What is the Responsibility of Rich Countries to Poor Countries?

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Copyright 2022 Center for RISC, University of Chicago

Key Terms

• Gross Domestic Product (GDP) - the official value of goods and services that are produced in a country
• Gross National Income (GNI) - GDP, plus income from foreign sources like residents living abroad or companies operating in other countries. For example, if a German company has a factory in the US, the output of this factory would be included in US GDP, but German GNI.
• Developed/developing country - a term classifying the economic development of a country. Developed countries are considered to have large and sophisticated economies, as measured by GDP, GNI and/or income per resident. Developing countries are those that are low-income and/or have smaller economies
• Official Development Assistance (ODA) - government aid designed to promote the economic development and welfare of developing countries. Also known as foreign aid

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How is Foreign Aid Provided and What Is It Intended to Do?

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• What are the differences between multilateral and bilateral aid? What might be some of the pros and cons of each way of providing aid?

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• What are some of the purposes of foreign aid?

Status Quo: How Do Rich Countries Currently Aid Poor Countries?

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• How have ODA rates changed over time?
• What might cause ODA rates to change?

Net ODA, as a % of GNI 1980-2017

Source: https://data.oecd.org/oda/net-oda.htm

Which Countries Give the Most Foreign Aid?

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Source: https://www.visualcapitalist.com/mapping-the-global-flow-of-foreign-aid/)

United Nations target of 0.7% of GNI used for foreign aid

• Why might some countries have larger foreign aid budgets than others? What benefits does a country get from having a large or small foreign aid budget?
• The US has a relatively small foreign aid budget compared to other very wealthy countries. Why might that be?

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American Foreign Aid by Sector, 2019

Source: https://foreignassistance.gov/

• How has foreign aid changed from 2005-2019? Why do you think those changes have happened?
• Why do you think the US focuses so much foreign aid on peace and security?

American Foreign Aid by Sector, 2005

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Japan

USA

Germany

Comparing Foreign Aid Spending in Different Countries

• Note: Most peace and security spending is included in humanitarian aid on this graph
• How different are the spending patterns of Germany, Japan, and the USA?
• Why might different countries have different foreign aid priorities?

Source: https://donortracker.org/

Which Countries Receive the Most Foreign Aid from Germany and USA?

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US

Germany

Source: https://donortracker.org/

• How do you think countries decide where to send foreign aid?

Readings/Viewings

Required

• Should America Keep Giving Billions Of Dollars To Countries In Need? - NPR
• Why trying to help poor countries might actually hurt them - Washington Post
• Is There a Moral Obligation to Help the Poor? - Law Journal for Social Justice
• Foreign Aid is Important and has Global Benefits - Gates Foundation & Dambisa Moyo: Maybe Bill Gates still owes me an apology - CNBC

Optional

• The inconvenient truth about foreign aid - Open Democracy
• The Ethics And Practicalities Of Foreign Aid - Sanders Institute
• Obama on what most Americans get wrong about foreign aid - Vox

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Discussion Questions

• Morally, do rich countries have an obligation to help poorer countries? Why or why not?
• Do you think that rich countries should spend more on foreign aid than they currently do? Less? The same?
• The US tends to spend a higher proportion of its foreign aid budget on security and conflict than other rich countries. Why do you think that is? Is this a good thing?
• The readings all presented very different views about whether foreign aid works. Why do you think it might be difficult to accurately estimate whether foreign aid really helps poor countries?
• From the perspective of poor countries, do you think foreign aid is a good thing or a bad thing?
• Imagine that all foreign aid stopped tomorrow. What do you think would happen? What if all foreign aid doubled?

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Teaching Notes

• This topic includes many technical and potentially new terms like GNI, ODA, economic development etc. It’s important to ensure that the entire class is comfortable with these terms
• Discussion might focus only on whether foreign aid works. Note that there is discussion to be had around whether we should give foreign aid in theory, separate to whether it works or not.
• When trying to understand if foreign aid is effective at influencing outcomes in a country (e.g. military, health), it’s important to emphasize that there are many other things going on in a country besides foreign aid. Just because an economy grows or shrinks alongside receiving foreign aid, doesn’t necessarily mean that aid is causing that change.
• Nuance is key to these discussions. Not all developing countries and not all developed countries should be painted with a broad brush. E.g. not every developing country has a corrupt government.

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Data Interpretations / Key Insights

Slide 6: ODA rates differ considerably between countries. The UK and Germany have increased their ODA substantially since 2005, while Australia, the USA, and Japan have not. Students should think about what factors may influence ODA, including changes in government, international crises, economic health etc.

Slide 7: potential benefits of large foreign aid budget include improving conditions in other countries, improving relations with other countries, and building influence over other countries. Benefits of a small budget include not interfering with others’ affairs and saving money.

Slide 8: The biggest difference between 2005 and 2019 is the much higher proportion of aid going to peace and security. Some students may pick up on the fact that, although many of the dollar values are the same, they have decreased in real terms when adjusted for inflation.

Slide 9: The US focuses much more on humanitarian aid (which includes peace and security), while Japan is very heavily focused on infrastructure. Germany has a very diversified profile, with no dominant sector. Students should think about why countries may have different priorities, e.g. what they might be good at, what the goals of their overseas assistance might be.

Slide 10: students should consider factors such as which countries donors might be trying to help/influence, how strategic considerations might influence these choices, and how immediate crises (e.g. a war) would change things.

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