1

By Mal Warwick

Take a guess: how big is the amount of money invested in economic development in what are generously called the “developing nations?”

Don’t speak too quickly. Keep in mind that economic activity on Planet Earth this year is estimated at roughly $75 trillion. And just in case you’re not conversant with millions and billions and trillions, rest assured that that is a VERY big number.

By comparison, how much is invested in economic development?

Perhaps more importantly, how does the amount invested in development compare with all the other money flowing in and out of the poor nations of the world?

That’s the question I attempted to answer by noodling around on Google. Sadly, I couldn’t find anywhere a reliable overall summary of the current picture. So I did some more poking around the web and came up with the following table. Consider this a rough approximation, based as it is on disparate sources that may be approaching their work with different assumptions with different methodologies and for different numbers of countries. (All figures are in millions of US dollars.) 

Item

Inflow

Outflow

Net Inflow

Exports

$11,900,0001

 

 

Imports

 

$11,453,3552

 

Debt service

 

$184,0003

 

Remittances

$414,0004

 

 

Direct Foreign Investment (DFI)

$702,0005

 

 

Overseas Development Assistance (foreign aid)

$126,0006

 

 

NGOs’ development expenditures

$9,0007

 

 

Total

$13,151,000

$11,637,355

$1,513,641

As you can see, the total invested in economic development is only about $837 billion—and that assumes that all Direct Foreign Investment should be included, and that all the funds spent by the UN, the World Bank, NGOs, foreign aid agencies, and faith-based organizations go to development, which they most assuredly do not. A large proportion of aid is devoted to simple humanitarian assistance, and probably even a greater proportion of DFI to simple import-export ventures that result in little if any economic development (and may, in fact, retard it). Even lumping all those funds together, we find the total is less than six percent of the money flowing into developing countries.

In fact, other estimates I’ve seen place the total amount of investment in economic development at somewhere between $150 and $200 billion annually—and usually somewhere close to the lower end of that range, nowhere near $700 billion. In other words, remittances alone at more than $400 billion probably dwarf the true amount invested in development.

Far and away the biggest numbers in the picture involve trade—on the order of $12 trillion on either side of the ledger. By comparison, the money involved in development is a pittance.

Now, with all this said, I must point out that virtually all economic statistics coming from developing countries are suspect. Researchers routinely find that government agencies sometimes simply make up the numbers. And disagreements among the various agencies that compile these statistics frequently show enormous gaps, depending on the methodology used.

So, please take this report with a shaker-full of salt. I’ll leave it to the economists to wrestle with the data (assuming they can find it) and to come up with estimates that may be closer to reality. My purpose here is simply to show by comparison how trivial is the world’s investment in developing the economies of our poorest countries.

Notes:

  1. http://www.wto.org/english/thewto_e/coher_e/mdg_e/development_e.htm
  2. Balance of trade for developing countries for 2013 is reported at http://unctadstat.unctad.org/TableViewer/tableView.aspx?ReportId=100. I subtracted that number from the number noted in 1 for total developing countries’ exports.
  3. http://www.globalresearch.ca/the-debt-of-developing-countries-the-devastating-impacts-of-imf-world-bank-economic-medicine/5354027
  4. http://www.worldbank.org/en/news/feature/2013/10/02/Migrants-from-developing-countries-to-send-home-414-billion-in-earnings-in-2013
  5. http://unctad.org/en/publicationslibrary/wir2013_en.pdf
  6. http://devpolicy.org/global-aid-in-2013-a-pause-before-descending-20131016/
  7. Estimated at $5.7 billion in 2002; extrapolated to reflect growth and inflation. http://www.globalpolicy.org/component/content/article/177/31620.html

Leave a Reply