Aid Summary
Most comparisons between donors are based on how much aid each gives, either in absolute terms or as a percentage of gross domestic product. For the CDI, quantity is merely a starting point in a review that also assesses aid quality. The index penalizes tied aid, which recipients are required to spend on products from the donor nation; this prevents them from importing from elsewhere and raises project costs by 15–30%. The index also subtracts debt payments the rich countries receive from developing countries on aid loans. And it looks at where aid goes, favoring poor, uncorrupt nations. Aid to both Israel and Iraq, for instance, is counted at 10¢ on the dollar, since Israel is hardly poor and in Iraq corruption is rampant and rule of law weak. Aid to Mozambique, on the other hand, with its high poverty and relatively good governance, is counted at 78¢ on the dollar. Finally, donors are penalized for overloading recipient governments with too many small aid projects. When projects are many and recipient officials few, the obligation to host visits from donor officials and file quarterly reports becomes a serious burden.
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. All CDI countries except Austria, Finland, and Sweden offer such incentives. Since the index is about government policy, it counts only private giving that is attributed to tax incentives. Private giving to developing countries is higher in the U.S. than in most countries, at 10¢ per person per day. But even adding that to the 19¢ a day in government aid leaves the U.S. well short of donors such as Sweden and Denmark, which give 86¢ and $1.08 a day in government aid alone.
The differences between countries in raw aid quantity are dramatic, and as a result they heavily influence the overall aid scores. The Netherlands and the Scandinavian countries take the top four slots on aid, while Japan and the U.S. end up near the bottom. But quality matters too. Norway ties Denmark for first on shear aid quantity as a share of GDP, but falls to third in the CDI for funding smaller projects and being less selective. And the U.S. would score higher if it did not tie 70% of its aid and gave less to autocrats in Russia, Jordan, Pakistan, and other countries.
For more, go Inside the Index.