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A Foreign-Policy Model of the Distribution of British Bilateral Aid, 1960–70

Published online by Cambridge University Press:  27 January 2009

R. D. Mckinlay  and
R. Little
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Extract

As a consequence of Truman's Point Four Program of 1949, the provision of economic assistance to independent low-income countries became the official policy of the United States. In the early and mid-1950s economic development assistance, though growing, received relatively little attention as the Korean war turned the USA's foreign aid in the direction of military assistance. However, by the start of the 1960s, the transfer of economic assistance from high-income to low-income countries had developed into an institutionalized relationship. Economic assistance was clearly distinguished from military assistance and administered separately; the USA's monopoly of aid was decreasing as other high-income countries, partially under the USA's pressure, were establishing their own aid programmes; and the volume of aid and the number of recipients were increasing.

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Articles
Information
British Journal of Political Science , Volume 8 , Issue 3 , July 1978 , pp. 313 - 331
Copyright
Copyright © Cambridge University Press 1978

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References

1 For some useful general studies of aid, see Bhagwati, Jagdish and Eckhaus, Richard S., eds., Foreign Aid (Harmondsworth, Middx.: Penguin, 1970)Google Scholar; Mikesell, Raymond F., Economics of Foreign Aid (London: Weidenfeld and Nicolson, 1968)Google Scholar; Wall, David, The Charity of Nations (New York: Basic Books, 1973)Google Scholar; White, John, The Politics of Foreign Aid (London: Bodley Head, 1974).Google Scholar

2 For the standard statement of this position, see Chenery, Hollis B. and Strout, Alan, ‘Foreign Assistance and Economic Development’, American Economic Review, LVI (1966), 679–733.Google Scholar Some have argued that aid does not provide economic assistance, on the grounds that it reduces savings, creates debt-servicing problems, and reduces the capital-output ratio: see, for example. Bauer, Peter, Dissent on Development (London: Weidenfeld and Nicolson, 1971)Google Scholar, and Griffin, Keith B., ‘Foreign Capital, Domestic Savings, and Economic Development’, Bulletin of the Oxford University Institute of Economics and Statistics, XXXII (1970), 99–112.Google Scholar These criticisms have been well answered by Papaniek, Gustav F., ‘The Effect of Aid and Other Resource Transfers on Savings and Growth in Less Developed Countries’, Economic Journal, LXXXII (1972), 934–50.CrossRefGoogle Scholar Although the critiques have been useful in pointing out that the acceleration effect of aid on development is a function of a variety of factors, we can in general accept that aid can provide economic assistance.

3 See, for example, Griffin, Keith B. and Enos, John L., ‘Foreign Assistance: Objectives and Consequences’, Economic Development and Cultural Change, XVIII (1970), 313–27CrossRefGoogle Scholar; Kaplan, Jacob J., The Challenge of Foreign Aid (New York: Praeger, 1967)Google Scholar; Knorr, Klaus, Power and Wealth (London: Macmillan, 1973)CrossRefGoogle Scholar; Mason, Edward S., Foreign Aid and Foreign Policy (New York: Harper and Row, 1964)Google Scholar; Mende, Tibor, From Aid to Recolonization (London: Harrap, 1973)Google Scholar; Payer, Cheryl, The Debt Trap (Harmondsworth, Middx.: Penguin Books, 1974)Google Scholar; Weissman, Steve and others, The Trojan. Horse (San Francisco: Ramparts Press, 1974)Google Scholar; White, , The Politics of Foreign Aid.Google Scholar

4 We have explicitly tested a humanitarian model of U.K. aid allocation. The model consists of the variables of per capita Gross Domestic Product, measuring the level of relative assistance, and two sets of variables measuring welfare needs (per capita GDP, per capita calory consumption, and number of doctors per hundred thousand population) and economic performance (size of international liquidity as a percentage of imports, the rate of growth of real per capita GDP, and gross domestic fixed capital formation as a percentage of GDP). The hypothesis derived from the model stipulates that there is a negative relationship between the amount of assistance and the variables measuring the recipient country's welfare needs and economic performance. However, the regressions of per capita U.K. aid receipt onto the six independent variables do not produce a significant equation for any of the years 1960–70. While these results do not indicate that aid is allocated in a deliberately anti-humanitarian manner, they do clearly show that humanitarian criteria do not underlie the distribution of U.K. aid.

5 The confusion is clearly stated by Morgenthau: ‘Of the seeming and real innovations which the modern age has introduced into the practice of foreign policy, none has proved more baffling both to understanding and action than foreign aid’, ‘A Political Theory of Foreign Aid’, American Political Science Review, LVI (1962), 301–9, p. 301.Google Scholar A number of more systematic attempts have been made to come to terms with the rationale underlying the distribution of aid. See, for example, Kato, M., ‘A Model of U.S. Foreign Aid Allocation’, in Mueller, John E., ed., Approaches to Measurement in International Relations (New York: Appleton Century-Crofts, 1969)Google Scholar; Wittkopf, Eugene R., Western Bilateral Aid Allocations, International Studies Series, Vol. II (Beverly Hills, Calif.: Sage Publications, 1972).Google Scholar These studies resemble this one to some extent. They differ in using a smaller population, a more limited time period, and a more restricted array of predictor variables, and in making little attempt to evaluate the findings in more general terms.

6 The most substantial discussions of British aid are to be found in monographs published by the Overseas Development Institute. Those of particular interest include: British Aid – 1: Survey and Comments (London: ODI, 1963)Google Scholar; British Aid – 2: Government Finance (London: ODI, 1964)Google Scholar; ODI Review – 1: British Development Policies 1966 (London: ODI, 1966)Google Scholar; ODI Review – 2: British Development Policies 1968 (London: ODI, 1968)Google Scholar; ODI Review – 3: British Development Policies (London: ODI, 1969)Google Scholar; ODI Review – 4: British Development Policies 1970 (London: ODI, 1970).Google Scholar

7 For a general theoretical discussion of commitment, see Roby, Thornton B., ‘Commitment’, Behavioural Science, V (1960), 253–64.Google Scholar In international relations, commitment has been most frequently employed in the literature dealing with strategic and alliance policy. For general discussions, see for example: George, Alexander L. and Smoke, Richard, Deterrance in American Foreign Policy (New York: Columbia University Press, 1974)Google Scholar; Schelling, Thomas C., Arms and Influence (New Haven: Yale University Press, 1966)Google Scholar; Schelling, Thomas C., The Strategy of Conflict (New York: Oxford University Press, 1963)Google Scholar; Weinstein, Franklin B., ‘The Concept of Commitment in International Relations’, Journal of Conflict Resolution, XIII (1969), 39–56.CrossRefGoogle Scholar

8 For general discussions of dependency, see, for example, Brown, Michael Barratt, After Imperialism (New York: Humanities Press, 1970)Google Scholar; Cohen, Benjamin J., The Question of Imperialism (London: Macmillan, 1974)Google Scholar; Fann, K. T. and Hodges, Donald C., eds., Readings in U.S. Imperialism (Boston: Porter Sargent, 1971)Google Scholar; Frank, Andre Gunder, Capitalism and Underdevelopment in Latin America (New York: Monthly Review Press, 1969)Google Scholar; Rhodes, Robert I., ed., Imperialism and Underdevelopment: A Reader (New York: Monthly Review Press, 1970)Google Scholar; Rosen, Steven J. and Kurth, James R., eds., Testing Theories of Economic Imperialism (Lexington, Mass.: D.C. Heath, 1974).Google Scholar

9 There are three qualifications to the argument that the foreign-policy advantage of aid derives from its capacity to provide commitment and dependency, which in turn allow the donor to promote and control a variety of its interests. Firstly, commitment and dependency can be established through a variety of other means, such as trade, private investment or military assistance. Secondly, aid provides a means but not a guarantee of commitment and dependency. For example, recipients can play one donor off against another, undermining the rationale of commitment, or recipients can refuse aid or repayments, thereby eliminating the potential for dependency. Thirdly, even if commitment and dependency are established, the donor may fail to derive any of the anticipated benefits. For example, intervention by a hostile party may occur despite the existence of commitment, or, in the case of dependency, the benefits accruing to the donor may become so important that it is no longer in a position to terminate the relationship (at which point the relationship is one of interdependence rather than dependence).

10 To illustrate the workings of relative commitment, let us take three countries, A, B and C, which receive amounts of aid giving them an absolute commitment ranking running from A to C. While per capita aid receipts are identical, once per capita GDP is taken into account it is C that receives the greatest relative commitment. We are in fact using deviations from a simple humanitarian model to measure relative commitment. Thus, if there were a collinear reciprocal relationship between per capita aid and per capita GDP (of the form , all countries would receive identical relative commitment.

11 Dependency on aid could be operationalized in a variety of ways. For example, aid could be expressed as a percentage of imports or domestic savings. These measures have very similar connotations to our index. We use GDP because it is more comprehensive, simple and straight-forward.

12 The publication used to provide gross aid figures is The Geographical Distribution of Financial Flows to Less Developed Countries (Paris: OECD DAC). It has been published for the following years: 1960–4, 1965, 1966–7, 1968, 1969, 1970. The remaining data sources are: United Nations Statistical Yearbook for the years 1960–72; United Nations Yearbook of International Trade Statistics for the years 1961–72; United Nations Yearbook of National Account Statistics for the years 1964–72; International Financial Statistics for the years 1960–70 (Washington: International Monetary Fund); Balance of Payments Statesman's Yearbook for the years 1960–70 (London: Macmillan); Europa Yearbook for the years 1958–70 (London: Europa Publications); Stebbins, Richard P. and Amoia, Alma, eds., Political Handbook and Atlas of the World (New York: Simon and Schuster, 1970)Google Scholar; Whitaker's Almanac for the years 1959–70 (London: Whitaker's Publications); Keesing's Contemporary Archives for the years 1959–70 (London: Keesing's Publications); The Military Balance for the years 1960–70 (London: Institute for Strategic Studies); Stockholm International Peace Research Institute, Yearbook of World Armaments and Disarmaments for the years 1968–72 (Stockholm: Almquivist); Stockholm International Peace Research Institute, Arms Trade with the Third World (Harmondsworth, Middx.: Penguin Books, 1973)Google Scholar; Dupuy, Trevor N. and others, Almanac of World Military Power (Dunn Loring, Virginia: Trevor N. Dupuy and Associates, 1970)Google Scholar; Sellers, Richard C., ed., Reference Handbook of Armed Forces of the World, 3rd edn. (New York: Praeger, 1971).Google Scholar

13 Unless stated otherwise, all the variables are lagged by one year on the aid receipt.

14 It must be emphasized that we are interested in identifying the critical interests underlying the distributions of commitment and dependency, and not in making a descriptive profile of the characteristics of countries receiving different amounts of commitment and dependency. In other words, we are interested in making a comparative evaluation of potential interests. The stepwise procedure is the most convenient way of coming to terms with a large number of predictor variables where we do not want to retain all the predictors but we do not know a priori which are the most important. A variety of possible rules, such as size of beta value, significance level, or magnitude of change in R2, govern the inclusion of variables. There are problems associated with each of these procedures which in practice make it impossible to set a hard and fast rule governing all the regressions. Since we are not interested, in general, in economy of estimation, we have used low values to produce as complex an equation as possible while remaining within the bounds of manageability.

15 Any multiple regression analysis in the social sciences must confront the problem of multicollinearity. In general we would argue that we do not have any major difficulties. A number of variables with high inter-correlations were rejected prior to analysis. In other cases where we wished to retain two highly correlated variables we standardized and added them (so long, of course, as it was meaningful to do so). Finally, we tested our independent variables by factor analysis. If there was a high degree of interrelation between the independent variables, then a factor analysis would produce a small number of factors with high communality scores. Factor analyses, however, did not produce these results.

16 There are a small number of exceptions: three OECD countries receive aid and are included (Greece, Spain and Turkey), and three non-OECD countries are excluded as they are high-income countries which do not receive aid (Australia, New Zealand and South Africa). As countries became independent during the period examined, the number of countries in the analysis increased. On account of missing data some countries had to be excluded each year. The total number of potential aid recipients and the actual number included in the analysis (the latter is given in parenthesis) are from 1961–70: 73(68), 75(70), 81(75), 83(77), 86(80), 89(82), 92(83), 93(83), 95(84), 95(84). The excluded cases in 1970 are: Botswana, Burundi, Guinea, Kuwait, Lesotho, the Maldive Islands, Muscat, Nepal, South Yemen, Swaziland and Yemen.

17 The size of the U.K.'s bilateral aid programme, measured in constant terms, fluctuated but generally increased over the period from $321 million in 1960 to $418 million in 1970. The fluctuating growth of the aid programme has not matched the growth of GNP, so that aid as a percentage of the U.K.'s GNP declined linearly from ·57 per cent in 1961 to ·38 per cent in 1970. As a consequence of our focus on independent low-income countries, we are obliged to ignore the aid allocated to non-independent recipients. For each of the years 1960–70, this amounts to 65%, 63%, 50%, 46%, 29%, 21%, 20%, 15%, 11%, and 13% of the U.K.'s total aid.

18 We have been obliged to remove India from the analysis basically because it is an ‘outlier’. Its removal substantially reduces the R2, although by removing it we can better explain the remaining cases. India's exclusion does not substantially change the critical variables but does alter their relative importance. India is deviant primarily because it combines massive size with the critical variables underlying the distribution of the U.K.'s absolute commitment.

19 We have been obliged to remove Malta from the analysis of relative commitment, again because it is an outlier. Its exclusion substantially increases the R2, although the relative importance of the critical variables are essentially the same irrespective of whether it is included. Consequently, the critical variables explaining relative commitment in all other countries also work in the case of Malta. However, for a number of idiosyncratic reasons Malta receives a particularly high level of relative commitment.

20 Firstly, the British government seemed tobe responding to a number of external influences, particularly USA and United Nations pressures, rather than developing its own positive initiatives. Secondly, the greater part of British aid continued to be confined to Commonwealth countries. Thirdly, government statements on aid were rather confused and showed little originality. For example, the White Paper of 1963 (Aid to Developing Countries, Cmnd. 2147) accepted the moral obligation outlined by the U.N. General Assembly, adding that aid should buttress the political stability of low-income countries and expand the trading markets of the donor countries. Fourthly, the administrative structure of the British aid programme was very fragmented. Aid to colonies was administered under the Colonial Grants and Loans Vote and the Central African Office Vote, Colonial Development and Welfare Funds, Exchequer loans, and Commonwealth Development Corporation loans. Aid to independent countries was administered through Commonwealth Grants and Loans Vote, Foreign Grants and Loans Vote, and Export Credits Guarantee Department Loans.

21 The ODM had been planned in early 1964 by a group of Fabians under Lord Balogh. It was intended to rationalize and co-ordinate all British development policies (of which aid was considered to be only one dimension), and to set clear, long-term development initiatives.

22 Seers, Dudley and Streeten, Paul, ‘Overseas Development Policies‘, in Beckerman, Wilfred, ed., The Labour Government's Economic Record 1964–70 (London: Duckworth, 1972).Google Scholar In this context, it is also interesting to note Hart, Judith, Aid and Liberation (London: Gollancz, 1973)Google Scholar, and the latest White Paper, Overseas Development: The Changing Emphasis in British Aid Policies (London: HMSO, Cmnd. 6270, 1975).Google Scholar

23 The ODM did introduce a number of important changes into British aid. It attempted to make aid more effective, it rationalized the structure of British aid to some extent, and it introduced interest free loans. However, the ODM failed to introduce any long-term or humanitarian policy initiative. This was closely related to the failure of the ODM to emerge as a powerful, independent ministry. It was not allowed to handle aid to colonies, or submissions to the World Bank, or loans under Section 3 of the Export Guarantees Act, or advances to the Commonwealth Development Corporation. The Treasury, Foreign and Commonwealth Office, and the Board of Trade continued to have very strong influences on the aid programme, and to some extent had interests which directly opposed those of the ODM. No strong Labour support for the ODM appeared, and in 1967 cabinet status was withdrawn. The Labour Government never gave high priority to its overseas development policies.

24 McKinlay, Robert D. and Little, Richard, ‘A Foreign Policy Model of US Bilateral Aid Allocation’, World Politics, XXX (1977), 58–86CrossRefGoogle Scholar, and ‘The French Aid Relationship’ (forthcoming).