chapter  3
21 Pages

Volume of aid: Reversing trends in international development

Every year a substantial amount of public resources are transferred from industrialised to developing countries. In general, volume of aid rose between the end of World War II and the 1980s with some exceptions, but declined throughout the 1990s (see Figure 3.1). The adoption of the Millennium Development Goals in September 2000 brought a wave of optimism, but donors ‘did not seem interested in putting their hands where their mouths were’ (Interview, March 2002). The US and Japan emphasised the role of trade and foreign direct investment as the best way to tackle world poverty. Within the EU, France and the UK had substantially scaled down their foreign aid programmes, Germany was still dealing with the consequences of its unification, and the southern Member States were facing economic difficulties. The only divergent voices were those of the northern Member States, most of which had already achieved the 0.7 per cent target, and the major international organisations – e.g. UN, World Bank and OECD – which had released various appeals urging industrialised countries to double their levels of aid, but their attempts were in vain. The prospects of the International Conference on Financing for Development, scheduled to take place in Monterrey in March 2002, to mobilise additional resources for development looked grim. Against this background, the commitment by the EU’s Member States to jointly increase their volume of aid from 0.33 to 0.39 as a percentage of their collective gross national income GNI a few days before the FfD conference was unexpected. Even more unforeseen was the US’s announcement to double its foreign aid programme. Although these pledges were far below what was estimated as necessary to achieve the MDGs, their real value was that of placing development cooperation back on the international agenda, at a time when aid levels were at their lowest ever. Since Monterrey, volume of aid has consistently risen, and various donors have made explicit plans to go beyond their initial commitments. In particular, in May 2005 the EU’s Member States committed to reaching 0.56 per cent of their collective GNI by 2010. This chapter concentrates on the European Union, explaining the reasons behind the March 2002 and May 2005 decisions. Before doing so, it discusses some general trends in volume of aid.