Global Development: Views from the Center
« More bad news for oil transparency in Congo-Brazzaville | Main | Is new Asia becoming old Europe on the labor front? »
April 13, 2006
Remittances aren't charity, and one country does not make an index
Posted by Steve Radelet at 05:14 PM
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.
Trackback Pings
TrackBack URL for this entry:
/mt/mt-tb.cgi/365
Comments
They partially address the misnomer issue in their media kit FAQs (PDF):
Question: Why does the Index of Global Philanthropy measure only U.S. private aid? What about private aid from other developed countries?
Answer: There is very little data on private giving from other countries, though that is starting to change. Future editions of the Index will incorporate more data from other countries, eventually providing a truly global account of private giving.
Posted by: Jessica Wolf at April 13, 2006 10:24 PM
I can understand why someone could look at numbers and say they don't lie, but do they actually tell the whole truth? If we only look at this one accountance of giving to this nation it may be true that the U.S. does not come in first place. I would then ask one to look at the bigger picture. Do the countries that hold the top postions in giving for this particular situation, also give to the same extreme in all other situations that contain countries in need?
I would venture to say that many of these countries may give, but not to the extent that the American government has done. It seems to me that everytime you turn around we are handing money out tro some needy country. I do not want to sound stingy, but lets try to spend some of this "not enough" money here in the states. We have enough work here to keep any amount of money busy. Think of this as raising a family....Noone would, in their right mind, feed, cloth and shelter the neighbors family before he would his own, so lets take care of our families first and then ask over a neighbor if there is food leftover.
Jason
Posted by: jason at April 14, 2006 04:08 PM
Steven Radelet:
Thank you for your important April 13, 2006 posting regarding the Hudson Institute’s disappointing “Index of Global Philanthropy”. As someone who has been working in development for many years, I am frustrated by what seems to be a chronic lack of understanding of foreign aid. The fact that “remittances” and “development assistance” continue to be mentioned in the same sentence exemplifies the lack of understanding between what I will call, “systemic development capacity building” (helping them sort out their own problems) and “dollars.”
By drawing attention simply to the money, the Hudson Institute, not unlike Jeffrey Sachs, detracts from the more relevant and nuanced discussion of building capacity and supporting bilateral foreign interests, not to mention the myriad of moral imperative arguments that ought to be at the forefront of these debates. Instead, we get caught up in the figures, and end up discussing percentages of GDP as if they are both the problem and the solution. They are neither.
I was pleased to see the Washington Post point out in its April 16, 2006 editorial, “Counting Aid Dollars,” as William Easterly does, that “private actors can be more innovative and nimble than governments…” The Post then rightly cautions that in spite of the advantages that private actors bring, “they can also be more amateurish.” I agree, and I hope we are beyond the point where well-meaning newbies are the principle actors in development assistance. After all, as many once-idealistic Peace Corps volunteers admit, the honeymoon of international development eventually wanes, and somebody (or some group of some ‘bodies’ - UN, World Bank, Bilateral Governments) has to run this railroad. Let’s ask the harder questions and do the math on the way
Andy is not my real name.
Thanks,
Andy
Posted by: Andy Greer at April 18, 2006 05:32 PM
I think Andy is making a valid point. The point here is that methods and emphasies detract from any substance that the index may possess. By being intellectually dishonest in several ways which are listed by Radelet and also Andy, the index may provide numbers which are convenient for journalists looking to meet their deadline but are inconsequential in any real sense (and often flawed). The numbers Adelman and co. are attempting to capture are difficult to obtain. There are issues of double counting which can be difficult to rectify. It is hard to determine which money is actually going to development. As mentioned it is disingenous to count remittances as aid as it inflates U.S. figures for political purposes.
The Index also takes a Polly Anna approach to development through its success story section. The stories covered just provide an overview of new approaches without any rigorous look at best practices and approaches. A more academic approach may be to look at what has been done in the field and review what has worked and why - not simply provide brief descriptions of new organizations and programs. This would be a real policy tool not just free advertisement for corporations, foundations etc. who in turn may provide funding for the Index (or may be persuaded to do so in the future).
The World Bank and other international organizations are not without their problems. Neither is other research conducted on these issue (hello Sachs). But it should not excuse the Hudson Institute for creating a politicized and flawed product.
Posted by: Katherine at December 5, 2006 12:58 PM

