The OECD’s Development Assistance Committee (DAC) defines what counts as Official Development Assistance (ODA)—what we usually think of as “aid.” It has been around since the 1960s, and has weathered previous downturns in aid flows.
The early 1990s were a dark period for foreign assistance. War raged in the Balkans, Black Wednesday depressed the UK, high levels of unemployment persisted in Germany and France, the US deficit ballooned, and consumer sentiment was grim. Whatever people wanted to spend the “peace dividend” on (following the Cold War), it wasn’t aid. The Financial Times chronicled the “Twilight of Foreign Aid,” and ODA volumes fell by a quarter between 1992 and 1997.
It is constructive, if a little depressing, to compare the DAC’s response last time there was an aid crisis to what it is up to today.
In 1996, the DAC fought back. The committee drafted a document that gave new purpose to foreign assistance, based around a set of targets that aid could help deliver: halving global extreme poverty, universal primary education, gender parity in secondary education, a two-thirds decline in child mortality, and universal access to reproductive healthcare.
The targets, which morphed into the UN Millennium Development Goals, were hugely ambitious and about a lot more than aid. While making a lot of progress, the world largely failed to meet them. But the DAC goals provided a focus and justification for foreign assistance that targeted aid where it could do the most good: fighting global poverty and the worst of deprivation. This focus was morally right, practical, and politically smart. It helped revive and target aid spending, but more to the point the aid finance helped save many millions of lives and improve hundreds of millions more.
Today, aid is back in the firing line, seeing cuts of a similar scale to the 1990s. So, what is the DAC doing to respond this time?
The most recent effort involves trying to weaken graduation requirements to allow high-income countries to qualify as ODA recipients. DAC members are looking around for measures of vulnerability, market access or inequality that might justify calling finance to economies more than fifty times richer than Burundi “development assistance.” The countries that might become eligible are far richer than many DAC donors were when the group was created. They shouldn’t be getting aid, they should be giving it. The proposed adjustment is supposedly driven by an aim “to keep the focus on development needs, including poverty alleviation, while taking account of specific vulnerabilities.” Given poverty and relative vulnerability are overwhelmingly reflected in GNI per capita, this seems disingenuous.
A look at the last few years of data for high-income countries suggests Panama has the highest proportion of people living under $3 a day, at about 3 percent. The average for low-income countries: 53 percent.
If anything happens to the ODA income threshold, it should be lowered and adjusted for purchasing power.
The graduation proposals are the latest step in a years-long DAC effort to weaken the ODA standard, following on from the inclusion of domestic refugee costs, profitable investments, vaccine dumping and ineffective climate mitigation projects as ‘development assistance.’
In defense of the DAC, it has also set up two working groups to discuss the role of ODA in development flows and “DAC Ways of Working.” Leadership from those groups would involve a vision and rules that lower the income threshold for ODA eligibility and work to focus assistance on the poorest countries and activities where it is most effective (as it happens, that is also where citizens in donor countries want ODA to be spent).
Leadership would also involve considerably broadening DAC membership. What counts as ODA shouldn't be defined by traditional donors alone, especially when they appear keen to demonstrate the enduring power of Goodhart’s Law. At least it should involve considerable representation from the countries that are supposed recipients.
Again, the DAC could think of a limited set of targets to which ODA could contribute, once more to help focus assistance on the places where it can make the most difference. For example:
- To ensure no one dies from conditions that cost a few dollars or less to prevent or treat, everyone worldwide should have access to an essential package of health care covering maternal and child health, infectious disease and family planning, with the goals (inter alia) of reducing under-five mortality in low-income countries to below 25 per 1000 live births by 2035.
- To end the most extreme poverty worldwide, donors will work toward the goal of transitioning all low-income countries to middle income status by 2040, as well as putting in place income transfer systems with universal coverage in countries home to the extreme poor, with the goal of reducing the proportion of the world’s population living under $3 a day to less than 3 percent by 2040.
But, frankly, I’m not holding my breath. And if the DAC isn’t up to promoting a positive and inclusive vision for and definition of ODA, perhaps it is time for something new.
Thanks to Euan Ritchie, Mikaela Gavas and Ian Mitchell for comments.
