Exchange to Change June 2015 - Page 2
p. 8 Towards
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Cover photo: Vinnie artist
0.7%, what are you talking about?
Last month, the OECD published its annual analysis of the trends in development aid, and as expected, the
internationally agreed target that OECD-DAC member countries allocate 0.7% of their GDP to development
aid was not attained: in fact, the DAC total only reached 0.29%. There is a lot to say about these figures: e.g. we
can refer to the history of the percentage, calculated by the Netherlands’ Nobel laureate Jan Tinbergen as what
was needed, back in 1972, to finance developing countries onto a sustainable growth path, and to the renewed
promotion of the objective by the MDG movement. In actual fact, whatever can be said about the MDGs, they did
play an important role in increasing aid flows. Finally, many who oppose the 0.7% target do so with an argument
about quantity, not quality. This is, of course, an odd argument; it would indeed be quite preposterous to suppose
that the countries that invested most heavily, percentage-wise, in development cooperation, would also be known
as ‘low-quality’ aid providers.
The big issue with the 0.7% targets lies elsewhere, however: it doesn’t seem to capture all relevant resource flows
that matter for development. The aid amounts are dwarfed by the effects of first world subsidies, for example.
Interestingly, a recent IMF study that calculated subsidies to fossil fuel energy estimated these real pre-tax subsidies
(i.e. when people and businesses pay less than it costs to supply the energy) worldwide at… exactly 0.7% of GDP!
And this is only the start of it, as we have to add a “post-tax” subsidy, i.e. the difference between the true cost of
energy and its effectively paid price, taking into account all negative external effects. These effects include health
problems but also the effects in terms of greenhouse gas emissions and, eventually, climate change, a burden to be
shared by the whole world, including developing countries whose economies are most vulnerable to the effects of
climate change. In total, the IMF estimates global fossil fuel energy subsidies at about $5 trillion, an amount 37 times
bigger than the total amount of development aid. Yes, indeed, 0.7%, what are we talking about?
Tom De Herdt
EtC team: Hans De Backer, Sara Dewachter, Joëlle Dhondt, Lisa Popelier, Catherine Windey
and Katrien Van Aelst