The Roles of Aid in Politics Putting China in Perspective

The empirical analysis, motivated by a model of agency-donor interaction, yields results largely consistent with significant US influence over World Bank lending, but through evolving rather than stable relationships. US interests in and policy toward the World Bank change frequently with presidential administrations and with economic and political circumstances.

Taking the 1968 to 2002 period as a whole, two measures of US interests have a significant and robust link with World Bank lending allocations. The first relates to trade. While there is no apparent link with world trade, the differential impact of purchasing of US exports is positive: ceteris paribus, the greater the share of US exports that a country purchased, the more funds the country got from the World Bank. This is consistent with the political economy of trade in the US, which favors exports over imports. The second significant measure may be interpreted as geopolitical. After including a number of controls for development concerns, we find countries favored in US bilateral aid allocations also received a disproportionate share of World Bank funds.

These aggregate results mask significant variation across the period, both in US policy toward the World Bank and in underlying US interests. From the Johnson administration through the first Bush administration, the link with US exports remains positive and, except in Nixon’s first term, significant. The first Clinton administration saw a change with a negative though insignificant relationship, reflecting large aid flows to transition economies which had no established trade ties with the US. The years since then suggest this may be a transitory pattern with trade interests reemerging as a significant influence. The relative consistency of the trade variable, as compared to the financial flow indicators, mirrors the more long term nature of trade ties.

The link between US aid and World Bank lending is more variable; we would expect this since bilateral and multilateral aid are distinct foreign policy tools. In many situations when a powerful donor wishes to fund a recipient country, it would provide its own funds and pressure the multilateral agency to supplement these. However, in some cases, the logic is reversed, for example when the donor cannot publicly support the recipient. This may explain why US bilateral aid enters positively and significantly in the Ford, Carter, and first Clinton administrations, but negatively and significantly in the second Reagan administration.

Taken as a whole, the evidence points to US influence over the World Bank, influence used in pursuit of US economic and strategic interests. These links are substantial though not overwhelming.¹¹ Nonetheless, when a multilateral organization serves the narrow interests of a powerful member, its unique character—its legitimacy—is necessarily eroded. Equally, the ability to commit credibly to future policies is reduced as donor objectives change with its domestic political cycle. This poses a critical problem for the World Bank and its current pursuit of selectivity. The policy of ex post conditionality promises substantial funding for developing countries governments only after reforms have taken place. Governments’ willingness to do this depends heavily on faith in the reform package and the implicit promise of future loans, that is, on the World Bank’s legitimacy and credibility.

The advent of the War on Terror and the leadership of the George W. Bush administration have clearly reshaped and refocused many aspects of U.S. foreign policy. There is considerable concern in the development community that the renewed importance of foreign aid as a geopolitical tool has undermined the development orientation of aid. One notable possibility is a re-emergence of Cold War practices, with less emphasis on need and hence declining funds for poor but geopolitically unimportant countries. In this paper, we analyze changes in aid funding from the Cold War to the War on Terror, assess the impact of these changes on aid to poor countries, and explore new trends in U.S. aid allocation policies.

The current decade began with a shift from a liberal to a conservative government, followed by a huge increase in foreign aid. Our analysis of the overall U.S. aid budget over a longer time horizon (1955 to 2006), however, finds that conservative governments typically provide substantially less economic aid than do liberal governments, all else equal. This suggests that a simple comparison of budget levels understates the effect of the War on Terror and underscores the enormous impact of the War on Terror on aid.

But what about the allocation of this larger budget? Does the War on Terror signal a return to Cold War aid practices – less funding for poor countries, less emphasis on need – as some scholars have suggested? According to our evidence, as the overall U.S. economic aid budget has increased with the War on Terror, so too has U.S. aid to poor countries of little immediate geopolitical importance. Indeed, since 1996 expected aid to lower income countries has increased steadily. But there has been an important shift in another aspect of U.S. aid allocation, one that coincides precisely with the George W. Bush administration taking office and the start of the War on Terror. For the 35 years preceding the War on Terror, there was a clear upward trend in the weight given to need in the allocation of aid to core recipients. In the years since, the weight given to need has decreased rapidly and steadily. This sharp reversal is not well explained by other developments, such as the shift toward greater selectivity in aid allocation. With the general increase in aid, thus far the decreased weight on need has merely slowed the growth of U.S. aid to poorer countries rather than actually reducing aid levels. But if this policy shift away from need outlives the general increase in the aid budget, U.S. aid to the poorest developing countries will decrease.

Some observers would like to return to a system of international humanitarian assistance which is essentially private.⁵² This view reflects and erroneous understanding of the situation. The reason that governments and intergovernmental organizations became involved was that the PVOs acknowledged the lack of financial and commodity resources to handle the problems, and asked the public authorities for aid. It is only governments, especially the U.S. government, which have access to money and commodities in sufficient quantity to respond to the sizeable humanitarian problems arising principally out of the developing countries. Particularly from the standpoint of donations of all types, but also at times from the standpoint of logistical support, governments must necessarily play a central role in international humanitarian assistance.

The U.S. government is likely to remain directly involved in all phases of international humanitarian relief, whether it is disaster relief centered around food, war relief, or refugee relief. The lead agencies like the ICRC and the UNHCR depend on that support, as do the charitable PVOs themselves. There is strong support for an active humanitarian assistance program in Congress, with some elements trying to increase the level of funding despite general budgetary and economic problems.⁵³ With considerable public support, Congress has protected the moral and humanitarian aspects of the Food for Peace Program. There is increased competency in AID and its Office of Disaster Relief, although questions remain about the sufficiency of ties to intelligence sources, proper staffing, and clarity of priorities.

NGOs like the ICRC, as well as IGOs like the UNHCR and the World Food Program, remain important to the United States as lead agencies and focal points for action. Many charitable PVOs are still seen as acceptable, flexible, knowledgeable conduits for assistance. The task for the U.S. is to find the proper mix of public and private agencies that will provide the best and most rapid delivery of assistance to those civilians in exceptional need.

The United States has shown over the years that there can be an assistance policy that is primarily driven by humanitarian concerns, even if at times strategic and economic considerations of an expediential sort get mixed in.⁵⁴ Some of this is inevitable in an imperfect world. The use of multilateral agencies and PVOs can help restrain this sort of influence, so that, at least at the margins of its foreign assistance program, the United States can claim without controversy to be a moral nation. So much the better is this form of morality turns out to be expediential as well.

Fukuyama, Francis (2004), “The Imperatives of State Building,” in Journal of Democracy, Vol. 15, No.2, pp. 17–31.

State-building—the creation of new governmental institutions and the strengthening of existing ones—is a crucial issue for the world community today. Weak or failed states are close to the root of many of the world’s most serious problems, from poverty and AIDS to drug trafficking and terrorism. While we know a lot about state-building, there is a great deal that we do not know, particularly about how to transfer strong institutions to developing countries. We know how to transfer resources, people, and technology across cultural borders. But well-functioning public institutions require certain habits of mind, and operate in complex ways that resist being moved. We need to focus a great deal more thought, attention, and research on this area.

The idea that building up, rather than limiting or cutting back the state, should be at the top of our agenda may strike some as odd or even perverse. After all, the dominant trend in world politics for the past generation has been the critique of “big government” and the attempt to move activities from the state sector to private markets or to civil society. Yet particularly in the developing world, weak, incompetent, or nonexistent government has been and continues to be a source of severe difficulties.

For example, the AIDS epidemic in Africa has infected more than 25 million people and will take a staggering toll of lives. AIDS can be treated, as it has been in the developed world, with anti-retroviral drugs. There has been a strong push to provide foreign assistance for AIDS medicines or else to force pharmaceutical companies to permit the marketing of cheaper forms of their products in Africa and other parts of the Third World.

While part of the AIDS problem is a matter of resources, another important aspect is the government capacity to manage health programs. Anti-retroviral drugs are not only costly, but complicated to administer. Unlike one-shot vaccines, they must be taken in complex doses over long periods of time; failure to follow the proper regimen may actually make the epidemic worse by allowing the HIV virus to mutate and develop drug resistance. Effective treatment requires a strong public-health infrastructure, public education, and knowledge about the epidemiology of the disease in specific regions. Even if the resources were there, the institutional capacity to treat the disease is lacking in most countries in sub-Saharan Africa (though some, like Uganda, have done a much better job than others). Dealing with this epidemic thus requires helping afflicted countries develop the institutional capacity to use what resources they may acquire.

Lack of state capacity in poor countries has come to haunt the developed world much more directly. The end of the Cold War left a band of failed or weak states stretching from the Balkans through the Caucasus, the Middle East, Central Asia, and South Asia. State collapse or weakness had already created major humanitarian and human rights disasters with hundreds of thousands of victims during the 1990s in Somalia, Haiti, Cambodia, Bosnia, Kosovo, and East Timor. For a while, the United States and other countries could pretend that these problems were just local, but the terrorist attacks of September 11 proved that state weakness constituted a huge strategic challenge as well. Radical Islamist terrorism combined with the availability of weapons of mass destruction added a major security dimension to the burden of problems created by weak governance. In the wake of military actions taken since 9/11, the United States has taken on major new responsibilities for nation-building and state-building in Afghanistan and Iraq. Suddenly the ability to shore up or create from whole cloth missing state capabilities and institutions has risen to the top of the global agenda and seems likely to be a major condition for the possibility of security in important parts of the world. Thus state weakness is both a national and an international issue today of the first order.

Goldstein, Judith and Keohane, Robert 0. (eds.) (1993), Ideas and Foreign Policy: Beliefs, Institutions, and Political Change, Ithaca, N.Y.: Cornell University Press.

Goldstein, Judith and Keohane, Robert 0. (1993), “Ideas and Foreign Policy: An Analytical Framework,” in Goldstein, Judith and Keohane, Robert 0. (eds.), Ideas and Foreign Policy: Beliefs, Institutions, and Political Change, pp. 3-30, Ithaca, N.Y.: Cornell University Press.

This book is about how ideas, which we define as beliefs held by individuals, help to explain political outcomes, particularly those related to foreign policy. As social scientists we are interested in using empirical evidence to evaluate the hypothesis that ideas are often important determinants of government policy. Our argument is that ideas influence policy when the principled or causal beliefs they embody provide road maps that increase actors’ clarity about goals or ends-means relationships, when they affect outcomes of strategic situations in which there is no unique equilibrium, and when they become embedded in political institutions.

For millennia philosophers and historians have wrestled with the issue of the role of ideas in social and political life, and for as long as social sciences has existed its practitioners have debated these questions. In many ways this volume is an extension of the approach first enunciated by Max Weber. Like Weber, we do not argue that ideas rather than interests (as interpreted by human beings) move the world. Instead, we suggest that ideas as well as interests have causal weight in explanations of human action.

If the study of impact of ideas on policy is so old, why revive it now? Simply because in modern political economy and in international relations, the impressive elaboration of rationalist explanations of behavior has called into question old assumptions about whether the substantive content of people’s ideas really matters for policy. To many economists, and to political scientists captivated by their modes of thinking, ideas are unimportant or epiphenomenal either because agents correctly anticipate the results of their actions or because some selective process ensures that only agents who behave as if they were rational succeed. In such functional arguments, effects explain causes through rational anticipation or natural selection.¹ The extreme version of this argument is that ideas are just hooks: competing elites seize on popular ideas to propagate and legitimize their interests, but the ideas themselves do not play a causal role.² These interests may be strictly material – in many economic models, individuals are wealth-maximizers – but they also may encompass broader utility functions, in which such values as status and power are included. Whatever the details, in this rationalist view interests are given and logically prior to any beliefs held by the actors.

The most widely accepted systemic approaches to the study of international relations, realism and liberal institutionalism, take rationalist models as their starting points. Both realism and institutionalism assume that self-interested actors maximize their utility, subject to constraints. In such models, actors’ preferences and causal beliefs are given, and attention focuses on the variants in the constraints faced by actors.³ More analysts who rely on such approaches have relegated ideas to a minor role.⁴ […]

At the most fundamental level, ideas define the universe of possibilities for action. As John Ruggie has pointed out, “fundamental modernist concepts such as market rationality, sovereignty, and personal privacy would not have been comprehensible before the development of appropriate terms of social discourse.”¹³ These conceptions of possibility, or world views, are embedded in the symbolism of a culture and deeply affect modes of though and discourse. They are not purely normative, since they include views about cosmology and ontology as well as about ethics. Nevertheless, world views are entwined with people’s conceptions of their identities, evoking deep emotions and loyalties. The world’s great religions provide world views; but so does the scientific rationality that is emblematic of modernity.

Ideas have their broadest impact on human action, when they take the form of world views. The world’s major religions, for instance, have deeply affected human social life in a variety of ways and across millennia.¹⁴ Similarly, it has often been argued that new conceptions of sovereignty led, at the Peace of Westphalia in 1658, to a new international order, dominated by independent states.¹⁵ Still, the connections between world views and shifts in material power and interests are complex and in need of investigation. They do not all run in one direction.

Of the major ideas discussed in this volume, none – neither human rights nor sovereignty not Stalinism – would have made any sense in those premodern societies in which people’s lives were governed by notions of magic or fate. Indeed, all of the chapters in this book take for granted a world view according to which human beings are assumed to be active agents in the construction of their own destinies. For traditionalist or religious fundamentalist societies even today, the individualistic and secular scientific premises of this world view remain intellectually and morally alien. Since all of the subjects discussed in this volume have been profoundly affected by modern Western world views, and our authors all share this modernist outlook, we can say relatively little about the impact of broad world views on politics. Only John Ferejohn and Stephen Krasner, writing about events in the seventeenth century, explicitly focus on changes that appear to have been affected by the intellectual movement toward individualistic, human-centered thinking. Understanding the impact of world views on general politics or foreign policy would require a broader comparative study of cultures, such as that on which Hedley Bull was engaged at the end of his too-brief career.¹⁶

Our second category of ideas, principled beliefs, consists of normative ideas that specify criteria for distinguishing right from wrong and just from unjust. The views that “slavery is wrong,” that “abortion is murder,” and that human beings have the “right of free speech” are principled beliefs. Principled beliefs are often justified in terms of larger world views, but those world views are frequently expansive enough to encompass opposing principled beliefs as well. For instance, although many opponents of slavery justified their arguments with references to Christianity, Christianity had tolerated slavery for almost two millennia. Principled beliefs mediate between world views and particular policy conclusions; they translate fundamental doctrines into guidance for contemporary human action. Millions of people have died on behalf of their principled beliefs; many people now alive are willing to do so. The revolutions of 1989 in Eastern Europe attest to the continuing vibrancy of principled beliefs in politics: people risked their lives in mass demonstrations, although material self-interest alone would have led them to be “free riders.”

Changes in principled beliefs, as well as changes in world views, have a profound impact on political action. In Chapter 6, for example, Kathryn Sikkink argues that the killing, torture and maltreatment of millions of innocent people during World War II led both Europeans and Americans to believe that human rights should properly be a matter for international agreement and regulation, not shielded from international surveillance by the doctrine of sovereignty. The effects on policy were profound, since new ideas on human rights conditioned the definition of nations’ interests. “The adoption of human rights policies,” she suggests, “represented not the neglect of national interest but a fundamental shift in the perception of long-term national interests.”

The ideas in a third category, causal beliefs, are beliefs about cause-effect relationships which derive authority from the shared consensus of recognized elites, whether they be village elders or scientists at elite institutions. Such causal beliefs provide guides for individuals on how to achieve their objectives. Scientific knowledge may reveal how to eliminate smallpox, for instance, or how to slow down the greenhouse effect in the earth’s atmosphere. Similarly, the Hungarian and Polish revolutions in the fall of 1989 showed people in East Germany and Czechoslovakia that unarmed mass protests could bring down long-standing repressive governments. Under such conditions, the efficacy of individual action depends on support from many other people, and therefore on the existence of a set of shared beliefs. Causal beliefs imply strategies for the attainment of goals, themselves valued because of shared principled beliefs, and understandable only within the context of broader world views.

Changes in the conceptualization of cause-effect relationships take place more frequently and more quickly than do changes in either world views or principled beliefs. Thus specific policy shifts can often be traced to such changes, particularly when technical knowledge is expanding. The foreign policies of the United States and many other countries with respect to regulation of the production of chlorofluorocarbons (CFCs), for example, changed dramatically between 1985 and 1990, largely in response to new scientific evidence about the hole in the atmospheric ozone layer over Antarctica. Policy shifted because scientific models linked ozone loss to cancer and climate change, and attributed much of it to increased levels of CFCs in the atmosphere.¹⁷ John Ikenberry’s discussion of the importance of monetary theory in the postwar economic settlement (Chapter 3) provides another example of how causal ideas –here ideas about the functioning of the economy – influence policy outcomes. Similalry, Nina Halpern argues in Chapter 4 that Stalinist economic ideas, which postulated a radically different set of relationships between market participants, became a guide for economic development in Eastern Europe.

Our categorization of beliefs is clearest in the abstract; in social life all three aspects of ideas may be linked. Doctrines and movements often weave conceptions of possibilities and principled and causal ideas together into what may seem to be a seamless web. The “epistemic communities” studied by Peter Haas and other scholars, for example, are constituted by knowledge-based experts who share both cause-effect conceptions and sets of normative and principled beliefs.¹⁸ Nevertheless, it is worthwhile for purposes of causal analysis to distinguish ideas that develop or justify value commitments from those that simply provide guidance as to how to achieve preferred objectives.¹⁹

The Impact of Ideas on Policy

The central issue of this volume concerns causality: Do ideas have an impact on political outcomes, and if so, under what conditions? The most egregious error that proponents of the role of ideas have made is to assume a causal connection between the ideas held by policy makers and policy choices. Ideas are always present in policy discussions, since they are a condition for reasoned discourse. But if many ideas are available for use, analysts should not assume that some intrinsic property of an idea explains its choice by policy makers. Choices of specific ideas may simply reflect the interests of actors. It is crucial for anyone working on ideas and policy to recognize that the delineation of the existence of particular beliefs is no substitute for the establishment of their effects on policy. Advocates of an ideational approach to political analysis must begin by identifying the ideas being described and the policy outcomes or institutional changes to be explained. We must also provide evidence about the conditions under which causal connections exist between ideas and policy outcomes.

In general, we see ideas in politics playing a role akin to that enunciated by Max Weber early in this century: “Not ideas, but material and ideal interests, directly govern men’s conduct. Yet very frequently the ‘world images’ that have been created by ideas have, like switchmen, determined the tracks along which action has been pushed by the dynamic of interest.”²⁰ Ideas help to order the world. By ordering the world, ideas may shape agendas, which can profoundly shape outcomes. Insofar as ideas put blinders on people, reducing the number of conceivable alternatives, they serve as invisible switchmen, not only by turning action onto certain tracks rather than others, as in Weber’s metaphor, but also by obscuring the other tracks form the agent’s view.²¹ […]

Conclusion

Ideas can be categorized as world views, principled beliefs, and causal beliefs. They can have impacts on policy by acting as road maps, helping to cope with the absence of unique equilibrium solutions, and becoming embedded in durable institutions. Policy changes can be influenced by ideas both because new ideas emerge and as a result of changes underlying conditions affecting the impact of existing ideas. Ideas matter, as a result of a system of interacting multiple causes of which they are a part. […]