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The Complicated Effects of Foreign Aid on African Democracy

13 December 2013

Annett Victorero

The effects of development aid are not straightforward, and often have unintended consequences. An inflow of money causes shifts and entrenchment of political and economic power, and gives influence and responsibility to new actors, inside and outside the national setting. In the UNU-WIDER project ‘Foreign Aid and Democracy in Africa’ (part of the Recom-Research and Communication on Foreign Aid programme), and new Oxford University press book, Democratic Trajectories in Africa: Unravelling the Impact of Foreign Aid, a team of researchers looked at the effects of foreign aid on democracy in sub-Saharan Africa since 1991. The findings of the project, which lead to the resulting book, were discussed in a roundtable at the Carnegie Endowment for International Peace (CEIP) in Washington DC on 6 November 2013.

The event was chaired by Thomas Carothers, vice president for studies at CEIP, and one of the most noted international experts on international democracy support, democratization, and US foreign policy. The panel, aimed to inform policy makers and researchers on the findings of the research, consisted of the editors of the book: Nicolas van de Walle, Professor and Chair of the department of Government at Cornell University, and Danielle Resnick, Research Fellow at the International Food Policy Institute (IFPRI) and former UNU-WIDER Research Fellow.

Why aid and democracy?

The intensified international discourse on the importance of governance and human rights in development is evidenced in the BUSAN and POST-2015 processes, and the parallel lack of evidence of the relationship between aid and democracy was one inspiration for undertaking the project, explained Danielle Resnick in her overview of the book’s problematic and findings.

Thomas Carothers pointed out at the beginning of the event that thus far, empirical research of this type on the effects of aid on politics and democracy does not really exist. This is especially the case when we take into account the vast amounts of money that go into foreign aid, especially in sub-Saharan Africa.

And this was another problem the project addressed. Cross-country studies tend to rely on disparate time periods and samples, and single case study findings can be very idiosyncratic. Furthermore, there is a strong tendency to aggregate all foreign aid together. This UNU-WIDER project approached the problem holistically; it included both case studies from seven sub-Saharan African countries, and a quantitative component covering aid to the region over the years from 1991 to today.

The category of foreign aid was broken into two components (Figure 1), development aid and democracy aid, reflecting the different communities of practice, goals and aims of these forms of development assistance. Development aid is aid aimed at social and economic transformation, and democracy aid, which accounts for around 8% of total official development assistance (ODA) commitments to sub-Saharan Africa, concentrates on strengthening key local actors and institutions that support political liberalization. 

Figure 1: Characteristics of development aid and democracy aid 

Humanitarian aid was not part of this analysis and was deducted from total aid in the quantitative component.

The research team looked at two different facets of the democratic process, namely transition and consolidation (Figure 2). This made it possible for the project to tease out more subtle effects of funding with different objectives and communities of practice.

Figure 2: Democratic transition and consolidation

The event started with Resnick elucidating on the motivations and findings of the research, with van de Walle opening up the case of Mali’s developing democratic trajectory. The ensuing discussion picked up on the importance of this form of research for other types of large fund injections into economies and how the implications of the research findings could be operationalized into the planning and implementation of development interventions as to avoid as much as possible the negative unintended consequences.

So, what have we learned?

Transitions to democracy

Development aid has, in general, had a positive effect where transition to democracy has occurred. The research found that an increase in development aid from 20^th to 80^th percentile has been associated with an increase in the predicted likelihood of transition to democracy from 16 to 34 per cent. The main mechanisms for support in transitions have been direct through political and economic conditionalities tied to the economic support, and diffusion.

In relation to democratic transition, the research team found that the effect of democracy aid has been most pronounced in facilitating elections during the transitions to democracy in the African counties in question. Crucially, many first elections would have been impossible without electoral assistance.

Consolidating democracy

Once a transition to democracy has been achieved the crucial task of consolidating and deepening the political regime starts. This process includes thwarting structures, tendencies and pressures that lead to erosion or even breakdown of the achieved advances.

Development aid

Not surprisingly development aid has had both positive and, unintended, negative effects on the consolidation process. These effects are largely rooted in the ideology based on which the development community mostly operates—the general aim is economic and social development, not politics. Thus the possible effects on local and national politics of the development interventions often go unexamined. The government is perceived to be a critical partner as it has power to undertake, legitimize and support development objectives at a large scale. One example on the effects of this thinking is the commendable drive for harmonization and co-ordination that has emphasized the importance of aid modalities like budget support, which the the EU describes as follows:

It should not be seen as an end in itself, but as a means of delivering better aid and achieving sustainable development objectives by fostering partner countries' ownership of development policies and reforms.

What the research team found is that in many cases funneling funds through the national budget had different effects in different contexts by lending political legitimacy and power to the executive branch in the recipient countries. This is especially problematic in countries with dominant party regimes where budget support can undermine horizontal accountability by marginalizing the legislative and judicial, branches even as the executive and finance ministries are strengthened. This can have the unintended consequence of strenghtening the incumbent’s advantage at the time of elections and thus dampen political competition and vertical accountability. An example presented at the roundtable was that of Malawi and the fertilizer subsidy programme (Figure 3). 

Figure 3: Expenditures on Malawi’s fertilizer input subsidy programme  

The general election in Malawi was held in 2009. Resnick pointed out that in the two years running up to it the Malawi government spent over twice as much money on the hugely popular fertilizer input subsidy programme than in preceding years, and much of this increase was funded by budget support. Simultaneously, direct donor funding to the programme quintupled. Thus the donors to this programme were inadvertently funding the election campaign of the late incumbent President Bingu wa Muharika.

Development aid funds often comprise a large influx of money, and can thus be also used as leverage by donors to prevent democratic erotion or breakdown. Often donor agreements have democratic- and governance-related preconditions for fund disbursment. Resnick pointed out that where as electoral violations and corruption often impel the donors to act (G19 donor strike in Mozambique), the example of Malawi’s 2012 human rights crisis is an example showing that these are mostly not enough to move donor groups to withold aid in order to prevent erosion or breakdown. In the case of Malawi only Germany decided to stop funding after controversial amendments to the penal code and the persecution of critical voices in the country. This was followed by other donors, but only after the depreciation of the Malawian kwacha, which undermined the country’s macroeconomic management.

Van de Walle also pointed out that the long-term structural effects of aid can result from a failure to rectify inequalities that undermine legitimacy, which can end up undermining the development process itself. Van de Walle’s case study asked the question ‘could foreign aid have prevented the breakdown of democracy in Mali?’. He argued convincingly that donors could have at least done more if they would have worked to rectifying some of the regional and democgraphic inequalities present in Malian society.

Democracy aid

Democracy aid, on the other hand, can also be used to strenghten vertical and/or horizontal accountability as it is designed to promote democratic consolidation through funding for elections, parliamentary, legislative and party strengthening, women’s equality, anti-corruption measures as well as for support for democratic participation, civil society strengthening and human rights. This funding comprises an estimated 8 per cent of all foreign aid to Africa and has been instrumental in ensuring several free and fair elections in the African context. Yet, the democracy aid community still tends to see elections as an event, rather than a continuous process that includes the strengthening of both governing and opposition parties, electoral systems and civil society continuously. The biggest funding area of democracy assistance is civil society strengthening, which dwarfs funds for legislative and party support. Here would be another opportunity for democracy assistance to support democratic consolidation through enabling stronger horizontal accountability by working to bolster judiciaries, parliaments, audit offices, and anti-corruption bureaus.

Aid has to take its political effects into account

In the wake of the Arab Spring and the perceived erosion of democratic gains in other areas of the world, the lessons from this research could be far reaching, as was pointed out by a policy maker in attendance. The ‘policy reflections’ from the research team were clear:

• There is a need for more attention to parties and long-term modes of engagement for institutions of horizontal accountability.

• The dilemma of donor co-ordination on erosion is reflective of lack of sound theory about the best means to generate democratic change.

• Failing to respond to democratic and governance crises can reinforce non-democratic behaviours.

• Reconciling trade-offs between democracy and development aid remains a major policy priority

The book can be found here, and the relevant WIDER Working Papers are freely available here.

Annett Victorero is Communications Associate, UNU-WIDER.

WIDERAngle newsletter
November—December 2013
ISSN 1238-9544

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