The "Monetary Diversion via Coffee" Effect

Lately, I've been thinking a lot about good old 0.7%. This is the hallmark figure suggested by Pearson as a target for foreign aid to developing nations. In other words, the main idea is that wealthy nations do something nice and set aside about 0.7% of the gross domestic product, so that the sorts of things that the UN Millennium Development Goals are focused on, can be proactively tackled.

Problem is, that not many countries actually do this, and this is why you have people like Bono and Bob Geldof all in an uproar, etc, etc, etc. For example, the United States puts aside approximately 0.2%, whereas Canada is only a little better at about 0.3% (see here for a good comparison of 2006 figures). A big part of these G7 Summits is about addressing this specific issue, except that often the agreements in place tend to long "statement of intent" type timelines - the sorts of timelines that are much longer than the life of existing elected governments.

Now, there is a lot of good debate about the relative merit and/or problems of going for the 0.7% target, which we won't go into here, but I thought a good exercise in perspective is to think about what 0.7% actually looks like.

To do this, I thought a good place to start would be to think about that cup of coffee you bought today.

Let us suppose that the average North American buys a single cup of coffee a day. And also let's guess that the average price of that coffee sits somewhere around the $1.50 range. This takes into consideration, those who don't drink coffee, those who can get their coffee cheaper (or for free) at work, those who buy larger sizes, those who buy the fancy coffee drinks, those who choose to also get the muffin - more or less, to say that an average cost of $1.50 per day doesn't sound too unreasonable. Besides, it's about what I spend daily on my caffeine perk for instance.

The point is, if you multiply $1.50 by the 365 days, you get a yearly budget of about $550.00. If we take that figure and extrapolate using 0.7% as a hallmark, it means that if you make about $80,000 per year, your coffee expenditure (under these parameters) would be equivalent to that 0.7% benchmark. If you make less than $80,000 or buy more than one cup of coffee a day, then your percentage actually jumps up significantly.

To me, the mental exercise here is to appreciate the relative insignificance of 0.7%, and to juxtapose that to what would happen if we all chose to use that coffee money towards developmental aid.

The answer, of course, is that "a lot of good" would happen. Actually, it's a little mind boggling when you think about what how a person's coffee habits and culture indirectly divert from some really serious global issues (rather than preach on what these issues might be, this piece over at Terry paints a pretty good picture of what's at stake).

Anyway, this is not to say that we should feel guilty for grabbing a cup of coffee, but rather to consider what that money might actually represent in the global context. Maybe we should all set up 0.7% collection jars or something - certainly wouldn't be a bad thing.

(p.s. I might be thinking a lot about this stuff because of my recent trip to Nigeria. I promise part 4 is coming up)