Special Report

Privately Generous

Critics of American foreign aid stinginess haven't a leg to stand on now, thanks to the Hudson Institute.

By 2.28.07

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Whether speaking with scruffy anarcho-socialists at the World Social Forum in Nairobi or posh suburban liberals at theTake Back America conference, one of the most persistent caricatures of America in the Age of Globalization -- or, if you prefer, the Neo-Liberal Juggernaut -- is as an all-for-profit, greed-fueled machine pillaging the world. Inevitably, the United States' supposedly miserly foreign aid expenditures -- i.e. low as a proportion of GNP, extraordinarily high in actual numbers activists are allergic to -- are presented as proof positive of the accuracy of the caricature. With the Index of Global Philanthropy, however, the Hudson Institute's Center for Global Prosperity has gone a long way towards dispelling the myth of American stinginess. "As a percentage of gross national income, the U.S. ranks toward the bottom of donor nations -- 21 out of 22," the Index notes. "But Americans give abroad as they do at home -- privately." In 2004 this private American international charity was underestimated to the tune of $71 billion -- almost four times U.S. government foreign aid and likely as many times more effective as well.

Karina Rollins, editor of the Index, was kind enough to answer a few questions:

The Index notes, "Massive foreign aid transfers through governments are prone to top-down, one-size-fits-all approaches," and, further, that, the "incentive" behind government aid is often to "'obligate' or 'commit' funds, not to measure how well the funds are spent." Did you find a difference between where public and private institutions put their money and how it is managed?

Rollins: We're not so naive as to think that inefficiency or corruption isn't possible in private philanthropy. But it is a fact that the widespread waste and corruption problems in developing countries are rooted in those nations' governments. So when money goes directly to a small village to build an AIDS clinic, for example, rather than having to be administered through an inefficient and corrupt Ministry of Health where it's anyone's guess when, and how much of, that aid will reach the people it was intended for, then private aid is absolutely more useful.

Not only will the private assistance reach people faster, but private philanthropy usually entails more than cash. Private money is often accompanied by donations of time and expertise, which means there will be people on the ground in this small village teaching and showing locals how to build and run the AIDS clinic, not just handing them the money. It also means the people doing the instructing will be private architects and doctors, not U.S. government bureaucrats.

The Index suggests huge infusions of cash cannot immediately industrialize a poor country with corrupt or non-existent institutions, yet this is what many well-intentioned people and organizations vociferously advocate. Does such advocacy sometimes hinder poor nations more than it helps?

Rollins: I'm so glad you asked this question, because this is one of the biggest misunderstandings of the problem out there. So many well-intentioned people, including celebrities like Bono and Bob Geldof, believe that if people in rich countries simply gave more money, then millions of people would stop starving. What is completely missed at all these Live Aid concerts and demands by the United Nations for industrialized nations to donate an arbitrary 0.7 percent of gross national income, is that merely handing money to governments, much of which never even reaches the people, does little to alleviate poverty. It does little to create prosperity. It perpetuates the cycle of the poor waiting for the next installment of cash, instead of providing them with the tools they need to help themselves get out of -- and stay out of -- poverty, and to build a future.

The U.S. is constantly berated by critics for ranking last among developed nations in foreign aid as a percent of gross national income, yet in "absolute amounts" the U.S. is by far the largest donor. Despite that distinction and the evidence you've gathered, aren't there those here and abroad who will always excoriate America as stingy as long as the nation remains so prosperous?

Rollins: Yes, absolutely. But their ranks seem currently to be shrinking. The claim that America is stingy seems to be losing some of its steam. As more and more attention is paid to the enormous amounts of time, money, goods, and expertise that are donated to the developing world by the American private sector, and as people learn more about the effects of this private charity, it is getting harder and harder to label the U.S. "stingy." Even Columbia University professor Jeffrey Sachs, who used to beat the stinginess drum hard, hasn't made that claim in the past half year. We'd like to think that the data and stories in the Index -- which received widespread positive major-media attention at home and overseas -- had something to do with that.

The Center's research indicates aid distribution has not only financial implications, but security implications as well. Is aid to un-free nations a security risk?

Rollins: Most of our government foreign aid has gone to unfree nations. The U.S. routinely gives to countries that don't have free elections. There are broader geo-political and strategic reasons to support certain countries. Zaire's Mobuto was anti-communist and recognized Israel. Egypt supported the Camp David peace accords and recognized Israel. Supporting Egypt was important for maintaining peace and security in Middle East. You can argue that this has not been a security risk, but has helped security. U.S. assistance has often contributed to stronger alliances. Of course, some countries that are among the top recipients of U.S. aid have supported terrorism, so there are clearly dangers involved.

Does private philanthropy promote freedom more frequently or efficiently?

Rollins: When it comes to promoting freedom for a certain country's inhabitants, private philanthropy can most likely do a better job -- because by taking government out of the equation, the aid goes directly to the people, cutting out the middleman of government bureaucracy and corruption.

Globalization has resulted in massive increases in private philanthropy. Still, the global market is frequently tarred as a system that perpetuates poverty and creates a "race to the bottom." Why does global class war rhetoric have so much potency?

Rollins: There are certainly downsides to globalization, as probably with any economic development, but perpetuating poverty in the developing world clearly isn't one of them. I can only speculate, but it seems to me that class-warfare rhetoric, absurd and dishonest as it is, continues to have appeal because it's easy. It's easy to smear people with whom you disagree as not caring about the poor, and in today's sound-bite mentality, many people will snap up an unsubstantiated accusation, and take a myth as fact. A goal of the Index is to dispel myths.

Since, as the Index explains, "Europeans have traditionally relied on government aid both for their own poor as well as the needy abroad," do Europeans' own aid policies and experiences distort their perception of American charity?

Rollins: I think that's a plausible conclusion to draw. The culture in which you grow up is so ingrained in you that it's usually hard for most people to view certain issues outside that prism. If you're used to your own government responding to people's crises and needs, it's understandable why you'd expect the government of the most powerful country in the world to contribute the most. Which the U.S. government does do in absolute numbers, just not as a percentage of gross national income. In the same vein, many Americans -- who traditionally have relied more on private institutions like churches or neighborhood groups in time of need, and who expect to do more themselves -- may have a hard time understanding why private assistance doesn't seem to count in the eyes of Europeans, why it has to come officially from the government.

The Index sheds light on one often-overlooked aspect of international philanthropy: Immigrant workers "remittances," or money sent back to their home country. [The World Bank estimates remittances have doubled over the last five years to $180 billion.] Why is this symbiotic relationship/dual benefit so often ignored? Is oft-derided American consumption, which as the Index notes, "indirectly pays the wages of immigrant workers through consumer purchases," more of a virtue than the public at large might suspect?

Rollins: Despite their magnitude, remittances are overlooked by many because they are a phenomenon that has not been well reported by official sources like the U.S. Commerce Department's Bureau of Economic Analysis (BEA) which collect this data. For the most part, information on remittances has been buried in obscure reports. This is partly due to the difficulty in measuring remittances, which are often transferred through informal channels like personal carriers. That is beginning to change, though: More and more remittances are channeled through American banks, as some have started offering affordable transfer services to immigrants.

As for consumer behavior, while I don't think that buying lots of stuff is necessarily virtuous, healthy consumption is tied to a healthy economy, which means the demand for labor is higher, which means higher wages. Higher wages mean that immigrants and migrants can send more money back home. So consumption does have positive aspects and certainly shouldn't be demonized.

Do you believe there is something to be said for private charity given of free will as opposed to government aid, which by necessity is coercively given via taxes?

Rollins: Absolutely. We at the Center for Global Prosperity believe that, while there is a place for government aid, both domestically and abroad, government money shouldn't, where at all possible, be the only dollar on the table. Private charity can often be more flexible, and more targeted than government assistance. Private volunteerism means doctors and scientists and builders and other experts in their field who donate their time and knowledge, instead of government bureaucrats being paid to advise on topics of which they often know little. Private philanthropy, more often than not has the longer view in mind, not just short-term relief. It's private money and goods, and private donations of time and expertise that foster peer-to-peer relationships, and lay the groundwork for lasting institutions.

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