What "Official Development Assistance" is not.

Statistics mean what they measure, not what their titles say.

I read an article in The Guardian which started:

The international rules that define what spending rich countries can count as foreign aid – and which developing countries are eligible to receive aid – are up for grabs for the first time in decades, with potential faultlines being drawn over whether donors should be able spend more aid money on support for private companies overseas. 

The development assistance committee (DAC) of the Organisation for Economic Co-operation and Development (OECD), the club of rich countries, defines and polices what its members can count as official development assistance (ODA).

Here is the official site for the current definition.

I think of the DAC as a forum for discussion among the members of the OECD -- the club of rich nations. In the DAC, the countries are represented by their governments. The definition of ODA is primarily to assure that when two countries discuss the similarities and differences of the programs, they are comparing apples to apples and not apples to watermelons. I am glad that the DAC is reexamining the way ODA is calculated in an effort to make its discussions of development assistance more and better informed by statistics. But I hope that the people involved in the discussions understand what the indicator measures. I strongly doubt that most of the public does.

Official: This means the statistics focus on aid provided by national, state and local governments. Different cultures differ in the importance of civil society within the culture and the importance of private charity versus government funding. Official development assistance does include the funding provided by governments to civil society organizations, but not the money that is donated to development assistance by private individuals, churches, or businesses.

Note especially that in the US governments exempt charitable donations from taxation, and also exempt charitable and religious organizations from taxes. This is "tax financing" and amounts to billions of dollars a year of what might be considered hidden subsidies for private charity. When people donate to Oxfam America, or when the Gates Foundation funds foreign aid, or when Catholic Relief Services provide projects in developing countries, the government foregoes income, but that amount is not counted in Official development assistance.

Over the past decade I have contributed well over 20,000 items to the Zunia resource base. I have done so as a volunteer, with no payment. Assume that I can find, read and post five items an hour. That implies I have spent at least 4000 hours trying to make relevant professional information more available to people working on development.  There is no place that that effort is included in the accounts; it is neither funded by the government nor measured in monetary value by the foundation that supports Zunia.

Similarly, consider my experience as a Peace Corps Volunteer in the 1960s. I received no pay as a trainee, and a living allowance when in country that was less than $100 per month. (Of course, the government spent money on my training, my transportation, and on the support staff.) I finished my two year stint as a PCV on a Friday and the following Monday I moved to the other university in the same town as a Ford Foundation Consultant (for the following three months) with a stipend of $1200 per month. It seems fair to say that my in kind contribution as a PCV might be valued at perhaps $25,000, much more than the government paid me. Then, after my service as a PCV was finished, the government issued me a check for $75 per month ($900 per year) for the time I served abroad. Note that that payment was made to me to be used in the United States while I was not providing any assistance. I am pretty sure that my contribution to the GDP in my host country was more than the cost to me and the government, but that is because I was lucky.

Development: There is a tendency to think of increases in gross domestic product (GDP) as the measure of development, and it is useful, and the ODA actually focuses on "economic development and welfare". The UNDP utilizes the Human Development Index which adds education and life expectancy to GDP for a more adequate measure of development.

I think of the demographic transition as a key element of development. Child survival was radically improved by public health programs based on immunizations, simple curative services, improved sanitation and improved nutrition. Couples chose to have fewer children, and were able to do so to the availability of contraceptive technology. Parents were able to invest more per child in education, food, health services, etc. because they had fewer children. The children, eventually entering the workforce with more human capital per kid, were more productive. The GDP did increase rapidly per capita, but societies evolved in many other ways, many of which must be seen as social or cultural development. How much of this is captured in GDP per capita or the UNDP HDI? Very little.

If we look at success in achieving the Millennium Development Goals, which focus in reduction of poverty, China and India are largely responsible for the global success. They have experienced rapid increases in GDP over many years with export driven economic policies. In the process, a lot of industries have moved production to these emerging economies, leaving unemployment a problem in rusting industrial cities in the USA and other OECD countries. Subsidies to foreign countries to build manufacturing industries to take away markets from the donor nation tend not to be popular with the people who wind up unemployed, nor with their neighbors, nor with the majority of voters.

On the other hand, Americans and citizens of other OECD countries sympathize with the victims of natural disasters, They support efforts to improve health and reduce hunger, especially when those efforts help children. Thus US foreign assistance has tended to focus on humanitarian relief and poverty alleviation (especially "the worst aspects of poverty") rather than industrial development (much less export oriented manufacturing).

Assistance: ODA focuses on concessional assistance. How much of the success of China and India was due to trade policies that allowed imports from those nations without heavy tariffs? How much was due to industrial policies that allow companies to foreign direct investment abroad and allow them to shelter earnings in foreign subsidiaries. I suspect that "concessional aid" are less important for the major successes in economic development than are trade and industrial policy instruments.

The world is -- I hope -- on the brink of eradication of polio. This became possible with the invention of polio vaccines as the result of decades of biomedical research, most of which was funded in the United States. None of this was seen as "assistance". Indeed, much of development can be seen as the result of technological revolutions, such as the green revolution, the development of contraceptive technologies, the information revolution, the development of biomedical technologies, energy technologies, and even space technology. Very little if any of the investment in this technology development occurred in poor countries nor was it accounted as development assistance. Yet the public investments in these technologies and their transfer at low or no cost to developing countries was critical to development. It is not seen as ?assistance".

The DAC is a forum for discussion of a multinational effort involving some $100 billion per year. It is worthwhile to have such a forum, and to have statistics on which to base their discussion, and to have a common definition of terms for the collection of those statistics in the member nations. Of course the definitions can be improved, and thus should be. Still, "the ideal is the enemy of the good". And it is counterproductive for outsiders to criticize the definitions because the do what they were designed to do and not what the outsider would prefer that they did.