TY - JOUR
AU - Faust, Jörg
AB - Abstract Does foreign aid prop up authoritarian regimes or is it conducive to democratic reforms? We use a two-level perspective that takes the domestic incentives of both the recipient and the donor into account to review the existent literature respecting this question. By bringing together research on democracy and autocracy with the literature on aid effectiveness and the political economy of aid provision, we provide a political economy perspective against which the mixed effects of foreign aid on political regimes can plausibly be explained. Against this background, research on aid effectiveness may give more attention to incentives in recipient countries and may take on a more comprehensive perspective on international relations. At the same time, the debate on authoritarianism may also gain insight into authoritarian strategies by investigating aid negotiations. Donor countries continue to provide the Ethiopian government with huge sums for development assistance. This places them in an awkward position. On the one hand, they are aware of the Ethiopian government's serious human rights violations and their own role in supporting the state apparatus. On the other, they know that confronting the EPRDF government on its human rights record could endanger projects and thwart their efforts to contribute to Ethiopia's economic development. (Human Rights Watch 2010:23) Does foreign aid prop up dictators? The citation from a Human Rights Watch report on the use of development aid by the Ethiopian government is not the first to raise concerns about foreign aid stabilizing autocratic and illiberal structures in developing countries. As a response to this challenge, donor agencies have tried to condition foreign aid on complex governance assessments so as to avoid supporting authoritarian or highly corrupt regimes; or, they have sought to circumvent these governments by channeling their assistance directly to non-governmental and civil society organizations (Dietrich 2012). Moreover, European donors in particular have increasingly spent aid with the purpose of promoting democracy, human rights, and accountable institutions. However, whether these attempts have been successful or whether foreign aid has helped to stabilize autocratic structures in developing countries remains a heated debate. Given the ambiguous empirical evidence regarding the impact of foreign aid on political regimes, it is puzzling that donors who claim to be committed to democracy and human rights continue to give aid to recipients (such as Ethiopia) with dubious governance practices, and that recipients, despite having agreed to aid conditionality and democracy aid, often still fail to democratize. In this article, on the base of a synthesizing literature review, we explain: under which circumstances foreign aid can be conducive to democratization, and under which circumstances it is likely to foster authoritarianism. Thereby, our analytical focus is guided by a two-level game perspective, which suggests that actors strategically bargain at the domestic and the international level to pursue their domestically defined self-interests (Putnam 1988; Moravcsik 1993, 1997). This explicit focus on the political preferences and incentive structures of domestic actors in both donor and recipient countries allows us to plausibly explain the diverse findings of the aid-effectiveness debate and to identify existing research gaps. We build on three interrelated strands of research. We depart from the literature in field of comparative politics that focuses on incentive structures in different political regimes and generally perceives redistributive policies to be the cornerstone of political survival. Differentiating not only between democratic and autocratic regimes, but also taking into account insights from recent research on authoritarianism, we establish that autocratic recipients can have an interest in the promotion of supposedly democratic institutions without, however, being committed to democratization. Such democratic institutions can help authoritarian recipients to overcome credibility problems associated with redistribution to small support groups and thereby strengthen their rule. We then turn to the aid-effectiveness debate, which puts particular emphasis on the problem of aid fungibility and the difficulties of making political conditionality work to support democratic reforms and shield aid against political capture. This literature, however, pays little attention to the logic of political survival in recipients, while being overly focused on donor coordination. Finally, we consider research on the domestic politics of donor behavior to explain why donors often fail to improve their aid policies in a way that supports democratic reforms rather than stabilizing autocratic structures. By explicitly combining these different strands of research, we are able to deliver a neat picture of the nexus of foreign aid and political regime type. Overall, it seems rather logical that foreign aid mostly stabilizes the prevailing political structure. Both recipient and donor governments tend to use foreign aid to serve narrow agendas intended to assure political survival. On the one hand, autocratic recipient governments use foreign aid at least partly for their survival, be it by redistributing additional rents to strategic groups or by financing repression. Donors, on the other hand, are often unable to solve this challenge of aid fungibility in a satisfactory manner. They can hardly manipulate the endogenous incentives in authoritarian regimes; effective political conditionality is often obstructed by the political economy in donor countries, by goal conflicts between developmental objectives and alternative foreign-policy goals, and by the need to satisfy domestic constituencies. Against our interpretation of the current state of the literature, we recommend that aid-effectiveness studies should put more emphasis on analyzing the varying domestic incentives of authoritarian or semi-authoritarian governments confronted with democracy aid or political conditionality attached to foreign assistance. At the same time, scholars interested in authoritarianism may profit from using data generated in the context of aid negotiations to understand better the strategic calculations of authoritarian governments. In a similar vein, the interaction of political institutions, government ideology, and public opinion in donor countries merits further scholarly attention, given that those domestic factors are important determinants of how and when foreign aid is delivered. Finally, studying the potential effects of foreign aid on political dynamics in recipient countries should move beyond its traditional boundaries. This implies further effort to investigate how democracy aid and political conditionality interact with conditionality and sanctions in other policy fields such as trade or investment. Furthermore, the changing international context also implies that the effects of Western foreign aid should no longer be studied in isolation from nontraditional donors. Political Order, Incentives, and Autocratic Survival Political Survival in Democracies and Autocracies During the last two decades, influential work in the social sciences has addressed how political institutions and actor constellations shape economic and social policies that determine a society's level of development (Olson 1993; Acemoglu, Johnson, and Robinson 2002; North, Weingast, and Wallis 2009). A crucial argument in this strand of research is that political regimes set incentives for how governments attempt to gain the support of those groups they need for their political survival (for example, Bueno de Mesquita, Smith, Siverson, and Morrow 2003). Thus, to better understand the effect of foreign aid on different political regimes, our point of departure is the logic of political survival. The logic of political survival rests on the assumption that political actors are office seekers. Once in power, governments and individual politicians seek to remain in office. The notion of political survival, therefore, refers to not being removed from a political position through election defeats, impeachments, coups, or other means (Bueno de Mesquita et al. 2003). For this purpose, governments exchange policy contents for political support. Although every government needs some societal support to survive politically, the size and composition of support groups differ and are defined by political institutions. Some governments depend on the support of large parts of the society, when access to power is based on competitive elections. Others depend on the support of a rather small fraction of societal groups, such as the military, the bureaucracy, mighty oligarchs, or repressive police forces and secret services. Under the constraint of scarce resources, governments try to provide their crucial support groups with benefits through well-targeted policies. The nature of these policies, in turn, is dependent on the size of the needed support group, dubbed the distribution coalition. When the support group is small and exclusive, governments will find it more effective to provide privileges, usually through the mechanisms of patronage and clientelism. In contrast, when incumbents depend on the support of larger parts of the society, it becomes increasingly rational for such large-distribution coalition governments to provide non-exclusionary public goods (for example, Bueno de Mesquita et al. 2003). For this reason, democratic leaders have a stronger inclination toward the encompassing interests of society than do autocrats. Increasing democracy levels will orient governments toward the growth-enhancing provision of public goods rather than greater rent-distribution (Olson 1993; Lake and Baum 2001; Deacon 2009; Doucouliagos and Ulubasoglu 2010; Blaydes and Kayser 2011). Thus, even if democracies are also characterized by the influence of interest groups and clientelism, the impact of such rent seeking is constrained by the fact that democratic governments have to satisfy encompassing majorities in order to survive. In contrast, autocratic governments generally depend on a relatively small fraction of society while substantially constraining the political freedom of a majority (Bueno de Mesquita et al. 2003). Hence, autocrats are confronted with the permanent threat of being overthrown. As such, they are not only interested in effectively controlling and repressing parts of the society, but also in providing themselves and their support groups with economic privileges. This structural difference in survival strategies between democracies and autocracies is the main political challenge of the transition to democracy, because such a change threatens the privileges of elites in autocracies and could make them responsible for past political repression. Therefore, they often have little interest in a transition to democracy. However, as we will discuss in the following section, the logic of political survival can sometimes create incentives for autocratic leaders to take steps in the direction of democratization. Autocratic Heterogeneity and Survival In democracies, as with most autocracies, the distribution of privileges is necessary to buy loyalty. However, in democracies, recurring elections enhance a trust relationship in which individuals and parties can develop a reliable mechanism of mutual support; this option often does not exist in autocracies. In autocracies, it is often unclear how transactions of political exchange between governments and their supporters can credibly be enforced to ensure that both sides comply with their promises, and thus ensure regime stability (Wintrobe 1998; Magaloni 2008). Thus, it is more difficult for autocrats to identify loyal supporters in the first place, because, due to the use of repression, they cannot know who truly supports them (Tullock 1987). Also, autocrats need to prevent the beneficiaries of redistribution from amassing a sufficient degree of power to overthrow the dictator. Both problems can be overcome with institutions; in particular, the massive increase in “electoral” or “competitive” authoritarianism has served this purpose (Levitsky and Way 2002; Schedler 2006). Many authoritarian regimes either introduced institutions such as elections and legislatures, which are commonly associated with democracy, or they liberalized and allowed for more formal political rights and inter-party competition. However, these forms of political liberalization often were intended to not endanger the ruling elite and a dominant party often continued to monopolize power (Magaloni and Kricheli 2010). In conjunction with some elements of competition, these dominant parties have been found to be specifically suited for overcoming the above-mentioned enforcement and information problems. These pseudo-democratic institutions facilitate interaction between the government, elites, and even the broader public (Magaloni and Kricheli 2010). They serve to constrain autocratic discretion to a certain extent, and thus enhance the credibility of the autocrat's commitments. Political parties and legislatures serve to control appointments and promote institutionalized power-sharing between the ruler and his followers (Wintrobe 1998; Gandhi and Przeworski 2007; Gehlbach and Keefer 2007; Magaloni 2008; Wright 2008a; Kricheli and Livne 2011). At the same time, dominant parties and mass organizations function as channels for information on the loyalty of citizens and the subsequent targeting of rewards or punishments. As a channel for redistribution, they enhance the co-optation of crucial societal groups and the demobilization of agents of change (Lust-Okar 2005; Kim and Gandhi 2010; Conrad 2011). In essence, dominant party regimes tend to be more inclusive and less repressive, more inclined to extend their distributional policies to a larger segment of the population (Kim and Gandhi 2010), but also more vulnerable to mass protest (Ulfelder 2005). Considering the evolution of this type of autocracy, it becomes clear that the introduction of formally democratic institutions and the expansion of political rights are often driven by a short-term desire to remain in power, rather than by a vision of long-term democratization. Ample evidence (for example, from South Korea, Taiwan, Mexico, and Ethiopia) illustrates how leaders in single-party regimes attempt to steer a gradual process of political liberalization while at the same time using their party organs to sustain sufficient political control over, and legitimation in, different segments of society (Solinger 2001). For the following discussion on aid and autocratic survival, it is therefore important to note that the mere introduction of elections with some competitive elements (or other nominally democratic institutions) does not necessarily indicate a transition from autocracy to democracy. As to the question to what extent, or under what conditions, such nominally democratic institutions have the potential to lead to democracy, there is no consensus in this debate. Several alternative pathways to democracy such as economic crisis, elite splits, and institutional insurances have been theorized. Some emphasize that autocrats are only forced to respond to the demands of opposition groups when they do not have the resources to co-opt them, only granting political concessions and the extension of rights under conditions of significant opposition force and mass protest (Bueno de Mesquita and Smith 2010; Conrad 2011). Others argue that whether or not autocratic elections ultimately lead to democracy is much dependent on elite cohesion within ruling parties (Solinger 2001; Brownlee 2009). For example, elections enabled transition to democracy in Mexico, Taiwan, and South Korea only when elite cohesion within the dominant ruling parties began to crumble (Solinger 2001). Seemingly in contradiction to the understanding that autocratic institutions are tools to bolster autocratic power, some institutions such as parties have been found to work as protections for the interests of autocratic elites in a future democracy, and therefore, they lower the cost for autocratic elites to abandon their monopoly of power (Wright and Escribà-Folch 2011). Others argue that once relatively competitive multiparty elections exist, they become stepping stones to democratization (Hadenius and Teorell 2007). In sum, relative to democracies, we still know little about how exactly the logic of survival plays out in autocracies, given that the heterogeneity of autocratic order makes it difficult to establish a common pattern of autocratic survival strategies. Yet, while this diversity of autocratic order has become a common ground in comparative politics, it has not resonated much in the aid-effectiveness debate. Foreign Aid and Political Change Fungibility and Political Capture Given the logic of political survival, one should not be overly optimistic about the democratizing effect of development aid in autocracies. As a significant amount of foreign aid is channeled through the recipient government (OECD 2010), it is plausible to expect recipient governments to directly or indirectly use aid for their political survival, respective to satisfying their specific support groups. Particularly because aid is a fungible resource, it is questionable whether foreign aid can break the logic of political survival in autocracies and can catalyze democratization (Bueno de Mesquita and Smith 2007). Nevertheless, in the past, some donors and scholars expected that development aid would further democratization. It had been hoped that, in addition to directly supporting democratic institutions, development aid would indirectly enhance democratization through an economic modernization effect that furthered education and welfare (Knack 2004). However, empirically, the effects of overall foreign aid on political structures are sobering. Whereas, traditionally, most of the aid-effectiveness debate has focused on the effect of foreign aid on economic growth and poverty reduction, the last decade has seen an increasing number of empirical studies investigating its effect on political order. Earlier studies did not identify a statistically significant effect of foreign aid on levels of democracy (for example, Knack 2004); rather, aid dependency of recipient countries had a negative effect on those institutional features that are often associated with being conducive to democracy, such as the rule of law and effective corruption control (for example, Knack 2001). These negative effects of aid have been attributed to the unintended effects of aid fungibility. Technically, foreign aid is an external inflow of resources affecting the opportunity costs for a government's allocation of its own domestic resources (for example, Jones 2005). Thereby, it is of little significance whether or not aid is disbursed in the form of earmarked project aid for sector-specific purposes—because aid recipients can reallocate at least part of their own resources and instead spend these funds on other political priorities (Kosack and Tobin 2006). In line with this expectation, aid has been found to contribute to autocratic survival even when it is not intended to have any effects on the political structures of the recipient, but is specifically targeted at developmental objectives such as poverty alleviation, education, and health, or is provided directly to civil society actors. Even if the degree of aid fungibility might be lower compared to other rents such as oil (Van de Sijpe 2013), the remaining fungibility of foreign aid can transform it into an externally created rent—retarding democratization and thereby contributing to autocratic longevity (Morrison 2007, 2009). This can materialize through various mechanisms, for instance: by enabling the government to feed its patronage and clientele networks while avoiding the taxation of important support groups (Ahmed 2012); by allowing the government to prop up its repression and intelligence apparatus (Bueno de Mesquita and Smith 2010); by the co-optation and demobilization of interest groups; or by actually providing development and thereby increasing the legitimacy of authoritarian governments (Morrison 2007, 2009). Yet, in contrast to this overly negative assessment, more recent and more nuanced studies of the relation between foreign aid, political structures, and regime survival suggest that foreign aid has an amplification effect (Dutta, Leeson, and Williamson 2013). Accordingly, aid tends to stabilize and consolidate the type of regime it encounters. Foreign aid stabilizes autocratic structures in autocracies while helping to consolidate democratic governance in democracies. Moreover, foreign aid feeds patronage politics in autocracies, but not in democracies (Hodler and Raschky 2014). These findings suggest that foreign aid is politically captured by authoritarian governments, and indeed, makes autocratic survival more likely (Bueno de Mesquita and Smith 2010; Ahmed 2012). While these findings are plausible from a political economy perspective, it has been questioned to what extent they may be affected by the problem of endogeneity. Aid might not only amplify preexistent political structures, but the relationship between both can go in two directions. This is of particular relevance regarding the effect of democracy aid. Studies that focused on such democracy aid generally have found this type of assistance to be conducive to democratization (for example, Finkel, Pérez-Linán and Seligson 2007; Kalyvitis and Vlachaki 2010; Scott and Steele 2011). However, governments that have already undergone a transition from authoritarian to democratic order are more likely to accept democracy aid. Rather than showing that democracy aid catalyzes democratization, the shown correlation could also be driven by reverse causality. Accordingly, the reliability of some studies finding that democracy aid has generally helped to erode autocratic structures in recipient countries and that democracy aid has been conducive to the establishment of democratic governance has been challenged on methodological grounds. In light of the political economy of authoritarian regimes, there is, however, another source of endogeneity that has received less attention so far. In addition to reverse causality, the logic of political survival in autocracies suggests that the likelihood of a transition to democracy—and the strategic incentives to introduce nominally democratic institutions in the first place—may both endogenously vary between different types of autocracies. Some types of regimes are more stable than others; their leaders may feel more secure in power or may even expect that democracy aid might bolster their hold on power by strengthening pseudo-democratic institutions (Cornell 2012). Likewise, with broader distributional coalitions, some may be less concerned with liberalization, because they anticipate having a sufficiently broad support base to win future elections (Wright 2009). For example, Ethiopia's government accepted donors' pressure to hold free elections as long as it expected electoral victory due to its increasing economic performance. When it became clear, however, that the opposition was much stronger than expected and threatened the regime's survival, the political liberalization process was stopped and repression increased (Abbink 2006). A small number of studies, which have taken the different types of authoritarianism into account, suggest that the effect of democracy aid and general aid is likely to vary between different autocracies (Wright 2009; Dietrich and Wright 2012, Licht 2010; Cornell 2012). For example, foreign aid has been found to have a positive effect on democratization in highly institutionalized, party-based authoritarian regimes, whereas no such effect was found in autocracies with a restricted support base such as military regimes (Wright 2009). In the latter cases, aid was found to decrease the chances of regime change occurring (Wright 2009; Bueno de Mesquita and Smith 2010; Dietrich and Wright 2012). Also, democracy and governance aid were positively associated with increasing democratic consolidation for a number of African countries that had already undergone a transition to democratic order. This effect was amplified when prior authoritarian regimes had been characterized by higher levels of party institutionalization (Dietrich and Wright 2012). The findings of these recent studies fit well with our two-level game perspective that emphasizes the political economy at the recipient's domestic level of the aid relationship. They bring the endogenous incentives for democratic reforms to the fore, but being exclusively quantitative in nature, they remain speculative about the causal mechanisms at play. On the one hand, there are close to no studies verifying the features that quantitative research assumes to make governments more likely to accept conditionality and receive (democracy) aid. On the other hand, one of the few existing comparative case studies shows that there are considerable differences in the calculations authoritarian governments make even between regimes of the same type (Hackenesch 2014). Therefore, the aid-effectiveness debate is likely to gain from more qualitative studies that take the recent literature on authoritarianism into consideration. Hence, future research should investigate the precise calculations autocratic leaders make when they commit to aid agreements. Thereby, the bilateral negotiations between donors and recipients about aid packages could be a potential entry point to investigate which aid packages autocratic leaders find attractive. If the logic of political survival suggests that those who feel domestically strong are more inclined to commit to democracy aid, we need to investigate how exactly they anticipate to instrument such aid for their own benefit—and why, despite this anticipation, such commitments can sometimes lead to democratization. We will get back to this latter question in more detail in the next section. The documentation of aid negotiations and the composition of agreed aid portfolios offers a hitherto untapped source of insights into authoritarian preferences. Qualitative comparative case studies should focus on the motivations of recipients and use this data as a starting point to verify whether the causal mechanisms assumed in existing large-n studies hold and thereby illuminate the precise nature of endogeneity. Focusing on and comparing relatively similar regimes would thereby allow for better understanding the contextual factors such as the degree of aid dependence and the dynamics inside recipient countries. As “electoral” or “competitive” authoritarian regimes form by far the most prevalent type of authoritarianism, studying how such regimes engage with foreign aid seems to be particularly relevant. Political Conditionality as a Remedy Against Political Capture? The literature on foreign aid has produced a number of ambiguous and sometimes even contradictory findings on how foreign aid affects political regime type. Against the logic of political survival in the recipient country, these findings seem more sensible. A political economy perspective suggests that the effect of foreign aid on political regimes—as well as the effect of democracy aid—is conditioned by the political institutions of the recipient country. Accordingly, neither foreign aid in general nor democracy aid provokes political transformation, but their effectiveness depends on the particular survival strategy of the recipient country's political regime. As donors have recognized the problem of aid fungibility, it has been proposed to make aid conditional. To avoid having aid stabilize authoritarian regimes, some donors, especially the United States (US) and European donors, sought to tie aid to political criteria and so make foreign aid different from unconditioned resource flows such as oil rents (for example, Wintrobe 2001; Collier 2006; Kono and Montinola 2009). For example, the United States' Millennium Challenge Corporation, the European Union's (EU) neighborhood policies, and the European Instrument for Democracy and Human Rights signified explicit commitments to governance criteria. However, as our review of the aid conditionality debate shows, conditionality has often not been implemented successfully. Again, we relate this finding to the logic of political survival. Whereas the political economy in recipients suggests that the requirements for donors to credibly construct conditionality are very high, the domestic politics in donors make it additionally difficult to coherently implement such conditionality. Yet our two-level perspective also reveals that the existing debate pays much attention to the political economy in donors, but is strikingly silent with regard to conditionality and the political economy in recipients. One approach toward political conditionality suggests that conditionality can be achieved through selective aid allocation along political criteria of democracy and human rights. This approach was pushed by several empirical studies that suggested that the economic impact of aid is conditioned by the institutional framework in recipient countries (Svensson 1999; Burnside and Dollar 2000, 2004; Kosack 2003; Wright 2008b; Hodler and Raschky 2014). Similarly, it was argued that selective aid allocation to countries with conducive political framework conditions—that is to say, to those countries that had already undergone a transition process to democracy—could improve the effect of aid for democratization. Such a selectivity approach primarily aims at providing aid only to those countries in which it does not run the risk of cementing authoritarian structures and where it is more likely to contribute to development-friendly policies rather than actively attempting to promote or catalyze political reforms. However, empirical studies investigating aid allocation patterns have found only mixed evidence of selective aid allocation since the end of the Cold War. Whereas the overall sum of official development assistance (ODA) has been increasingly influenced by a country's economic neediness (for example, Claessens, Cassimon, and Van Campenhout 2009), human rights and levels of democracy have not been found to consistently determine aid allocation. Even if acknowledging that there remains a huge heterogeneity among bi- and multilateral donors, whole regions such as the Middle East and Central Asia have not been disadvantaged by the fact that they have been hosting predominantly authoritarian regimes. Another, more proactive approach toward political conditionality seeks to actively promote democratic governance and human rights by employing “ex post conditionality,” particularly in political contexts, where authoritarian regimes have initiated political liberalization, or in hybrid regimes with competing elements of authoritarian and democratic governance. The EU's neighborhood policy and the EU's Cotonou Partnership Agreement are two relatively successful and well-studied instances of such conditionality. In the EU's neighborhood policy, the effectiveness of conditionality relied on EU membership negotiations (for example, Schimmelfennig 2007; Schimmelfennig and Scholtz 2008), implying that political conditionality was accompanied by a harmonized dialogue and monitoring process and by clearly designed criteria for reforms. Strikingly, the EU membership negotiations successfully managed to streamline incentives for donors and recipients alike. Opportunities to exploit aid-giving for other political purposes were limited for donors, as it was embedded in the common EU membership negotiations. For recipients, EU membership provided strong economic incentives in terms of market access and subsidies, whereas membership candidates had already undergone substantive steps toward democratization. The EU's Cotonou Partnership Agreement points to the same requirements to make conditionality work. Whereas EU sanctions against developing countries in general have not been found to be very successful, sanctions under article 96 of the Cotonou Partnership Agreement were comparatively effective in influencing the recipient's behavior. The latter allow for a suspension of development cooperation in the case of human rights violations. Again, these latter sanctions involved a relatively high level of harmonization among donor governments, formalized political dialogue, clear benchmark criteria, and high economic leverage (Portela 2007, 2012). Finally, the difficulties of realizing harmonized conditionality are also reflected in the instrument of Multi-Donor Budget Support (MDBS). MDBS is the most prominent endeavor for using foreign aid for the double purpose of financing anti-poverty policies and at the same time for contributing to the erosion of non-transparent and autocratic state structures (for example, Faust, Leiderer and Schmitt 2012). Financial disbursements of MDBS for poverty alleviation have been conditioned on mutually agreed policy reforms, on macroeconomic policies, and increasingly on issues related to democratic accountability and human rights. Unfortunately, MDBS has suffered from political capture on the side of donor governments, which frequently failed to behave according to this intervention logic in a harmonized and well-coordinated way. Participating donor governments often have differently weighted the political and economic dimension of MDBS and have unilaterally employed political conditionality (Faust et al. 2012; Molenaers 2012). Thus, whereas MDBS has contributed to the reduction of potential fungibility problems and to reforms in public financial management, the harmonization deficits among donors have undermined the potential effects of political conditionality. Overall, the requirements for conditionality to be effective appear to be rather high. Given the limited endogenous incentives for recipients to liberalize, external incentives—even when constructed powerfully, tailor-made, and coherently—are likely to make democracy aid work only indirectly through locking in instrumental reforms, so as to either deepen them or make them more difficult to be reversed. Therefore, ambivalent assessments of aid conditionality do not come as a surprise (for example, Crawford 1997; Smith 1998). However, the conditionality debate tells us relatively little about the role of recipients and their response to aid conditionality for the effectiveness of such conditionality. Research on economic aid conditionality suggested that only when recipient governments perceive the conditionality as being in their own interest are they willing to implement it (Killick 1997). Likewise, one reason for the limited effectiveness of political conditionality could be ill-constructed political incentives, overly ambitious reform demands, unrealistic time horizons or, as Hackenesch (2014) argues, aid negotiations under detrimental domestic circumstances. Against this background, it is surprising that questions such as why and when which kind of political conditions are acceptable to autocratic recipients have not been formulated as a research agenda within the conditionality debate so far. Rather, these questions mostly seem to be left to policymakers, who often oscillate between implementing political conditionality in an ad hoc manner either as encompassing political transformation or gradual reform steps. For example, the recent lifting of sanctions and the decision to re-allocate aid to Myanmar was justified with the need to support further political reforms and to stabilize the fragile domestic situation. At the same time, there remains substantial doubt among practitioners whether the current mix of aid inflows and conditionality is conducive to these goals (for example, Rieffel and Fox 2013). Overall, there is little academic guidance as to how exactly such proactive use of political conditionality needs to be designed and under which conditions—beyond donor harmonization—it is most likely to have such lock-in effects. In light of our earlier research suggestions, we therefore propose examining the role of external aid and conditionalities as a strategic instrument in the domestic politics of the recipient. If the logic of political survival suggests that recipient governments only agree to conditionalities when they anticipate that they will be able to politically survive these commitments, we need to understand when and why they go wrong. Thus, we need to complement the body of large-n aid allocation and aid-effectiveness literature with comparative in-depth longitudinal case studies of the interplay between external conditionalities and domestic dynamics in recipients, such as domestic protest, oppositional movements, or economic crisis. Questions that should guide this research agenda are, for example, whether, when, and how more progressive elites or oppositional forces in recipient countries can strategically use the government's commitments to conditionalities in their domestic struggle over power and over policy directions. For instance, countries like Myanmar or Ethiopia in which aid conditionality is currently employed seem to offer themselves for in-depth process tracing to understand whether, when, and how external aid and conditionality are helpful to overcome domestic resistance against reforms. Moreover, there seem to be some parallels with existing literatures. Hence, there is potentially also a lot to gain from findings in the field of transitology or the study of international human right norms and their effects on domestic human rights performance, for example. Similarly, the reconstruction of elite bargaining in the context of reform trajectories in authoritarian regimes and the role of external commitments therein more generally may be of interest, such as, for example, China's accession to the World Trade Organization. Foreign Aid and Domestic Politics in Donor Countries Even if to a limited extent, democracy and overall foreign aid can contribute to the erosion of authoritarian structures in specific contexts when crafted properly. Why then do aid providers regularly fail to allocate foreign aid more selectively and do not craft aid interventions in a way that takes into account the endogenous prospects of political reform? We argue that the limited success of—at least bilateral—donors in supporting democracy and shielding foreign aid from political capture mainly arises from domestic political considerations. What follows is that if one considers donor–recipient relationships as an interaction process, donor governments, too, will take the preferences of their domestic constituencies seriously. Simply because donor governments are more accountable to their domestic supporters than to needy and politically marginalized groups in faraway countries, the policies of foreign aid are primarily driven by considerations about domestic politics. Drawing on Putnam's (1988) two-level games metaphor, we see how donor governments therefore will craft their specific interventions according to the constellation of their domestic winning-coalition. Thus, even traditional, democratic donor countries choose their aid policies according to the logic of political survival (for example, Bueno de Mesquita and Smith 2007, 2009; Lancaster 2007) and the concept of political survival enables us to integrate two isolated research debates on (i) the conflicting objectives of aid providers, and on (ii) the impact of political institutions and partisan preferences. Conflicting Objectives The above-mentioned tension has been analyzed through the lenses of conflicting objectives. Democracy promotion has increasingly become a developmental goal for most Western aid bureaucracies as it is overwhelmingly financed by ODA, independently of whether democracy aid is channeled through bilateral, multilateral, or non-governmental organizations. Still, this objective is competing with other foreign-policy objectives that are of major importance for crucial domestic constituencies (for example, Brown 2005; Grimm and Leininger 2012). As donor governments have a portfolio of foreign-policy interests, researchers have put increasing attention to such goal conflicts and particularly the aid allocation literature shows that aid allocation is also driven by the geostrategic and economic self-interests of donor governments (for example, Alesina and Dollar 2000). As a result, foreign aid can easily be “misallocated” so that it contributes to the stabilization of authoritarian structures, and, at the same time, remains perfectly in line with other prioritized foreign-policy goals. A common tension exists between the interest in political stability in a given country or region and the goal of incentivizing political change toward democratic governance (for example, Grimm and Leininger 2012). For instance, authoritarian regimes in the Middle East have been receiving vast amounts of foreign assistance because their political stability was considered crucial for the stability of the region and for guaranteeing Western donors' economic and security interests. Similarly, the provision of budget support in several African countries has often been seen as compatible with donor governments' interest in stabilizing weak states even though this contributed to an increasing neglect of political reforms and even an undermining of domestic accountability mechanisms (Manning and Malbrough 2012; Tripp 2012). In contrast, when newly democratized governments of Eastern Europe became interested in EU membership, security, and democracy interests of the old EU member states converged. EU membership promised to stabilize and consolidate the new regimes to include a formerly hostile region into Europe's integration mechanism. Therefore, successful support through politically conditioned access to the EU became a priority. While this strand of literature is not explicit with regard to agency, the logic of political survival would suggest that, whether donors' commitment to democracy and human rights turns into a credible commitment or remains lip service depends on whether domestically influential and politically relevant constituencies are interested in and able to pressure for these alternative objectives. This, in turn, depends much on their domestic institutions and partisan politics. Political Institutions and Partisan Politics The degree to which donor governments are affected by those goals depends on their own domestic political institutions. Indices measuring the quality of foreign aid find significant differences among aid-providing governments. Aid-allocation patterns, as well as the importance given to democracy, human rights, and anti-corruption strongly vary across donor countries, as does the use of different aid instruments and political conditionality. This heterogeneity has been increasingly used by researchers to examine the impact of donors' domestic politics on democracy support and, in broader terms, on the quality of foreign aid. Hence, at least part of the sketched variance can be explained by differences between democracy levels or political transparency. The overall commitment to development cooperation, as measured by the Commitment to Development Index, is mostly driven by the quality of democracy in the donor country (Faust 2008), suggesting that more democratic donor countries are more committed to promoting development in poor countries. Similarly, more corrupt and non-transparent donor countries tend to allocate more aid to corrupt recipients and pay less attention to allocating foreign aid according to development-oriented criteria such as economic neediness and institutional performance (Schudel 2008). For instance, Organization for Economic Co-operation and Development (OECD) peer reviews on donor countries such as Italy, Greece, and Japan have criticized their low levels of aid transparency and opaque relations between aid allocation decisions and business interests. Those reviews praise the attempts made by donor countries such as Finland, Denmark, and the Netherlands to make their aid systems more transparent as a means to strengthen the development orientation of their foreign aid (Faust 2011:7–8). Moreover, authoritarian donor countries such as China and Russia are said to be more interested in stabilizing authoritarian order elsewhere than in supporting emerging patterns of democratic governance (Bader, Grävingholt, and Kästner 2010; Vanderhill 2013). If one considers that huge majorities of citizens in democratic OECD donor countries have a strong preference for implementing aid in a development-friendly way, those findings seem to reflect the effects of democratic institutions that ensure large winning coalitions and policies in the interest of such large coalitions. In donor countries with less political transparency and less democratic accountability, governments will tend to pay less attention to the developmental interests of encompassing majorities. As the winning coalition in such polities tends to be smaller, aid is allocated more closely in line with the narrow preferences of key constituencies such as influential business groups, who prefer aid to be used to further their economic interests rather than to address developmental concerns. Thus, like in other policy fields, the constructions of particular aid policies can be interpreted as an attempt to satisfy the core constituencies of a donor government, which are heavily influenced by a country's political institutions. While institutions help to identify the size and the composition of a government's winning coalitions, the winning coalition's size does not tell us much about the particular preferences of a donor government's core constituencies. With regard to the substance of a constituency's interest, partisan politics seem to be more telling. While it is still disputed whether there is a clear relationship between a donor government's ideology and its overall aid effort (for example, Thérien and Noel 2000; Chong and Gradstein 2008; Tingley 2010), there is mounting evidence that the position of a donor government on a left-right spectrum does have an impact on how aid is spent. For instance, more leftist governments put a greater emphasis on allocating aid to the poorest countries (Tingley 2010). In contrast, more conservative donor governments are more likely to link aid to their trade interests (Seelkopf and Michalik 2013). The core constituency of conservative governments is also more concerned about aid being wasted due to badly governed recipients (Bauhr, Charron, and Nasiritousi 2013) and therefore is more likely to favor political conditionality in the allocation of foreign aid (Bodenstein and Faust 2014). As a result, conservative donor governments have been reluctant to disburse aid via budget support and are more inclined to tie this aid instrument to political conditionality (for example, Faust and Koch 2014). These domestically rooted differences among donor governments regarding aid allocation and political conditionality—whether related to the quality of domestic political institutions or the ideological preferences of a government—pose a serious challenge for donor coordination. Heterogeneous donor governments (in terms of institutional quality or ideological differences) will find it hard to establish a coherent incentive system vis-à-vis recipient governments. Accordingly, the lack of coherent aid allocation and the coherent use of political conditionality is often the result of political considerations geared toward satisfying domestic constituencies with different preferences on how to use foreign aid. Against this background, future research should pay more attention to a donor's own quality of political institutions as they structure how different preferences with regard to aid allocation are aggregated and translated into policy decisions. Thereby, it seems worthwhile to investigate whether differences in institutional quality and partisan preferences interact in the crafting of aid policies. If domestic politics in donors inhibit donor coordination, it would be of high policy relevance to put more effort into investigating how the delegation to supranational bodies and international organizations such as the European Commission or the World Bank can solve the resulting collective actions problems. Outlook for Further Research Does foreign aid prop up authoritarian regimes or is it conducive to democratic reforms? In our synthesized review, we have tackled this question by linking three different strands of research. Reviewing these debates from the perspective of a two-level game helped us to make sense of the often diffuse findings of the literature on the effects of foreign aid on political structures in recipient countries. Our emphasis on agency and political economy suggests that these mixed findings are not so much a result of different research strategies or different methodological approaches. To the extent that domestic politics on both ends of the delivery chain largely determine whether aid is given, how it is given, and how it is used, these findings are rather consistent with the incentives of political survival in recipient as well as in aid-providing countries. Neither should the effectiveness of aid be analyzed without considering the domestic politics of recipients, nor can aid policies be understood without accounting for donor governments' own domestic incentives. Consequently, analyzing the origin of the varying effects of foreign aid on political structures in recipient countries crucially depends on our knowledge of domestic incentive systems at both ends of the aid-delivery channel. Such a perspective also helps us to identify where further research is needed. To begin with, we find that recipient behavior in authoritarian and semi-authoritarian settings still lacks sufficient academic attention. This is not only a result of our generally rather thin understanding of how authoritarianism works. It is also a consequence of the fact that research, for a long time, has been focused on donor behavior. The latter becomes apparent in the discussion about aid conditionality, where the debate is often focused on donor harmonization. While donor harmonization is certainly highly important, it is not a sufficient condition for making foreign aid more conducive to political reform. Other requirements, such as the match between endogenous and exogenous (aid-induced) incentives on the recipient side have received much less scholarly attention. Therefore, we suggest paying more attention to the domestic politics on the recipient side. First, such a research agenda should analyze which specific components of aid packages are adopted or rejected by authoritarian leaders, with what kind of calculations and under which circumstances (Hackenesch 2014). To do so, we propose to exploit existing policy documents on aid negotiations and agreed aid portfolios as a new source of data. Comparative qualitative analysis of this data should look into the motivations of authoritarian governments, their expectations when engaging in democracy aid with attached conditionalities, as well as the domestic context in the recipient. Close examination of these calculations could lead to novel findings for both the aid and authoritarianism literature, for example, the possibility that authoritarian leaders perceive many more aspects of governance reforms conducive to autocratic rule than democracy promoters would expect. Second, the logic of political survival suggests that leaders rarely have genuine intentions to democratize, even though they may have an interest in the introduction of nominally democratic institutions. Moreover, political actors are sensitive to domestic challenges to power rather than to external commitments. Thus, if conditionality contributes to democratization, this is likely to happen accidentally in interaction with domestic dynamics, such as mass protest or elite bargaining. Therefore, longitudinal in-depth case studies could push the conditionality debate by illuminating whether and under which circumstances conditionalities can bind elites to democratic reforms. It would be a major step forward if scholars could show that domestic agents can indeed be empowered by external conditionality commitments. Methodologically, both questions are difficult to answer by the means of large-n quantitative studies as they concern the mechanism of aid conditionality and its effects. Therefore, we call for more systematic in-depth qualitative research that employs structured comparison and process tracing. Countries, such as Myanmar, that experience political change offer themselves for investigation. However, comparison of countries with relatively similar regimes may offer more opportunities to take into consideration or control for contextual factors. Third, there is a systematic mismatch between donors' and recipients' incentives to commit to and implement aid conditionality, whereby donors are inclined to pressure for aid conditionality at times when recipients are least likely to concede (Hackenesch 2014). In practical terms, this may hint to a policy dilemma, that is, contrary incentives in donors and recipients. In terms of research, however, to overcome such conceptual divergence, it could be fruitful to put more emphasis on investigating the negotiation process as a strategic moment of interaction between donor and recipient. This would force scholars to think more explicitly about the timing and the context of such aid negotiations and the policy options recipient and donor governments have against the background of their domestic situation. On the donor side, further empirical research should build on recent insights that the provision of foreign aid is driven by domestic factors. It needs to further illuminate how accountability or transparency structures or ideological preferences of governments impact on how donors use foreign aid for the purpose of political reform in recipients. Only on the basis of such enquiry can one answer normative questions about how incentives for donors and aid agencies should be crafted so as to improve aid selectivity and conditionality, with a view toward making aid less prone to political capture. For example, does aid transparency improve mutual accountability toward developmental goals in the aid relationship (Winters 2010)? Or does a greater insulation from domestic politics and public opinion enable aid agencies to operate more independently from domestic political considerations? Finally, research on how foreign aid from traditional aid donors affects political structures needs to be better linked to other fields of international relations. For instance, over the last two decades, research on aid conditionality has only loosely linked up with academic enquiry on the employment of economic conditionality and sanctions in the field of foreign trade and investment. For empirical and normative reasons, however, it is of great interest to know whether, and with what effect, political conditionality and other attempts to support democratization have been interacting across different policy fields. Yet, in addition to taking on a perspective on international relations that views aid relations as only one dimension of interaction between donors and recipients, the aid-effectiveness debate also needs to consider that the international context in which development cooperation is provided has been changing substantially in recent years. In this regard, analyzing the impact of nontraditional providers of foreign aid is of equal importance. For instance, research on how the increasing role of Chinese development cooperation has affected the interaction between traditional donors and recipients is still in its infancy (Hackenesch 2013). The same holds for academic enquiries that seek to identify whether autocratic powers such as China or Russia have been engaged in autocracy promotion, thereby potentially undermining the effects of Western attempts to support democratization (Bader 2014). This needs to be taken into account in future studies about the impact of foreign aid on autocratic survival and democratization. Notes Authors' note: We thank the participants of the ECPR Joint Session Conference workshop on “Political Conditionalities and Foreign Aid,” and particularly Christine Hackenesch, three anonymous reviewers, and ISR's editors for their valuable comments on earlier drafts of this article. Our understanding of political regimes is a continuous one, with consolidated democracy at one extreme end of the spectrum, and highly repressive and closed autocracies at the other end. However, in terms of terminology, we define autocracy as being opposed to democracy, whereby autocratic regimes are those that fail to meet minimum standards of democratic institutions. In practice, this implies that whenever we talk about autocracies, this includes hybrid regimes with some democratic institutions (Geddes 1999; Przeworski, Alvarez, Antonio Cheibub, and Limongi 2000; Cheibub, Gandhi, and Vreeland 2010). We define democracy in a procedural way with the principle of “contestation open to participation” (Dahl 1971:4) at its core, guided by institutional criteria such as free and fair elections, political equality of all citizens, a free press, and the freedom of association. Autocratic regimes fail to meet minimum standards of these procedural characteristics. Based on this definition, transition to democracy involves the full adoption of these criteria. In contrast, democratization is understood as a step toward more democratic procedures. Thus, democratization essentially reflects an increase in the size of the truly needed support groups and the provision of those rights that allow citizens to freely coordinate and politically organize. In turn, liberalization denotes the process of easing restrictions on political rights. Since democracy needs to satisfy contestation and institutional criteria, it is therefore possible for a country to engage in institutional reforms or the extension of political rights without, however, transitioning to democracy. In other words, liberalization does not necessarily need to lead to democracy (Diamond 2002; Levitsky and Way 2002). The debate about how best to categorize different authoritarian regimes is controversial. For a review see, for example, Hadenius and Teorell (2006). With regard to the degree of institutionalization, personalist and military regimes are usually described as the least institutionalized and monarchies and single-party regimes as the most institutionalized. More institutionalized regimes tend to be more inclusive and to rely more on co-optation of elites and broader segments of society. Less institutionalized regimes typically rely more on narrow support groups and on repression (Davenport 2007). Because repression is also costly, this is a result of shrinking resources to both buy off and to repress oppositional forces. Under economic constraints, an authoritarian regime can neither appease those oppositional forces that are willing to accept material benefits, nor repress those who prioritize political concessions. Economic crisis is therefore a window of opportunity for those parts of the opposition that prioritize political over material concessions and are not willing to accept mere material co-optation (Conrad 2011). The conventional definition of foreign aid (official development assistance) encompasses financial flows and technical assistance for the promotion of economic welfare in developing countries as grants or subsidized loans. This definition originates in the OECD's Development Assistance Committee, which also includes financial and technical assistance for the direct promotion of democracy. The aid statistics data provided by this organization form the base of almost all quantitative studies on development aid allocation and effectiveness of Western donors (see: http://www.oecd.org/dac/stats/). For an overview on the research on aid fungibility, see Jones (2005); for empirical evidence regarding effects of fungibility across different sectors, see Feyzioglu, Swaroop, and Zhu (1998); on foreign aid being used to finance regional arms races, see Collier and Hoeffler (2007). The debate on foreign aid's effects on economic development is inconclusive at best, with no robust findings either in favor or against the economic effectiveness of development assistance. For this debate see, for example, Easterly, Levine, and Roodman (2004); Roodman (2007); Arndt, Jones, and Tarp (2009); and Chong, Gradstein, and Calderon (2009). Similar findings hold with regard to the effectiveness of aid on economic and human development. When foreign aid encounters regime structures in which a government has strong incentives to improve the provision of development-enhancing public goods, aid can indeed provoke a developmental effect. This holds true not just for democratic recipients (Svensson 1999; Kosack 2003). In line with the domestic logic of authoritarian survival, aid has been found most likely to enhance growth in autocracies only when conditions are most conducive to economic development, particularly in stable autocracies with long time horizons (Wright 2008b). Whereas donors have attempted to circumvent authoritarian governments by channeling their aid more through NGOs and civil society organizations (Dietrich 2012), authoritarian and hybrid regimes opposing (further) political liberalization respond to this challenge by restricting the maneuvering space for NGOs working in areas linked to democracy support. Democracy aid can be defined broadly as those foreign aid activities geared toward enabling internal actors to establish and develop democratic core institutions (Grimm and Leininger 2012:396). Given the variety of different approaches to and perspectives on external democracy assistance, there is, in practice, no consensus among donors on a more narrow definition of democracy aid. It can encompass the support for democratic elections, political parties, parliaments, and watchdog NGOs, but also support for independent oversight institutions and judiciaries. In terms of measurement, many quantitative studies rely on assistance that has been spent in the sector “Government and Civil Society” of the OECD's Development Assistance Committee's aid statistics. Such democracy aid accounts for roughly 10% of overall foreign aid (Ziaja 2013). Democracy aid also has been found to be helpful in reducing the probability of violent conflict during the process of institutional transition, due to its capacity to reduce political uncertainty, which is particularly high in such periods (Savun and Tirone 2011). Prominent examples of economic conditionality were the structural adjustment programs of the World Bank and the International Monetary Fund, which conditioned aid flows to macroeconomic reforms. However, financial support was repeatedly given, despite recipients' violations of the agreed reform steps (Easterly 2005). Partly, the limited effectiveness resulted from moral hazard problems due to the character of ex post conditionality, where the aid-receiving country agrees to conditions set by the donor before carrying out the demanded reforms. For instance, foreign aid provided through the US Millennium Challenge Account and the provision of General Budget Support was originally intended only for countries that met minimum criteria regarding their institutional quality (IOB 2012; Öhler, Nunnenkamp and Dreher 2012). Many studies analyzing aid selectivity patterns have explicitly investigated whether aid allocation has been influenced by measures of institutional performance such as corruption, democracy, and human rights (for example, Alesina and Dollar 2000; Berthélemy 2006; Clist 2011; Höffler and Outram 2011). On the use of political conditionality in the 1990s see, for example, Robinson (1993); Bayliesa (1995); Crawford (1997, 2001); Smith (1998). MDBS channels financial resources directly to the recipient government's budget to support a national anti-poverty strategy. Originally, political conditionality was not a major issue in its intervention logic but became increasingly important during the second half of the past decade, particularly among bilateral donors (Faust et al. 2012; Molenaers 2012). Despite these challenges, the attempt to combine financial resources, policy dialogue, and political conditionality in a harmonized way has had positive effects. According to a comparison of sub-Saharan countries, MDBS did not have a crowding-out effect on domestic revenue generation (Knoll 2012). Moreover, unlike other types of World Bank grants and credits, the provision of budget support (Poverty Reduction Support Credits) did have a statistically significant effect on democratic accountability (Limpach and Michaelowa 2010). However, conditionality “only occasionally tips the balance in favor of pro-reformers within government” (Killick 1997:492). Accordingly, this section's focus is on research that primarily analyzes the motivations of bilateral donors, given that multilateral aid providers such as the World Bank and the IMF are less affected by domestic political considerations. Yet, as research on those organizations has also shown, their foreign aid policies not only follow developmental or technocratic considerations, but are also influenced by political considerations of powerful member states (for example, Andersen, Hansen, and Markussen 2006; Dreher and Jensen 2007). The degree to which donors view democracy promotion as a developmental goal as opposed (or conducive) to a strategic foreign policy goal varies among different donors and over time. For example, the promotion of US geopolitical and strategic interests is an acknowledged objective of its foreign aid (USAID 2004:3). 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TI - Foreign Aid, Democratization, and Autocratic Survival
JF - International Studies Review
DO - 10.1111/misr.12158
DA - 2014-12-18
UR - https://www.deepdyve.com/lp/oxford-university-press/foreign-aid-democratization-and-autocratic-survival-ZhQrN3MaP1
SP - 1
EP - 595
VL - Advance Article
IS - 4
DP - DeepDyve
ER -