Share of national wealth theoretically allotted by donor countries to official development assistance

In the early 1960s, the persistence of mass poverty revealed the need to set clear objectives for ODA. Though economic theories had predicted that poor countries would catch up with the West, this had not actually happened. On the contrary, tens of millions of people were still living below the poverty line in China, India and Africa.

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At the United Nations (UN), the end of the decade was marked by intense negotiations to define a new development strategy for the 1970s. One figure in particular was a topic of major debate: what share of the wealth created in “developed” countries should be transferred to “developing” countries?

One figure, three origins

The World Council of Churches (WCC) actively contributed to promoting a more egalitarian distribution of wealth between countries. In 1958, it proposed that donor countries should transfer 1% of their income to developing countries.

“This growing awareness was also informed by a desire to use international aid to pursue development projects that several European powers had launched in their former colonies between the 1930s and 1950s,” explains Hubert de Milly, an AFD expert on ODA.

Lastly and most importantly for the determination of ODA, many economists warned that low savings rates in developing countries could not provide the investment needed for the expected growth. External transfers were therefore necessary. Additionally, the irregular nature of private capital flows toward developing countries gradually showed the need for public transfers.

The savings gap

This gap was identified by economist Jan Tinbergen, winner of the 1969 Nobel Prize in Economic Sciences. He calculated that to achieve convergence, Third World countries needed 6% annual growth, requiring investment equivalent to 21% of local GDP.

To compensate for low savings in developing countries (the gap that made it impossible to reach this 21% ratio), Tinbergen used 1963 figures to estimate that around $8 billion would need to be invested externally by the so-called developed countries. At the time, this represented 0.62% of the GDP of OECD countries.

In 1968, this idea was taken up by the Pearson Commission, created by Robert McNamara, President of the World Bank. In 1969, the Commission’s report recommended that ODA increase to 0.7% of the donors’ GDP by 1975, and at the very least before 1980.

This was the objective that was finally taken up by the UN General Assembly in 1970 when it adopted a resolution stating that “Each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount of 0.7% of its gross national product at market prices by the middle of the decade.”

Several UN members that were also members of the OECD’s Development Assistant Committee (DAC)—with the notable exception of the United States—committed to reaching this objective within the next five years. The main donors to approve this target were France, Germany, Belgium, Canada, Italy, Portugal and the United Kingdom. Many other countries joined them over the following years, including Sweden, Denmark, Norway and Australia.

Some exemplary countries

50 years later, despite constant reminders of this target—such as during the establishment of the UN’s Millennium Development Goals in 2000—very few DAC members have met it. Exemplary countries in this regard include Norway, Sweden, Denmark and Luxembourg, which regularly surpass the 0.7% threshold.

The Netherlands was a model until 2012, when it sharply curtailed its ODA budget. The United Kingdom joined this very exclusive group in 2013, and Germany did so in 2016.

Despite the joint efforts of these countries, the OECD notes that the weighted average of DAC members has never exceeded 0.4% of GNP.

What about France?

Though France has never met this target, it has come close, with a peak in 1994 (0.61%). According to recent figures from the DAC, France contributed 0.43% of its GNI in 2018.

This amounts to around €10.3 billion, making France the 5th largest contributor in value, after the United States, Germany, the United Kingdom and Japan.

On 29 August 2017, French President Emmanuel Macron committed to increasing ODA to 0.55% of GNI by 2022, which should help France catch up somewhat to its European partners.
 

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