Counting Aid Dollars

Sunday, April 16, 2006

THE SPRING meetings of the World Bank and International Monetary Fund will take place this week, and the workings of these global agencies will be debated around Washington. But official aid is not the only kind. Unofficial philanthropy also flows to poor countries, some of it from famous outfits such as the Ford Foundation, and some from millions of ordinary givers. Conservatives argue that this private aid is less bureaucratic and more effective than the government kind, and that incorporating it into international lists of donors could end the common complaint that the United States is stingy.

A new study by the Hudson Institute sets out to prove this point. It concludes that U.S. private giving to poor countries came to $71 billion in 2004, a sum more than triple the U.S. government's foreign aid and nearly as large as the $80 billion given away by all donor governments combined. By itself, official U.S. foreign aid comes to a minimal 0.17 percent of the gross domestic product, the second-lowest share among the 22 rich countries tracked by the Organization for Economic Cooperation and Development. Add in private philanthropy, and U.S. help to poor countries jumps to 0.61 percent of GDP, only slightly less than the 0.7 percent target urged by development advocates.

But who's giving most of this private aid? Foundations, corporate philanthropic efforts, religious organizations and voluntary aid groups account for only about one third; fully two-thirds comes from migrant workers sending money home. These worker remittances have become a powerful engine of progress in countries from the Philippines to El Salvador. But these transfers, mainly within families, clearly aren't the same as "foreign aid" or even "charity." Moreover, they don't tend to flow to the regions most in need -- notably, Africa.

Eliminate these remittances, and the United States doesn't stand out for its generosity. Official aid plus private charity comes to 0.39 percent of GDP, tying the United States for 10th place in the OECD's table of donors. Add in a reasonable estimate for private giving in Europe and elsewhere, and the United States slips into the bottom half, according to Steve Radelet of the Center for Global Development. The Hudson Institute is right to draw attention to unofficial aid; private actors can be more innovative and nimble than governments -- though they can also be more amateurish. But a nation that wants to lead the world should invest more in the battle against poverty.

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