Mind the Gap

Global Development

Mind the Gap

Have you ever wondered how large the gap in living standards is between countries? Or how this has changed over time?

An excellent resource to allow you to look at the evidence in a visually engaging and user friendly way is http://www.gapminder.org/

For example, to explore how the Wealth and Health of Nations has changed over time click on the picture below to open Gapminder’s interactive display.

Gap Minder picture

Gapminder also has a series of brief and informative YouTube clips, such as the following video that shows how 200 countries have developed over the last 200 years in just 4 minutes.

So many charities, which one do I support?

Global Development

Author: Victoria Dimond

Key points:

  • When deciding which charity to give to many supporters examine administrative costs per dollar fund raised.
  • This approach misses the point of a charity: to have a large positive impact, not to have low administrative costs.
  • A better way to assess charities is to investigate what impact they are having per dollar fund raised.

Background

Charities are often compared based upon how low their administrative costs are. For example, see the graph below of some of Australia’s largest international development charities. This type of comparison is based on the argument that funds donated should not be wasted on big salaries or expensive advertising campaigns, but going to help those in need.

admin costs

However this approach misses the point.

Rather than comparing charities based on how much of each dollar is being spent on administrative costs, a better way is to consider how much benefit each dollar brings about: the impact each dollar is having.

Innovations for Poverty Action (IPA) is a not-for-profit organisation that researches the impact of development projects. Using IPA’s analysis, the graph below compares the impact of different projects aimed at increasing school attendance in developing countries.

additional years of schooling

The graph shows that $100 spent on school attendance can have a very different impact depending on what project the money is spent on. An information project that raises awareness about the benefits of education to parents and children has the largest impact. In this case, $100 spent results in an additional 21 years of education (i.e. helps many kids stay in school for longer). However $100 spent on Cash Incentives for families only keeps one child in school for an additional 11 days. Considering the impact of projects when supporting a charity can make a world of difference to those in need.

Another organisation that assesses charities’ impacts is internationally recognised not-for-profit Givewell. In addition to their own evaluations of hundreds of charities, they have a online do-it-yourself kit that you can use for the charities you are looking at giving to: http://www.givewell.org/charity-evaluation-questions

Get greater bang for your buck in terms of impact, not low administrative fees.

Source:

Innovations for Poverty Action, 2014 <http://www.povertyactionlab.org/policy-lessons/education/student-participation>

The data in the first chart of this blog was sourced from the individual charities websities on 23rd June 2014.

Information about Author: Victoria Dimond has a variety of experience in international development. She has volunteered and interned with many not for profits in the sector including Oaktree, Vgen, Global Poverty Project and GiveWell. Victoria has also spent time volunteering in Kenya and Uganda.

The World Cup is an Uneven Playing Field

Global Development

A country’s chance of winning the World Cup is strongly related to the size of its population and how rich the population is. Countries with bigger populations have a larger pool from which talented players can be sourced and richer countries are better able to nurture their players. All, except two (Uruguay and Colombia), of the top 15 ranked World Cup teams are from countries that have populations over 8 million people and income per person over US$12,000 a year. These countries have among the highest incomes and largest populations in the world and appear in the top right of the chart below.

Final World Cup Graph

Between the World Cup countries, an uneven playing field still exists. The richest qualifying country, Switzerland, has around 80 times more income per person, than the poorest qualifying country, Cameroon. While the largest country in terms of population, the United States, has almost 100 times more people that the smallest country in terms of population, Uruguay.

To learn more about just how uneven the playing field is and what life is like in the poorer World Cup countries, check out this blog http://mattdarvas.com/2014/06/18/the-poorest-world-cup-nations/

Source

World Bank 2014 <http://data.worldbank.org/data-catalog/world-development-indicators>

How much control do you have over your standard of living?

Global Development

Key Points

  • An individual’s standard of living is overwhelmingly determined by factors out of their control. As such poverty is largely entrenched from birth.
  • A person’s nationality and the level of income of their parents account for over 80% of global differences in standards of living. Nationality alone explains almost two-thirds of the difference.
  • All other factors such as effort, gender and ethnicity account for less than 20% of global differences in standards of living.

Background

Analysis by the World Bank finds that where you are born and who your parents are have huge implications on your standard of living. Nationality and parent’s income level account for over 80% of global differences in standards of living, as can be seen in the chart below.

Control over standard of living

This analysis provides further evidence to demonstrate that one’s standard of living is mainly due to circumstance rather than effort. A child born to parents in poverty in the Democratic Republic of Congo (one of the world’s poorest countries) will almost certainly live their life in extremely different conditions to a child born to middle class parents in Australia.

This has profound implications in regards to how one perceives poverty. Overwhelmingly it is not an individual’s own fault for being in poverty since they had no control over where their were born and how wealthy their parents are. This creates a profound impetus to address this injustice.

Source

World Bank 2009 http://www.arts.cornell.edu/poverty/kanbur/InequalityPapers/Milanovic.pdf

The Next Millennium Development Goals?

Global Development

One year ago, a panel of world leaders (including David Cameron, the UK Prime Minister) released a report about the next Millennium Development Goals (MDGs). The purpose of the report was to suggest goals to be achieved by 2030, which can follow on from the MDGs (due to expire in 2015). This September these goals will be voted upon by world leaders and are shown below:

The Next MDGs?

Among policy makers these goals have grown in popularity, however civil society groups are yet to heavily promote them. The exception to this is the first goal, which is to End Poverty by 2030. Organizations such as the Global Poverty Project have mobilized large numbers of people in support of this goal.

Please consider sharing these goals with your friends and colleagues. If you want them to be changed, contact your local politicians and join civil society groups that are trying to influence them. After all, decisions about what the world should be aiming for by 2030 are far too important to be left to policy makers alone.

Read the full report here: http://www.post2015hlp.org/the-report/

 

 

Are Developing Countries too dependent on Aid?

Global Development

Key Points

  • Aid as a share of Gross National Income (GNI) in developing countries has remained below 1% for the last 20 years. In 2012, it reached the lowest level ever recorded.
  • Least Developed Countries receive more than ten times as much aid as a share of GNI as Middle Income Countries.
  • The Pacific receives the highest level of aid as a share of GNI for any region in the world.

Background

A great deal of attention is given to the level of aid as a share of GNI that developed countries provide, however less attention is given to aid as a share of GNI that developing countries receive. This measure is important to examine because it provides insight into how dependent developing countries are on aid. While there is a considerable variation between countries, the chart below shows that on average aid to developing countries has remained below 1% of GNI for the last 20 years.

Aid as a share of Developing World GNI

Least Developed Countries (LDCs) receive significantly more aid as a share of GNI than Middle Income Countries. However on average aid as a share of GNI is still below 5% in LDCs. As the chart below shows as countries’ incomes increase they tend to become considerably less dependent on aid.

Aid as a share of GNI (Income level)

There is tremendous variation in the level of aid as a share of GNI across regions. The chart below shows that the Pacific region receives almost 10% of GNI in aid. The low level of aid as a share of GNI for East Asia is partly due to high economic growth in the region in recent decades that has reduced dependence on aid.

Aid as share of GNI (Regional)

On average, there is little reason to believe that developing countries are too dependent on aid. However for some countries this concern may be more valid. For example, the Solomon Islands have received around 40% of GNI in aid for the last decade.

Source

OECD 2014 <http://www.oecd.org/dac/stats/idsonline.htm>

Using Aid to Reduce Poverty is in the National Interest

Global Development

Further evidence that using aid to reduce poverty is in the national interest of donors has recently been published in the Quarterly Journal of Political Science. Rigorous analysis by University of Sydney, Dartmouth College and Australian National University academics, shows that aid targeted towards poverty reduction can improve the public perception of donors in recipient countries.

They illustrate that one of the United States Government’s flagship aid initiatives, the President’s Emergency Plan for AIDS Relief (PEPFAR), significantly raised public perception of the United States in aid recipient countries. For example, it is estimated that if PEPFAR had not been provided to Kenya, approval of United States leadership would have fallen from around 85% to 75%. The chart below shows the results for a number of African countries.

PEPFAR public opinions

To read more about this analysis check out the following:

-Development Policy Centre blog post summarizing these findings: http://devpolicy.org/doing-well-by-doing-good-foreign-aid-improves-opinions-of-the-u-s-20140423/

– Published Article can be accessed here: http://www.nowpublishers.com/articles/quarterly-journal-of-political-science/QJPS-13036

How much more income do the poor need to reach the extreme poverty line?

Global Development

Key Points

The end of extreme poverty has never been so affordable.

  • The additional income required for everyone to be lifted out of extreme poverty is the equivalent of only 0.05% of World Gross Domestic Product (GDP).
  • This is the smallest increase in income (as a fraction of global income) required to end extreme poverty in human history.

Background

The additional income needed for people in extreme poverty to reach the poverty line is defined as the ‘poverty gap’. The chart below shows that over the last 20 years, the global extreme poverty gap has shrunk from over 25 cents to below 10 cents as the average income of those in extreme poverty has increased.

Poverty Gap

The share of global income required to fill the extreme poverty gap has never been so small. As shown in the chart below, over the last 20 years the share of World GDP required to fill the extreme poverty gap has fallen from 0.35% to 0.05%.

Share of World GDP

The actual cost of raising people out of extreme poverty is likely to be significantly larger than the poverty gap. This is because there are costs associated with getting resources to those in extreme poverty, whether through direct cash transfers, income generation activities or other mechanisms.

This analysis provides even further reason to believe that extreme poverty can be eliminated within a generation. Furthermore, it discredits cynics who argue that the world can’t afford to eliminate extreme poverty.

Sources

World Bank 2014A <http://iresearch.worldbank.org/povcalnet/index.htm>

World Bank 2014B <http://data.worldbank.org/data-catalog/world-development-indicators>

 

Grading Bill Gates

Global Development

Could you imagine Grading Bill Gates? Well Columbia University Professor Chris Blattman did just that. What did he grade? A must read for those interested in aid and development. Find out more below.

A Must Read for those interested in Aid and Development

Each year Bill and Melinda Gates release a letter to the public and in 2014 they decided to Bust Three Myths about Aid and Development. These are that:

1) Poor countries are doomed to stay poor

2) Foreign aid is a big waste

3) Saving lives leads to overpopulation

The letter contains a large amount of evidence. If you have not read it already make sure you do, it is available here.

Also check out the following videos that summarise the evidence provided in the letter.

MYTH ONE: Poor Countries are doomed to Stay Poor

MYTH TWO: Foreign Aid is a Big Waste

MYTH THREE: Saving Lives leads to Overpopulation

Bill Gates Graded

Overall Bill and Melinda Gates received an A- from Columbia University Professor, Chris Blattman. The full report can be found here.

The main reason they do not score higher is because they claim aid leads to economic growth. Professor Blattman notes ‘The evidence that aid projects are associated with growth is amazingly absent’. This is problematic for the new Australian Government who have shifted the objective of the aid program away from poverty reduction and towards economic growth. Even though there is not any evidence that aid can actually cause economic growth.

There is however a great deal of evidence that aid can dramatically improve the lives of those in poverty. Professor Blattman comments ‘aid projects work and we know it’ and ‘Plenty of aid projects have huge impact’. 

Global Aid flows are going up, while Australian Aid is going down

Australian Aid Policy, Global Development

Key Points

  • Global aid flows reached the highest level ever in 2013, according to the latest OECD data released on Tuesday. In 2013, around US$135 billion was provided in aid, which is six percent increase from 2012.
  • The majority of developed countries increased their aid budgets, however Australia’s aid spending declined by almost five percent.
  • In 2013, Australia had the highest median income, the 4th highest income per person, the 8th largest economy but only the 10th largest aid budget in the OECD.

Background

Since 2012, the Australian Government has cut the aid budget five times. This is out of step with Australia’s international commitments and most other donors who are scaling up their aid programs. The latest data, released by the OECD on Tuesday, shows that while global aid flows are increasing, Australian aid is declining. In 2013, global aid flows reached the highest level ever. As the chart below shows, aid has increased above pre-Global Financial Crisis levels.

Total Aid

Australia is clearly against the trend by reducing its aid budget. The chart below shows that while most donors increased their aid budgets in 2013, Australia reduced its aid budget by almost 5%. Of the donors that did reduce their aid budget, most were still recovering from the European economic crisis, such as Portugal and Greece.

Change in Aid Budget 

It is clearly disappointing to see Australia fall in the international aid rankings. On any measure of economic prosperity Australia is one of the richest countries in the world. In 2013, Australia had the highest median income, the 4th highest income per person and the 8th largest economy in the OECD, but only the 10th largest aid budget. This is set to decline even further in coming years due to recent aid budget cuts announced by the Australian Government.

Sources:

Credit Suisse 2014 <https://www.credit-suisse.com/ch/en/news-and-expertise/research/credit-suisse-research-institute/publications.html>

IMF 2014 <http://www.imf.org/external/pubs/ft/weo/2013/01/>

OECD 2014 <http://www.oecd.org/newsroom/aid-to-developing-countries-rebounds-in-2013-to-reach-an-all-time-high.htm>