The Reality of Aid (II)

10/04/2009 11:05 am ET | Updated May 25, 2011

Today only a handful of countries have reached the magic number. Percentage wise the United States is the country in the OECD that devotes less public money to development aid. As Robert Calderisi points out:

Only five countries (Denmark, Luxembourg, the Netherlands, Norway and Sweden) have met the United Nations' target of providing 0.7 percent of their gross national income in aid to poor countries. The United States has never spent more than one quarter of one percent of its national income on foreign aid, and two thirds of that has been devoted to just two countries: Israel and Egypt.

Some would argue that the contribution from corporate donors in the United States well exceeds that of other European countries. As a result, the aggregate contribution, both public and private, could approach the 0.7 percent. The reality is different. According to the Committee to Encourage Corporate Philanthropy (CECP), the 155 companies (including 69 of Fortune Magazine's Top 100) that participated in the 2007 Corporate Giving Standard (CGS) survey of philanthropy donated a total of $11.6 billion in both cash and non-cash contributions to communities around the globe, which represents a median contribution of 0.92% of pre-tax profit for all companies and of 0.83% for the 69 Fortune 100 Companies that participated in the survey, down from a median of 1.3% of pre-tax profit in 2004. Out of this percentage Fortune 100 companies provide an average of 14% of its aid to international end-recipients, whereas all other companies give an average of 10% to international end-recipients. As a result Fortune 100 companies give 0.12% of their pre-tax profit to international end-recipients, whereas all other companies give 0.09% of their pre-tax profit to international end-recipients.

According to Fortune Magazine, the top 1,000 companies in terms of revenue in the United States had an aggregate profit of $724 trillion in 2007. If we assume that each of them devoted on average 0.12% of their pre-tax profit to international end-recipients, the total dollar amount devoted to international end-recipients was $869 million, or roughly 0.0063% of the United States' GDP. This is a minuscule amount compared to the target 0.7% and its contribution is quasi negligible. The United States is as a result far from reaching the target. On the other hand the United States' contributes with innovative allocation schemes, such as the Millennium Challenge Corporation.

Forbes ranks the top 200 charities in the United States. According to the American magazine the total volume of private contributions for the 200 largest charities for 2008 amounted to $40.75 billion, up 5% from a year before. Of this amount $9.44 billion or 23.16% of the total was spent in international needs.

The Foundation Center features the endowments and the annual giving of the top 100 US foundations. The aggregate endowment of the top 100 US foundations amounted to $263.4 billion in 2008. Total giving for the 2007-2008 fiscal year amounted to $15.6 billion, of which $2.0 billion corresponded to the Bill and Melinda Gates Foundation and $526 million corresponded to the Ford Foundation. The Foundation Center does not disclose what share of the total giving ($15.6 billion in 2007-2008) was spent in the United States and what share was spent internationally. According to The Economist in 2008 American foundations spent $5.4 billion internationally. Joel L. Fleishman, author of The Foundation, summarizes the foundation sector in the United States as follows:

In 2005, about 68,000 foundations of all kinds existed in the United States, controlling estimated assets of half a trillion dollars and making annual grants totaling $33.6 billion. Most of these foundations are small and unstaffed, but a few are very large and powerful by national and global standards. As of December 31, 2003, forty-six foundations had assets of over one billion dollars, while another sixty-four had assets between give hundred million and one billion dollars. Fully 70 percent of all foundation assets were controlled by just 2 percent of foundations.

According to Oxfam, "Meeting the UN target of allocating just 0.7 per cent of national income to aid would generate $120 billion, enough to meet the MDGs and other vital poverty-reduction goals". Oxfam adds that "by 2003, spending on aid and debt relief to all developing countries, measured per person in rich countries, was just $80 per year, or $1.53 from each person per week". As a percentage of Gross National Income (GNI) governments spend today less than ever on aid. The percentage has decreased from 0.5% in 1961 to just above 0.2% as of 2002. In aggregate total development assistance of the 22 OECD member countries of the OECD Development Assistance Committee (the world's major donors) went down from $104 billion or (0.31% of GNI) in 2006 (0.31%) to $103 billion in 2007 (0.28% of GNI).

As of 2007 only five OECD countries reached the 0.7% target, with the United States and Greece in the last position at 0.14%. The following countries increased their ODA in 2007 compared to a year earlier: Spain +33.8%, Norway +13.4%, Luxembourg +11.7%, Austria +7.6%, Germany +5.9%, Finland +5.5%, Greece +5.3%, Ireland +4.6%, New Zealand +3.7%, the Netherlands +3.1% and Australia +1.0%. The following countries decreased ther ODA in 2007 compared to a year earlier: Japan -30.1%, United Kingdom -29.1%, France -15.9%, Belgium -11.2%, United States -9.9%, Portugal -9.4%, Italy -3.6%, Switzerland -3.0%, Canada -2.7% and Sweden -2.6%.

The United States Official Development Assistance (ODA) amounted to $21.75 billion or 0.16% of the country's GDP. If corporate giving in the amount of $869 million and charities expenditure in the amount of $9.44 billion are added to the US ODA, the sum of public and private development assistance would amount to 0.23% which would put the US ahead of Portugal, Italy and Japan but still behind many other European countries.

Oxfam also illustrates how a large percentage of aid from G7 countries is still tied to serving their own domestic interests. In the case of Italy and the United States, their percentages of tied aid, as of 2002 were 92% and 70%, respectively. Many of Oxfam's concluding recommendations have not been satisfied since they were proposed in 2005, including (i) "providing at least $50 billion in aid immediately", and (ii) "providing long-term, predictable aid for investment in the provision of universal, free, and high-quality public services".