The other day, a United Nations official accused the United States of being ?stingy? in terms of aid to tsunami victims in South Asia. After criticism from the State Department, the official clarified his position. Americans are not being stingy in helping tsunami victims, only stingy in terms of overall foreign aid as compared to other countries.
This is a familiar attack, which comes up annually when the foreign aid appropriations bill is before Congress. But let?s look at the facts. According to the Organization for Economic Cooperation and Development in Paris, in 2003, the world?s major countries gave $108.5 billion in combined foreign aid. Of this, the U.S. contributed $37.8 billion or 35 percent of the total. The next largest foreign aid contributor was The Netherlands, which gave $12.2 billion, following two years in which it was actually a net recipient of foreign aid.
The claim of stinginess, however, comes from a different calculation?foreign aid as a share of national income. In 2003, U.S. foreign aid came to just 0.34 percent, well below the world leading Dutch at 2.44 percent. Other big contributors are Ireland (1.83 percent), Norway (1.49 percent), and Switzerland (1.09 percent). The U.S. would have to triple foreign aid just to reach the lowest of these contributors.
The first thing one notices when looking at the big foreign aid contributors is that they all spend very little on national defense. According to the Stockholm International Peace Research Institute, in 2002, The Netherlands spent just 1.6 percent of its gross domestic product on defense. Norway spent 2.1 percent, Switzerland spent 1.1 percent, and Ireland spent a piddling 0.7 percent. By contrast, the U.S. spent 3.4 percent?and this was before the Iraq war. It?s easy to be generous with foreign aid when another country is essentially providing your defense for free.
Another thing one notices is that the foreign aid data are only for ?official? (i.e., government) aid. The data are sketchy, but by all accounts Americans are far more generous in terms of charitable contributions than the citizens of any other country. A 1991 study found the United Kingdom to have the second largest percentage of private charitable giving. But in 2003, charitable giving amounted to 8.6 billion pounds or 0.8 percent of GDP in the U.K., according to the Charities Aid Foundation, compared to $241 billion or 2.2 percent of GDP in the U.S., according to the American Association of Fundraising Counsel.
But even this estimate of charitable giving by Americans is low because it counts only cash contributions and omits volunteer work. According to Independent Sector, in 2003, they contributed an additional $266 billion worth of their time to charitable enterprises. This is based on a value of $17.12 per hour of time. But even if one assigns a value equal to the minimum wage, this noncash contribution still comes to about $100 billion.
In the area of international aid, the official data also exclude private transfers such as remittances by foreign workers in the U.S. According to the Inter-American Development Bank, remittances to Latin America alone amounted to $38 billion in 2003?more than all official assistance combined. And $31 billion of that came from the U.S. In some countries, foreign remittances came to more than 10 percent of GDP, thus having a significant impact on economic growth and poverty alleviation.
Former U.S. Agency for International Development official Carol Adelman attempted to calculate a total of all private foreign aid in 2000 in a 2003 Foreign Affairs magazine article. She found that private foreign aid greatly exceeded that provided by the U.S. government. Official aid came to $22.6 billion that year, but private aid came to $35.1 billion, including $18 billion in remittances, $6.6 billion from private voluntary organizations, $3.4 billion in aid from churches, $3 billion from foundations, $2.8 billion from corporations, and $1.3 billion from universities.
But even this understates the extent to which Americans help developing countries, because it excludes private investment and trade. According to the Institute of International Finance, in 2003, Americans invested $124 billion in emerging market economies, three-fourths in direct investment such as plant and equipment and the rest in stocks and bonds.
Americans also buy a considerable amount of goods from developing countries. This year, about a third of all our imports will come from developing countries, providing jobs and incomes for millions of poor people. This is probably less than most protectionists think. The bulk of our imports still come from industrialized countries such as Canada, Japan and Germany.
In short, the charge of stinginess is unfounded. The U.S. carries much of the world on its back, providing other nations with security, aid and much of their investment and income. It also pays for a fourth of all the salaries of U.N. bureaucrats.