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For the developed, not the developing: Explaining the change in foreign aid policy patterns

Image credit: US Army (Flickr: Creative Commons)

Earlier this year, President Donald Trump took to twitter to threaten a moratorium on foreign aid payments to Palestine. The President wrote a series of tweets in which he criticised Palestine for its lack of “appreciation and respect” for the substantial aid it receives from the US, and its refusal to negotiate a peace treaty with Israel.

Since then, the nature of US development assistance to countries around the world has repeatedly been called into question. Trump’s tweets seemed to suggest that US foreign aid is a favour, or a charitable contribution, that only benefits the recipient countries.

This line of reasoning accounts for the State Department’s 30% budget cuts to foreign aid last year. The document, ‘America First, A Budget Blueprint to Make America Great Again’, justified this drastic reduction by arguing that "it is time to prioritise the security and wellbeing of Americans, and to ask the rest of the world to step up and pay its fair share”.

However, the anachronistic idea that development – via the vehicle of foreign aid donations – is motivated by altruism on behalf of the donor, with windfall gains for the recipient developing nation, is no longer evidenced in foreign aid patterns.

The exponential growth in foreign aid has been accompanied by a body of literature seeking to unravel when aid is most effective, and the relationship between foreign donors and recipient nations in shaping its delivery. Yet alongside the jump from $85 billion in 1990 to $147 billion in 2015 of development assistance from members of the OECD, little attention has been paid to the changes in what actually determines aid allocation – and the increasingly important role development is playing in the international community in the 21st century.

Following World War Two, foreign aid increasingly became a favourable policy tool in the Cold War bi-polar environment, and aid allocation revolved around the security and economic interests of the donor country, rather than the promotion of development in the receiving country. These geopolitically motivated aid donations declined in former clientele states as the Cold War came to a close and the Soviet Union collapsed. The Democratic Republic of the Congo (at the time, Zaire) was the recipient of $1.1 billion in aid from OECD member states when the regime actively rejected communism in the 1980s. By 1992, this amount had fallen to just $152 million.

The end of the Cold War saw a growing interdependence between states in the global community, a phenomenon attributed to increased globalisation. Issues that had hitherto only been experienced in developing countries started to spread to developed donor countries. These negative externalities – or spill-over effects – took the form of terrorism, trafficking of substances, disease and migration. Increasingly, the welfare of citizens in donor countries has become interlocked with the welfare of citizens from the developing world.

In her seminal article on aid allocation, Sarah Blodgett Bermeo argues that donor countries are increasingly motivated by so-called ‘targeted development’, which signals a water-shed change in development policy. Simply put, Bermeo claims “if the goal is to prevent problems such as conflict, mass migration, climate change, and others from having an impact on the donor, assistance will be targeted toward those states most likely to inflict these costs in the first place”.

The implications of this shift don’t just pose a challenge to the ‘moral vision’ of aid, but how aid itself is allocated. If aid donors are motivated by self-interest, then as Kilby and Dreher have suggested, “its allocation decision does not depend on how the recipient uses aid and the recipient might not select developmental policies”. Even more concerning is the idea that developing countries who are not as well connected to the developed world – and are therefore producing fewer spill-over effects in donor countries – will receive less aid.

Although studies on the effectiveness of these strategies are lacking, and perhaps the intentions behind aid allocation will not achieve the desired results, it will be interesting to see how countries like the United States, and other major development aid donors such as the United Kingdom and Germany, direct aid as a foreign policy tool as crises in areas like the Middle East intensify.

Hayley Pring is the International Trade and Economy Fellow for Young Australians in International Affairs.

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