Can Governments Buy Friends?

Since 2015 it has been UK law that the government must spend 0.7% of UK GDP on foreign aid. Needless to say, this is a controversial subject. When the headlines discuss how the foreign aid budget has been used to invest in private hospitals and upmarket Brazilian gyms it is understandable that people get angry. Why should taxpayer money finance such extravagances when our own roads are full of potholes? This seems to be the subject that sparks the fire under most pub debates. Perhaps a more convincing argument for this metropolitan liberal elite car-shunner is, why spend this money abroad when child poverty in the UK is so bad that UNICEF have started sending food to UK children?

If you question the foreign aid budget enough times the curious cabal of the 5 living former Prime Ministers get wheeled out to talk about generosity of spirit, goodwill generation and how this small contribution will ultimately pay for itself via soft power.

And if you wheel out that cabal enough times then Southern Oatcake revives the blog, which this week comes with an unasked for, if anticipated, list of his thoughts on the subject.

  1. 0.7% of UK GDP is simultaneously not very much and a huge amount of money. It’s not very much in that it accounts for around 2% of tax paid, or around £120 per median tax payer per year. However this is a lot of money for one government department to get out of the door every year. It leads to rushed decisions. Hence the gyms.
  2. You could please the sceptics and, ultimately, the world’s poor by initially, say, halving this budget to trim off all the fat, then quietly escalating the amount again over the next decade back to its original level. Provided that you cut the right programmes (the ones in China seem particularly ripe for dropping).
  3. The ex-PM club, freed from political ambition, can then tell everyone the real truth. The government doesn’t have enough money to spend on potholes and food for kids and healthcare and international aid because people don’t pay enough tax. Or generate enough income. Either works.

A more interesting question, that can’t be “solved” in a 3 point list, is does the foreign aid budget achieve what it sets out to do? If you think like the former PM’s and want to use it to increase soft power, then it’s not obvious that this can be achieved. In short, their strategy is:

Give aid money to foreign countries and improve people’s lives.

And the result they hope for is:

Generate good will and improve future personal, trading and political relations.

We now compare this to the actual political situation in Scotland, which starts off the same but diverges somewhat from the above:

Spend more money per capita on Scottish people than English people -> improve people’s lives -> generate strong and increasing anti-English sentiment -> end up with a majority of Scots wanting Scotland to leave the UK.

A not dissimilar situation existed in Germany until this month. Believe it or not this post is a result of today being pay day. Since the reunification of Germany, citizens have paid a solidarity tax to rebuild the regions that were formerly in East Germany. It being Germany there is a long and tedious algorithm, accessible only in German, that determines the sliding scale of solidarity taxation before and after the end of 2020. The result is that far fewer people pay it starting this month, and I have an extra 50 big ones a month to spend.

In some ways it feels historically pleasing to have contributed to advancing the post-Soviet prosperity of East Germany. Although mostly I’m just happy to have the extra cash in my bank, to look at for a while before it invariably ends up in the pocket of my expensive [West] German dentist.

How did the solidarity tax improve Germany? Plenty of things got built, but people didn’t like paying the tax (surprise, surprise) and the controversial and, to put it mildly, anti-status quo Alternative für Deutschland party swept up 30% of the East German vote in some 2019 elections. Pulling East Germany out of Communism to face losing it to populism 30 years later was not what the solidarity tax was supposed to be about.

What lesson can we learn from all this? Probably that if we support giving financial aid then the best mentality is to be jolly Christian about it all and simply be happy that people’s lives have materially improved, whether they thank you or not. But it is no guarantee of improving relations. People need to feel involved and engaged in the project, and to see how it benefits them. How to do that? That’s a real challenge.

On a small scale, however, it is no challenge at all. This weekend I will help a friend move house. You never feel more engaged than when carrying a sofa backwards down a flight of stairs. And it will benefit me as I will get paid in beer!

Apologies for the lack of blogging action over the last half year. I’ve gone too deep on this one, but I am back on the horse. Normal farcical service will be resumed shortly.

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