Monday, May 24, 2004

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Ranking the Rich, mark two

Longtime readers of the blog may remember that I was critical of the Center for Global Development for last year's Ranking the Rich. That report, if you remember, had the U.S. ranked 20th out of 21 countries in terms of helping the developing world. It was a good effort, but it stacked the deck against the U.S. in a number of ways.

The Center reacted to my critique in the most cunning of ways -- asking me to be on their Commitment to Development Advisory Board.

In response to their feedback from last year's index, the authors of the index revised the measures used for some of the components, and added a new one -- technology.

This year's Ranking the Rich is now out -- here's a list of the 2004 rankings. As happened last year, Foreign Policy has run a story on it. The key paragraph:

In order to rank rich nations as accurately as possible, this year the aid, trade, and environment components of the index were revised, a technology component added, and the sections on investment, migration, and security (formerly called peacekeeping) overhauled. Australia gains most from these improvements in method, surging from 19th place in 2003 to 4th place this year, due in part to changes in the investment and security components. The new measure of security also helps boost the United States 13 slots; Australia, the United States, and Canada all gain from improved data on migration. Amid all the jockeying, however, the same stalwarts anchor first and last place: Japan remains at the bottom of the CDI while the Netherlands stays at the top, though it now shares that position with last year's number two, Denmark.

And for all of those just waiting to ask whether the revision factored in private aid flows as well as official development assistance -- a topic I've addressed before -- here's the key passage:

This year, the CDI rewards governments for allowing their citizens to write off charitable contributions on their income taxes—and for taxing their citizens less, leaving more money in private hands for charity. Some of those contributions go to humanitarian organizations such as Oxfam and CARE that do important work in developing countries. Currently, all index countries except Austria, Finland, and Sweden offer tax deductions or credits for such contributions. However, even in the United States—often considered a stingy government donor and generous source of charity—private giving is small compared to public giving. U.S. government aid in 2002 was $13.3 billion, or 13 cents a day per U.S. citizen. U.S. private giving to developing countries was another $5.7 billion, less than six cents a day, two cents of which is attributed to U.S. tax policy as opposed to individuals' own decisions. In the end, factoring in tax policy only lifts the U.S. aid rank from 20th to 19th....

Many of the CDI nations increased their foreign aid in 2002, especially the United States, which favored geopolitically important actors such as Turkey, Indonesia, Russia, and Afghanistan. But although the United States gives more aid than any other country in absolute terms, it still gives less aid in proportion to its size than any other rich country, and so finished near the bottom in this category. However, due to the penalty for overloading countries with projects, Greece and New Zealand scored below the United States. Evidently these countries spread their modest aid thinly, covering many countries with small projects and overburdening local administrators.

Go check out the whole report -- I'll be attending a board meeting soon, so any and all constructive feedback is appreciated.

posted by Dan on 05.24.04 at 12:45 PM


One quick thought is that this report fails to account for how effective the aid is at promoting long-term economic success. Former Treasury Secretary Paul O'Neal's greatest (and arguably only) success was linking foreign aid to basic political factors such as the rule of law and basic governance transparancy. I don't see why other nations should be rewarded for donating millions to authoritarian states with non-free economies - afterall these donations will only result in one-time gains rather than structural transformations.

posted by: dellis on 05.24.04 at 12:45 PM [permalink]

Sorry, until "the world" starts taking responsiblity for it's own military and quits getting a free ride on prescription drugs from the backs of our elderly, I really don't care how they rate US.

And I'm taking it that "private giving" is only based on international giving?

And if they're basing it on our tax returns, what happens when people like me throw $50 into the Salvation Army pot or drop off canned goods at church w/o taking a donation, and do they include clothing/item write-offs?

Does this include thru the UN? And does this include corporate/nfp aid?

posted by: Sandy P on 05.24.04 at 12:45 PM [permalink]

A side benefit of the new methodology is that it creates some churn in the rankings, making it more newsworthy -- something BusinessWeek, US News, ... are accused of doing in the context of various school rankings.


posted by: Angry Bear on 05.24.04 at 12:45 PM [permalink]

From what I read about the earlier report, this looked like an anti-American smear organization. I'm very impressed with the way they responded to their critics.

posted by: Xavier on 05.24.04 at 12:45 PM [permalink]

“Sorry, until "the world" starts taking responsiblity for it's own military and quits getting a free ride on prescription drugs from the backs of our elderly, I really don't care how they rate US.”

Amen. The Old Europeans and Canadians mooch off of us. We pay for most of their military defense. Americans do far more than their share in subsidizing other countries in the world.

posted by: David Thomson on 05.24.04 at 12:45 PM [permalink]

For next year, under security, should some consideration be given for discouraging arms trade with poorly governed countries?

posted by: Andrew Price on 05.24.04 at 12:45 PM [permalink]

If I give to one of those "development agencies" that then uses the money to house it's staff in five-star hotels and fly first class ... does that count for any extra?

posted by: bruce on 05.24.04 at 12:45 PM [permalink]

A couple possibilities. DSL has been slow, so I've had trouble accessing the PDF files that describe methodology at the RTR site, so these may be covered.

I see from the FAQ, Q.12, that remittances aren't included because of incomplete information. They recognize elsewhere that these can be really important, and should be added. Hopefully, next year will have it.

On the security component, if Country A relies on Country B's capabilities to keep its troops somewhere, then I'd argue that A's forces should be included in B's totals. There are, of course, methodological problems with this.

As an overall comment, the study seems biased in favor of governmental operations rather than private ones, and direct rather than indirect actions. I assume this is a consequence of where data is available, though whether it's that or a general statist bias I can't say, and it probably doesn't matter.

posted by: Tom on 05.24.04 at 12:45 PM [permalink]

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