skip to Main Content

Myopic meanness – Australia’s ODA cuts to its neighbours in the Pacific

Neoliberal governments and their supporters have a habit of spruiking gee whiz solutions to the world’s problems, where gee whiz means make it easier for corporations to make profits and harder for workers to get pay rises, claiming that the destiny of individuals is in their own hands (denying systemic failures), and reducing regulations that ensure equity is enhanced. Australia added another dimension to that list (which is not exhaustive) – being mean spirited when it comes to the less well-off nations in the world. The problem with this approach is that it does not live up to promise – it certainly enriches those who are already well-off – but when the rest of us realise something is wrong, the horse has already bolted and picking up the pieces becomes more ‘costly’ than before. In the last few weeks, our government has been bellowing again about China. China is a threat, China is a crook, China is this, China is that. The trigger point this time is the revelation that China’s external strategy has come to the Solomon Islands and the anti-China paranoid gang within the Australian government has a problem. The Solomon Islands are less than 1,700 kms from our mainland and the fear that China will establish a military base there is sending shivers up the spines (euphemism) of our conservative government. Perhaps if we had have been more generous to this region, the Chinese would not have so easily been able to invest there.

Background reading

1. Australia’s Overseas Aid cuts reveal a nation that has lost its spirit (May 15, 2017).

2. Australians have plenty of reasons to be ashamed – ODA is one of them (December 29, 2016).

3. Australia’s generosity to other nations is collapsing (April 9, 2015).

4. Advanced countries should invest in fair trade ventures (without ownership claims) (March 22, 2022).

I have written about the way the privatisation of the water utilities in the UK have brought poor results.

1. British floods demonstrate the myopia of fiscal austerity (January 4, 2016).

2. The myopia of fiscal austerity (June 10, 2015).

I have written about how the privatisation of the electricity generating and retailing system in Australia has been destructive:

1. Market manipulation and electricity blackouts (February 13, 2017).

2. Welcome to the world of privatised electricity and canned music (October 3, 2012).

I am currently working on a large project about aviation firefighting services which are under attack again from the Australian government, who is trying to cut investment and let the ‘market’ work.

Next stop: a major aviation disaster!

There are countless examples from the last several decades of where privatisation, outsourcing, funding cuts, imposing so-called ‘contestability’, etc has been a disaster.

And the cuts in foreign aid are another example.

One of the ways the Australian government has attempted to cover its tracks on the ODA front has been to divert ODA funding from hospitals, education, infrastructure etc and pump it into maintaining the privatised prisons on Manus Island and Nauru, where we have been sending people seeking refugee protection.

We lock these people up indefinitely without rights and then say that the ODA budget is rising.

For Australia, running prison camps is ODA!

China’s foreign policy exposing our lack of generosity

Reportedly, China is about to sign a treaty of some sort with the Solomon Islands, the details of which I am not privy to.

There is some evidence that these sort of treaties that China has been establishing with materially poorer nations have been somewhat problematic for those nations.

But equally, there is evidence they have improved material prosperity for the citizens.

So the jury is out I would think on whether the – Belt and Road Initiative – has been a sound development strategy.

The Solomon Islands joined the Belt and Road Initiative in 2019, which signalled the Chinese government’s growing involvement in the Pacific (Kiribati also joined the initiative around then).

Australia, of course, likes to think of itself as the king pin in the region – bullying nations that helped us during the Second World War against the Japanese aggression in the region.

The way we have treated Timor-Leste in the last several decades, for example, has been a disgrace (geographical note – TL is not in the Pacific but it is still a close neighbour).

Our own global obligations

In 1970, the 25th Session of the General Assembly of the United Nations passed a – Resolution on Financial resources for development – (Paragraph 43) that said:

… 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 percent of its gross national product at market prices by the middle of the decade.

The commitment was not met by many advanced nations, including Australia.

Thirty-two years later the UN reaffirmed the goals – Report of the International Conference on Financing for Development – at the Monterrey meetings (March 18-22, 2002) stating:

… we urge developed countries that have not done so to make concrete efforts towards the target of 0.7 per cent of gross national product (GNP) as ODA to developing countries …

The – The 0.7% ODA/GNI target – a history – is worth reading (short).

The ODA/GNI ratio tells us how much the government of any country is allocating to ODA relative to the size of the economy (the nation’s total income).

The latest OECD – Development Co-operation Report 2021 – tells us that Australia’s:

… official development assistance (ODA) as a share of gross national income (GNI) has declined in the past decade

The data

The OECD publishes fairly reliable data on ODA.

The next graph shows the movements in the ODA/GNI ratios between 2000 (red triangles) and 2020 (blue columns) for selected (advanced) OECD nations.

The dotted line represents the 0.7 per cent target.

In 1970, when Australia signed up to the 0.7 per cent target, we devoted 0.37 of GNI to ODA and we were a considerably poorer nation in material terms then (1970).

The following graph shows Australia’s ODA/GNI ratio history since data was first collected in 1960 by the OECD.

Since the mid-1970s, which is when the fiscal deficit paranoia really began in Australia we have progressive cut the proportion of GNI that we devote to foreign aid.

It is now at record lows and successive governments have shown no inclination to reverse the downward trend.

Australia likes to claim it “punches above it weight” when it is winning some sporting event but when it comes to something important (and I love sport) like feeding starving children we largely ignore our international responsibilities and commitments.

We can always seem to find $A millions to buy military equipment and invade nations with the US though.

The following graph uses data from the ANU Development Policy Centre’s – Australian Aid Tracker – which was first published in 2016 and provides an invaluable source of data “about the state of Australia’s aid efforts”.

The raw data is from the Commonwealth – Department of Foreign Affairs and Trade.

In terms of the Asia-Pacific region – Australia’s immediate neighbourhood – “the vast majority of Australia’s bilateral aid goes to countries in East Asia and the Pacific region.”

You can also explore an excellent visual resource – HERE.

The following graph shows Australia’s total aid to the Asia-Pacific region in constant $A millions.

After the GFC, the ODA budget took a hit.

There was some temporary injections during the early stages of the pandemic but that has ended.

So not only is Australia failing to meet its UN obligations in terms of the ODA/GNI pledge, it is also cutting its ODA in level terms on an inflation-adjusted basic.

The next graph shows the real ODA from Australia for the Solomon Islands.

It replicates the pattern in the previous graph.

In real terms, our ODA to the Solomon Islands has fallen from a peak of $A342 million in 2009-10 to a projected $A161.1 million in 2022-23, a decline of 52.9 per cent.

In 2010, the population of the Solomon Islands was 527,861.

So in per capita terms, the Australia ODA was equal to $A649 (per person).

In 2020, the population had grown to 686,878 and the per capital Australia ODA outlays in real terms had fallen to $A268.

By 2022-23, with the estimated population growth, the per capital Australian ODA outlays in real terms will fall further to $A217 per person.

Stingy is not the word.

And remember, the Solomon Islands were a major theatre of conflict during the Second World War (between 1942 and 1943) as the Japanese Imperial forces attempted to protect their Southern exposure and set up to invade Australia (Source).

The islands were significantly destroyed during the conflict and many civilians lost their lives as the attempt to invade Australia was defeated.

My own father was involved in that conflict.

Many civilians died protecting Australian soldiers.

Gratitude is not something the Australian government seems to remember.

And so, with the void left by the withdrawal of Australian ODA and a growing population, the Chinese government obviously saw an opportunity.

While the investment that China is making is shifting from ODA to loans, the fact remains that if Australia had been more generous, it is probable the Chinese government would have had less chance to enter these deals with the Solomon Islands governments.

There is a lot of shady stuff going on between China and the Solomon Islands MPs (alleged) but Australia only has itself to blame for its declining influence in the Pacific.

Conclusion

Another negative fall out from the neoliberal austerity mindset when applied to fiscal policy design.

That is enough for today!

(c) Copyright 2022 William Mitchell. All Rights Reserved.

Spread the word ...
    This Post Has 11 Comments
    1. spruik: verb. (intransitive) Australian archaic, slang
      to speak in public (used esp of a showman or salesman)

      (Collins English Dictionary)

    2. While not regarding the motives of China’s activities in the Pacific as being 100% pure in intent, I’m nonetheless bemused by the stark hypocrisy on display by our government over the Solomon Islands issue.

      Australian government: “just because the US has massively expanded by over 1000km eastward a military machine that is now five times bigger than Russia’s military, that was created for the purpose of going to war against Soviet Russia, and that they have spent since 2008 attempting to roll right up against the Russian border a stone’s throw from Moscow………..that doesn’t give Russia the right to be concerned about it and definitely not the right to try and do anything about it. Sanction them! Send weapons to Ukraine!”

      Australian government: “Gasp!! How DARE China try and establish a military base a couple of thousand kilometres from the Australian mainland – that’s our back yard. Unacceptable!!”

      Hypocrisy writ large.

    3. @Neil,

      Re: Spruik,
      Old English: Sprec/Sprecanne
      German: Sprechen
      Dutch: Spreken

      I guess modern English dropped the “r” at some point.

      Whenever I read Spruik, I always think of Grok, which is a word invented by Robert Heinlein, meaning to intuitively understand – or at least it does in the human context, where it doesn’t describe the process of Martians merging themselves with water!

    4. We are talking here about left and right.
      I understand why Bill says MMT is a lens and it has nothing to do with the left or right, specifically.
      It should be like that, but then the right-wingers distort the lens and try to sell you lies.
      The one they are selling right now is about inflation. They say it will need an interest rate hike, but what is coming is a major recession.
      The rich will be affected by the recession, but it will be the poor who will take the brunt and, in the ende, the rich will be richer and the poor, poorer.
      It’s class war as always been. It’s left vs right as always been.

    5. Here we are in the midst, or at least at the beginning, of economic history being made or remade. Russia is pegging its currency to gold and other commodities. The global dollar seems to be self-destructing. The East rises as the West falls. And where the hell is the voice of MMT? Is it also manipulated or intimidated by the unprecedented onslaught of propaganda? Or have I not been listening to the right people at the right time?

    6. Newton,

      “Russia is pegging its currency to gold and other commodities. The global dollar seems to be self-destructing. ”

      The idea of Russia declaring a gold convertible rouble and destabilizing the West’s financial system has been around since the collapse of the Bretton Woods arrangements.

      I can’t see what MMT has to say about international financial arrangements per se.

      Do you have any specific ideas?

      How would you approach the analysis of such arrangements from an MMT perspective?

    7. To all

      You might have noticed your comments have been deleted recently. I mentioned a few weeks ago that I was going to delete any further comments that were just speculative opinions about the Ukraine situation (from any angle) and which bore no immediacy to the blog post that they were posted to.

      I don’t devalue or disrespect your opinions and positions. They are important. But this is not a blog about that topic, even though it is an important topic.

      If I write about that topic, then for a time, I will allow discussion of it.

      But this is not an arena for endless discussions on whether Russia is evil or the opposite.

      best wishes
      bill

    8. @Bill – yep, perfectly fair.

      I look forward to you writing a blog more closely related to the topic as you suggest you might.

      As I stated some time back, I think it will be hard for professional economists to avoid engaging with the subject since it is clearly the source of major global economic consequences already and I suspect these will intensify as they go hand-in-hand with a geopolitical power struggle the likes of which the world has not witnessed for some considerable time. We’re already seeing economics used as a weapon of war just as readily as guns.

      Uncertain times.

    9. Dear Bill,

      “…. whether Russia is evil or the opposite”.

      Fact is we are all ‘evil’ (or at least irrational, which is just as bad), so long the the veto exists in the UNSC.

      And while we are making war (forever), we are not increasing ODA.

      Cheers,

      Neil H.

      PS: Re MMT and Russia: from an article by Ellen Brown

      “Russia had remained too enthralled by free-market ideology to take steps to protect its own agriculture or industry. The United States provided the help that was needed by imposing domestic self-reliance on Russia (via sanctions). When the Baltic states lost the Russian market for cheese and other farm products, Russia quickly created its own cheese and dairy sector – while becoming the world’s leading grain exporter.

      Russia is discovering (or is on the verge of discovering) that it does not need U.S. dollars as backing for the ruble’s exchange rate. Its central bank can create the rubles needed to pay domestic wages and finance capital formation. The U.S. confiscations thus may finally lead Russia to end neoliberal monetary philosophy, as Sergei Glaziev has long been advocating in favor of MMT [Modern Monetary Theory]. …

      What foreign countries have not done for themselves – replacing the IMF, World Bank and other arms of U.S. diplomacy – American politicians are forcing them to do. Instead of European, Near Eastern and Global South countries breaking away out of their own calculation of their long-term economic interests, America is driving them away, as it has done with Russia and China.

    10. Dear Bill: Certainly this is not the place to put forward “speculative opinions about the Ukraine situation (from any angle)” or to argue about whether “Russia is evil or the opposite.” But is this not the place to discuss the potentially earthshaking macroeconomic changes occurring before our eyes? MMT, as you know FAR, FAR better than I do, is predicated on a particular theory of money–what it is, how it’s created, what gives it value, how it operates within and between nations, its possibilities (to build prosperity) and constraints (to avoid inflation), etc. I believe that many of us here would love to dive into a dispassionate MMT analysis of the monetary developments flowing from the Ukraine situation and how they might play out in national and global economies. When you find the time to go there in some depth (and I know you do nothing half-baked), you’ll find a most eager and appreciative audience.

    11. @Neil H., regarding article by Ellen Brown in the post script…

      The article is weak but it helps me to see more real issues that are interplaying.

      First, many countries are stuck in the gold exchange rate era, that is why we see the IMF, World Bank, etc. around (it is a form of financial diplomacy, aka colonialism, and we unknowingly got sucked into it at times). Russia is trying to decouple from this, as the article suggests, which is fine but… wait a minute.

      We should separate the issue between the domestic MMT and the current account balance (CAB) from each other. I believe they are two different things, but have to work together since we live in the double entry book keeping world (that is how our money and the financial system is constructed).

      Hence, at the global level, the floating exchange rate system and the CAB are the ones we have to use as a lens for this Russian or any other countries analysis like Sri Lanka, not just MMT lens.

      In that sense, the world is intact, she will continue her course of the globalization with many international, regional and localization, especially at this crossroads.

      The global financial system is too ingrained in our lives like cultures and customs, it wouldn’t be replaced overnight, not like this (by the current conflict).

      And as we can witness, even if China may have all the back up systems (as we have heard every so often over the news), this is still not the world we live in, and it won’t be used any time soon nor in the medium term future I believe (purely because there is nothing to replace the fundamental concept of money’s construct).

      So, I think the demand for payment in ruble analysis is a mixing of apples and oranges, and it is a road to ruin. Plus, no one will go there or be in trend (especially under sanctions).

      In sum, the the world will move on without Russia. Even with the full blown MMT, it is still a losing position as the days go by.

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Back To Top