Remittances as "philanthropy": The worst development idea I've seen this year

The latest Hudson Institute "Index of Global Philanthropy" just came out. It makes a very important point: that the United States gives an enormous amount of private, voluntary cash assistance to people in developing countries, far in excess of its official aid. Indeed, it shows that Americans give more to poor countries via private channels -- as a fraction of national income -- than any other rich country. They also give more privately (about $33 billion in 2005) than they do through public aid mechanisms (about $28 billion in 2005). We should think a lot about how other countries might follow the U.S. lead on in this regard, and how those donations might be better used.Unfortunately, this valuable point is helplessly crushed under the weight of a big, ludicrous blunder that this same report makes, year after year. Beyond the $33 billion that Americans give in private transactions, legitimately called donations, the report includes $62 billion of workers' remittances in Americans' "total assistance" to poor countries (Chart 5). In other words, the Hudson Institute believes that about half of Americans' "global philanthropy" comes from workers' remittances. The report includes that money in a list of ways that Americans have responded to the "call to alms" (pp. 19, 23). This is one of the most worthless claims in the entire development field. Let's toss this idea on the dung-heap where it belongs, once and for all.What is a "worker's remittance" anyway? Take the case of José Edgardo Andrande, a Salvadoran who works in construction and other jobs in the United States. He sends or "remits" about $700 a month home to support his two sons and his mother. He was the subject of a recent New York Times article.My parents worked for many years to support their two sons (yup, I mean me), and helped out their elderly mothers too, just like Mr. Andrande. The money they spent clothing and feeding me and sending me to university was simply paying the bills, a small part of which they could deduct from their taxes via the dependent allowance. It most certainly was not a 100 percent tax deductible charitable donation. Why not? Because helping relatives is neither "philanthropy," nor "assistance," nor "alms." It is a transfer within a household, broadly considered, and it is part of the reciprocal relationships present in every household on the planet. The support my mom and dad gave me would not magically have become charity if it had happened to cross an international border, as Mr. Andrande's does. (Even if it were, Mr. Andrande's decisions have nothing whatsoever to do with Americans' generosity; he is not American.)If you can swallow the Hudson Institute’s logic on this one, then anyone who ever raised a child or helped a relative is a “philanthropist.” Unfortunately, if everyone on earth is a philanthropist, then no one is. David Roodman and others have made this point before.But aren't we "generous" for giving a Salvadoran like Mr. Andrande a job? The construction companies and restaurants that have employed Mr. Andrande in the United States did not choose to employ him instead of a U.S.-born person due to their interest in the welfare of Mr. Andrande's sons and mother. They employed him because of the low wage he accepts, and its effect on their profit margins. The same employers might also give to charities, but that has nothing whatsoever to do with Mr. Andrande's job. The tacit weak enforcement of U.S. border controls does not constitute "generosity" either; it is the outcome of domestic labor shortages and domestic political struggles entirely divorced from development concerns. The simple fact is that nothing at all about the money Mr. Andrande sends home involves any donation or generosity by any American, ever.The Hudson Institute's claim that U.S. overseas "assistance" to poor countries is $123 billion per year, or almost 1 percent of national income, deserves only to be ignored and forgotten. Using their figures (assuming they are correct) without remittances, assistance is $61 billion, or 0.49 percent of national income. This is still a lot more than official aid, and it is worthwhile for the Hudson Institute to point that out. Such a useful message would come through more loudly and clearly if they would drop their flaming gaffe from next year's report.