Many countries around the world benefit from foreign aid, but few rely on it for their livelihood. Greenland is one of the few countries that would struggle to exist at all without it, as Greenland’s foreign aid is essential to its economy. Each year, Denmark, Greenland’s former colonial ruler, gives the island nation about $591 million in subsidies. That represents about 60% of the Greenlandic government’s budget and comes to more than $10,000 for every person living in Greenland. The subsidy, however, is not the cure-all Denmark might hope it to be.
Greenland’s Foreign Aid and Social World
Greenland is a land of contradictions. It is the largest island in the world, yet has a population of fewer than 60,000 people. Its average income is about $33,000, placing it far above the international average, yet Greenland also suffers from a suicide rate seven times higher than in the United States, and a poverty rate of 16.2% as of 2015. Traditional practices remain the norm in many parts of the country. Fishing accounts for 90% of Greenland’s exports, and dog sleds are still a common sight in the island’s undeveloped interior.
How can Greenland receive so much aid and still suffer from such social ills? Part of the answer lies in international politics. Although Greenland is nominally independent, many of its politics are still under the control of Denmark. Worried about losing influence in Greenland, Denmark has often blocked other countries’ efforts to invest in Greenland.
For example, Denmark raised objections to a $12.1 million aid package to Greenland from the U.S. in 2020. While politicians raised some valid concerns about the package (particularly in light of President Trump’s tactless 2019 offer to buy Greenland from Denmark), the fact remains that foreign investment would almost certainly enrich Greenlanders. This would be especially relevant if Greenlanders, rather than Danes, were the ones to make decisions about foreign aid.
Potential Wealth in Greenland
On the other hand, Greenland itself enjoys huge sources of potential wealth. The island is strategically located in the arctic region. Greenland also possesses valuable mineral deposits in its interior, which global warming will eventually uncover. Unfortunately, Denmark’s reluctance to permit foreign aid, and a lack of local capital, have prevented Greenland from taking advantage of these resources.
Greenland’s dependence on Danish money is a major source of instability for the country. Were the Danish government to change its policy, Greenland’s fragile economy would collapse. Greenland’s reliance on fish also creates uncertainty, since fish prices tend to fluctuate quickly. Economic development, as well as investment from a variety of countries, would remove much of the country’s economic uncertainty.
The goal of foreign investment should be to make countries prosperous and, eventually, self-sufficient. Greenland, however, shows few signs of becoming more economically independent from Denmark. Greenland’s GDP has grown very slowly and actually shrank between 2013 and 2014, despite Denmark’s funding. Danish aid to Greenland seems to have become an absent-minded gift, rather than an aid program with a clear purpose and goals.
Consequences of Denmark’s Aid
If Denmark sticks to the status quo of offering aid but preventing others from doing the same, Greenland will continue to suffer from its high poverty rate. Denmark will still have to pay huge sums of cash to keep the Greenlandic economy afloat.
However, if Denmark were to permit more investment in Greenland and put more emphasis on helping Greenland achieve self-sufficiency, Greenland would become wealthier and its economy would be more stable. This would in turn benefit Denmark because Greenland would eventually no longer need so much financial support. Whatever Greenland’s foreign aid future holds, it seems clear that it can do better than the status quo.
– Thomas Brodey
Photo: Flickr
