I serendipitously came across this fascinating paper by Michael Clemens and Todd Moss of the Center for Global Development (CGD) while looking for the history of the much-vaunted aid target. As someone interested in all matters dealing with development, I've been curious about the somewhat obscure origins of the target that official development aid (ODA) constitute, at a minimum, 0.7% of the GDPs of developed nations' respective outputs. Even today, the UN Millennium Project harps on the 0.7% target:
The UN Millennium Project's analysis indicates that 0.7% of rich world GNI can provide enough resources to meet Millennium Development Goals, but developed countries must follow through on commitments and begin increasing ODA volumes today. If every developed country set and followed through on a timetable to reach 0.7% by 2015, the world could make dramatic progress in the fight against poverty and start on a path to achieve the Millennium Development Goals and end extreme poverty within a generation.While several Nordic and Benelux countries approach or exceed this target of 0.7%--see a review from not so long ago--many others fall short. Here is the abstract from the Clemens and Moss contribution:
The international goal for rich countries to devote 0.7% of their national income to development assistance has become a cause célèbre for aid activists and has been accepted in many official quarters as the legitimate target for aid budgets. The origins of the target, however, raise serious questions about its relevance. First, the 0.7% target was calculated using a series of assumptions that are no longer true, and justified by a model that is no longer considered credible. When we use essentially the same method used to arrive at 0.7% in the early 1960s and apply today’s conditions, it yields an aid goal of just 0.01% of rich-country GDP for the poorest countries and negative aid flows to the developing world as a whole. We do not claim in any way that this is the ‘right’ amount of aid, but only that this exercise lays bare the folly of the initial method and the subsequent unreflective commitment to the 0.7% aid goal. Second, we document the fact that, despite frequent misinterpretation of UN documents, no government ever agreed in a UN forum to actually reach 0.7%—though many pledged to move toward it. Third, we argue that aid as a fraction of rich country income does not constitute a meaningful metric for the adequacy of aid flows. It would be far better to estimate aid needs by starting on the recipient side with a meaningful model of how aid affects development. Although aid certainly has positive impacts in many circumstances, our quantitative understanding of this relationship is too poor to accurately conduct such a tally. The 0.7% target began life as a lobbying tool, and stretching it to become a functional target for real aid budgets across all donors is to exalt it beyond reason. That no longer makes any sense, if it ever did.And here are the key parts of the paper to me. While most of us know that it had something to do with the UN--particularly the UN Conference on Trade and Development (UNCTAD) formed by more activist developing countries--there is more to the story. First, there is the involvement of the World Council of Churches that had indirect clout at the United Nations. American officialdom circa the mid-Sixties also figures into the preliminary argument for 1% of rich-country GDP being devoted to ODA:
The World Council of Churches is a Geneva-based organization that has promoted cooperation between different Christian sects since 1948, and claims to represent 400 million people in 100 countries. From its inception the Council was a conduit for cash donations from parishes in rich countries to those in poor countries. At its 1955 Central Committee meeting in Davos, the Council asked Dutch agricultural economist Egbert de Vries, a senior World Bank official and devout Christian, to advise it on its aid efforts. De Vries made the case that no amount of church donations could reasonably do the job and that “a great amount of capital would be needed from the rich nations in order to achieve only a modest increase in the standard of living of the poorer.”We now need to complete the story by explaining how the 1% figure above came to be the 0.7% standard of today that we all know and at least some people love. What's remarkable here is the involvement of Robert S. McNamara in arriving at this figure during his term as World Bank president. Often a target for activists' ire for his role in the Vietnam conflict as US Secretary of Defence, perhaps it's time the aid activists cut him some slack in pushing for the time-tested standard:
In 1955, total public and private capital flows to poor countries were about 0.5 percent of rich countries’ GNI. The Council’s Central Committee, meeting in Denmark in 1958, adopted a statement that “[o]nly with substantial outside aid from the economically more developed countries … can countries with soundly based development plans hope to carry them through and avert the human disasters that follow from their failure. … Far more grants and generous loans are essential. … If at least one per cent of the national income of countries were devoted to these purposes, the picture would become much more hopeful.”
Though the Council provided no record of how it arrived at the one percent figure, it is unlikely that it was settled on for any other reason than that it was a round number representing roughly a doubling of capital flows from the levels of the mid-1950s. The Council’s request was transmitted to several developed countries’ missions to the United Nations.
Throughout the late 1950s public and private capital flows all developing countries increased, and by 1960 had reached 0.83% of rich countries’ GNI. In that year, the United Nations General Assembly called that level “inadequate” and adopted without vote the resolution that it “[e]xpresses the hope that the flow of international assistance and capital should be increased substantially so as to reach as soon as possible approximately 1 per cent of the combined national incomes of the economically advanced countries.”
The 1% figure got more than just this hopeful nod from the UN. It was supported directly and explicitly—though not publicly—by rich-country governments. US State Department internal memos from early 1961 reveal that the Undersecretary of State for Economic and Agricultural Affairs “thought the Germans might agree to one per cent of gross national production. This seemed satisfactory to Mr. [Secretary of State Dean] Rusk”, and that the State Department told all its European missions that “we can perhaps set as a collective target a sum of one per cent of our aggregate income”.
A final step remained for this “1%” goal for aggregate capital flows to become the modern “0.7%” goal for aid. The first meeting of the United Nations Conference on Trade and Development (UNCTAD) in 1964 noted that capital flows to developing countries had reached 0.8% of rich-country income in 1961, approximately three quarters of which were official bilateral aid. The meeting thus hinted at, but did not adopt, an aid goal. The Conference’s final act stated that it “recommends” that “[e]ach economically advanced country should endeavor to supply … financial resources to the developing countries of a minimum net amount approaching as nearly as possible to 1 per cent of its national income …” An aid goal was not only absent but notably and explicitly ruled out: “This is not intended to represent either a ceiling or a suitable method for comparing the appropriate quantitative or qualitative development assistance efforts between economically advanced countries.”The text of the General Assembly resolution is here. It's good investigative work by Clemens and Moss and makes for a compelling story in its own right. Like with so many other things, standards often come about by happenstance and accident than any conscious effort to make them so.
The second meeting of UNCTAD, in New Delhi in 1968, went one step further but stopped just short of a formal aid target. Background studies by the UNCTAD secretariat noted that combined public and private capital flows had slipped from 0.87% of rich-country GNI to 0.62% over 1961–1966. These background studies—which were not endorsed by the delegates—suggested that to meet the General Assembly’s one percent goal for total capital flows, “it would be desirable to have a target for official development assistance as a measure of the commitment of governments to international development” and “consistent with the 1 per cent target, … [c]ountries whose net official assistance is currently below 0.75 per cent of their GNP might undertake to raise it to this level by, say, 1971.” To arrive at this number, the study explicitly assumes that official flows would continue to represent roughly two thirds to three quarters of total capital flows through the mid 1970s.
Though the Conference reiterated support for the 1% goal of total capital flows, it did not adopt the secretariat’s suggestion of an aid goal. The Conference’s “decision” on an “aid volume target” reads: “A number of developed countries stated that within the 1 per cent target defined above, they were prepared to attempt to provide a minimum of 0.75 per cent of their GNP by way of net official financial resource transfers. One developed country expressed the view that this proportion should be at least half of the 1 per cent target. The other developed countries, even though they are not prepared to accept any precise ratio, believe that endeavors should be made to ensure that official bilateral and multilateral flows represent a substantial part of the totality of financial resources provided.” The anonymity of these references suggests deep and sensitive divisions at the meeting.
The aid community wanted more. World Bank President Robert McNamara together with British Minister of Overseas Development Lord Reginald Prentice conceived the Commission on International Development—more commonly known as the “Pearson Commission” after its chair, former Canadian prime minister and Nobel laureate Lester Pearson. The main purpose of the group was to use the commissioners’ political clout to draw attention to the UNCTAD target in legislatures, especially the United States. From its inception, the Pearson Commission was conceived in order to “rejuvenate the commitment to the UNCTAD target… The Commissioners were largely ‘political influentials’ and well-known economists to help persuade legislatures, with the US as a prime target,” explains Ernest Stern, who was Deputy Staff Director for the Commission.
Arrival at the 0.7% figure was also the result of an arbitrary compromise based on what was thought politically feasible at the time. Former Pearson Commission staffer Sartaj Aziz recalls:
By the time the Pearson Commission met, there was a virtual consensus on the 1% target. From there, the rationale for reaching the 0.70% target for ODA was straightforward. ODA had already reached 0.54% in 1961. An increase to 0.6% would have been considered too modest since countries like France had reached 0.72% by 1968. I remember one staff discussion in which we debated whether the ODA target should be 0.70% or 0.75%. Consensus reached was in favor of 0.70%, as a ‘simple, attainable and adequate’ target.
The final report, delivered to McNamara in September 1969, read: “We therefore
recommend that each aid-giver increase commitments of official development assistance for net disbursements to reach 0.70 per cent of its gross national product by 1975 or shortly thereafter, but in no case later than 1980.”
The UN took on the 0.7% figure, but agreed that governments would exert “efforts” to reach it rather than agreeing to actually reach it. On November 19, 1970, the General Assembly adopted without vote the declaration of the Second Development Decade, calling for six percent GNI growth in developing countries and stating, “Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7 per cent of its gross national product … by the middle of the Decade.” What constituted sufficient effort was not defined.