A poor target

World Bank's foreign aid target is barbarous relic

In the world of economic development, 0.7 per cent has become something of a talisman. It is the proportion of gross domestic product (GDP) that rich countries are supposed to donate to poor ones in foreign aid. The target, first set in 1970, still lives. At the World Bank's spring meeting this week, President Jim Kim praised the UK for becoming one of only five nations to meet it. But the number has long outlived its usefulness.

Certainly, last year's six per cent increase in foreign assistance budgets to a record $135 billion, according to the organisation for economic co-operation and development, is laudable. Netherlands, Finland and Switzerland are all near the 0.7 line. But the focus on one financial input is misguided.
 
To start, government development aid is often tainted by political considerations. The bulk of US money helps allies in Iraq, Jordan and Afghanistan, not to mention wealthy Israel. The UK is considered relatively straight but its count includes military training for African officials and global citizenship lessons for Scottish school children.

Also, the focus on one crude measure distracts attention from more efficient ways to spur development. Switzerland gives a relatively generous 0.5 per cent of GDP in aid, but a national agency that offers its investors political risk insurance would probably do more for less. Ireland and Greece could repeal their bans on pension funds investing in developing countries. Then there is the money flowing in the wrong direction, stolen from poor countries by corrupt officials and placed in developed countries. A clampdown on such accounts and investments would be welcome.

For poorer people, emigration to richer countries quickly generates remittances to the homeland. These contributed almost four times more than official aid in 2013, according to the World Bank. As a bonus, some migrants eventually return with expertise and capital. But most rich countries, including the UK and Switzerland, are tightening immigration rules. For a broader target of development help, look to the multi-variable index provided by the centre for global development. That provides a good measure of the overall commitment to helping development. The world has moved on since 1970. The World Bank should, too.