but there are a lot of refugees and migrants in Norway …

  4. I think daaboom is right. A colleague of mine (UCSD) tried comparing aid, private contributions and remittances, but then he realized that the processes that generate each are so different as to merit separate analysis. Nevertheless, it’s interesting to see what the implications of all that private giving might be. What’s the state of this data?

  5. Does anyone know how tax deductions for charitable giving work in the US? I’ve heard you can deduct some stuff, but I’ve never known what. Just curious to see how much of this “charitable” giving people might be getting back.

  6. Canada beats US in ODA per capita, but US crushes Canada in Private philanthropy per capita. Draw from that what you will, but Canada is not beaten by the US on every measure.

  7. 1) Counting Remittance is just wrong. Period. How can you call it assitance when the cash is generated by a family member? I mean, you don’t call it a donation when you buy a handbag for your wife or a toy for your son, that’s consumption.

    2) The Gate foundation is committed to spend $1-2 billion a year. The 2003-2004 boast is in the tune of $100 billion.

    3) Even without remittance, US has a better Per Capita number than France/Germany/Canada.

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