Argument: Remittances creates freedom of choice for individuals

Changing from ODA to Remittances is good for freedom of choice in two ways.

First tax breaks and other incentives will mean that migrants have more money. It will clearly be up to the migrant to decide if they want to or can afford to send their money home; they can decide how much they want to send, when they want to end it, how they want to send it etc. At the other end it will be up to the individual recipient to decide how they want to spend the money received.

Secondly it is good for the freedom of choice of the taxpayer. At the moment they are having their choice taken away from them as they have their own money being spent by the government on someone else; foreign countries. The individual taxpayer sees none of the benefit of this money and often they don’t like paying so much aid, 59% of Americans support cutting aid. [1]

[1] Newport, Frank, and Saad, Lydia, ‘Americans Oppose Cuts in Education, Social Security, Defense’, Gallup Politics, 26 January 2011

Candidate 1: "This creates freedom of choice for the donor, but at the same time takes it away from the recipient. Recipients, whether governments or NGOs, will no longer have the money to spend. They will no longer be able to target that funding towards those areas that need it most instead the money will bypass them."
Candidate 2: "Remittances are of course an excellent way of reducing poverty for those who receive them; more broadly however they are unlikely to be successful. Money sent back as remittances are unlikely to be used to target the development needs of the nation so it will not be creating the basis of sustainable growth in the future."
Candidate 3: "This is to ignore the influence of remittances on the market. Of course ODA may build a school, but it is just as likely to make something that the donor country believes the recipient needs when it does not in fact need that investment. Money being sent home and then invested in an individual’s information will help signal to the market that there is greater need for educational facilities and so someone will build a school when there is enough demand."
Candidate 4: "Of course not all aid is ending, it will simply fall to aid agencies and charities to provide for the very poorest rather than governments. These aid agencies will no longer need to help out those who are getting remittances so will have more to spend on the poorest. There may even be an increase in individual donations in rich countries to provide aid when individuals realise their tax dollars are no longer being spend on aid so they may feel the responsibility to do something themselves, something that giving through the government shields us from."
Candidate 5: "The change to remittances may or may not benefit the countries themselves. It is likely that remittances will go directly to individuals. Rwanda may have managed to persuade Rwandans in foreign countries to put money into its sovereign wealth fund but this will often not be an option or individuals will not want to give to their government rather than their families. Most of the time the government will be less well off."
Candidate 6: "While developed countries may be making it more financially attractive to come to them to work and send back remittances in practice they are unlikely to actually allow more immigrants into their countries.

Secondly the brain drain is not all negative for the countries concerned; migrants may return home with new skills, and considerably more money to invest and create new businesses. It is also likely that many of those who go abroad would not have found jobs at home, particularly if highly skilled as the developing country has few jobs available for people with their skills, so would have been a drain rather than a benefit to the economy no matter their skill level. It should also be remembered that the costs of educating these skilled workers will be paid all the faster due to increases in remittances – a study of Ghanaian migrants found that the cost of education of emigrants was paid 5.6 times over by remittances. [1]

[1] Economics focus, ‘Drain or gain’, The Economist, 26 May 2011"

This creates freedom of choice for the donor, but at the same time takes it away from the recipient. Recipients, whether governments or NGOs, will no longer have the money to spend. They will no longer be able to target that funding towards those areas that need it most instead the money will bypass them.
