Turning our backs on foreign aid
In 2005, one-fifth of about one billion people living on less than $1.25 a day – the World Bank measure of extreme poverty – were located in such fragile states. Today that figure is 50 per cent and is set to rise to 80 per cent by 2025. For the first time, the United Nations has declared three simultaneous crises at the highest emergency rating (level 3), in South Sudan, Syria and the Philippines following super-typhoon Haiyan, indicating humanitarian crises are increasing in frequency and complexity, stretching the aid system to the limit.
In this context Australian overseas aid has fallen victim to ideologically recharged domestic politics. Despite a rapid rise in the aid budget under Labor, $375 million was raided to fund detaining asylum seekers. Projects equally unrelated to poverty reduction, such as $5 million pledged to Granada to rebuild their parliament (part of Australia’s campaign for the UN Security Council) were funded from the aid budget. Scholarships, debt cancellations and government loans are also counted, making the amounts spent on actual aid and development projects appear artificially high.
Within hours of being sworn in, the Coalition government announced it would merge Australia’s independent aid agency (AusAID) with the Department of Foreign Affairs and Trade (DFAT). The hostile style of the merger was captured by a DFAT employee pretending to machinegun a group of former AusAID staff from the balcony of an assembly room where they were being briefed about the changes. Joe Hockey observed that “we can’t continue to fund a massive increase in foreign aid at the expense of investment in the Australian economy”. More bluntly still, the prime minister announced that “we will build the roads of the 21st century rather than shovel money abroad”.
In the federal budget a $7.6 billion cut in aid over the forward estimates was unveiled, accounting for about 20 per cent of overall government savings. This was the single biggest deficit-reduction measure announced on budget night. The attack on the sector is central to the Coalition’s ideological project and deliberately gives the impression aid funding is much bigger than it actually is. In fact, the aid program is only 1.3 per cent of government spending, and at about $5 billion a year is a fraction of government spending on health ($56 billion), education ($36 billion) and the military ($29 billion).
What the cuts to aid spending mean in reality is slightly unclear. The $7.6 billion saving represents a cut in the projected growth in the aid budget over the next five years. The aid budget is now to be capped for the next two years, rising in line with the Consumer Price Index from 2016-17. The current level of spending is $5.013 billion and represents a 10 per cent decrease in funding from 2013 levels, with cuts commencing this financial year. This is a real cost to the aid program of about $1.02 billion over the next five years.
Despite commitments in 2010 by both major parties to lift Australia’s overseas aid budget to 0.5 per cent of national income by 2015-16, it has now shrunk to about 0.33 per cent of national income and is predicted to fall to 0.31 per cent by 2018. This means Australia currently commits about 33 cents for every $100 to overseas aid, which compares unfavourably with countries such as Britain (72 cents), the Netherlands (67 cents) and Denmark (85 cents) and puts us is in 13th place among Organisation for Economic Co-operation and Development donor nations. These commitments remain a long way short of the internationally agreed standard of 0.7 per cent of national income from OECD countries, and is not enough to substantiate the government’s claim that Australia is “one of the most generous per capita aid donors in the world”.
In addition to cuts, there are a series of new mantras that surround the objectives of the aid program. “Economic diplomacy”, “value for money” and, in particular, “aid for trade” now form the basis of the “flagship of the Australian aid program”, according to Julie Bishop. The approach seeks to promote Australia’s national interest through economic growth and poverty reduction, and is measured at a macro-economic level in terms of per capita growth rates. Trade liberalisation, development of economic infrastructure and private sector investment are at the heart of our aid program on the basis that increased trade brings about economic growth and benefits for all. As the foreign minister put it, “a rising tide lifts all boats”.
However, the impact of trade reforms on poverty reduction is long term, indirect and difficult to measure. Prioritising trade fails to address inequality within countries (itself a cause of instability, as the rise of Boko Haram in oil-rich Nigeria suggests). Sustainable economic growth is vital but should not replace funding for pro-poor development programs.
Despite enormous challenges, aid works. Owing to investment in the Millennium Development Goals, the developing world is on track to halve the number of people living in poverty by 2015. Six million fewer children died this year than in 1990; that is, 14,000 fewer child deaths a day. Even at 0.33 per cent of our national income, Australia’s regional aid represents more than six times the combined fundraising of Australian overseas aid organisations. Aid cuts will significantly affect the ability of NGOs, UN agencies and the International Red Cross and Red Crescent Movement to bring relief to the world’s most vulnerable people, to bring a measure of humanity to the appalling cost of conflict, and to make long-term investments in economic and social development that underpin stability and prosperity.
In contrast to our leaders, Britain’s Conservative prime minister, David Cameron, says: “We accept the moral case for keeping our promises to the world’s poorest, even when we face challenges at home. When people are dying, we don’t believe in finding excuses. We believe in trying to do something about it.”
This article was first published in the print edition of The Saturday Paper on Jun 21, 2014 as "Turning our backs". Subscribe here.