The Swiss Federal Council and Parliament want to fund aid to Ukraine directly from the development cooperation budget. This would have devastating consequences on the world's poorest countries.

This guest commentary by Dina Pomeranz was originally published in German in NZZ on 27 March 2024. Translated and edited for layout purposes by the UBS Center.

When I tell people that I do research in economics of developing countries, they often ask: "Since poverty is increasing, even though we provide so much development assistance, does this assistance actually make a difference?" What are the implicit assumptions behind such questions, and do they hold up empirically?

Global poverty is decreasing

In fact, global poverty has not increased in recent years, on the contrary it has fallen more rapidly than ever before in human history. While in 1990, 30 per cent of the global population lived in extreme poverty, today this share is less than 10 percent - the lowest it has ever been in the history of mankind. Extreme poverty means having to live on less than around 2 Swiss Francs per day (adjusted for price differences).

Despite the global population growth, the absolute number of people living in extreme poverty decreased by more than half, from around 1.7 billion to 0.7 billion. At the same time, the share of children who are malnourished has fallen by more than a third and illiteracy and infant mortality have been reduced by half.

Despite this incredible progress, many people still live in poverty. In low-income countries, the infant mortality rate is around ten times higher than in rich countries such as Switzerland. In addition, current crises threaten further progress in the fight against poverty. Hunger and malnutrition started to increase again as a result of Covid-19, climate change, and the war in Ukraine, after having declined for many years. A lot of work remains to be done.

Of course, this global reduction in poverty is the result of many more factors, not just development assistance. However, research shows clearly that many development projects have strong positive impacts and lead to lasting improvements in people's lives. Thanks to new research methods, such as randomized field studies, such impacts can now be measured very reliably. Such studies show that development assistance can be highly effective.

In the health sector, for example, the global community has saved millions of lives through immunization campaigns. It is estimated that the measles immunization alone averts over two million deaths per year. Investments in education have been shown to lead to higher incomes and economic performance after graduation. As a result, not only the students themselves, but also their children reach a higher standard of living. Due to higher education and better healthcare, birth rates have also been falling, such that the number of children in the world is practically no longer growing.

Other research results show that investments in infrastructure such as suspension bridges, which connect isolated communities to market centers, strongly boost regional growth. Studies show that such bridges can increase people's income by over a quarter by providing them with more direct access to markets for agricultural products and to the labor market opportunities. Recently, the ten thousandth suspension bridge was inaugurated in Nepal. These bridges were built with Swiss support and have sustainably improved the lives of 19 million people.

Population wants to give more development assistance

Another implicit assumption in the initial question mentioned above is that Switzerland sends a lot of money to poor countries. An ETH study shows that the majority of the Swiss population massively overestimates how much development aid the Swiss government actually provides. Around 80 per cent of those surveyed did not know that it is less than 450 Swiss Francs per person per year. This puts Switzerland well below the UN target of 0.7 per cent of gross national income (GNI); a target that the UN has reaffirmed several times. Other countries such as Sweden, Norway, and Germany allocate more than 0.8 per cent of their GNI to public development assistance.

Around two-thirds of the electorate would like to see an increase in Swiss development aid, according to the ETH study. The main reasons given by respondents are preservation of world peace, reduction of the consequences of climate change, and international solidarity. The Swiss population wants to help more. In spite of this, cuts to international cooperation are on the horizon: the Swiss Federal Council and Parliament would like to fund the aid for Ukraine at the expense of the world poorest, by financing it directly out of the general development cooperation budget. This would have devastating consequences, as development assistance has the greatest impact in the poorest countries.

With a de-facto cut to international development assistance, the Federal Council and Parliament are acting contrary to the will of the electorate, who on the contrary would like to see an increase in the Swiss support for the world’s poorest.