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Aid-ing their influence: US aid and spread of economic ideology

Date:29 March 2018
Dr Anna Minasyan is Assistant Professor at the Faculty of Economics and Business
Dr Anna Minasyan is Assistant Professor at the Faculty of Economics and Business

To what extent do countries use foreign aid strategically to promote their economic principles? Past studies have found that aid may be used for strategic political reasons. During the cold war for example, the United States gave aid to neighbouring countries of Communist states to strategically isolate Communist regimes.

Could education be used the same way? Recent examples of leaders educated in the US who receive high foreign aid include Liberian President Ellen Johnson Sirleaf, Colombian President Juan Manuel Santos, and many others. Do countries with leaders who have been educated in the US receive more aid?

I set out to answer this question by examining 896 leaders in 143 countries from 1981 to 2010. The results, published in the European Journal of Political Economy, show that the US allocates 30% more aid to countries with leaders educated in the US, particularly if they have a right-leaning political ideology.

The US Department of Foreign Affairs is explicit about its motives in giving aid. On the US foreign aid website, it is stated that US aid should be used to promote US interests and free markets as well as to protect US values. Moreover, the educational exchange is often used as a tool to promote state interests. Hillary Clinton stated that educational exchange is one of the key tools in “smart power” or the protection of US interests internationally.

My research shows that leaders of aid-recipient countries who were educated in the US receive more aid, provided they share the economic ideology of the US. More aid is given to right-leaning than to left-leaning leaders US educated leaders, where right-leaning leaders are taken to be those who support free market capitalism. This result is robust to a variety of sensitivity-checks.

The findings of my research provide evidence that the US uses its soft power in aid allocation, and that the image of a benevolent big-brother in providing foreign aid is not without strategic considerations. There are a number of possible reasons: for example, this strategic aid-allocation can help in reducing the trade barriers and widen the cultural interests of the US. Alternatively, it could be to buy support for US policies via aid and create political and economic hegemony.

However, it is also possible that countries who share US beliefs and values are more likely to accept US aid. Further research may disentangle these reasons more carefully.

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