Poverty (Part 1)

Last year, I took an economics undergraduate module, called "Development Economics". Dr Mani, the module teacher was talking about the size of the international foreign aid, saying it was an enormous amount, that she could not believe it when she first saw the figure, more than $100 billion annually.

I have just thought about it, and realised actually it is not that big number considering the extent of poverty in the world and the gap between the richest and the poorest nations. I did some research, and that actually makes that "$100 billion" number even worse, in terms of quality and therefore making the effective size of the international aid significantly lower than the $100 billion.

I will write about the problems with international aids and donor countries' policies in Part 2, but here I just want to show why those numbers are low:

1. The number is low in nominal or absolute term:
The estimated total amount of international aid is $123 billion in 2008.
The World Bank estimated there were 1.4 billion people living on less than $1.25 a day (at PPP) and 2.7 billion people living on less than $2.00 a day.
That makes it $0.24 per person (or $0.13) a day.
That number is clearly not enough to support or take those people out of poverty.
(I know it's not meant to spent on everyone in a single year and hence reducing poverty, but this is just to show the size of the aid in relation to the problem it's trying to solve. Part 2 will explain it in more detail.)


2. The number is low in relative term:
There are 34 countries in "Advanced Economies" (by definition of IMF), which as a group has a nominal GDP of more than $40 trillion. That means the total international aid equals to mere 0.3% of GDP of these 34 rich nations.