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mount in OECD countries following the 2008-2009 global financial and economic crisis. The
arguments in favour of ODA commitments from donor countries have been articulated by
several writers over the years, but have consistently been challenged. This paper briefly and
critically assesses the main arguments in favour of, and against, continuing substantial
international aid programmes and makes a distinction between arguments relating to the
short-term and to the long-term. The long-term is considered in the context of the cases for
and against sustained ODA programmes. The short-term is discussed in the context of
potential adjustments in ODA volumes due to economic decline, reduced tax revenue and
1
1. Introduction
The financial and economic crisis which beset advanced industrial countries in 2008
and 2009 has led to significant reductions in real GDP in OECD countries, implying
reductions in tax revenue and a perceived need to reduce public expenditure. This raises the
issue of whether Official Development Assistance (ODA) should be reduced in line with
public expenditure cuts.1 Such reductions could be consistent with holding ODA at the UN
target of 0.7 per cent of national income if that target had been achieved in every ‘donor’
country, but in many cases ODA still remains below the target. 2 In the United Kingdom (UK)
– for example – a consensual agreement has emerged between the main political parties to the
effect that the 0.7 per cent target should be achieved before 2013 (i.e. within the time span of
the current Millennium Development Goals) (HM Treasury, 2010: 6).3 In the UK, with an
active public expenditure reduction programme (with recurrent public expenditure set to fall
significantly across all sectors other than health and ODA (HM Treasury, 2010: 5) the
coalition government has explicitly ring-fenced ODA with the achievement of the 0.7 per
cent target still being an objective. This position has been maintained despite substantial
criticism from sections of public opinion and UK media which is antagonistic, or at least
1
ODA is defined in the Glossary to the annual report of the Development Assistance
Committee (DAC) of the OECD (OECD-DAC, 2010a: 273) and the “grant element” which is
3 We have taken the United Nations target as ‘given’ for this paper although it is open to
Project website (United Nations, 2011) and an independent view is provided by Clemens and
Moss (2005).
2
agnostic, about the consensual ODA commitment. Over the period 2010-11 to 2014-15 the
cent, while in the same period the real cumulative increase in ‘international development’
and to discussion of ODA in the context of donor public expenditure constraints. ‘Long-term’
considerations are taken to refer to periods of ten, fifteen to twenty years (i.e. in terms of
place). ‘Short-term’ considerations are taken to refer to periods of three to five years during
which fluctuations in national income, taxation and public expenditure occur. This distinction
is important for a careful assessment of the case for maintaining or increasing ODA
We have not attempted a comprehensive review of the ‘aid literature’ for two reasons.
First, the ‘aid literature’ is vast and has several distinctly different foci, so that – for example
would only be peripherally relevant to discussion of the arguments for and against ODA at a
time of global financial and economic crisis. Second, our main focus is on the relationship
between the contemporary global financial-economic crisis and the pressure which this has
‘official’, including neither aid contributed by NGOs nor non-ODA development assistance.
No distinction has been made between bilateral and multilateral ODA since this would not be
private foundations which are not directly related to ODA. In addition it may be noted that
Section two of the paper will review some of the main long-term arguments in favour
of, and against, ODA, giving particular attention to the moral-ethical case. Arguments
relating to the self-interest case have largely been omitted for reasons of space, although they
are referred to in the third section.4 Section three considers the implications of the recent
global financial and economic crisis for ODA from ‘traditional’ donor countries. Section four
The case for aid can be placed within two distinct areas: firstly the ethical or moral
case, and secondly the self-interest case. 5 The bases of these cases are summarised in Table 1
below. Controversy has never been far away from the literature on ODA and well-known
authors have argued the case for and against throughout the last half century. Bauer (1972)
and Easterly (2007 and 2008) exercise robust arguments which are critical of ODA (neither
are totally against aid), while some of the most supportive arguments have been articulated
recently by Sachs (2005) and by Radelet (2003 and 2006). Further significant contributions to
the literature are by Riddell (2007), Cassen (1994), Lancaster (2000 and 2007a), Lancaster
and Van Dusen (2005) and Tarp and Hjertholm (2000). Riddell’s recent book is almost
4
And in a longer version of this paper, forthcoming.
5
This paper is mainly concerned with the arguments for and against the commitment of ODA
contributions by donor countries. There is an obverse set of issues concerning why recipient
countries accept (or do not accept) ODA which is not much touched upon in the literature. A
recent paper by Nixson takes a broader overview of ODA than is found in much of the
volume rather than at the beginning (Riddell, 2007: Chapters 6, 7, 8 and 9). 6 Baulch (2006:
933-4) suggests that there are many factors determining donor decisions about ODA
including: historical and commercial ties, governance and institutions, absorptive capacity,
discussion is supportive of the findings of Alesina and Dollar (2000) that in practice donor
economic needs and policy performance. They argue that allocation patterns – commonly
inconsistent with the ‘demand side’ of aid markets – are partially responsible for why aid has
not had more of an impact on growth and poverty reduction, presumably because the patterns
have not lined up with ‘poverty efficient’ allocations. They find that three major donors (the
USA, France and Japan respectively) allocate significant amounts of their aid to strategic
allies, former colonies, or in ways highly correlated with UN voting patterns. They also
report a clear trend for ‘democratisers’ to benefit from more generous ODA allocations
Recent contributions to the literature on ODA have questioned the rationale for ODA
without challenging the underlying need for donor transfers. For example, Severino and Ray
(2009 and 2010) have argued that a wholesale reconsideration of the role of aid in the context
of 21st century international development is needed, taking into account increased complexity
in the relationship between advanced industrial countries, newly emerging economic powers,
and more ‘conventional’ developing countries. They discuss a ‘triple revolution’ in ODA in
6
Most ‘development texts’ include substantial discussion of ODA. From the more
‘economic’ direction these include Todaro and Smith (10th edition, 2008: Chapter 14) and
Thirlwall (9th edition, 2010, Chapter 14). More multidisciplinary ‘development studies’ texts
covering ODA include Desai and Potter (2008: Chapter 10), Clark (2006: Chapter 29) and
ODA and foreseeing an eventual end to ODA as conventionally understood. Key issues of the
moment, and possible future ‘game changers’, include: the emergence and rise of non-DAC
contributions from significant private foundations, new financing and delivery mechanisms,
and the possible dwarfing of traditional ODA by climate-change financing. Others have
focussed on aid governance, aid effectiveness, aid architecture and the relationship between
development policy formulation and the aid system – with Barder (2009b), Birdsall (2009),
Brainard et al. (2003), Fischer (2009), Hudson and Mosley (2008), McGillivray et al. (2006),
and Mavrotas (2010) being particularly notable in this respect. Easterly has also contributed
to this discourse through an edited book (2008) in addition to his more polemical book
(2007).
Table 1 summarises the range of arguments which together make up the case in
favour of ODA. Inevitably there are overlaps between some of the categories. For example,
the moral-ethical argument relating to poverty reduction can be applied to ODA focused on
stimulating economic growth in developing countries, which can also be linked to the self-
interest case for ODA. A number of the elements of the ‘security’ case for ODA might also
be linked to economic growth, socio-economic development and the moral-ethical case. Such
‘overlaps’ are common in attempts to set up logical categorisations. The following sub-
section of the paper focuses on the moral-ethical dimensions of the case for ODA focusing on
6
Poverty and International Socio-Economic Justice: In an article published in the
1980s Riddell made it clear that public opinion gave ethics a major role in the justification for
aid (Riddell, 1986:24) at that time. A recent study found that, depending upon the nature of
the question asked, between 50 percent and “over 6 in 10” of a sample supported the
moral/ethical stance on aid in the UK (Henson and Lindstrom, 2010). This public view
developed market economies which might have been expected to change public opinion
somewhat more. Riddell’s more recent major overview of aid highlights the moral case for
aid (Riddell, 2007: Chapters 6, 7, 8 and 9) but other specialist ‘aid’ literature gives little
global poverty and is analogous to the intellectual basis for income transfers from richer to
poorer people within any one country. Economic theory relating to inter-personal welfare
comparisons within any particular society has tended to be very restrictive, avoiding moral or
ethical judgements.7 However, it is logical that the arguments on which income transfers
within a country are based should be extended to the global society. This extension raises
7
The conventional Paretian approach within economic theory is that one welfare position
cannot be said to be ‘better’ than another unless at least one person is better off and nobody is
worse off. However, there is a substantial literature which extends Paretian optimal
systems based particularly on the work of Hochman and Rodgers (see for example Hochman
and Rodgers, 1977). Political scientists have focused considerable attention on the concept
and practice of global social justice and a recent books by David Miller (2007) and by
this lies behind acceptance of the 0.7 per cent of Gross National Income target for ODA by
the international community. The principle of the more privileged in – global – society giving
some of their income through ODA to those who are less privileged is a form of international
socio-economic justice comparable with the adoption of progressive taxation and public
elements of poverty within their societies, and poorer countries have elements of privilege
within theirs, it is logical that international aid programmes which have poverty reduction
objectives (such as the adoption of the MDGs) would not aim to enrich the more privileged
ODA as Compensation: One aspect of the case for ODA as compensation from richer
countries to poorer countries case is based on past ‘transgressions’ of the former colonial
powers, including the slave trade. To the extent that imperialism/colonialism exploited or
immiserated former colonies it may be argued that transfers should be made from the former
colonial powers to the countries which suffered from the exploitation. The economic impact
of the slave trade can be compared to that of the extraction of mineral wealth (i.e. plundering
rather than commercial transactions recognising the property rights of the indigenous
It would be extremely difficult to place a value on the level of transfers which might
be associated with this ‘exploitation’ element of the case for aid, and many people within the
8
Tribe and Lafon (2010) report the view that ODA transfers should become, at least partially,
automatic in the form of ‘international taxation’ and this view received support from a
thousand economists in a letter to the G20 and its adviser, Bill Gates in April 2011
‘exploitation’ simply reflects legitimate market forces, or that their country was not involved
in the slave trade or in past imperial/colonial exploitation. Equally, not all developing
countries were involved in these forms of colonial exploitation, and of those which the
impacts were diverse. Fair and equitable compensation would be difficult to achieve even if
rather than past, ‘exploitation’ either through movements of the international terms of trade
against developing countries (and in favour of the richer countries), or through the process of
richer countries receiving merchandise imports from countries which have significant
reserves of cheap labour in an international variation of the ‘Lewis model’ (Tribe, Nixson and
Sumner, 2010: Chapter 2). This has been recognised in two particular instances relating to
African countries it was found that during the “adjustment period” ODA had been at a level
which offset income lost through deterioration of the international terms of trade, implying
that ODA had not made any net contribution to these economies (Husain, 1994: 7). Although
this link to a compensatory principle is uncommon in official discussions of aid policy the
fact that it appeared in a World Bank source is of great interest. These arguments relate to
secular deterioration in the net barter terms of trade and its impact on the international
arguments of the Prebisch-Singer thesis and its derivatives (Tribe, Nixson and Sumner, 2010:
Chapter 2).
ii) The EU’s STABEX programme was devised in order to cushion the economic
impact of fluctuations in export earnings due to changing world market conditions (Aiello,
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1999). The STABEX scheme was never intended to relate to the deterioration of international
terms of trade, but was explicitly focussed on the uncertainties created by fluctuating export
to the positive relationship between economic growth and poverty reduction in developing
countries would emphasise the role of ODA in contributing to sustained economic growth
and to poverty reduction. This contrasts with an alternative approach emphasising static
income redistribution from high income countries to poorer countries. The link between
economic growth in developing countries and poverty reduction is provided by the ‘poverty
Chenery and Strout (1966). The intellectual basis for this approach consists of the notion that
ODA provides funds which supplement domestic savings (and private capital inflows) and
therefore increases the capacity to invest, which should have the result of increasing the rate
intensive, so that the binding constraint may not be savings per se but rather foreign exchange
availability. Through providing foreign exchange, ODA was viewed as easing both these
9
The poverty elasticity of growth links economic growth to poverty reduction (Heltberg,
relationship than that provided by Dollar and Kraay in their ‘Growth is Good for the Poor’
‘financing gap’ is based on the difference between the levels of savings and investment
required to sustain the rate of economic growth which is aspired to, and the levels available in
the absence of ODA. The ‘financing gap’ approach has been criticised robustly by Easterly
(1999) and, more recently, by Clemens and Moss (2005). Such papers do though implicitly
omit reference to the role which ODA can have in the context of contemporary economic
growth theory. This ‘modern’ growth theory emphasises the roles of technology change,
institutional change, labour force quality and the ‘economic environment’, in addition to
savings and investment rates, within what is referred to as ‘endogenous growth’ (Pack, 1994;
Romer, 1994; Tribe, Nixson and Sumner, 2010: Chapter 4).10 Although there has been little
research on the contribution of ODA to ‘endogenous growth’ there can be little doubt that it
is probably quite substantial and that it needs to be incorporated more fully into discussion of
the relationship between ODA flows, economic growth and poverty reduction. White (1992)
provides a systematic review of many of the macroeconomic issues associated with the
impact of ODA on the economies of recipient countries and Killick and Foster (2011) have
One implication of all this is that for aid to have a poverty-reducing role it does not
policies. Equally, a broader definition of poverty which extends beyond income poverty
means that public health, water and sanitation and other social infrastructure development
programmes often involve a ‘public goods’ dimension in the sense that benefits to the
poverty-reducing economic growth, in reality there are a series of trade-offs and sacrifices
which come at the expense of facilitating such growth. If the focus of donor objectives is
simply on the growth aspect of poverty reduction there is a risk of marginalising other
legitimate objectives, such as reducing chronic poverty or providing social services (Barder
2009a: 1-2). In contrast, by adopting too many diverse objectives, donors risk negatively
affecting the performance of ODA (Edgren 2002). Indeed, Easterly (2002: 39-40), for one,
has argued for a reduction in our expectations: “Aid agencies should set more modest
objectives than expecting aid to launch the takeoff into self-sustained growth”.
Climate Change and the Environment: Another form of compensation linked to ODA
recognises the negative economic role which the demonstrable global environmental impact
of high developed country consumption levels (and global warming emission levels) has on
developing countries, and on their agricultural production in particular (for a detailed review
of studies of climate related poverty impacts see Skoufias et al., 2011). This is an example of
which have been suggested, for example in documents produced at the time of the 2009
conceptualised as being part of ODA. However, in the new, wider, view of ODA reflected in
Table 1 this type of financial flow does need to be included although whether ‘climate
finance’ is additional to, or part of, ODA has been a source of considerable discussion.
Conflict and Stress: One of the most challenging issues within international
development has been the role of conflict and civil strife in dislocating economies and
societies over long periods of time. This has been notable in sub-Saharan Africa and South
East Asia in particular, but extends to other regions as well. The response of the ODA sector
to this problem has involved two strands: efforts to control and resolve conflict, including
12
provision of international armed forces (which also relate to the international security
argument for ODA), and contributions to the recovery and rebuilding of fragmented
economies and societies. It is the second of these which properly belongs within the
ethical/moral argument for ODA through the application of the principles of international
Responses to Disasters: The final element of the moral/ethical case for aid relates to
international responses to disasters. This argument has an illustrious record and has become
considerably more sophisticated over the years and now involves significant collaboration
Governmental institutions contribute not only funds but also a coordinating and emergency
There have been considerable arguments marshalled against ODA over the years from
a diversity of political perspectives. Bauer (1972), Moyo (2009), Hayter (1971) and Escobar
(1995) approach the issues from a range of radical positions across the political spectrum.
Others, and Easterly (2007) in particular, have launched their criticisms from a more
apolitical stance.11 Essentially these negative perceptions are of a long-term nature, and
shorter-period fiscal constraints are not directly relevant. Be that as it may, those who take a
negative overall view of ODA would be likely to welcome short-period cuts in ODA
commitments and would wish to convert them into long-term reductions. It should be
apparent that, to a considerable extent, negative views of ODA do not place a high priority on
11
A very good summary of some of the main arguments for and against ODA can be found
in a recent working paper by de Haan (2009). Discussion of the diverse views of the nature of
‘development’, including the position of the ODA donor community, can be found in Chapter
Broadly the case against ODA might be broken down into six elements: First, ODA
has consistently under-achieved its objectives, and the record of aid effectiveness is not good.
This argument is contentious but is significantly dependent upon empirical evidence, which is
itself open to question (see the systematic review by Doucouliagos and Paldam, 2009). Booth
(2011) reminds us of the limited role which external assistance can play in fostering or
and it is better to depend on market solutions in aiming for these objectives (this is the
considerable extent, representing the neo-liberal critique of aid. Third, ODA suffers
pressures, and leading to a ‘donor-driven’ set of priorities and predilections. This is a variant
of the second element in many respects, but does not necessarily include the ideological
baggage of the neo-liberal view of the world (de Haan, 2009). Fourth, ODA has consistently
failed to tackle corruption, and has tended to reinforce privilege and power-relations in
recipient countries (de Haan, 2009). Fifth, a view which is found in domestic political
discourse in donor countries explicitly rejects ethical and moral arguments supporting ODA,
reverting to a myopic nationalism and taking the view that advanced industrial countries
should focus on domestic issues rather than commit resources to the reduction of poverty in
the rest of the world (see for example blog responses from the public to The Guardian, 2010;
or Scottish Daily Express, 2011). This position is not directly identified in de Haan’s (2009)
review paper, but needs to be recognised explicitly. Sixth, ODA perpetuates a neo-colonial,
vide the views of Alesina and Dollar, 2000) which is mainly to the advantage of the donors
14
and to more privileged groups in recipient countries (Hayter, 1971 and Escobar, 1995).
Set against these longer term arguments against aid are those which take the view, in
the shorter term, that ODA should take its ‘fair share’ of public expenditure cuts at a time
when a serious economic and financial crisis has occurred in the developed market
economies, comparable with (and probably more serious than) the East Asian crisis of 1997.
In many respects this argument for short-term, temporary, cuts in ODA do not necessarily
imply an antagonistic view of ODA in the longer-term, but at least represent an ‘agnostic’
view.
15
3. ODA and fiscal constraints associated with the global financial/economic crisis
A major issue for this paper is whether fiscal constraints, and public expenditure cut-
backs, which are currently being experienced across developed market economies should be
the basis for reductions in allocations of ODA. This is essentially a short-term preoccupation,
rather than being within a long-term perspective of the appropriate position of ODA with
to identify the extent of the economic contraction in OECD countries caused by the 2007-
increasing ODA, in this time of economic crisis will be elaborated, followed by a series of
Table 2 presents data taken from the OECD online statistical country profiles (OECD,
2011) for fourteen developed market economies. The main limitations of this data are that for
key variables they end at 2008, and cannot provide any indication of the intentions of the
governments of these countries with respect to ODA commitments beyond the end of 2008.
Five of these countries experienced a decline in GDP between 2007 and 2008, and the
remainder experienced a reduction in the rate of economic growth. Between 2008 and 2009
twelve of the countries experienced a decline in GDP ranging between 5.6 (Ireland) and 0.5
per cent (France). However, by the end of 2010 thirteen of the countries were again
experiencing increases in GDP, the exception being Ireland, suggesting that most of these
economies are resilient and that the decline resulting from the crisis was only a temporary
phenomenon.12
12
Some of these OECD countries have experienced economic setbacks which are not directly
associated with the main financial-economic crisis of 2008-2010 which are likely to delay
recovery, and to influence public expenditure levels and allocations. Examples include the
sustained impacts of the very considerable Irish financial sector crisis and of the Japanese
earthquake and tsunami of early 2011. There is also a possibility that the current UK
16
Table 2 about here
From the perspective of this paper the incidence of fiscal constraints are manifested
governments in the form of tax revenue. For the eleven countries with data on tax revenue
available from the OECD, only one has an increase in the proportion of GDP taken as tax
revenue between 2007 and 2008, although some of the changes are comparatively marginal
and are within the context of fluctuations rather than distinct trends.
interest. To some extent countries fall into clusters – some having around 0.2 per cent, some
around 0.4-0.5 per cent, and others having around 0.8-0.9 per cent committed to ODA. The
first group includes Italy, Japan and the USA; the second includes Australia, Canada,
Finland, France, Germany and the UK; and the third includes Denmark, the Netherlands,
Norway and Sweden; Ireland represents a transitional case with an increase from about 0.3
per cent in 2000 to about 0.6 per cent in 2008. Eleven of the fourteen countries have either
attained, or are within reach of, the 0.7 per cent target: there is significant international
consensus in practice.
Table 3 provides some more easily comprehended statistics on the reduction in GDP
for six OECD countries from the beginning of 2008 until the end of 2009, taken from an
17
OECD table presenting comparative data for economic/financial crises since the 1970s13. For
these countries the reduction ranges from a low of about 2 per cent for the USA to a high of
about 6 per cent for the UK and Italy. The implication of this is that government revenues
would have been expected to have fallen by approximately the same proportion as GDP.
approximate equivalence between GDP (Gross Domestic Product) and GNI (Gross National
Income) giving an estimation for the proportion of total tax revenue allocated to ODA in
18
these fourteen countries.14 The proportion of Total Tax Revenue committed to ODA depends
in part on the ratio of tax revenue to GDP. For example, in Ireland tax revenue is about 30 per
cent of GDP, so that the 0.6 per cent of GNI contributed as ODA represents about 2 per cent
of total tax revenue and for the UK the equivalent proportion is about 1.2 per cent of tax
revenue. The UK’s GDP fell by about 6 per cent between the beginning of 2008 and the end
of 2009, so that if tax revenue fell proportionately, and for ODA to contract in line, it would
have to fall by about 0.07 per cent of the total tax revenue in 2008 (i.e. 6 per cent of 1.21 per
as a whole.
This review of the economic and public finance impacts of the global crisis suggests
that if ODA were to have been reduced in line with fiscal constraints the economic and
financial dimension would hardly have been significant, and would perhaps have been
We will now set out some of the issues relating to support for ODA in the context of
the current global financial and economic crisis. The first relates to the ‘0.7 per cent target’,
the second to a mutuality of interest, the third to the nature of the ODA commitment process,
the fourth to emergency and disaster-related aid, the fifth to security arguments, and the sixth
to environmental arguments.
The target 0.7 per cent of GNI as ODA from economically advanced countries is a
long term one, and several countries experiencing contraction of GDP and of tax revenues
during the current crisis have not yet reached it (see Table 2). For most of these countries
even with the contraction of GDP, holding ODA constant would still not lead to the 0.7 per
cent target being met. Indeed, for the UK even with a substantial increase in ODA over the
current spending review period the target will barely be met by 2013 (HM Treasury, 2010: 6).
This provides a partial argument for maintaining or increasing ODA despite the short-term
19
contraction of GDP.
One of the key ‘mutuality’ arguments supporting ODA has related to expenditures
from aid disbursements being made in the domestic economies of donor countries. The Accra
Agenda for Action committed donors to ‘untie’ ODA, potentially increasing the effectiveness
of ODA, but reducing the ‘mutuality’ element (OECD-DAC, 2008). However in practice,
even for donor countries which have most or all of their ODA ‘untied’, there are still
20
significant expenditures from ODA programmes which occur in their domestic economies.15
Expenditure on, for example, capital equipment, consumables, consultancy fees and
commitments. Recipients obtain tangible benefits from ODA, and donors benefit from
expenditure through its favourable impact on the ‘home’ economy and on recovery from the
crisis. One factor making short period cutbacks in ODA commitments dysfunctional is that
aid allocations are made for expenditures over a number of years ahead, rather than for single
years. Short-term cuts therefore run the risk of endangering the projected outcomes from past
ODA which is committed to emergency and disaster aid could be subject to cuts
simply because the reasons for the expenditures are not foreseeable at the time of setting
budgets. Donor governments might therefore reduce budget commitments for emergency and
disaster relief, citing the significance of private contributions by the general public as one
form of justification. However, this type of ODA probably has considerable public support,
with media reporting of international emergencies and disasters being very visible and
Likewise, ODA linked to international security issues can receive significant support,
particularly where linked with domestic security threats in donor countries and to military
actions in countries where donors have committed armed forces (such as Afghanistan).
Equally, the arguments for retaining ODA expenditures associated with the
environment are also likely to be strong since these are of a long-term nature and ‘mutuality’
links exist between donor and recipient countries. International inter-connectedness is likely
21
to be a significant factor supporting a case for maintaining ‘environmental’ ODA.
selectivity. The social sectors have particularly benefited from ODA increases over the last
decade. At a global level bilateral ODA went up in absolute terms between 2000 and 2008
from $46bn to $74bn and from 0.14 per cent of donors’ GNI to 0.20 per cent but has actually
fallen slightly as a percentage of recipients’ GNI (McKinley, 2010). There has been a
structural shift towards social sector allocations and away from economic and productive
sectors. In absolute terms, social sector, bilateral ODA spending has doubled between 2000
ODA has stagnated (McKinley, 2010). In this sense a form of selectivity has already been
operating, with increasing focus on ‘direct’ poverty reduction through social sector
Reducing ODA commitments can also be related to directing aid more selectively to
countries with a high proportion of the world’s poor. It is arguable that some ‘poor’ countries
contain only a small proportion of the world’s poor people, while other lower middle or even
upper middle income countries, through being more populous, contain a higher proportion of
the world’s poor. Through switching ODA to focus more finely on higher concentrations of
the world’s poor, and away from a focus on ‘poor countries’, could have a larger impact on
global poverty. Evans (2010) and Sumner (2010) and Kanbur and Sumner (2011) have
discussed this ‘new geography of global poverty’ which includes the proposition that many of
the world’s poor live in middle income countries such as India and Indonesia that may – in
the medium term – neither need nor request significant levels of ODA and will instead of
resource transfers be more interested in ‘policy coherence’ meaning the range of non-aid
development policies such as trade, tax havens, migration and remittance policy and so on
22
and global public goods. ODA might then be increasingly focused in an ever smaller number
of low income countries that are fragile or conflict-affected states (Moss and Leo, 2011).
However, even if some middle-income countries can support their own poverty
reduction programmes through internal resource mobilisation others cannot (Ravallion, 2009)
and even in countries with substantial resources the poor will often lack ‘voice’ within
governance structures. Further, some countries such as Pakistan are only just within the
‘middle income threshold’ so that withdrawing ODA suddenly could lead to a slip back into
The issues discussed above are illustrative of changes in financial and economic
conditions in developing countries over the years, so that some of these countries now have
substantial domestic resources and are even donors themselves (see for example Manning,
2006). Estimates for India’s aid programme are $550m in 2008, for China’s aid programme
are in the region of at least $1-2bn/year, and Brazil’s aid programme is estimated at
23
$1bn/year.16 This would mean that new donors are set to overtake some ‘traditional’ DAC
donors including Australia, Belgium, or Denmark. At the same time net annual ODA into
India is $2.1bn and to China $1.5bn raising a question over the ethical case for ODA flows to
countries which themselves have substantial domestic resources (World Bank, 2010).
However, fragile and conflict-affected states are regarded as having a very strong case
tax revenue, is a particular problem (for ‘fiscal space’ in low income countries see Kyrili and
Martin, 2010). However, whether ODA can be absorbed in fragile states and even non-fragile
low income countries remains a point of contention (Killick and Foster, 2011; Feeny and
4. Conclusion
issues surrounding the cases for and against reducing, maintaining or increasing the level of
arguments fall broadly into two categories: the moral or ethical case and the self-interest case.
The paper focused mainly on the moral and ethical case, but in relating to donor responses to
There are significant long-term arguments based on the moral/ethical case in favour of
donor commitments to ODA. The arguments against ODA tend not to consider the
moral/ethical case, rejecting it in an extreme variant, and also do not give much attention to
the self-interest case. Some of those taking an antagonistic or agnostic view of ODA would
accept a moral/ethical case with respect to emergency relief in particular. There have been
significant arguments marshalled in favour of making ODA more selective and effective, and
24
favour of ODA reform focus on changing sectoral priorities, the ‘new geography of poverty’,
The arguments for and against ODA relate to long-term considerations rather than to
short-term considerations linked with temporary economic, financial and fiscal constraints.
The recovery of most OECD economies from the 2008-2010 crisis has followed soon after
the decline, making the case for short term cuts in ODA weaker. From the viewpoint of donor
countries there are arguments for maintaining or increasing ODA during economic and
financial crises as a measure contributing to recovery strategies, based largely on the self-
interest case. The case for ODA is stronger for fragile and conflict-affected states, and
particularly those with serious crisis impacts, based on both the moral/ethical and self-interest
cases.
25
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35
Table 1
36
Table 2
37
Table 2 – GDP, Government Revenue and ODA Statistics for Selected Canada
OECD Countries GDP growth (%) 5.23 3.02 2.85 2.53 0.41 -1.10* 3.21*
2000 2005 2006 2007 2008 2009* 2010* 35.6 33.3 33.5 33.2 32.1
Australia Total Tax Rev. (%GDP) 4 8 5 8 7
0.30* 0.33**
GDP growth (annual %) 1.90 3.00 3.30 3.68 2.29 2.61* 2.71*
Net ODA (%GNI) 0.25 0.34 0.29 0.29 0.32 * *
31.1 30.8 30.6 30.8
Total Tax Rev. (%GDP) 4 2 3 3 n.a. Denmark
0.29* 0.32** GDP growth (%) 3.53 2.45 3.39 1.69 -0.87 -3.11* 2.67*
Net ODA (%GNI) 0.27 0.25 0.30 0.32 0.32 * * 49.3 50.8 49.6 48.6 48.2
Total Tax Rev. (%GDP) 6 2 3 7 9
government’s strategic reduction in public expenditure will slow economic 0.88* 0.90**
Net ODA (%GNI) 1.06 0.81 0.80 0.81 0.82 * *
Finland
recovery from the crisis, compounding the variety of country experiences.
GDP growth (%) 5.06 2.77 4.92 4.20 1.04 -5.52* 5.05*
47.2 44.0 43.4 43.0 42.7
Total Tax Rev. (%GDP) 2 1 8 1 8
13
The statistics in Table 3 come from the same OECD source as those in
0.54* 0.55**
Net ODA (%GNI) 0.31 0.46 0.40 0.39 0.44 * *
Table 2 but there are apparent inconsistencies between the two tables, which France
GDP growth (%) 3.91 1.90 2.22 2.32 0.43 -0.52* 1.47*
can be reconciled. For example, for the UK Q4 of 2008 has a GDP decline 44.3 43.9 44.0 43.4 43.0
Total Tax Rev. (%GDP) 5 1 5 7 7
of 2.75% over the same quarter in 2007, and for 2009 the equivalent figure
knowledge of the differences between these two measures.
was 2.84%, giving a cumulative reduction over the two years of 5.5%,
15
This issue is explored in the 2010 OECD-DAC Annual Report (OECD-
much closer to the decline of about 6% reported in Table 3.
DAC, 2010: 16, 23, 225 and 226).
14
Data were not available for two of the countries for 2008, but the
16
calculation could readily be made for 2007. In the OECD source for the On India’s aid programme see Ramachandran and Walz, 2010; on
statistics in Table 2 Total Tax Revenue is given as a proportion of GDP and China’s see Lum et al., 2009 or Lancaster, 2007b; and on Brazils’ see
ODA is given as a proportion of GNI (as is conventional) with the ‘heroic’ Cabral and Weinstock, 2010. Another interesting source on this issue is
assumption of identity between GDP and GNI having been made in full Dreher et al., 2010.
38
0.47* 0.50** 0.76 0.94 0.89 0.95 0.88 1.06** 1.10***
Net ODA (%GNI) 0.30 0.47 0.47 0.38 0.39 * *
Sweden
Germany
4.40 3.30 4.25 2.54 -0.22 -1.60* 7.23*
GDP growth (%) 3.21 0.75 3.16 2.47 1.26 -2.00* 5.05* 51.7 49.4 49.0 48.3 47.1
37.1 34.7 35.5 36.1 36.4 9 8 5 1 1
Total Tax Rev. (%GDP) 9 9 9 7 3
0.80 0.94 1.02 0.93 0.98 1.12** 0.97***
0.35* 0.38**
Net ODA (%GNI) 0.27 0.36 0.36 0.37 0.38 * * UK
Ireland 3.92 2.17 2.85 2.56 0.55 -2.84* 1.46*
36.3 35.7 36.6 36.0 35.7
GDP growth (%) 9.45 6.18 5.36 6.02 -3.04 -5.64* -0.69*
9 6 2 8 1
31.2 30.3 31.6 30.8 28.2
Total Tax Rev. (%GDP) 8 6 9 1 6 0.32 0.47 0.51 0.35 0.43 0.52** 0.56***
0.54* 0.53** USA
Net ODA (%GNI) 0.29 0.42 0.54 0.55 0.59 * * 4.17 3.06 2.67 2.14 0.42 0.19* 2.70*
29.8 27.5 28.2 28.2 26.8
9 4 0 9 6
0.10 0.23 0.18 0.16 0.19 0.21** 0.21***
continued 2000 2005 2006 2007 2008 2009* 2010*
Italy
3.69 0.66 2.04 1.56 -1.04 -2.91* 1.49*
42.2 40.8 42.3 43.4 43.1
9 5 4 6 7
0.13 0.29 0.20 0.19 0.22 0.16** 0.15***
Japan
2.86 1.93 2.04 2.39 -0.70 -1.75* 2.53*
27.0 27.4 27.9 28.3
0 0 7 3 ..
0.28 0.28 0.25 0.17 0.19 0.18** 0.20***
Netherlands
3.94 2.05 3.39 3.61 2.00 -2.44* 2.09*
39.6 38.5 38.9 37.5
6 0 1 4 ..
0.84 0.82 0.81 0.81 0.80 0.82** 0.81***
Norway
3.25 2.74 2.28 3.13 2.13 -0.89* 1.54*
42.6 43.5 43.9 43.6 42.0
4 2 7 3 9
39
Notes to Table 2
Notes to Table 2:
Notes: * These quarterly statistics represent the percentage change compared with the same
quarter in the previous year
** These statistics are from the OECD-DAC’s ‘Aid Flows’ website provided in
collaboration with the World Bank – accessed on 28th March 2011 from oecd.org.
*** These statistics are from the OECD’s Newsroom “Development aid reaches an
historic high in 2010 – accessed on 9th April 2011 from www.oecd.org
Source: OECD, 2011 - Statistics: Country Profiles - www.oecd.org
40
Table 3
2008 2009
Time Period Q1-2008 Q2-2008 Q3-2008 Q4-2008 Q1-2009 Q2-2009 Q3-2009 Q4-2009
France 100.00 99.56 99.32 97.81 96.49 96.80 97.05 ..
Germany 100.00 99.44 99.12 96.70 93.28 93.69 94.37 ..
Italy 100.00 99.44 98.64 96.61 93.98 93.52 94.05 ..
Japan 100.00 97.91 96.91 94.34 91.41 92.02 92.33 ..
UK 100.00 99.92 98.99 97.21 94.76 94.12 93.97 94.06
USA .. 100.00 99.32 97.96 96.35 96.17 96.70 98.06
41
Table 4
Note: The data in this table are based on the assumption of an equivalence between GDP and
GNI statistics, which is not perfect but gives an indicative order of magnitude.
Source: calculated from OECD, 2011 - Statistics: Country Profiles - www.oecd.org
42