The Retreat of Australia’s Aid Program

Australian Aid Policy

Key Points

  • In 2015-16, Australia’s Aid Program will be around A$4 billion, which is less than half the size of what it would have been if the bipartisan promise to reach 0.5% of GNI in 2015 was kept.
  • The cuts to the aid program over the last three years have disproportionally affected the world’s poorest countries, with aid to Sub-Saharan Africa to fall to less than 10% of the level it was promised to be.
  • Only the Pacific and countries that Australia has a refugee processing deal with have been spared the bulk of the cuts, as aid to the Pacific is still set to be almost 60% of the level originally promised. 

Background

Three years ago the Australian Government released a blueprint for the bilateral aid program in 2015-16 disaggregated by region. The plan was for a geographically diverse aid program that had a presence in the world’s poorest countries, while still clearly prioritising Australia’s immediate neighbourhood. However these spending promises have failed to be fulfilled. Instead, Australia’s aid program almost exclusively focuses on the Pacific and some nearby countries in East Asia. The chart below shows that Africa and the Middle East as well as Latin America and the Caribbean have disproportionally suffered from the aid cuts since 2012.

Australian 2015-16 Aid Budget

Potentially one of the most concerning aspects of the retreat of Australia’s Aid Program from its trajectory three years ago is the shift away from the world’s poorest countries. As discussed in this blog, Australia’s aid program was already dramatically disproportionally skewed away from the world’s poor. The latest round of aid cuts is set to exaggerate this imbalance even further.

Source:

DFAT 2015 <http://dfat.gov.au/aid/Pages/australias-aid-program.aspx>

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Is extreme poverty going to end by 2030?

Global Development

The Overseas Development Institute (ODI) has just released a report including a chapter that provides an overview of existing work on projections of extreme poverty to 2030. Ending extreme poverty (defined as living below $1.25 a day 2005 PPP) by 2030 is a central part of the global development agenda. It is at the heart of the United Nations Sustainable Development Goals, the World Bank has made it a key goal, and NGOs, such as the Global Poverty Project, are mobilising hundreds of thousands of people to encourage global leaders to achieve zero poverty by 2030.

But is ending extreme poverty by 2030 achievable?

Before addressing this question directly it is worth highlighting the historical significance of this goal. Extreme poverty was the common experience for most of human history until recent generations. Former World Bank Economist, Martin Ravallion, has estimated the historic reduction in the number of people living in extreme poverty in the developed world using data on income and inequality (see here). While it is difficult to be exact, he provides the best insight available into historical trends in poverty reduction, which is shown in the chart below.

Historical poverty reduction

Note: ACN – Australia, Canada, New Zealand, ACH – Austria-Czechoslovakia-Hungary BSM – Benelux-Switzerland-Micro-European States PS – Portugal, Spain, UKI – United Kingdom and Ireland

Source: http://www.cgdev.org/blog/poverty-rich-world-when-it-was-not-nearly-so-rich

It was not too long ago that developed countries had similar rates of extreme poverty to what developing countries have today. For example, over three-quarters of the populations of Australia, Canada and New Zealand were in extreme poverty 200 years ago, which is on par with the poorest countries in the world today. Only by 1950 had extreme poverty been eliminated in these countries.

In addition to the relatively recent elimination of extreme poverty in developed countries, extreme poverty began falling rapidly in developing countries over the last half century. The first Millennium Development Goal, to halve extreme poverty in the developing world between 1990 and 2015 was met five years ahead of schedule. If these trends continue the world would seem to be on track to be free from extreme poverty in the foreseeable future.

The best available estimates suggest that the world will come close to ending extreme poverty by 2030, but that there will still be more to be done. Most projections show that around 3 – 7% of the developing world population (around 200-600 million people) will remain in extreme poverty in 2030. The projections in the ODI report, shown in the graph below, are based upon a ‘business as usual’ approach whereby strong economic growth in the developing world continues as it has over the last decade or so, inequality remains constant and the potential effects of climate change are ignored. Clearly these assumptions are simplistic. One of the authors of these studies, Lawrence Chandy from Brookings, even highlights that predicting poverty into the future is a ‘fools errand’ (see here). Yet these projections provide a helpful guide as to what the world is on track to achieve.

Projections of Poverty in 2030

Source: Data and links to underlying sources available here

Where will those remaining in extreme poverty live?

A major shift of the geographical concentration of global poverty is expected to continue over the next 15 years. Since the 1990s the vast majority of the reduction in people living in extreme poverty occurred in East Asia, with only slight decreases in South Asia and increases in the number of people living in poverty in Sub-Saharan Africa. As the chart below shows, over the next 15 years, the bulk of the reductions in poverty is expected to occur in South Asia, leaving almost all the world’s extreme poor living in Sub-Saharan Africa.

Regional Breakdown of Poverty Projections

Source: Data and links to underlying sources available here

What role does inequality play?

A major assumption underpinning these projections is that the distribution of economic growth across the income distribution remains constant. A recent World Bank working paper highlights that there will be significantly different outcomes for the proportion of people living in extreme poverty in 2030 depending on the distribution of growth across the income distribution. The paper shows that if the bottom 40% could grow two percentage points faster than the average, the proportion of people living in extreme poverty could fall below 3% of the world’s population by 2030. However if the bottom 40% grows at two percentage points slower than the average, almost 10% of the world would remain in extreme poverty in 2030.

 

While eliminating extreme poverty by 2030 would be an amazing milestone for humanity, it is important to keep in mind that development doesn’t stop there. The extreme poverty definition only provides a very limited snapshot of people’s standard of living, through the lens of changes in consumption. In addition, even though there has been significant progress in reducing the number of people living below $1.25 a day, the majority of the developing world still live below $4 a day. Furthermore, if climate change and other global development challenges are not addressed in the coming decades, progress against reducing extreme poverty could easily be reversed.

 

This blog post was originally featured on the DevPolicy Blog available here: http://devpolicy.org/is-extreme-poverty-going-to-end-by-2030-20150506/

Child Labour: The Facts

Global Development

Author: Rachel Hoy

If you asked a stranger on the street how they felt about child labour, it’s safe to say most people would not offer support for it. Yet evidence about the widespread damaging effects of child labour is overwhelming and we need to do more than hold a moral card against it, especially when we often support the demand for child labour unknowingly through our purchases.

There are 168 million child labourers around the world today. Around half are estimated to be in a hazardous form of labour.

Over 10% of the world’s children over 5 years old are child labourers. That means that one child in every ten is currently working under conditions detrimental to their physical and mental health.

Image 1

This is the same percentage of people who travel to work via public transport in Australia.

More than 2 out of 5 child labourers are aged between 5 and 11 years old. That means nearly half of child labourers are younger than Australian high school age.

Image 2

This is more than the percentage of people in Australia who own one car.

More than 1 in 5 children in Sub-Saharan Africa are engaged in some form of child labour. That means in a group of five friends, one is unable to attend school due to being forced into child labour.

Image 3

This is around the same percentage of people in Melbourne who live in a two-bedroom household.

These are just some of the facts surrounding the pervasiveness of child labour. Child labour is declining due to collective efforts but it is clear there is a long way to go. While these statistics are alarming, behind each statistic lies a personal story – both heartbreaking and mostly preventable.

A good start to preventing demand for child labour is to know the standards of the product that you buy. Try downloading the shopethical! app for your next trip to the supermarket or asking your local café about their coffee and tea suppliers.

Source:

World Vision Australia 2014 <http://www.worldvision.com.au/Libraries/Child_Labour_Myths_report/Child_Labour_Myths_Media_Report_12Jun14.pdf>

Information about the Author: Rachel Hoy is a VGen Youth Campaigner for World Vision Australia who works on the #FreeTo campaign. She just completed a Master of development studies at the University of Sydney.

40 Hour Famine

Global Development

This weekend, hundreds of thousands of Australians gave up something they live with everyday (food, furniture, technology etc) to fundraise as part of World Vision’s 40 Hour Famine. This year the focus is on alleviating poverty in Rwanda, particularly reducing hunger in children under five-years old.

The table below provides a snapshot into just how different life is like in Rwanda compared to Australia. For example, for every 1 maternal death in Australia, there are 143 in Rwanda. While for every $1 spent per child on primary education in Rwanda, over $300 is spent per child in Australia.

AUSTRALIA

Aus flag

For Every RWANDA 

Rwanda flag

1

Maternal death

143

1

Child that dies before five-years old

11

1

Preventable death

14

1

Undernourished child

30

1

Person per square kilometre

157

303 Dollar spent per child on Primary Education

1

93

Dollar spent on Health

1

2

Child completing Primary Education

1

10 Internet user

1

8 Child in pre-school education

1

According to World Vision, just $1 fundraised as part of the 40 Hour Famine is enough to feed 1 person for up to 5 days. If you are interested in finding out more and/or donating check out: http://www.40hourfamine.com.au

Sources:

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

The Beginning of the End of Extreme Poverty

Global Development

Key Points

  • In 1820, almost everyone in the world lived in extreme poverty. Since this time, incomes in the developed world have increased more than 12 fold, eradicating extreme poverty in these countries. In the UK, income per person was equivalent to Africa today in 1820 and to Latin America today in 1950. While in China income per person was equivalent to Africa today twenty-five years ago and is now similar to Latin America.
  • Income per person only tells part of the story of how living standards have changed over time. For example, due to improvements in medicine, child mortality in Africa is around one quarter of the rate of the UK in the early 1800s, even though they had similar income per person.
  • The eradication of extreme poverty in less than two centuries in some countries provides hope that extreme poverty can be eliminated from all countries.

Background

For most of human history, extreme poverty was the norm. This only began to change in the last couple of centuries as some countries (largely in Western Europe and North America) experienced prolonged periods of economic growth.

The chart below shows the steady increase in income per person over the last two hundred years in the UK. In 1820, income per person was equivalent to Africa today, while by 1950 incomes were similar to Latin America today.

Income per person overtime

Rapid economic growth in China led to the same increase in income per person, which took the UK 130 years, in just 25 years. This has led to hundreds of millions of people escaping from extreme poverty.

To get a more holistic understanding of how living standards have changed over time, it is important to go beyond the income per person measure. Advances in medicine have allowed for higher levels of development for a given income level than what today’s developed countries experienced in the 1800s. For example, in the UK in the early 1800s, every second child died before the age of five. While around one in seven children die before five in Africa today.

Next month, World Leaders will discuss the next Millennium Development Goals and whether to include a timeframe to end extreme poverty by 2030. This is a truly historic moment in human history as it was really only a couple of centuries ago that extreme poverty began to be permanently reduced.

Sources:

World Economics 2014 <http://www.worldeconomics.com/Data/MadisonHistoricalGDP/Madison%20Historical%20GDP%20Data.efp>

Copenhagan Consesus Center 2011 <http://www.copenhagenconsensus.com/sites/default/files/health.pdf>

 

Australian Aid mainly goes to Middle Income Countries

Australian Aid Policy

Key Points

  • Almost 90% of Australia’s country program aid goes to middle-income countries.
  • Middle-income countries have higher average living standards than low-income countries and are typically less reliant on aid. For example, aid accounts for less than 2% of Vietnam’s economy.
  • Almost all low-income countries in the world are in Sub-Saharan Africa. This is the region where Australia provides the lowest level of aid in per person terms.

Background

The World Bank defines a middle-income country as having over US$1045 income per person (2013 GNI Atlas Method). These countries are considered to be rich enough to be able to begin to access forms of finance other than grant aid, such as private sector loans.

Australia provides almost 90% of country program aid to middle-income countries. This is significantly higher than most other aid donors. The chart below shows that almost all of Australia’s top aid recipients are middle-income countries.

Income per person

Aid is typically only a small share of the economy in middle-income countries. The chart below shows how most of Australia’s top aid recipient countries are not very reliant on aid. In the case of Indonesia and Philippines, aid is actually a negative share of GNI because more money is spent paying off aid loans than they receive in new disbursements of aid.

Aid as a share of GNI

High economic growth rates in Asia in recent decades have meant that there are only a few low-income countries in the region. Sub-Saharan Africa is home to almost all low-income countries in the world and the region is the most reliant on aid. However Sub-Saharan Africa receives the lowest level of Australian aid in per person terms.

Should the region with the poorest countries in the world, which rely the most on aid and have the highest proportion of people in extreme poverty, receive the lowest levels of Australian Aid?

 

Sources

 

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

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

 

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.

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>

Australia’s 2014-15 Aid Budget

Australian Aid Policy

Key Points

On Tuesday, the Australian Government not only cut the aid budget, but it also further redirected aid away from the majority of the world’s poor.

  • Australia spends less than $1 in aid per person in the developing world each year. This makes it incredibly important where the aid is spent.
  • Australia’s largest aid partners in the Pacific receive up to almost a $1 per person every day. This is more than 1,500 times the amount of aid Australia provides per person to Sub-Saharan Africa.
  • While reducing the overall aid budget, the Government increased aid to the Pacific and more than halved aid to Sub-Saharan Africa.

Background

On Tuesday, the Australian Government cut the aid budget for the sixth time in two years and it further redirected aid away from the majority of the world’s poor. As outlined in this post here, the Australian aid program does not focus on the majority of the world’s poor, and disappointingly, the new Government is exasperating this. The magnitude of the bias towards Australia’s neighbourhood is shown in the chart below.

 Aid per person

While cutting overall aid spending, the new Government increased aid to the Pacific and East Asia, by reducing aid from South Asia and Sub-Saharan Africa. The chart below shows how regional aid allocations have changed under the new Government in terms of aid per person living in extreme poverty.

Aid per person living in extreme poverty

In the pursuit of budget savings, the new Government has not only, targeted the aid budget, but also disproportionately targeted people living in poverty outside of Australia’s neighbourhood. Given that the cuts to the aid budget make up over 20% of the total cuts to the budget, the Australian Government is trying to balance the books on the backs of the poor, in the poorest regions in the world.

Sources:

DFAT 2014 <http://aid.dfat.gov.au/Pages/home.aspx>

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

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

 

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