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

April 12, 2012 12 By admin

While I was 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?