Aid
Foreign aid is the first policy that comes to mind when people in rich countries think of helping poorer countries. And most comparisons between donors are based only on how much aid each gives. Have they doubled aid to Africa? Are they giving 0.7 percent of GDP? For the CDI, quantity is merely a starting point in a review that also assesses aid quality. The CDI penalizes “tied” aid, which requires recipients to spend aid on products from the donor nation; this prevents recipients from shopping around and raises project costs by 15–30 percent. The CDI also looks at where aid goes, favoring poor and relatively well-governed nations. While aid to Equatorial Guinea—where corruption is rampant and rule of law weak—is counted at 15¢ on the dollar, aid to Ghana— where poverty is high and governance relatively good—is counted at 94¢ on the dollar. Donors are penalized for overloading recipient governments with too many small aid projects, which burden recipient officials with hosting obligations and frequent report filing. Finally, the Index rewards governments for letting taxpayers write off charitable contributions, since some of those contributions go to Oxfam, CARE, and other nonprofits working in developing countries.
The dramatic differences between countries in raw aid quantity heavily influence the overall aid scores. The top performers on the aid component are Luxembourg, Norway, Sweden, Denmark, and the Netherlands; all give large quantities of aid as a share of GDP. But quality matters too. Spain ranks 11th on sheer aid quantity as a share of GDP, but falls to 14th in the overall aid component for funding smaller projects and tying nearly a fifth of its aid. Despite policies that promote private charitable giving, the United States also ranks in the bottom half (17th) of donors on aid. It would score better if it contributed a higher share of its GDP and gave less to corrupt or undemocratic governments in Iraq, Jordan, Afghanistan, and elsewhere. The Visegrad countries—the Czech Republic, Hungary, Slovakia, and Poland—and South Korea place last in both aid quantity and quality.