H/T to David Roodman who has written a critically important post on the excellent Center for Global Development’s blog. The graph shows the trends in foreign aid from Norway, Sweeden and Finland before after a 1991 banking crisis hit the Nordic countries. As you can see, it took some time for Sweden and Norway to get back to their pre-crisis foreign aid spending levels. Finland never fully recovered. Roodman posts a second graph showing how Japan’s foreign aid expenditures also plummeted after the 1990 stock and real-state bubble burst. Like Finland, Japan has not returned to pre-bubble foreign aid spending (adjusted for inflation).
Why is this important? The countries listed above are the world’s most generous donors of foreign aid in terms of the percentage of their GDP that goes to foreign development assistance. As this graph shows, we can expect even the most generous countries to scale back their foreign development assistance as the world economy turns sour.
Here in the United States the percentage of our GDP that goes to foreign aid is pretty minuscule–the United States offered $25 billion in official foreign development assistance last year. The Obama campaign has promised to double that amount to $50 billion. But recently, Obama and Biden have said that given the current economic situation they will not be able to fulfill this promise as quickly as they would have liked. If past is prologue, it looks like even the most generous countries on the planet will not be able to pick up the slack. The world’s poor are in for rough times in the coming years.