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DEVELOPMENT: Richest Countries Also the Stingiest

Wolfgang Kerler

UNITED NATIONS, Dec 4 2008 (IPS) - As the biggest economy in the world, the United States is hardly living up to its potential to promote global prosperity and boost development in poor countries, according to the 2008 Commitment to Development Index (CDI) released Thursday.

Other major economies are doing only slightly better. The CDI, which ranks 22 of the richest countries on their development-related policies, shows that “with the exception of Britain, the countries with the most potential to help – by virtue of the size of their economies – are all in the bottom half of the index”, as David Roodman, research fellow at the Centre for Global Development (CGD) and architect of the index, told IPS.

Britain was the sole member of the G7 – the group of the seven largest industrialised economies – to make it into this year’s top 10. The G7’s most powerful member, the United States, came in 17th out of 22. Only Switzerland, Greece, Italy, Japan, and South Korea showed less commitment to development.

Most dedicated to assist poor countries are comparatively small countries that are all major donors of development aid: The Netherlands ranks first, followed by the Scandinavian countries of Sweden, Norway, and Denmark. Coming in fifth and followed by Britain, Ireland manages to close ranks with the top performers – primarily due to an increase of foreign aid by one-third.

However, governments should stop thinking that “development is something that you can buy through the budget,” Roodman said. Instead, “rich and poor countries are linked in many ways: through trade flows, movement of people, the global environment, and others. The governments of rich countries exercise a lot of influence through all of these linkages.”

That is why the CDI, released on an annual basis since 2003, combines indicators from seven policy areas – ranging from the quantity and quality of aid, trade barriers to exports from poor countries, to the openness towards migrants from the developing world. Data on environmental performance, transfer of technologies, and contributions to internationally approved military operations is also included.

The CDI revealed that there were two types of countries, Roodman explained: Countries where government activism is rewarded – resulting in ample aid budgets or contributions to U.N. peacekeeping missions, for example – and countries “that do better in areas where government helps by getting out of the way.” Thus, the United States, Australia, Canada and New Zealand scored poorly on the aid component, but had lower levels of barriers to food exports from other countries.

“One of the key ideas that come out of the index is that openness and engagement with the rest of the world is a good thing,” Roodman said.

That would explain the weak performance of Japan and South Korea as they were “more closed and inward oriented” when it came to government policies. “They give very little aid for their size, they have very high barriers on trade, and they also have not done much on the security front,” Roodman added.

With a new government taking over in January, this year’s CDI could serve as a guide for how the United States could improve its tarnished reputation around the world, CGD pointed out.

“Investment in global development is the most cost-effective, long-term path to restoring [U.S.] reputation in the world, and has a direct impact on our security and prosperity,” said Nancy Birdsall, president of CDG.

Some policies already announced by President-elect Barack Obama are likely to improve the country’s CDI score – like steps to cut greenhouse gas emissions, increased development aid, and a troop shift from the internationally unapproved military campaign in Iraq to the U.N.-backed mission in Afghanistan.

However, Roodman warned of risks that there might be pressure for higher trade barriers, coming from a strongly Democratic Congress.

Globally, “The big story now is the financial crisis,” Roodman said. “It illustrates the many ways in which rich and poor countries are interlinked, as the crisis is now spreading to poor countries through channels like lower imports [purchased by developed countries] and investments [from developed countries].”

Looking at the experiences from the banking crises of the 1990s in Finland, Sweden, Norway or Japan, Roodman explained that he “wouldn’t be surprised to see foreign aid from rich countries fall by a third or a quarter in the next few years.” Finland and Japan, which were hit hardest in the last decade, cut their development aid in half in the following years.