Sunday, January 2, 2005

The other day, a U.N. official accused the United States of being “stingy” in terms of aid to South Asian tsunami victims. 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 aid recipient. 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 United States spent 3.4 percent — and this was before the Iraq war. It’s easy to be generous with foreign aid when another country essentially provides your defense for free.

Another thing one notices is that 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 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, U.K. charitable giving amounted to 8.6 billion pounds or 0.8 percent of GDP, the Charities Aid Foundation says. Compare that to the United States’ $241 billion or 2.2 percent of GDP, according to the American Association of Fund-raising Counsel.

But even this estimate of American charitable giving is low because it counts only cash contributions and omits volunteer work. According to Independent Sector, in 2003, volunteers contributed another $266 billion worth of their time to charitable enterprises. This is based on $17.12 per hour. But even if one assigns a value equal to the minimum wage, this noncash contribution still comes to about $100 billion.

On international aid, the official data also exclude private transfers such as remittances by foreign workers in the United States. 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 United States. In some countries, foreign remittances were more than 10 percent of GDP, thus significantly helping economic growth and poverty alleviation.

Former U.S. Agency for International Development official Carol Adelman tried to total all private foreign aid in the year 2000 in a 2003 Foreign Affairs magazine article. She found private foreign aid greatly exceeded that of the U.S. government. Official aid totaled $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.

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, Americans in 2003 invested $124 billion in emerging market economies, three-fourths of it in direct investment such as plant and equipment and the rest in stocks and bonds.

Americans also buy lots of goods from developing countries. This year, about a third of all U.S. imports will come from developing countries, providing jobs and incomes for millions of the poor. 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 United States carries much of the world on its back, providing other nations security, aid and much of their investment and income. It also pays for a fourth of all the salaries of U.N. bureaucrats.

Bruce Bartlett is senior fellow with the National Center for Policy Analysis and a nationally syndicated columnist.

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