By Miles Williams
Competition or Cooperation in Foreign Aid
Last summer I had the privilege of attending a conference put on by the College of William and Mary. This convening brought together a fruitful mix of academics, think tankers, US State Department and USAID officials, and politicians. Our hosts set before us a daunting set of questions. What does the rise of China as a prominent foreign aid donor in the Global South mean for the future of development and democracy? How should Washington reimagine its economic statecraft to compete or cooperate with Beijing?
At the time, I felt unequal to the task. I was still just a junior academic and with so many experienced scholars, policymakers, and practitioners in the room, I thought it best to keep my head down and use this opportunity to learn as much as possible. But I quickly realized that others in attendance shared my ignorance about China, too. Many of us left unsatisfied with the answers we provided.
Perhaps the most unsatisfying part of the entire experience was our inability to answer the question about cooperation between Washington and Beijing. This, more than anything else, left me with a nagging feeling. The dissertation I had recently defended (and presented as a manuscript at a meeting of the Political Economy of International Organization later that year) centered on the very issue of cooperation among foreign aid donors. Yet I failed to explicitly tackle US-Sino relations. Only after this conference did I realize I missed an opportunity to add to this debate.
After I graduated with my Ph.D. and started work as a visiting assistant professor I came up with a clever name for the problem I spent so much time wrestling with as a graduate student: elusive collusion. I wanted to know why cooperation fell short of expectations so often among aid donors. I therefore set out to understand how the interests of donors creates a scenario where cooperation eludes the actors involved. What I found surprised me. It’s also helped me to better understand the problem of cooperation between Washington and Beijing.
Much of the literature on donor competition and cooperation situates actors either in a collaboration or coordination problem. Let’s begin with a collaboration problem. Imagine the classic Prisoners’ Dilemma. Two parties, in separate rooms, face questioning by law enforcement about a crime the pair allegedly committed. If both individuals collaborate and keep silent, they’ll get a moderate sentence. But they face a temptation to betray one another. If one speaks while the other stays quiet, the confessor will get a light sentence while the other gets a heavy sentence. Neither want the heavy sentence. So, tragically, both parties speak. This nets them a worse sentence than had they both remained silent.
In the context of foreign aid, some researchers proceed as if donor governments face a similar scenario. Instead of a prison sentence, the use of development funds to reduce poverty and create more political stability in recipients is lost to wasteful donor jockeying for political influence over recipient governments.
Now the coordination problem is similar to traffic laws. In some countries, people must drive cars on the right side of the road. In other countries, the opposite holds true. Unlike the Prisoners’ Dilemma, it benefits no one in this scenario to adopt a different strategy than other drivers. Traffic flows best when we make a single decision for everyone involved. But how do we decide? Some form of authority makes those decisions to avoid an unmitigated disaster on the roads.
In the international development space, some observers proceed as if foreign aid allocation requires a traffic director. They cite adverse recipient outcomes due to aid fragmentation where the presence of multiple donors overwhelms the bureaucracy of a recipient government. The failure to coordinate means donors establish redundant projects that operate poorly because they overburden the recipient.
An Unexpected Twist
While each kind of problem demands its own unique solution, both coordination and collaboration imply the existence of a mutually beneficial alternative to the current status quo. My research suggests a third scenario, one much less amenable to cooperation. I’ve boiled it down to a pair of lessons here. First, both collaboration and coordination problems can arise under certain circumstances. That means the intuitions of scholars and practitioners have not missed the mark too much in terms of what donor cooperation demands.
However, we should not take either collaboration or coordination problems as given. Under a wide range of circumstances, aid allocation devolves into a zero-sum game. I’ve modeled a number of characteristics about aid donors, including their resources, their priorities over aid recipients, and whether their aid dollars supplement or negate the goals other donors pursue through aid allocation. I examined multiple scenarios. I expected that a world where donors share no goals in common and their activities only conflict with others’ would pose the greatest challenge to cooperation. Much to my surprise, collaboration works even under these conditions. Instead, a world where donors have a mix of common and conflicting interests has the potential to create the most tension.
I compared uncooperative outcomes from the model to alternative solutions that should net better collective payoffs. In a world of mixed interests, moving from no cooperation to cooperation left at least one donor worse off 50% of the time. In such cases, a zero-sum calculation baked directly into the negotiation process prevents donors from collaborating.
While the shadow of great power competition looms over the aid allocation decisions of the US and China, common ground exists too. Despite very different political systems and conflicting geostrategic interests, the US and China’s economic, financial, and social coupling means that both countries depend on each other. In a tragic twist, my model shows that common interests alongside points of conflict gives space for zero-sum thinking. The problem for Washington and Beijing may not lie in sharing too little in common, but too much.
About the Author
Miles D. Williams is a Visiting Assistant Professor in Data for Political Research at Denison University. His areas of research include the geoeconomics of foreign aid, statistical methods, game theory, and policy analysis. You can follow him on twitter @MDWilliamsPhD or check out his personal website.
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