To What Extent Do National Interests Influence National Foreign Aid Policy

To what extent do national interests influence national foreign aid policy?

I        When thinking about foreign aid, many people perceive it as a form of doing good and helping the world develop into a better place. From this altruistic perspective, aid is supposed to help poor people in Third World countries by improving the social, economic and political situation of those countries. Governments from developed countries thus use foreign aid as a tool to promote humanitarian concerns (Fuller, 2002: 78). According to this positive and idealist perspective, foreign aid can save and improve the life of millions of people living in underdeveloped countries around the world. The financial and technical resources that are allocated by the donor countries then address issues such as health, infrastructure and education (BorgenProject, 2016; Fuller, 2002:78). This lies in line with the Organization for Economic Cooperation and Development’s (OECD), or more specifically the Development Assistance Committee’s (DAC) definition of aid. The DAC defines foreign aid as Official Development Assistance (ODA) which consists of a flow of (financial) resources to countries that are named on the DAC list of recipients. According to the official ODA definition a transaction by a donor or developed country to a recipient or developing country is “administered with the promotion of the economic development and welfare of developing countries as its main objective” (OECD, 2017; Fuchs, Dreher and Nunnenkamp, 2013: 172,173). However, recently the benefits of foreign aid have been under scrutiny. As The Guardian (2011) put it “giving aid to poor countries is hardly a great act of generosity”. From this more realistic perspective the decision to give foreign aid to a developing country is made with strategic concerns in mind and could increase a donor countries political support or economic advantage (Fuller, 2002:79). Donor countries may thus give aid for humanitarian reason, but may also have national interests in supporting developing countries. This leads to the following question: to what extent do national interests influence national foreign aid policy? This essay thus aims to ‘get the facts straight’ by discussing what ‘strategic’ reasons donor countries could have to provide foreign aid. The next part further discusses the reasons for donor or developing countries to give foreign aid to recipient counties from both the realistic and idealistic perspective. Finally, a summary of the most important argument will be given and the research question of this essay will be answered.

II         When considering the positive view that foreign aid is provided for humanitarian reasons, an important question that arises is whether the support given by the developed countries actually helps the recipient countries. Some developed countries have complained or felt offended about the lack of appreciation of the receiving countries for years of foreign aid that was provided (Wittkopf, 1973:868). But the developing countries might have a good reason to do so: according to multiple articles on foreign aid policies, the aid flowing from donor to the receiving countries is wasted and only increases unproductive public consumption. Economists were noticing that a high amount of foreign aid does not always produce economic growth in de developing countries. Big amounts of foreign aid is even correlated with lower economic growth, as is shown in a working paper by the National Bureau of Economic Research (NBER: 2005).  Foreign aid could weaken the relationship between the recipients government and its citizens. However, according to Alesina and Dollar (2000), this failure can only partly be blamed on the receiving countries themselves (corruption, bureaucracy, lack of efficiency). Also quite a few inquiries on foreign aid argue that a large part of aid giving by donor countries is driven by political and strategic reasoning (Alesina and Dollar, 2000). Countries thus give aid for their own interest, not taking the political situation of the receiving country into account. Foreign aid gives the donor countries some relative power over their receiving countries. First of all foreign aid could provide a donor country with political support. The recipients are expected to show some ‘gratitude’ in the form of political support on international subjects (TheGuardian: 2011). For example Japanese aid goes mainly to nations with comparable international political interests. The other way around a donor country could also starve a poor or developing county into political support, and withhold help if this support is not given (Wittkopf, 1973:887,888, Alesina and Dollar, 2000). Second, recipient countries may trade more with donors, furthering the donor’s economic interest. Donor countries can use foreign aid as an export promotion strategy which could lead to beneficial in- and export trade deals for the developed countries (Bandyonpadhyay and Vermann, 2013). The research shows that trade interest is positively correlated with higher levels of foreign aid (Wittkopf, 1973: Bandyonpadhyay and Vermann, 2013). Another argument for donor countries to provide foreign aid is because of national security reasons. As top United States (U.S.) military leader James Jones put it “not all foreign crises are solved on the battlefield”. Foreign aid is used by the developed countries as a strategic tool of national security by investing in the enhancement of stability in the worlds ‘vulnerable’ places.  In this way developed countries have better grip on issues like terrorism, radicalism, refugees and human trafficking that are developing in highly fragile places (Politico, 2017; Bandyonpadhyay and Vermann, 2013).However apart from the self-interested reasons of countries to support developing countries with foreign aid, some altruism can also be found: Donor countries ties with a former colony seems to be an important reason to provide foreign aid. Many Third World countries started developing the postcolonial period. Thus the former colonial powers feel obligated (and maybe a little guilty) to facilitate their development through provision of resources in the form of foreign aid (Alesina and Dollar, 2000; Bandyonpadhyay and Vermann, 2013). Also, donor countries might also really care about doing some good in the world by contributing to solving poverty and underdevelopment in the world (Fuller, 2002). There are however a lot of differences in why donor countries decide to provide foreign aid, and not all countries have the same reason to do so. In the research of Alesina and Dollar (2000) the big three donor countries all had different main reasons to give foreign aid: Japans seemed to care most about political influence and voting patterns, where France cared more about its former colonies and the U.S. for national security and trade reasons.

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