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Microfinance, foreign aid, Commitment to Development Index, debt and debt relief
David Roodman, a former CGD senior fellow, worked at the Center from March 2002 to July 2013. His work at the Center focused on microfinance, debt relief, and aid effectiveness. His widely praised book Due Diligence confronts questions about the impacts of microfinance and how it should be supported. He wrote the book through a pathbreaking Microfinance Open Book Blog, where he shared questions, discoveries, and draft chapters.
Roodman was an architect and manager of the Commitment to Development Index since the project's inception in 2002. The Index ranks the world's richest countries based on their dedication to policies that benefit the 5 billion people living in poorer nations; it is widely recognized as the most comprehensive measure of rich-country policies towards the developing world.
Roodman wrote several papers questioning the capacity of common cross-country statistical techniques to shed light on what causes economic development. He co-authored a 2004 American Economic Review paper that challenged findings of World Bank research that aid works in a good policy environment. His non-technical Guide for the Perplexed builds on analysis of methodological problems and fragility in other studies. Among econometricians Roodman is best known for his computer programs that run in the statistical software package Stata; articles about them won him the inaugural Stata Journal editors' prize in 2012. Also in 2012, Roodman aged off the RePEc list of top young economists in the world, at number 6.
Why did a U.N. official’s remark soon after the tsunami hit that rich countries are “stingy” stir such a furor in the U.S.? We are a thick-skinned people, inventors of “Crossfire” and the NFL, led by a president who takes pride in disregarding foreign opinion. Yet even though Jan Egeland, the U.N. point person for disaster relief, did not single out the U.S., his words hit a raw nerve.
Secretary of State Collin Powell, USAID administrator Andrew Natsios, and President Bush himself rallied to the defense of American generosity. The outraged Wall Street Journal said, “Mr. Egeland is simply wrong.” Carol Adelman, a former USAID official, pointed out in the New York Times that the U.S. gives more in absolute terms than any other country.
But an honest survey of how America and its government affect poorer nations gives plenty of cause for shame—and a few sources of pride. When it comes to foreign aid, for example, we are in fact stingy. True, America provides more official aid than any other country. But the $16 billion in aid the U.S. government gave in 2003 works out to just 15¢ per American per day. Compare that to 29¢ for the United Kingdom, 33¢ for France, and $1.23 for Norway. Americans give more through church groups, the Red Cross, and other charities, but that amounts to just another six cents a day, and does not close the gap with other rich countries.
Largely forgotten in the heated debate has been that foreign aid is just one channel linking us with poorer countries. For example, the relative openness of the United States to toys, cameras, and cars facilitated rapid industrialization and poverty decline in China, and before that South Korea, and before that Japan. Americans take pride in that. On the Commitment to Development Index, a ranking maintained by the Center for Global Development and Foreign Policy magazine that covers seven policy areas, the U.S. ranks tops on trade policy among 21 rich countries.
But the U.S. does maintain significant barriers. In fact in 2004, it collected $1.8 billion from tariffs—taxes—imposed on imported clothing and other goods from India, Indonesia, Sri Lanka, and Thailand, five times what it promised those tsunami-hit countries in emergency aid. Nevertheless, the U.S. is more open than Europe or Japan.
The United States also does well, at least compared to its peers, on migration. It is relatively easy for someone from El Salvador, Mexico, or Somalia to the come to the United States, get a job, and send home money—or get training and return home with skills and entrepreneurial energy. Immigrants remitted $32 billion to Latin America and the Caribbean in 2002, six times what the region received in foreign aid. The index ranks the U.S. second on immigration, ahead of Australia and behind Canada, two other nations of migrants.
But in other ways, the United States is less exemplary. With its low gas taxes and sprawling suburbs, the country is a major contributor to global warming. And as the tsunami should remind us, poor countries are most vulnerable to the ravages of nature. Global warming could inundate large sections of low-lying Bangladesh, forcing millions of poor farmers off their land. For a really generous response to the problem of inundations in the Indian Ocean, Americans could climb out of their SUVs.
The U.S. global military reach is another essential aspect of our international profile. Evaluating the impact of these activities on poor people in developing countries is tough and controversial. In the Commitment to Development Index, we give credit for military activities that are endorsed by an international body, such as the UN or the NATO Council. For its size, the United States makes only average contributions to such operations.
Combining all this information with scores for investment and technology policy, the U.S. ties Germany, Norway, and France for seventh place for overall support for development. That makes the U.S. above-average among the 21 donor countries, but hardly commensurate with the boast that we are the most generous nation on earth.
The details of the scoring can be debated. But the lesson is clear: the U.S. could do much more to support the efforts of poor people in developing countries to improve their lives. Congress could slash tariffs on crops and clothing from developing countries. President Bush could invest political capital in proposals he floated a year ago to legalize millions of undocumented immigrant workers who are contributing to this country’s economic strength—and supporting families in their old homes. The outpouring of generosity since the tsunami and the furor over Egeland’s remarks show that Americans believe they should be generous. It’s time we held our government to the high expectations we hold for ourselves.
David Roodman, a Research Fellow at the Center for Global Development, oversees the preparation of the Commitment to Development Index, a collaboration with Foreign Policy magazine
This is a joint post with Steve Radelet and Michael Clemens
Even as the tragedy in Asia elicits an outpouring of charity from Americans, it has sparked controversy over whether America is in fact generous. President Bush, Secretary of State Colin Powell, and U.S. Agency for International Development (USAID) chief Andrew Natsios have all asserted that America is generous. What are the facts?
Facts from the Center for Global Development (CGD):
According to the Commitment to Development Index, which ranks 21 rich countries on how much their policies hurt or help poorer countries, when it comes to giving money, America is less generous than most other rich countries. (See coin chart in attached pdf)
• The U.S. gives 13¢/day/person in government aid, roughly one cup of Starbuck’s coffee a month.
• American’s private giving—another 5¢/day—is high by international standards but does not close the gap with most other rich countries. Norway gives $1.02/day in public aid and 24¢/day in private aid.
• President Bush was right Wednesday when he said that the U.S. gives 40% of relief aid, but this is about 2 cents per day per American, ranking the U.S. 9th among 21 donors.
• “It’s true that the U.S. gives a lot of money in absolute terms but that’s just a reflection of our size. In terms of aid given per person, the U.S. is one of the least generous rich countries. Privately Americans are generous, but our generosity as a country is definitely not what you would expect from the leader of the free world,” says David Roodman, a CGD Research Fellow who oversees the preparation of the Commitment to Development Index.
When all policies and types of support to developing countries are included, the U.S. is tied for seventh place with France, Germany, and Norway. (See scorecard in attached pdf)
• The U.S. ranks 19th on aid because it gives little compared to the size of its economy.
• The U.S. ranks last on environment because its rapid fossil fuel consumption contributes to global warming, which will have devastating effects on low-lying poor countries. Much of Bangladesh, for example, could be inundated by sea level rise, forcing poor farmers off their land.
• But the U.S. ranks #1 on trade because its borders are relatively open to food, clothing, and other goods made in developing countries.
• And it ranks #2 on migration because it is comparatively open to people from developing countries coming to the U.S. to work and send home money.
Overall support to development matters because the earthquake did not cause all these deaths. Poverty deserves as much blame.
• A similar-magnitude quake in the Northern Pacific would have cost fewer lives, because the Pacific is rimmed by rich nations such as Japan and the United States, which maintain a high-tech tsunami detection and monitoring system, and have stronger buildings and better infrastructure.
• The difference can be seen in the death tolls from tropical cyclones and hurricanes. Hurricane Mitch killed 10,000 in Honduras, Nicaragua, and El Salvador in 1998, and a “supercyclone,” which is like a hurricane, killed 50,000 in the Indian state of Orissa in 1999. Deaths from similar storms in Florida can typically be counted on two hands.
• “Most of the people killed by the tsunami died because they are poor,” says Michael Clemens, a research fellow at the Center for Global Development. “Even with improved warning systems, little can be done to prevent natural disasters from becoming massacres as long as people's livelihoods, infrastructure, and public health conditions are precarious. To minimize the death toll in future disasters we need to do a much better job of supporting long-term economic development in these countries."
Big disasters like the tsunami grab attention while larger, silent tragedies are ongoing. Yet there are proven ways to overcome these tragedies. It is in the best interests of the U.S. to do more to support development.
• Estimated deaths from the earthquake and tsunami: 70,000–100,000 –once a century.
• Deaths from HIV/AIDS: 240,000 a month. (Of which in rich countries: 1,776)
• Deaths from diarrhea in developing countries: 136,000 per month.
• And yet…a river blindness control program supported by 22 donor countries prevented 600,000 cases of blindness in west Africa and made 25 million hectares of arable land safe for resettlement—enough to feed 17 million people.
• A USAID anti-diarrheal disease program in Egypt helped save the lives of 300,000 children in1982–89.
• A donor-backed campaign to eradicate guinea worm in many poor countries in Africa cut the number of cases 99%, from 3.5 million cases in 1980 to 35,000 today.
• “The U.S. is not doing enough in terms of development assistance to meet our own goals of creating a more stable and democratic world,” says CGD senior fellow Steve Radelet. “It’s not so much a question of generosity as doing what is best for the U.S.”