Remittances aren't charity, and one country does not make an index

April 13, 2006

The Hudson Institute has just released its new Index of Global Philanthropy. The report makes an important point: U.S. private charitable flows to developing countries are on the rise and can do much good. In a world with the Gates, Turner, Hewlett, Soros and other foundations doing plenty of good things, it is a point worth making. But this new index is flawed in crucial ways. Most obviously, it seems to have been misnamed: since it only covers one country, it is not really an index at all, in the sense that this word is normally understood. Our own Commitment to Development Index, for example, ranks 21 of the richest countries across seven policy areas. The U.S. falls in the bottom half of the distribution.Even in its own terms of counting just U.S. giving, however, the report makes a key mistake by counting remittances as "assistance." Remittances account for fully half of the $99 billion in so-called private assistance that the report counts. Make no mistake: remittances are important financial flows, are understudied, and can have important effects on development. But the fact that they are an important financial flow does not make them assistance, philanthropy, or a measure of whether the U.S. is stingy or generous, anymore than bank loans or foreign direct investment (other important financial flows) are by any measure assistance or philanthropy.Remittances come from people working hard for a living, getting paid for their work, and sending money primarily to provide for their families. No philanthropy or generosity there – just good old fashioned family values. These flows are no more assistance than Americans working abroad and sending money home would be counted as reverse aid.The addition of private capital flows in a report on philanthropy is also odd. If one is to count purchase of bonds, to be fair of course one would have to count the reverse direction of China's flows in to the U.S. for purchases of bonds and T-bills. That would make the picture look a bit different! So this line should be dropped as well.If you drop remittances and private capital flows, and accept the report’s other numbers for charitable giving (even though these are somewhat higher than other estimates), the total for U.S. private giving comes to $45.5 billion, or about 0.39% of U.S. GNI. Assuming reasonable amounts of private aid from other donor countries, this would make the U.S. at best 13th among the top 21 donors and perhaps lower, still in the bottom half of the list. Whether that makes the U.S. stingy or generous I will leave for others to debate, but it doesn't bring us anywhere near the top of the list.For more on this topic, see U.S. Aid: Generous or Stingy a debate between me and Carol Adelman, the lead author of the Hudson Institute report, on January 13, 2005.


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