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U.S., U.K., and French Economic Aid Distributions in 1999: Divergent Allocation Policies Explain Why Aid Does Not Work
Kyle Atwell
March 8, 2007
kyle.atwell at gmail.com
650-996-8437
(I) Introducing the Problem
In a world that continues to globalize and become more interdependent, instability in one state can have direct impacts on the economic and security interests of others (Gomes 1996). Western leaders since the end of the Cold War have determined that the spread of democracy will bring long-term stability to developing countries, and therefore have embraced—at least in rhetoric—democracy promotion as pillars of their foreign policies. In 1992 both the French and British foreign ministers declared that their national foreign assistance programs should be based on good governance of the recipient, while Blanton (2000:123) states that “The United States has endorsed the promotion of liberal democracy as a cornerstone of its foreign policy” since the first Bush administration following the end of the Cold War.
Despite grand overtures from western political leaders, there has been broad speculation in the academic literature that western foreign policy is not in sync with western rhetoric (Blanton 2000; Olsen 1998). That is, western states may be preaching the spread of democracy, while concomitantly using their actual foreign policy tools to prop up autocratic and inefficient states based on narrow donor interests.
This paper goes beyond the rhetoric of policy makers to analyze the extent of US, French, and UK democracy promotion as represented by their bilateral economic aid to 85 developing countries in 1999. While bilateral economic aid is not the only tool countries use to promote their interests abroad (military force and aid, defense budgets, and foreign investment are other potential indicators), scholars have nonetheless applied it as an indicator of governments’ foreign policy priorities, with the foreign aid budget having been described as the U.S. foreign policy budget (Meernik et al 2000; Riddell 1987). Due to the global reach of foreign aid regimes, aid budgets indicate which countries are favored by a donor country (those that receive aid), and what the salient characteristics are about these recipients that donors seem to prefer (Alesina and Dollar 2000; Apodaca and Stohl 1999; Blanton 1994; Cingranelli and Pasquarello 1985; Maizels and Nissanke 1984; Poe 1991,1992; Poe et al 1994; Schraeder 1998; Zanger 2000).
Specifically, this paper looks at five broad recipient country characteristics to determine which factors have the largest influence on a donor country’s decision to give aid. The recipient country characteristics tested include good governance, economic status, strategic importance, recipient country need, and previous historical relationship with the donor. Each of these characteristics are quantified and run through OLS regressions against the levels of Official Development Aid granted by the US, Britain, and France in 1999.
This paper stands apart from previous research in three ways. First, Official Development Aid (ODA) is tested in 1999, which is four years later than any other study I have found. There has been significant speculation, and some subtle yet promising evidence that with the end of the Cold War, western donors are changing their aid preferences. While the intensity of the bipolar international system placed priority on strategic concerns, particularly for the United States, “the demise of bipolarity and the Communist threat has radically altered the nature of the international environment, thereby calling into question the dominance of security considerations in state behavior” (Meernik et al 1998: 63). While security concerns were ubiquitous during the Cold War, the more relaxed security environment (the so-called “peace dividend”) may have allowed donor states to recalibrate their aid allocations based on ideological and economic concerns instead (Huntington 2002). Zanger (2000b: 311) points out that good governance in the developing world had not yet been declared an official goal of European foreign aid until the early 1990s, and that, “foreign aid donors have only started to make political conditionality an official guide for their aid allocation. Future research might show whether the adoption of this concept changed long-term ODA distribution in the late 1990s and the following century.” By looking at the aid regimes of three major western donors in 1999, this paper will determine if security interests have taken a back seat role compared to the ideological and economic interests of donor governments.
Second, this paper is exceptional in looking at good governance preferences from three donors who could arguably be considered the prime leaders of the west. The United States, France, and Britain hold the only western seats on the United Nations Security Council, have historic ties through the NATO alliance, and have an extensive history of military and economic cooperation since the end of World War II. Zanger (2000b) observes that most empirical studies on whether good governance affects aid allocations have focused on the United States (Apodaca and Stohl 1999; Poe 1992). Others that look at multiple case studies have tended to not include good governance as an indicator (Maizels and Nissanke 1984, Schraeder et al 1998). Only two studies (Alesina and Dollar 2000; Zanger 2000b) seem to have looked at good governance variables in multiple countries, and again both of these studies have not extended their analysis beyond 1995. By testing US, French, and UK ODA, this study provides a unique look into the symmetry or asymmetry of the foreign policies of three specific donors who play a significant role in representing and promoting western values.
Finally, this paper takes the all-too-rare step of providing a policy recommendation, based on both a qualitative assessment of global affairs and the quantitative results of this study. Given concerns about the effectiveness of economic aid in promoting good policies and governance, a radical reform in the international aid regime is needed.
(II) Aid, Determinants of Aid, and Expectations
Official Development Aid
A standard measure of economic aid used extensively in previous studies is the bilateral ODA data provided by the Organization for Economic Cooperation and Development (OECD 1999). Previous studies have found that aid allocations are substantially influenced by the size of the recipient country’s population (Alesina and Dollar 2000; Maizels and Nissanke 1984; Zanger 2000b). This leaves two options for modeling the dependent variable: first, absolute aid could be taken with population on the right side; or second, relative aid (aid per capita) can be used. I have chosen to employ the latter in this study. ODA is expressed in per capita terms of the recipient country’s population, logged.
Determinants of Aid
There are five broad characteristics of recipient countries that are considered as potentially influencing the level of economic aid from donor countries. These include good governance, economic status, strategic relevance, recipient country need, and historical ties with the donor.
1 - Good Governance: Democracy and Human Rights
Since the end of the Cold War, the world has experienced a rise in democracy. Table 1 displays the increasing trend in democracy in the world according to the mean of two scales put out by Freedom House, one measuring political rights and the other measuring civil liberties (Freedom House, 1972-2003).
TABLE 1 (Table available upon request)
This expansion of democracy has been embraced by western policymakers based on the tendency for democratic polities to be associated with fewer human rights violations, and the potential of democracy for increasing international stability and therefore the security of western states. Poe and Tate (1994, 1999) find robust quantitative evidence in two related studies that democracies are less likely to violate citizens’ human rights. There are several reasons democracies may engage in fewer human rights violations than non-democracies: political leaders can be removed from office if they take violent action against citizens of the state; the institutional structure of a democracy encourages retribution by other political actors against one who engages in violent activity; democratic structures provide and encourage the use of alternative outlets for conflict resolution; and finally, democratic norms and values emphasize a preference for non-violence over violence (Davenport and Armstrong II 2004; Mitchell and McCormick 1988; Poe and Tate 1994; Zanger 2000a).
Research into the democratic peace has found that although democracies are as conflict-prone as non-democracies, they are less likely to go to war with each other (Owen 1994). Maoz and Russett (1993) have determined that while both the structural and normative characteristics of democracies explain this trend, it is the shared norms and values of democracies that are primarily responsible for the lack of democratic dyads going to war with each other. This means that democracy holds the promise of not only diminishing the global threat provided by unstable regimes, but it may also create better allies considering they share the same values and norms as western states (Meernik et al 1998; Windsor 2006; Zanger 2000b).
This study employs a variable for democracy and one for human rights. Democracy is measured by the Polity dataset (Apodaca and Stohl 1999; Meernik et al 1998). Specifically, the Polity 2 data, found in the Polity IV dataset, measures autocracy and democracy through a scale of negative ten as most autocratic, to positive ten as most democratic (Marhsall and Jaggers 2003). Human Rights data are provided by the Purdue Political Terror Scale (PTS), which plots human rights abuses on a scale from one to five. One is defined as, “Countries under a secure rule of law, people are not imprisoned for their view, and torture is rare or exceptional. Political murders are extremely rare”. A score of five indicates a high level of murders, disappearances, and torture throughout the entire population (Gibney and Dalton 1997).
Past research has been inconsistent about the impact of recipient democracy characteristics on aid allocations. Meernik et al (1998) find that democracy was significant in the Cold War, but was diminishing in importance through 1994. Zanger (2000b) finds overall that France and Britain placed no conditionality on good governance, neither human rights nor democracy, while Alesina and Dollar (2000) find democracy to be significant for the US and the UK, but not for France through 1994. Regarding human rights however, there has been consistent findings from the Carter Administration onward that the United States gives aid based on the human rights performance of recipient states. (Cingranelli and Pasquarello 1985; Meernik et al 1998; Poe 1992).
Given expectations that donors will be able to direct their foreign policy tools increasingly toward ideological and economic concerns in the post-cold war world, I expect that good governance variables will play a significant role in determining western aid allocations.
2 - Economic Status: Economic Growth and Trade Relations with a Donor
Given the rise in globalization and the end of the Cold War, economic interests are likely to become paramount for western policymakers. Meernik et al (1998:66) argue that, “as international economic competition increases, the demand from the business community for the government to provide greater investment opportunities abroad and to promote American goods will intensify.” To measure these economic interests, two variables are employed. The first is economic growth, measured by the mean of the annual growth in GDP per capita for the five years before ODA was given. A positive relationship is expected between economic growth and donor aid, because western nations will see expanding economies as providing fertile ground for future investment and an expansion in trade relations. GDP per capita data is from the Penn World Tables (Heston et al 2006).
Trade is a second measure widely used to explain economic relations (Apodaca and Stohl 1999; Maizels and Nassanke 1984; Schraeder et al 1998; Zanger 2000b). Within these various studies, trade has been found significant for the US, France, and the UK consistently. As Young (1994) argues, the ascendancy of the trade state is expected to replace the bipolar security orientation of the Cold War. This is particularly true given the competitive nature of international markets; developing countries face decisions on setting trade barriers and selecting trade partners, and donor states may feel they can get preferred access to an aid recipient’s market if they provide more aid to that country. For this reason I expect to find a continuance of the strong positive relationship between trade relations and donor aid. Trade relations are indicated by the level of imports as a percentage of total imports from each donor to each recipient, logged. This data is provided by the International Monetary Fund’s Description of Trade Statistics database (IMF 1998).
3 - Strategic Relevance of a Recipient
Quantifying strategic interests has been the most complex variable to work with, primarily due to its qualitative nature (i.e.- how do you measure an ally or strategically important state in numbers?). The wide array of measures used in previous literature demonstrates the complexity of quantifying strategic relations. For this study, I have chosen three broad strategic concerns, each with a single measure to represent it. The three strategic measures are strategic security interests, strategic resource interests, and regional interests.
Security Interests: According to the realist perspective on international relations, in an anarchic world system, states are first and foremost concerned with security objectives, particularly the United States who continues to act as the global hegemon. The predominance of security concerns means that the maintenance of international security will generally take precedence when it comes into conflict with other foreign policy goals such as ideological and economic concerns. However, this does not mean that non-security goals will never be pursued, but rather that, “in eras of relative peace and safety, security concerns assume a less prominent role” (Meernik et al 1998: 65).
Security interests are represented by and indicator for whether or not the donor country exports conventional weaponry to the recipient country. Data on exports of conventional weapons is provided by the Stockholm International Peace Research Institute is used for this data (SIPRI 1998). The use of this variable is predicated on the fact that governments put constraints on military exports, only allowing politically ‘friendly’ states to by weapons (Maizels and Nissanke 1984, Zanger 2000b). Arms exporters maintain gate-keeping determination over arms transfers in the form of government agencies who are responsible for maintaining an export ban list, which determines what kinds of arms can be exported to which states. For example, the State Department maintains International Traffic of Arms Regulations, which list all goods considered munitions, as well as all states ineligible to receive US armaments (Berrigan et al 2005). While demand is also a component in determining arms exports, the fact that the United States, United Kingdom, and France only exported arms to 24, 7, and 14 of the 85 countries tested respectively, suggests that recipient countries must qualify to receive arms, and therefore arms are not just sold to anybody.
Past research has posited that the significance of strategic security variables is decreasing in the post-cold war world. Meernik et al (1998) find that security concerns remain significant after the Cold War, but by 1994 were decreasing in importance. Zanger (2000b) also finds that the UK gave more aid to countries that imported arms, but not after the end of the Cold War. Zanger finds no relationship between arms exports and foreign aid for France. Continuing the trend of decreased significance with regard to strategic security allies, it is expected that strategic concerns will not play a major role in determining the level of US foreign aid.
Strategic Resources: Strategic resources are represented by and indicator of whether a recipient country is an oil exporter. While there are several types of resources that could be considered strategically important (Thiel 2004), I have chosen oil due to its significance across sectors in contemporary societies, and the politically salient impact that rises and falls in oil supplies have in the US, UK, and France. Because donor governments will want to ensure stability in an oil producing country to ensure oil prices remain stable, we can expect donors to give higher levels of foreign aid to oil exporters.
Strategic Regions:
Based on the assumption that, “countries constituting a specific region… share certain characteristics that differentiate that subsystem from other geographical regions and therefore potentially affect northern aid policies different” (Schraeder et al 1998:322), I have divided the world into six regions based on the United Nations geoscheme, which places every into broadly defined regions (see Table 2). These regions include Africa, West Asia, South Asia, East Asia, South America, and Central America.
Table 2: Regional Division of Countries Based on UN Geoscheme
Region # Countries in Region Countries in Region
Africa 32 Algeria, Benin, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Republic of Congo, Cote d’Ivoire, Gabon, The Gambia, Ghana, Guinea, Kenya, Madagascar, Malawi, Mali, Mauritania, Morocco, Mozambique, Niger, Nigeria, Rwanda, Senegal, South Africa, Sudan, Tanzania, Togo, Tunisia, Uganda, Zambia, Zimbabwe
West Asia 10 Armenia, Azerbaijan, Georgia, Jordan, Kuwait, Oman, Saudi Arabia, Syria, Turkey, Yemen
South Asia 10 Bangladesh, Iran, Kazakhstan, Kyrgyzstan, Nepal, Pakistan, Sri Lanka, Tajikistan, Turkmenistan, Uzbekistan
East Asia 11 Cambodia, Indonesia, Democratic Republic of Korea, Republic of Korea, Laos, Malaysia, Mongolia, Papua New Guinea*, Philippines, Thailand, Vietnam
South America 10 Argentina, Bolivia, Brazil, Chile, Columbia, Ecuador, Paraguay, Peru, Uruguay, Venezuela
Central America 12 Costa Rica, Cuba, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Trinidad & Tobago
4 - Recipient Country Need
Perhaps the most intuitive reasoning for aid allocation is to help countries in need. That is, foreign aid should go to the poor, desperate, and suffering in the world in order to cut them a break. I employ two variables, including GDP per capita and average life expectancy. First, the recipient state’s real GDP per capita, logged, is used to indicate the overall wealth of a country. Several studies have found a negative relationship between GDP per capita and aid, which would follow the belief that poorer countries should receive more aid (Alesina and Dollar 2000; Apodaca and Stohl 1999; Meernik et al 1998; Schraeder et al 1998).
A second variable to measure recipient need is the average life expectancy of people in the recipient state, provided by the World Bank (World Bank 2006). Average life expectancy reflects living conditions and the effects of economic poverty (Zanger 2000b). Again, a negative relationship is expected between average life expectancy and foreign aid, which would indicate that needy states receive more aid.
5 – Historical Ties
A fifth and final consideration for donor states is the historical ties between the aid donor and recipient. A common indicator of historical ties is whether or not the recipient state was a colony of the donor state at some point in time. For this I employ and indicator of whether or not the recipient country was a colony of the respective donor country sometime in the 20th century. Every study on France has found a strong positive relationship between colonial status and aid allocations, explained by France’s desire to first and foremost promote the “rayonnement” (spread) of French culture (Schraeder et al 1998). There has also been evidence that Britain favors its former colonies, though it is not as robust as the evidence for France. While it is likely that France maintains its preference for former colonies, I also suspect that in the increasingly economically competitive and globalized world, the UK will begin to focus more on trade issues than former colonies.
Table of Variables to be Tested
A complete list with each variable, and the expected outcome is listed below in Table 3:
Table 3: Table of Variables to be Tested
Type of Donor Interest Variable Employed Expected Association with Aid
Good Governance Polity 2 Democracy/Autocracy ratings positive
Good Governance Political Terror Scale on human rights negative
Economic GDP per capita growth positive
Economic Imports from donor to recipient positive
Strategic Arms transfers from donor to recipient none
Strategic Recipient is oil Exporter positive
Strategic Region varies by region
Humanitarian GDP per capita negative
Humanitarian Average life expectancy negative
Historical Relations Colony in 20th century positive
(III) Model Nuances
Policy Lag
The year to be analyzed is 1999. 1999 was selected because it provides the most current date of any research I have discovered, without extending beyond 9/11, an event which may have changed aid allocations significantly. All variables other than ODA were lagged one year (1998 data used) to account for lag in the policy making process (Meernik et al 1998).
The Test Cases
A total of 85 recipient countries, and three donor countries are used in this study. Recipient country selection started by considering all countries in the world except those in the European Union, Japan, Australia, New Zealand, the United States, Canada, and Russia. Countries in Southern Europe were not included due to the extensive western involvement in the Balkan conflicts at the time. The number of recipient states attenuated to 85 after countries with missing data were removed, as well as countries with full data but containing population level outliers.
Population Outliers
Recipient states with population outliers have been removed for the sake of discovering donor aid tendencies toward typical recipient countries, even if full data was available for them. States with population outliers may be considered exceptional by policymakers, and therefore their aid allocations may undergo unique considerations. Two states with abnormally large populations (over 900 million) were China and India, with the largest country beneath them being Indonesia with a population of 217 million. China and India have been removed. Also, all microstates (states with a population under one million) have been removed.
Aid Recipient Outliers
Several previous studies on US aid allocations have made special note of Israel and Egypt as aid recipients who receive unusually large amounts of aid. (Alesina and Dollar, 2000; Meernik et al 1998). Based on the ODA data, it appears that Egypt continues to receive disproportionate amounts of aid considering its population: in 1999 Egypt accounts for 22.9% of U.S. aid. Surprisingly, Israel received zero aid from the United States, United Kingdom, and France from 1997 to 1999, though it should be noted that this does not mean it was not receiving substantial aid in the form of arms transfers and through other means. Israel has been removed as a recipient country nonetheless, due to its well-developed technology-based economy, and pseudo-status as a western country.
(IV) Results: Three Allies, Three Foreign Policy Approaches
Aid Variations to Each Region
The results indicate that the United States, United Kingdom, and France each have different considerations when determining their aid allocations to the rest of the world. This can be seen by observing the diversity in amounts of aid given to different regions in Table 4 below, which shows the geographical distribution of each donor’s aid allocations as a percentage of their total ODA for the year 1999.
Table 4 (Tables available upon request)
The United States has a preference for South Asia (34.6% of total US aid), which is also indicated in the regression model, as well as for Central America (24.2%). The United Kingdom focuses almost 80% of its aid on two regions: Africa (52.6%) and South Asia (26.9%). France gives a dramatic 83.2% of its foreign aid to Africa. It is interesting to note that there are very few zeros in the ODA data, suggesting that donors like to give at least a little aid everywhere.
The regional breakdown in Table 4 demonstrates the asymmetry in aid allocations between the US, France, and the UK. The regression models also suggest that each donor state has different priorities when determining their aid allocations to the developing world. Overall, it appears that the United States is primarily concerned about its trade partners, and the human rights records of recipient states. The United Kingdom focuses on trade partners, democracy sometimes, and average life expectancy sometimes, and tends to not give aid to oil exporters. France’s former colonies clearly receive the bulk of its foreign aid.
The United States: Human Rights Advocate and Global Trader
In every model run, the human rights record of the recipient country according to the PTS showed significant and negative, with p=.022 in the original model presented above. That is, the United States consistently gave more aid to developing countries that showed a greater respect for human rights protections. The trade variable also played a significant role exhibiting the expected positive relationship with foreign aid, suggesting that the United States gives more aid to countries with which it has extensive trade relations.
After running the general model for US foreign aid, I removed all countries that the United States transferred arms to. In removing all of the United States’ strategic security allies, I aimed to see if the United States applied more stringent conditionality on human rights or democracy concerns when the recipient pool were not essential states regarding security issues (Barratt and Gartner 2006). Indeed, the significance of the human rights variable strengthened slightly (from p=.022 to p=.020), as did the trade variable. Against my expectations, there was no significant relationship found between the Polity 2 democracy data and foreign aid.
To further test the influence of democracy on donors, I switched in an alternative measure of democracy, the Freedom House data (used in Table 1) on political rights and civil liberties. In the year 1998, the Freedom House and Polity IV data had an absolute correlation of .88, suggesting a high level of consistency between the two datasets. Nonetheless, the human rights data from PTS is more strongly correlated in absolute terms with the Freedom House Data (.40) than it is with the Polity IV data (.19). However, applying the Freedom House data did not find a significant relationship between donor aid and recipient democracy.
UK Aid: Focused on Trade
United Kingdom aid allocations at first did not find associations significant at below p=.05. The closest association was the oil exporter indicator, which came up negative (p=.06, with a coefficient of -3.87). In both the tests where the top 20% of UK trade partner as well as when UK arms trade partners were removed, the negative relationship between oil exports and UK aid became more prominent. This result was surprising considering my original expectation that donor states would provide greater economic assistance to oil exporters with the aim of keeping supplies stable, and in turn maintaining stable prices. In retrospect, the negative relationship could be explained by the fact that rentier states are in less need of aid due to the higher incomes that their natural resources provide them. Indeed, the average GDP per capita in the oil exporting states ($9125) is 275% higher than that of non-oil exporting states ($3324).
When strategic security partners and former colonies are removed, the trade variable for the UK becomes positively significant at p=.035. However, when top traders are removed instead, life expectancy becomes negatively significant at p=.01. The means that the only time that recipient needs are taken into account in any of the models tested for any three of the donor states, is when the United Kingdom is tested against 68 recipient states who are not part of its top 17 trade partners.
Also, while the Polity democracy data gives no significant feedback for the UK, the Freedom House data is positively associated in absolute terms at p=.037, only when no UK arms or colonies are considered. This finding is consistent with a qualitative analysis of four African states by Olsen (1998) that finds donors may be willing to live up to their democratic rhetoric if no major interests are at stake. In this case, it appears that the UK is willing to place political conditionality on foreign aid only if it is not dealing with a strategic security ally, or a former colony.
French Aid: It is all about the Colonies
As found in all of the previous literature, French foreign aid policy is centered on its former colonies, which are significant and positively associated with foreign aid in every model tested. Furthermore, the French models have the highest adjusted R-squared, at 51.16% (compared to 23% for the United States, and 20.43% for the UK).
All of the top 17 trade partners are former French colonies located in Africa, and in 1999 the 20 French aid recipients that are former colonies receive 74.6% of total French aid, compared to 59.8% of UK aid going to UK former colonies. Overall, France gives 83.2% of its aid to Africa. It is important to note that French aid toward former colonies appears to be unconditional. The nature of France’s foreign aid regime are summed up well by Alesina and Dollar (2000:33): “An inefficient, economically closed, mismanaged non-democratic former colony politically friendly to its former colonizer, receive more foreign aid than another country with similar level of poverty, a superior policy stance, but without a past as a colony.”
Interesting Findings: No Democracy; Only the United States cares about Human Rights; no Strategic Concerns
While there were several revealing findings in this research, three are particularly noteworthy. The first is that with the exception of the UK when considering a limited pool of recipients and the Freedom House dataset, democracy played no consistent role in influencing aid allocations. This brings conclusion to this paper’s central question: are western governments applying their foreign policy tools in a way that matches their rhetoric regarding democracy promotion? The answer is clearly no.
However, it is interesting to find that the United States alone paid consistent attention to the human rights records of recipient states. This may be because the United States has no former colonies in this model. Also, Meernik et al (1998:66) suggests that, “if a state possesses overwhelming international power, there are substantial opportunities and incentives to remake the world in its own image… and to socialize leaders in other states to its norms and values.” The United States, with its extensive power and influence as the global hegemon, may be more capable of applying its economic aid selectively and based on political conditionality. France and the UK have smaller aid budgets and choose to focus it where they may have some other advantage in influencing the recipient, such as a historical tie.
Finally, it appears that no states were concerned with security interests. This supports an extension of the trend already documented by Zanger (2000b), who identified that the influence of security allies in the post-cold war world is diminishing over time.
Table 5: Combined Results From all Tests
Type of Donor Interest Variable Employed Expected Association with Aid Association with Aid
Good Governance Polity 2 Democracy/Autocracy ratings positive none
Good Governance Political Terror Scale on human rights negative negative for US
Economic GDP per capita growth positive none
Economic Imports from donor to recipient positive positive for US and UK
Strategic Arms transfers from donor to recipient none none
Strategic Recipient is oil Exporter positive negative for UK
Strategic Region varies by region South Asia for US
Humanitarian GDP per capita negative none
Humanitarian Average life expectancy negative negative for UK sometimes
Historical Relations Colony in 20th century positive positive for France
(V) Conclusion: Harmonizing Western Aid Policies will Help Aid Work
The above results provide two key findings for formulating a policy recommendation. First, donor countries do not consistently require good governance from their aid recipients. Second, there is little symmetry between the US, French, and UK foreign aid regimes, despite their frequent cooperation within the international system as being three leading western powers. Instead, it appears that myopic policies based on narrow self-interests have guided the foreign aid distributions of these donors. “The notion that self-interest pervades the aid calculations of industrialized states has become axiomatic in the scholarly literature. Various interests, in fact, have often been proclaimed explicitly by donor governments and lamented by recipients. But this notion begs the question of which of many potential self-interests are at play in the execution of aid policy” (Schraeder et al 1998:296; Alesina and Dollar 2000). For the year 1999, this research finds that France continues to focus narrowly on its francophone sphere of influence, the UK is focused on trade, and the US alone is placing conditionality on the human rights records of aid recipients, while concurrently giving more aid to its trade partners.
These two discoveries combined can help explain why bilateral aid has been ineffective to date at alleviating poverty, increasing democracy, or stimulating good policy (Alesina and Dollar 2000). Donors do not place political conditions on economic aid, and so recipient leaders are not accountable for the assistance they receive. Even when a donor like the United States does place conditionality on aid, a cut-off recipient will be able to fill the vacuum with aid from another donor seeking to increase influence with that recipient state (Thiel 2004). In essence, donor countries are competing for influence, and this allows autocratic recipients to shop for donors.
A body of research has begun to build arguing that aid is actually making some states worse off. Knack (2004) finds no evidence that aid promoted democracy for the period 1975-2000, and the World Bank (1998) believes aid flowing into developing countries can increase unproductive public consumption when poor institution development and corruption prevail. Recognizing the negative impacts that foreign aid dependency can have on recipient states, some scholars have expressed concern with the continuance of aid to developing regions (Gomes 1994).
Rather than abandoning aid altogether, the international foreign aid regime should be modified so that attaining economic aid hinges on a state’s institutional policies and practices. The prospects for such a system depend on donors recognizing first that aid can promote positive long-term institutional and policy change in developing countries if applied in a transparent and structured manner, and also that it aid a public good.
Foreign aid has the potential to promote democracy and institutional development through technical assistance with electoral processes and strengthening democratic processes, through conditionality, and by “improving education and increasing per capita incomes, which research shows are conducive to democratization” (Knack 2004:251).
Frey (1984) argues that if aid is a public good, then one would expect a negative relationship between each donors’ allocations. This is because each donor would benefit from the others’ investment in a developing state. By this line, if aid is not a public good, then a positive association is expected as donors will compete with each other for influence. What this argument does not recognize is that there are both narrow state benefits associated with gaining influence through aid, and larger public benefits if aid allocations can actually encourage positive development within recipient states. As explained above, political conditionality to date has been undermined by competition among donors for influence in developing states. However, if donors can coordinate their aid policies and compound the impact of their allocations to recipient states (i.e.- good policies will receive significantly more aid and bad policies will receive a complete shut-out of aid), then this will likely encourage developing states to pursue sound policy. Ultimately, this will allow economic aid to promote positive public returns for all donor countries in the form of increased recipient stability and economic development as a product of sound policy. This analysis is predicated on the widely accepted concept that institutions determine long-term development (Burnside and Dollar 2004), and the argument from earlier in this paper that instability in one state leads to insecurity in another state. If aid can help bring stability to the developing world, the aid donors will all benefit from this as well.
For foreign aid to have long-term positive influence on developing government policies, it is important that money is mixed with ideas, and that foreign aid act not only as a transfer of resources, but also as a transfer of values (World Bank 1998; Zanger 2000b). Today, a revolution in aid distribution, to include the collaborative application of good governance policy conditionality, is needed to ensure the long-term development and stability of the world’s poorest countries.
Exploring the specific mechanisms to increase symmetry in the application of political conditionality between aid donors is beyond the scope of this paper, and should provide an interesting topic for future research. Such research should consider programs such as the United States’ Millenium Challenge Account and the European Union New Neighborhood Initiative, which in rhetoric are a good start toward a more effective aid policy (Asmus et al, 2005). Since the end of the Cold War, policy makers have embraced such a revolution in their rhetoric, having called for the continued spread of democratization in the world. However, the western foreign policy budget is not in sync with western rhetoric. Economic aid provides the chance to match words with action; while there are multiple venues for promoting bilateral ties, donor states should reserve economic aid for those recipients who are serious about building the institutions that will promote long-term political and economic growth and stability.
REFERENCES
Alesina, Alberto, and David Dollar. 2000. “Who Gives Foreign Aid to Whom and Why?” Journal of Economic Growth 5:33-63.
Apodaca, Clair, and Michael Stohl. 1999. “United States Human Rights Policy and Foreign Assistance.” International Studies Quarterly 43:185-98.
Asmus, Ronald, Larry Diamond, Mark Leonard, and Michael McFaul. 2005. “A Transatlantic Strategy to Promote Democratic Development in the Broader Middle East.” The Washington Quarterly 28(2): 7-21.
Barrat, Bethany, and Scott Gartner. 2006. Human Rights in OECD Aid Decisions.” Not published.
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Appendices
Appendix 1: U.S. Aid Overall
R-SQUARE ADJUSTED = .2341
P-VALUE
.002
VARIABLE ESTIMATED STANDARD T-RATIO PARTIAL STANDARDIZED ELASTICITY
NAME COEFFICIENT ERROR 70 DF P-VALUE CORR. COEFFICIENT AT MEANS
HUMRITES -2.0032 .8582 -2.334 .022 -.269 -.2424 1.5601
DEMOC .20095 .1533 1.310 .194 .155 .1726 -.0691
LNGDPCAP -1.8505 1.347 -1.374 .174 -.162 -.2313 3.9512
GROWTH -23.753 22.19 -1.070 .288 -.127 -.1132 .0606
USIMPORT 1.8660 .7958 2.345 .022 .270 .3219 -1.0131
USARMS -.95501 1.936 -.4933 .623 -.059 -.0585 .0723
USCOLONY -10.673 7.052 -1.514 .135 -.178 -.1565 .0337
OILEXP -3.7690 2.250 -1.675 .098 -.196 -.2004 .1901
LIFEEXP -0.61366E-01 .1081 -.5676 .572 -.068 -.0978 1.0007
AFRICA .86453 2.545 .3397 .735 .041 .0570 -.0872
WESTASIA 4.4061 3.085 1.428 .158 .168 .1931 -.1389
SASIA 6.3018 3.028 2.081 .041 .241 .2762 -.1987
SAMERICA 4.4153 3.304 1.336 .186 .158 .1935 -.1392
CAMERICA 1.0493 3.196 .3283 .744 .039 .0497 -.0397
CONSTANT 15.608 10.09 1.547 .126 .182 .0000 -4.1828
Appendix 2: U.K. Aid Overall
R-SQUARE ADJUSTED = .2043
P-VALUE
.005
VARIABLE ESTIMATED STANDARD T-RATIO PARTIAL STANDARDIZED ELASTICITY
NAME COEFFICIENT ERROR 70 DF P-VALUE CORR. COEFFICIENT AT MEANS
HUMRITES -.43885 .7844 -.5595 .578 -.067 -.0610 .2900
DEMOC .15079 .1288 1.170 .246 .139 .1487 -.0440
LNGDPCAP -1.5826 1.153 -1.373 .174 -.162 -.2272 2.8672
GROWTH 10.253 19.58 .5236 .602 .062 .0561 -.0222
UKIMPORT .88160 1.122 .7855 .435 .093 .1265 -.1742
UKARMS .79928 2.690 .2972 .767 .035 .0343 -.0150
UKCOLONY 3.1138 2.055 1.515 .134 .178 .2027 -.1583
OILEXP -3.8686 2.024 -1.912 .060 -.223 -.2362 .1656
LIFEEXP -.10127 0.9414E-01 -1.076 .286 -.128 -.1854 1.4013
AFRICA -.86056 2.453 -.3508 .727 -.042 -.0651 .0737
WESTASIA -.22137 2.932 -0.7551E-01 .940 -.009 -.0111 .0059
SASIA 3.8941 2.671 1.458 .149 .172 .1960 -.1042
SAMERICA 3.7018 2.762 1.340 .185 .158 .1863 -.0990
CAMERICA 2.1152 2.618 .8080 .422 .096 .1151 -.0679
CONSTANT 13.716 8.956 1.532 .130 .180 .0000 -3.1189
Appendix 3: French Aid Overall
R-SQUARE ADJUSTED = .5318
P-VALUE
0.000
VARIABLE ESTIMATED STANDARD T-RATIO PARTIAL STANDARDIZED ELASTICITY
NAME COEFFICIENT ERROR 70 DF P-VALUE CORR. COEFFICIENT AT MEANS
HUMRITES 0.14779E-02 .2366 0.6247E-02 .995 .001 .0005 -.0042
DEMOC 0.36697E-01 0.4046E-01 .9071 .367 .108 .0911 -.0465
LNGDPCAP .13978 .3657 .3822 .703 .046 .0505 -1.0995
GROWTH 6.4506 5.988 1.077 .285 .128 .0889 -.0606
FRIMPORT .51160 .2365 2.163 .034 .250 .2709 -.6183
FRARMS -1.2397 .6479 -1.913 .060 -.223 -.1808 .2016
FRCOLONY 1.9013 .6750 2.817 .006 .319 .3171 -.4417
OILEXP -.96454 .6088 -1.584 .118 -.186 -.1482 .1793
LIFEEXP -0.50172E-01 0.2926E-01 -1.715 .091 -.201 -.2312 3.0142
AFRICA -0.56488E-01 .7789 -0.7252E-01 .942 -.009 -.0108 .0210
WESTASIA -.42330 .8516 -.4971 .621 -.059 -.0536 .0492
SASIA -1.1016 .8120 -1.357 .179 -.160 -.1395 .1280
SAMERICA .29404 .8579 .3427 .733 .041 .0372 -.0342
CAMERICA -.30528 .8167 -.3738 .710 -.045 -.0418 .0426
CONSTANT .33503 2.690 .1245 .901 .015 .0000 -.3308
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