Articles and commentary regarding world events
January 12, 2005

THE ECONOMICS OF GIVING

"In the months since 11 September 2001, new coalitions have been formed and considerable new resources found to combat terrorism against the US and its allies. But the everyday terror experienced by communities devastated in conflict, mothers dying in childbirth, infants succumbing to malnutrition and diarrhoea, young people dying of AIDS, families with no livelihood, is a human tragedy on an almost unthinkable scale. Ever-deepening poverty, which robs parents of their children, which leaves AIDS orphans, which denies whole communities basic rights, is a deeply rooted crisis that requires urgent and radical action on the part of the international community."

                                         From: The Reality of Aid 2002

 

       In the wake of the Asian tsunami, nations, relief agencies, businesses and individuals have dipped into their financial resources and extended themselves with compassion and generosity to those in need.  This worldwide effort has given shape to what may be called a 'global community' - a community of caring.  And of course, for the moment, this is true and needs to be true, for the suffering of the individuals, families, communities and countries that were torn apart by the tsunami is very great.  But the presence of a true global community needs to be based on more than one event.  It needs to be based on the presence of a long-term commitment of caring which seeks to give to those who have less, not just when there is a spectacular reason for doing so, but also when there is a more quietly desperate and ongoing reason for doing so.

       There are a number of reasons why the present outpouring of aid has become possible for the many.  The first is that the disaster was so singular - so defined in time, place, and effect - so clear in its cause and in its results.  Also, what was needed in the way of help was equally clear. Different relief agencies may be oriented toward meeting the needs of the devastated populations in different ways, but the general outlook remains the same:  there is an urgent need for money, food, clothing, shelter, sanitation, clean water, medicine, care for the children, rebuilding. 

       Second, the drama of the event itself has engaged the news media to an extent that only huge and powerful human interest stories can.  This has played a very important part in bringing the visual images of the tsunami and the stories of its survivors to every corner of the world.  The extensive coverage has not only sold news, but created a sense of solidarity in the task of assisting those who have lost everything.  Worldwide participation in a human tragedy has taken place on a scale not normally seen. 

       Third, the 'public image benefits' that have accrued to countries taking an active part in relief efforts are large.  The U.S., in particular, has been very visible with its helicopters, its air-drop relief, and its State visits, in characterizing itself as a leader in the move to bring help to the desperate.  In general, the factor of 'public image' as a political tool does not eliminate the motive of compassion.  But it does affect how that compassion is translated into economic aid, goods, and services.

       In order to have a real global community, we need to have not only a response to an immediate crisis, but a more permanent commitment to helping those in need.  We need to feel related to them in the long-term, even when the news media does not engage itself in such an active way.  For example, the work of Wangari Matthai in Africa went entirely unnoticed by American news media until she won the Nobel Peace Prize this past year.  Despite the significance of her efforts over many years, in this country we knew nothing about her work.  This is because despite the sincere desire of many Americans to help African nations, they are still 'other' to us, and very far away.  News media in a domestic market are occupied with the people and events that are closer to us in our consciousness.

       A true ' global community' means that there cannot be people who are so distant from us that we are indifferent to their needs.  Their needs must become our needs, and to be of help, we must go beyond good intentions into understanding something about the 'economics of giving' and, as a nation, make different decisions about how much we give, to whom, and for what reasons.

       At present, the 'economics of giving' cannot be isolated from national self-interest, from political motives, or from a culture's wish to maintain its own comfort, even at the expense of others.  In the future, this will hopefully be different, supported by a different conception of one world of nations rather than three - the developed, the developing, and the underdeveloped.  Yet for us, now, in this 'wealthiest of all nations', America, it is important to know how past and present government policy influences the way in which U.S. aid is distributed to poorer countries.  Informing in this way is the purpose of this newsletter.  It has become lengthier than most, because of the importance of the subject and the need to begin with basics and to expand from there.  If the subject of economic aid seems too foreign - too far away from spiritual reality, please think of it as being about the basis for creating one world, rather than about economics.   For those unfamiliar with economic language and concepts, I have started with some simple definitions which structure the ways in which foreign aid is generally perceived.  This understanding can lead us into a discussion regarding the choices our government makes in relation to assisting the world's needy:

Measurements of aid

   First, aid can be looked at in terms of the total amount in dollars given.  By this standard, U.S. promised aid of $350m (as of this writing) in relation to the Asian crisis ranks second only to Japan as an individual donor nation.  However, when aid is looked at in terns of 'gross national product' or 'gross domestic product', or even in terms of 'per capita outlay', then the United States ranks very low on the scale of countries contributing assistance, many of whom have much less in the way of GNP or GDP, yet give more.  The terms to consider are the following:

GNP (Gross National Product) is the total value of final goods and services produced in a year by domestically owned factors of production.  If a Japanese car manufacturer earned dollars in this country, those dollars earned would accrue to the Japanese GNP, not the U.S. GNP, since the car manufacturer was Japanese, even though the plant was in this country.

GDP (Gross Domestic Product) is the total value of final goods and services produced within a country's borders within a year.  GDP counts income according to where it is earned, rather than who owns the factors of production.  If the same Japanese car manufacturer earned dollars in this country, those earnings, based on GDP, would be part of the U.S. Gross Domestic Product, despite the fact that the owner of the plant was Japanese.  The distinction between GNP and GDP is important in the case of a country like China, where GDP is much higher than GNP since there is so much outsourcing of foreign manufacture within its borders.

Per capita is a Latin phrase meaning 'for each head'.  It is usually used to indicate the average per person of any given statistic, generally income.

      When the U.S. (and other wealthy nations) were recently criticized for being 'stingy' in terms of foreign aid, it was because though the U.S. spends more in dollars in relation to the expenditures of other countries, it spends less in terms of GDP and GNP because a smaller percentage of our national wealth goes into foreign assistance.  Similarly, it spends less in terms of 'per capita' percentages, that is, less per person within the total population.   Smaller countries, with greater foreign aid commitments, have a higher per capita outlay.

      Why is it important to know this?  Because governments continually make decisions about how to allocate foreign versus domestic spending, and also how to allocate portions of the national budget each year.  Often, the capacity to set aside more toward helping others is reduced by both the high proportion of the budget commited to military spending, and by the overall philosophy that an administration may have toward helping those who have less, whether in this country or abroad.  In the case of the United States, the year 2003 showed defense spending (See chart) accounting for approximately half of the annual budget, and also half of the discretionary funds available to Congress for use in all the various situations that might require funding.

       Decisions regarding government spending have a great deal to do with both politics - that is, what our national goals are in offering aid and what we seek in return - and to philosophy.  An example of the first is the bill which recently went before Congress to reduce aid to countries that did not support a U.S. exemption from accountability to the International Criminal Court.  The second issue, philosophy, has to do with what we conceive to be our relationship with and responsibility to the rest of the world. This sense of responsibility shapes the strength of our motivation for making assistance available to those in need, whether they can serve our national self-interest or not. As an example of this, despite the millions and even billions of dollars that have been given by the U.S. to the U.N.'s World Food Program to help Africa, this does not even approach the amount that has been given to Israel since 1949, where our strategic interests are met by giving abundantly of financial and military aid and technical support. 

Moral Responsiblity

       The issue of global responsibility is a moral one, a spiritual one, an emotional one, and in the end, a practical one - since the global conditions we promote through our giving and our not-giving end up shaping the world we live in as well as the ways in which others relate to us.  The U.S. has been a huge giver of dollars to many countries and peoples of the world, and on that basis has declared itself to be a 'generous giver'. (See: President Bush's recent remarks on this subject).  However, based on the proportion of wealth (GDP, GNP) that it holds and based on the patterns of consumption that it maintains, there is much to be desired in terms of  true generosity which would allow the millions of people in the world who are living lives in abysmal poverty, to have more of a guarantee of life for themselves and their children.  Also, so that beyond survival, they might be assured of the capacity for obtaining the kinds of 'fundamentals of living' - adequate food and shelter, education and healthcare, and the possibility of a sustainable income - that we in this wealthiest of all nations take for granted. 

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TABLES:

     Even if you don't like reading tables and statistics, these are worth looking at in order to understand how U.S. wealth compares to that of other nations and, in this context, to look at decisions being made regarding the distribution of foreign assistance.

1) GNP Distribution - Countries of the World - 2003

http://www.studentsoftheworld.info/infopays/rank/PNB2.html

     A visual picture of the relationship of US wealth to that of other nations

2) GDP Distribution - Countries of the World - 2003

http://www.photius.com/rankings/gdp_2003_0.html

     A similar picture of US wealth in relation to others, with an illustration of the way in which outsourcing from the US and others has increased China's GDP.

3) GNP Per Capita - Countries of the World - 2003

http://www.studentsoftheworld.info/infopays/rank/PNBH2.html

     GNP related to per person distribution of wealth.

 

Issues Regarding U.S. Foreign Aid:

       If we are truly to become a helping nation to others, there are important economic, philosophical, and moral issues that need to be considered  These issues are more in the forefront today because of the recent tsunami crisis in Asia.  This crisis places in bold relief all other situations regarding aid to victims of disaster - including the disaster of ongoing extreme poverty - that have been given less attention.

       Jan Egeland's (UN Undersecretary-general for Humanitarian Affairs) recent remarks regarding the 'stinginess' of wealthier nations with respect to foreign aid, mentioned above, were primarily related to what is called "Agenda 21" and its agreements.   The following quote, as well as the in-depth look at other aspects of U.S. Foreign Aid present in this newsletter, comes primarily from a website called "Global Issues That Affect Everyone" by Anup Shah, which I strongly recommend to those interested in a deeper understanding of the relationship of wealth to poverty, worldwide. (See, especially, the sections on "Sustainable Development" and on "Causes of Poverty").  In the discussion below, italics used for emphasis are mine throughout.

Agenda 21: Rich Nations Agreed at the United Nations to 0.7% of GNP To Aid

       "When the world's governments met at the Earth summit in Rio de Janeiro in 1992, they adopted a programme for action under the auspices of the United Nations - Agenda 21. Amongst other things, this included an Official Development Assistance (ODA) aid target of 0.7% of gross national product (GNP) for rich nations - roughly 22 members of the OECD (Organization of Economic Cooperation and Development) known as the Development Assistance Committee (DAC)."  (Please take a look at The US and Foreign Aid Assistance - Chart of "Official Development Assistance from 2000-2003.  It will open your eyes.)

Almost all rich nations fail this obligation

       "Even though these targets and agendas have been set, in the past decade and more, almost all rich nations have constantly failed to reach their agreed obligations of the 0.7% target. Instead of 0.7%, the amount of aid has been around 0.2 to 0.25%, some $100 billion short.

       Most wealthy nations spend far more on millitary than on development, for example. The United Nations, which gets its monies from member nations, spends about $10 billion (on aid) - or about 3% of what just the U.S., alone, spends on its military. (The U.N.) is facing a financial crisis (today), as countries such as the U.S. want to reduce their burden of the costs - which comparatively are quite low anyway - and have tried to withhold payments or continued (to pay) according to various additional conditions (placed upon these payments)."

       Shah continues:

       "However, even though the  Official Development Assistance (ODA) chart above does show U.S. aid to be poor (in percentage terms) compared to the rest, the generosity of the people of America is far more impressive than their government.

       It is interesting to note for example, per latest estimates, Americans privately give at least $34 billion overseas - more than three times U.S. official foreign aid of $10 billion:

  • International giving by U.S. foundations totals $1.5 billion per year
  • Charitable giving by U.S. businesses now comes to at least $2.8 billion annually
  • American NGOs gave over $6.6 billion in grants, goods and volunteers.
  • Religious overseas ministries contribute $3.4 billion, including health care, literacy training, relief and development.

Aid to Africa: 

      This section has been set up so that you can either read the Expanded Section on 'Aid to Africa' first, or continue below and read it, optionally, later on.

       As mentioned earlier, nations may fail to meet their agreed upon obligations in giving, and yet within the parameters that they do give, they may select certain recipient nations for help that comes with fewer strings attached, and others who will receive aid only in exchange for large reciprocal benefits.  Again, from: "Global Issues That Affect Everyone", Shah refers to a quote by Kevin Watkins, Chief Researcher of Oxfam:

... "Much has been made of America's generosity towards Africa under the Africa Growth and Opportunity Act (AGOA). This (act) provides what, on the surface, looks like free market access for a range of textile, garment and footwear products. (However), scratch the surface and you get a different picture.

      Under AGOA's so-called rules-of-origin provisions, the yarn and fabric used to make apparel exports must be made either in the United States or an eligible African country. If they are made in Africa, there is a ceiling of 1.5 per cent on the share of the US market that the products in question can account for Moreover, the AGOA's coverage is less than comprehensive. There are some 900 tariff lines not covered, for which average tariffs exceed 11%. This makes goods from Africa more difficult to sell in the U.S. domestic market and increases African production costs by 11% if they try to do so.   (For a basic understanding of tariffs and their impact, see: "The Economic Effect of Tariffs").

       According to the International Monetary Fund (IMF), the benefits accruing to Africa from the AGOA would be some $420m, or five times, greater if the US removed the rules-of-origin restrictions. But these restrictions reflect the realities of mercantilist trade policy. The underlying principle is that you can export to America, provided that the export in question uses American products rather than those of competitors. For a country supposedly leading a crusade for open, non-discriminatory global markets, it's a curiously anachronistic approach to trade policy."

--   Kevin Watkins, (Chief Researcher of Oxfam) "Trade hypocrisy: the problem with Robert Zoellick," Open Democracy, December 12, 2002.

      Anup Shah, continues:

       "Watkins lists a number of other areas, besides the AGOA, that are beset with problems of hypocrisy, and concludes that “nihilism and blind pursuit of US economic and corporate special interests represents an obstacle to the creation of an international trading system capable of extending the benefits of globalisation to the world's poor.”

       In (this) context then, and given the problems mentioned above about agricultural and textiles/clothing subsidies, etc., the current amount of aid given to poor countries doesn't compare to (the) "aid" given to wealthier countries' corporations and industries, and hardly compensates for what is lost."

      It is abundantly clear from this discussion, that "aid is more than just charity and cannot be separated from other issues of politics and economics, which must also be considered."

Trade and Aid: 

       This section has also been set up so that you can either read the Expanded Section on 'Trade and Aid' first, or continue below and read it, optionally, later on.

       The relationship between 'trade' and 'aid' is central to penetrating the 'illusion of generosity' that wealthier nations can maintain if aid in dollars is looked at in isolation. The effectiveness of aid packages can only be judged in relation to trade policies which regulate how that aid can be used, and with what restrictions, particularly in relation to the donor nation. 

       'Trade' relates to the exchange of goods and services between nations and the policies which govern these.  If we look at these policies, we can see that it is often the case that donor nations often benefit as much from their aid packages as recipient nations, if not more. This occurs through conditions that are placed on how aid may be used - conditions which are often detrimental rather than helpful to the growth of that country's economy.

      "In October 2003, at a United Nations conference, UN Secretary General Kofi Annan noted that developing countries made the sixth consecutive and largest ever transfer of funds to “other countries” in 2002, a sum totalling “almost $200 billion.” He said:

“Funds should be moving from developed countries to developing countries, but these numbers tell us the opposite is happening.... Funds that should be promoting investment and growth in developing countries, or building schools and hospitals, or supporting other steps towards the Millennium Development Goals, are, instead, being transferred abroad.” (United Nations News Centre, Oct. 30, 2003).

Also,

"While the amount of aid from some countries such as the U.S. might look very generous in sheer dollar terms (ignoring the percentage (of wealth) issue for the moment), the World Bank also points out that at the World Economic Forum in New York, February 2002, “[U.S. Senator Patrick] Leahy noted that two-thirds of US government aid goes to only two countries: Israel and Egypt. Much of the remaining third is used to promote US exports or to fight a war against drugs that could only be won by tackling drug abuse in the United States.”

       Shah, in his discussion of "Causes of Poverty" says the following regarding 'trade and aid':

       "There are many issues involved when looking at global poverty and inequality. It is not simply enough (or correct) to say that the poor are poor due to their own (or their government's) bad governance and management. If fact, you could quite easily conclude that the poor are poor because the rich are rich and have the power to enforce unequal trade agreements that favor their interests more than the poorer nations."

Structural Adjustment - A Major Cause of Poverty

       "The IMF and World Bank-prescribed 'structural adjustment' policies, have meant that nations that are lent money are done so on condition that they cut social expenditure (such as health and education) in order to repay the loans. Many (loans) are tied to opening up their economies and being primarily commodity exporters, in such a way that poor countries have found themselves in a spiraling race to the bottom as each nation competes against others to provide lower standards, reduced wages and cheaper resources to corporations and richer nations. This has increased poverty and dependency for most people. It also forms a backbone to what we today call 'globalization'. As a result, it maintains the historic unequal rules of trade."

Consumerism:

       It is time to ask some fundamental questions: Why do the wealthy want to remain wealthy at the expense of the poor?  Why are unequal trade practices that claim to be helping 'third-world' nations in place, when more genuinely beneficial policies could be employed?  Why is protectionism of the wealth of the wealthy through tariffs, conditional aid-packages, and outsourcing of domestic manufacture to foreign labor markets - which maintains these markets at their present low income level - pursued increasingly by corporations?  These are naive questions to ask, but they are necessary ones if we are to see what is needed in order to reverse the trend and to establish a genuine global community.

       One of the basic ways to look at an answer has to do with consumerism, or the politics and economics of self-aggrandizement.  The perceived need of those who have more to hold on to what they have and even to create more wealth at the expense of others, is what self-aggrandizement or greed is about. It is like a child within a family that wants to hoard all the toys.  This motivation operates to create and perpetuate a serious imbalance between the 'haves' and 'have-nots'.  It forms one of the primary roots that fuel the ongoing and serious inequality among nations. 

       A second, and equally important root, is that of unconsciousness.  Unconsciousness involves lack of awareness of the individual reality of others so that they are not perceived as suffering, unique human beings, but rather as abstractions, as in the phrase 'African nations', or even 'third-world' nations.  This division in language which assigns people to 'first', 'second', and 'third' worlds, exemplifies the kind of tri-partite reduction of people to economic categories that can only exist in the absence of a true sense of planetary citizenship.  It is, in a sense, economic apartheid - self-perpetuating and insidious.  Therefore, the second root of an answer to the question of why the wealthy want to remain wealthy at the expense of the poor, is unconsciousness related to there being just one world not three, shared by all human beings who are interdependent with each other.  This, of course, is not an idea whose time has yet come.  Until the unity of man within the unity of the Earth becomes more real to those in positions of economic and political power, the inequality of trade and aid practices which are harmful to the growth of poorer nations will continue.

       In relation to the exploitation of land in Africa by the corporate interests of wealthier nations, for example - land which could be used to create and expand domestic markets and to develop an agricultural foundation that would support domestic economic growth - we see, instead, the appropriation of land for foreign use:

       "Environmental damage and misuse of land (in underdeveloped countries) occurs because demand for various foods, flowers, textiles, etc. has increased as a direct result of consumption patterns in wealthier countries. This means that more land is used to grow cash crops, cleared for cattle grazing, or diverted for non-productive uses (for example, flowers and tobacco)." (See: Richard H. Robbins, Readings on Poverty, Hunger, and Economic Development).  According to Robbins,

       "To understand why people go hungry you must stop thinking about food as something farmers grow for others to eat, and begin thinking about it as something companies produce for other people to buy.  Food is a commodity.  Furthermore, agricultural producers choose to grow, not only what people will and can buy, but they grow things for which they will get the best price.  This has various implications.  For example, much of the best agricultural land in the world is used to grow commodities such as cotton, sisal, tea, tobacco, sugar cane, and cocoa, items which are non-food products or are maginally nutritious, but for which there is a large market. 

       Millions of acres of potentially productive farmland is used to pasture cattle, an extremely inefficient use of land, water, and energy, but one for which there is a market in wealthy countries...  In many countries agricultural producers are discouraged from producing.  Furthermore, as food producing corporations grow larger, they are able to control production to ensure they don't "overproduce."   The problem, of course, is that people who don't have enough money to buy food (and more than one billion people earn less than $1.00 a day), simply don't count in the food equation.  In other words, if you don't have the money to buy food, no one is going to grow it for you.  Put yet another way, you would not expect The Gap to manufacture clothes, Adidas to manufacture sneakers, or IBM to provide computers for those people earning $1.00 a day or less; likewise, you would not expect ADM ("Supermarket to the World") to produce food for them." 

       Robbins continues:

       "Aid programs or governments may take up some of the slack by purchasing food from producers and distributing it; but, as we discuss in Global Problems and the Culture of Capitalism (by Robbins, New York: Allyn & Bacon Publishing, Inc.), this may do more harm than good. What this means is that ending hunger requires doing away with poverty, or, at the very least, ensuring that people have enough money or the means to acquire it, to buy, and hence create a market demand for food."

International Relief Agencies:

     In closing, I would like to mention three world relief agencies that are important in the distribution of economic assistance, both to underdeveloped countries and to those in crisis. In each case, information offered is taken from the self-description of the organization found on its website.

International Monetary Fund (IMF)

       "The International Monetary Fund was created in 1945 to help promote the health of the world economy. Headquartered in Washington DC, it is governed by and accountable to the governments of the 184 countries that make up its near-global membership.

       The IMF... was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment."

UN World Food Program (See: 'Overview')

       "There is enough food in the world today for every man, woman and child to lead healthy and productive lives. And yet, hunger afflicts one out of every seven people on earth... WFP's vision is a world in which everyone has access at all times to the nourishment they need for a full-life. It believes that the issue of hunger belongs at the top of the international agenda.

       Since it was set-up in 1963, the Rome-based organisation has invested US$27.8 billion and more than 43 million metric tonnes of food to combat hunger, promote economic and social development and provide relief assistance in emergencies throughout the world."

The World Bank Group

       "We live in a world so rich that global income is more than $31 trillion a year. In this world, the average person in some countries earns more than $40,000 a year. But in this same world, 2.8 billion people—more than half the people in developing countries—live on less than $700 a year. Of these, 1.2 billion earn less than $1 a day."  

       The World Bank works to bridge this divide and turn rich country resources into poor country growth. One of the world’s largest sources of development assistance, the World Bank supports the efforts of developing country governments to build schools and health centers, provide water and electricity, fight disease, and protect the environment.

       The World Bank is not a “bank” in the common sense. It is one of the United Nations’ specialized agencies and is made up of 184 member countries. These countries are jointly responsible for how the institution is financed and how its money is spent. Along with the rest of the development community, the World Bank centers its efforts on reaching the Millennium Development Goals agreed to by UN members in 2000, and aimed at sustainable poverty reduction.

       The "World Bank" is the name that has come to be used for the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Together these organizations provide low-interest loans, interest-free credit, and grants to developing countries."

 




The purpose of Light Omega is to bring us all into greater planetary consciousness with awareness of the suffering of others and with a willingness to remain awake to the challenges, dangers, and possibilities we face today.

Julie Redstone

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A true ' global community' means that there cannot be people who are so distant from us that we are indifferent to their needs.  Their needs must become our needs...

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Issues That Affect Everyone by Anup Shah.

 

 

 

 

 

 

 

 

 

 

Even though these targets and agendas have been set, in the past decade and more, almost all rich nations have constantly failed to reach their agreed obligations of the 0.7% target.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The effectiveness of aid packages can only be judged in relation to trade policies which regulate how that aid can be used, and with what restrictions, particularly in relation to the donor nation. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The perceived need of those who have more to hold on to what they have and even to create more wealth at the expense of others, is what self-aggrandizement or greed is about.  

 

 

 

 

 

 

 

Until the unity of man within the unity of the Earth becomes more real to those in positions of economic and political power, the inequality of trade and aid practices which are harmful to the growth of poorer nations will continue.

 

 

 

 

 


 

 

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