Are aid cuts inevitable and if so, what should aid campaigners do about it?

snowed in in a holiday cottage last week (quite fun actually, especially when you’ve packed your West Wing box set just in case), the 2011 OECD aid numbers came out (see table). 2011 OECD aid figs The numbers show total aid falling in real terms for the first time since 1997. What was also striking was the variation between OECD members, with crisis-hit Greece and Spain slashing aid by a third, while oddly, Italy increased it by the same amount (due to a one-off rise in debt forgiveness, as well as an increase in refugee arrivals from north Africa, according to the FT). I won’t repeat the standard criticisms of governments breaking their aid promises (Oxfam press release here). Instead, just a couple of observations: Firstly, this is remarkably in keeping with previous World Bank research aid after banking criseson the impact of banking crises in donor countries in 24 financial crashes spread over the 30 years to 2007. This found that aid budgets behave like wily coyote running off the end of a fiscal cliff, continuing to rise for 2-3 years before going into free fall (see graph). We appear to have reached that point now – the FT reports that Spain, Canada, Austria, Belgium and the Netherlands are seeking to reduce their aid budgets further this year. Secondly, what should we be doing about it? In particular, should we be changing our language or emphasis on aid? One option is to focus on minimising the decline, for example by highlighting the differences between countries in standard heroes-and-zeroes press work. History is not destiny and maybe this time we can avoid poor countries taking the hit for the failings of global finance. But damage limitation is hardly the stuff to inspire campaigners. Another option is to shift the focus onto quality of aid, rather than the emphasis on overall quantity that has dominated NGO messaging in recent years (see this new website on US aid for ideas). The problem here is that the experimental/innovative kinds of aid are likely to be the first to be cut, while the bad stuff (tied aid, aid linked to security or other political self interest) is likely to be the last to go. An aid downturn may not be a propitious moment for trying to improve quality. wily coyoteA third (probably my favourite) is to look for alternative sources of revenue. At an international level, closing down tax havens and introducing a Robin Hood Tax can ease the pressure both on aid and the domestic spending of cash-strapped OECD governments . And since aid is just a small part of raising finance for development, let’s look much more at domestic sources of revenue through tax reform, natural resource royalties etc. A fourth option, of course, is to decide that campaigning on aid is just too much of a downer and give up altogether, but that strikes me as a pretty lousy choice. Extracting those aid promises at Gleneagles back in 2005 was a massive achievement and should not be abandoned lightly. One way or another, poor countries are going to need finance, including aid, to develop. Any views?]]>

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12 Responses to “Are aid cuts inevitable and if so, what should aid campaigners do about it?”
  1. Vero

    While I find this post to be truly interesting and provoking, I also find that it still views the “global south” mostly as a dependent on ODA coming from the global North – I think facts have demonstrated that there is a growing South-South cooperation and it so turns out that it’s working… additionally, some “developing countries” are starting to buy foreign debt from developed countries and within these, several setbacks in civil, political, economic rights are taking place… (this I believe should at least open a deeper debate…)
    On the, other hand, in countries such as Spain – I find that it’s not only about cutting back on a percentage… it’s about strategically disintegrating a cooperation model… what are your views on this specific case?

  2. Chris

    Maybe we could learn from this campaign to protect a library from closure.
    What would a similar campaign look like for cuts in the aid budget? Maybe one which started to get a bit more imaginative than the current ‘stop
    aid cuts’ slogans, and had the same cut through as ‘book burning’?
    Ignore Your Neighbours Festival? Boycott Your Morals Day? Spend on
    Yourself Week? The Forty Hour Bender? The Who Cares Carousal?

  3. Andy Sumner

    Hi Duncan, certainly would be good to analyse the recipient data too – assess recent trends from the point of views of recipient countries.
    Here’s a thought – If there are fewer and fewer low income countries over time (maybe 20 in 2030 on my estimates) and development ahead is largely going to be framed by climate change and climate finance transfers maybe there needs to be a new 0.7 type-figure based on the % of OECD GNI to be transfered via climate financing (which after all is what ODA will become by 2030 as there wont be enough poor countries to absorb what the 0.7 implies in terms of ODA US$ in 2030). Or maybe someone has already done the sums and provided a logic for a new 0.7 type figure for climate finance (you’ll recall the Clemen’s Ghost of 0.7 paper).

  4. Nicholas Colloff

    To be truly quixotic, we could campaign for a genuine reform of global finance to make it more resilient and less vulnerable to shock and kill two birds with one stone. A better financial system investing in real stuff as opposed to speculating and that generates more inclusive growth with reduced inequality.
    Too idealistic – except it existed (imperfectly) in the post WW II settlement unpicked when the US effectively defaulted in 1971.
    What is truly scary about the current debate is that it has shifted from financial failure to public deficit – and that nothing that has been done to fix ‘global finance’ has fixed anything much.
    Next financial crisis in the works, and each one appears to be bigger and more unstable than the next…

  5. Andy

    There are of course quite a large number of us who think that a ‘hard-budget’ constraint on the aid industry might be a good thing for a while. I think most people would agree that little progress has been made in implementing the Paris/Accra Agendas. Perhaps a harder budget constraint would focus minds on how to improve aid quality more by, for instance, increasing the share of country programmable aid (the part of aid budgets actually received by recipient countries), reducing the aid bureaucracy, reducing funding on the endless stream of conferences with little or no tangible results, etc. etc. Perhaps one more positive off-spin of lower aid budgets would be a little more humility regarding evaluations of practices by emerging donors – helping move the DAC towards a more pragmatically-minded development cooperation….just a few thoughts….

  6. Chris

    Following on from Nicholas it is instructive to note that a recent LSE seminar on ‘Bottom-Up Politics’ suggested that there is a large gap in the work of INGOs around the global financial system – as opposed to other areas – and it is in fact declining despite its key importance to functioning of the global system, and it knock effects on health, inequality, poverty and ultimately democracy,

  7. It’s time for new donors, and I mean really new ones, not just the non-OECD states to take the burden share. Hard to name such states in full but they include some island near the equator, principalities (some are already donors but could do much more) and those who simply have high GDPs but are not part of the aid club.

  8. Catherine Dom

    I like Andy’s point. If it’s all about more than aid (trade, climate change adaptation financing, clean energy and clean minerals etc.), then ‘targets’ should reflect this too.

  9. Anuj

    I am actually surprised to not see a greater fall in the Aid numbers from OECD countries; given the gross fall of growth in the economies, but more importantly, their political perceptions and opinions about aid. So, this is a good news overall, not a bad one. An overall fall of 2.7% is neither here nor there; and on the other hand, actual disbursements/ expenses may be more approprite to compare the change in sentiments.
    i think, the established and recognised ‘development’ sector survives off OECD aid, and hence ot carries a direct bearing on our comemntary. Otherwise, what Vero says above, about the role of south-south collaboration; FDI trends, and the role that other countries are now playing from outside OECD (specifically China) in capital movement around the world is perhaps far more significant in bringing about change than OECD aid. Perhaps teh question to be asked is – can the formal development sector transition successfully and remain/ become an independent voice in the post OECD aid world. A continued level of OECD aid will certainly help in making that transition over time…..

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