Especially in hard times, some people will say rich countries should cut their ODA. They should not. Not only because they have made promises, but also because important pieces of the development agenda won’t be addressed without assistance. ODA spurs innovation by funding pilot projects that poor countries would not undertake themselves. It also pays for global public goods like scientific research. Finally, people in very poor countries will continue to depend on assistance for their survival for the foreseeable future.
One stark way of looking at it is to consider the death toll from AIDS. It costs approximately $450 per year to treat a person for AIDS. A donation of $450 to the Global Fund to Fight AIDS, Tuberculosis, and Malaria, for example, keeps somebody alive for a year and helps prevent the disease from spreading. Conversely, every $450 that isn’t forthcoming represents a person the world is willing to let die from a treatable disease. Sometimes, it’s a simple question of money.
It is common to say that, given the economic crisis, countries cannot be expected to budget for increases in ODA. As the founder of a company that has weathered several recessions, I understand the need for belt tightening in downturns. But the fact is aid accounts for about 1 percent of public spending in most donor countries. That amount of money isn’t causing the world’s fiscal problems, and cutting back on ODA isn’t going to solve them. Aid is a small investment that generates a huge return. Those are precisely the investments we should spare when it’s time to make cuts.
Many donor nations have established targets for ODA. Most notably, 15 European countries pledged to spend 0.7 percent of their GNI on development assistance by 2015. I urge wealthy countries that have not pledged to the 0.7 percent threshold to adopt this standard and start budgeting for small increases to get there.
The United Kingdom has charted a course to reach its 0.7 percent pledge. Australia has also increased its aid significantly during the crisis, and a number of northern European donors have reached—and some have surpassed—0.7 percent. Clearly, it is possible for countries to meet their commitments with the right leadership. The deadline for these pledges is 2015, so there is still time. I urge donor countries to develop plans to hit their targets.
If donor countries that made aid promises keep them, it will generate an additional $80 billion for development each year by 2015. If all donor countries achieve the 0.7 percent target, it will generate an additional $170 billion.
It’s also essential to get serious about maximizing aid’s effectiveness. In recent years, as Cold War habits have receded, countries have increasingly focused their aid on MDG-related goals. The development community has gotten more efficient, but we still have a long way to go. The key multilateral institutions that focus on development priorities have an important role to play. Some of the strongest results in recent years have come from pooling funding for general development purposes (through the World Bank’s International Development Association, for example) or for specific issues (through the Global Fund, for example). These bodies should concentrate on the highest-impact interventions, and they must be given adequate resources to do their best work. In some key areas prioritized by the G20, such as food security, revitalizing these institutions is especially urgent.
The basic principles behind effective aid for rich countries are similar to those behind effective budgeting for poor countries.
The goals should be to:
- Focus on the types of programs that contribute to the achievement of the MDGs, and on the countries that most need assistance.
- Provide easy-to-understand, real-time information about programs so that the development community can do a thorough analysis.
- Devote resources to evaluating the impact of development programs, so we can sort through various approaches and gradually get better at the entire enterprise.
There are major development programs that meet these criteria. Earlier this year, a number of donors stepped up to meet the fundraising goal set by the GAVI Alliance, the organization responsible for helping poor countries buy and deliver vaccines. It was one of the most inspiring moments in my career at our foundation. Vaccines are phenomenally cost-effective. And because of GAVI, the world will bring the newest vaccine technology to almost all children right away, rather than making the poor wait, and die, for 20 years before the innovation trickles down. The number of lives saved, as impressive as it will be, doesn’t capture the full benefits of vaccination, because disease disables many more children than it kills. Take the example of diarrhea. It kills about 1.5 million children every year, but it affects hundreds of millions more. Frequent bouts of diarrhea make it harder for children to absorb nutrition, which interferes with their mental development. There is now a vaccine for rotavirus, the leading cause of diarrhea, and GAVI will make sure it is given to hundreds of millions of children. This is a model of aid effectiveness.