Research Brief
Economic Aid vs. Democracy Aid

Foreign Aid and Democratic Development in Africa

The past twenty years have seen donors increasingly linking foreign aid to democracy objectives in Sub-Saharan Africa. In the same period many countries in the region have adopted multi-party political systems, perhaps the minimum condition required for democracy. However, in the 18 years from 1991-2008 only eight elections have resulted in the incumbent leading office. A large amount of research has been done on the relationship between aid and democratic transition, but much of this groups all categories of aid together and does not look beyond democratic transition and towards indicators of democratic consolidation.

These shortcomings are addressed by Simone Dietrich and Joseph Wright in the UNU-WIDER working paper 'Foreign Aid and Democratic Development in Africa'. They distinguish between two potential mechanisms for encouraging democratic consolidation; the use of aid as leverage to buy political reform and investment in the opposition through aid specifically earmarked to help improve democracy and governance, strengthen public institutions and the civil society. They look beyond simple democratic transition by assessing the effect these types of aid have on five separate indicators, four of which relate to democratic consolidation. These indicators, and the findings that relate to them, are laid out below.

Democratic transitions and consolidation - findings

Using OECD figures for aid flows into the 48 Sub-Saharan African countries in the period 1991 – 2008, Dietrich and Wright found that democracy and economic aid had the following effects on five key indicators of democratic transition and consolidation.

1. Transitions to multi-party elections

A transition to multi-party elections requires the existence of an opposition party in the legislature as well as universal suffrage. Countries, such as Zaire in the period between 1992-1997, which allowed opposition parties but never had an election to place them in the legislature, are excluded. The fairness elections and the quality of civil liberties are not taken into account so countries with reasonably fair and non-violent elections, such as Botswana, are grouped together with countries which sometimes have unfair and violent elections, such as Kenya. Aid was found to have the following effects on the transitions:

• Economic aid was associated with an increased likelihood of transition to multi-party elections, democracy aid was not.
• The likelihood of transition is higher in non-military authoritarian regimes than in military ones. Non-military regimes tend to have a broader support base and thus democratic transition is typically less costly. This suggests that economic aid is effective at buying political reform when the costs of that reform are relatively low.

2. Multiparty failure

The authors define multiparty failure as one of the following three events occurring.

i) Government change via a coup during a civil conflict.
ii) Institutional change that excludes opposition parties.
iii) The opposition withdraws so there is no opposition presence in the legislature.

Aid is found to have the following impact on multiparty failure:

• Democracy aid is found to be associated with a lower likelihood of multiparty failure while development aid has little effect.
• The effect of democracy aid in lowering the risk of multiparty failure is found to be particularly strong in countries which have high levels of prior party institutionalization and which have never been ruled by a personalist dictator.
• While economic aid appears to have little effect there is some association between high levels of economic aid and an increased likelihood of multiparty failure.

3. Electoral Fairness

Prior to the 2006 general election in Gambia the government arrested three opposition leaders and made libel an offense punishable by six months in prison. It is such events that constitute a failure of electoral fairness. The authors use the Freedom House political rights scale to measure this variable and find that aid inflows have the following effects:

• Democracy aid is associated with a lower likelihood of multiparty failure particularly in countries with high party institutionalization, and no history of personalist dictators.
• The effect of economic aid is again weak.

4. Incumbent Turnover

Incumbent turnover happens when an election leads to an incumbent leaving office. The authors exclude cases where the incumbent is vote out in the first multiparty election and focus on elections subsequent to this initial transition. Such a turnover has only occurred eight times in the countries studied; Benin 2001, Cape Verde 2001, Ghana 2000, Guinea-Bissau 2000, Kenya 2002, Madagascar 1996, Mali 2002, and Senegal 2000. Aid is found to have the following effects on the likelihood of incumbent turnover:

• Democracy aid is strongly associated with an increased likelihood of incumbent turnover.
• Economic aid is associated with a lower likelihood of political turnover when political opposition is weak, suggesting that economic aid may help keep incumbents in power when they dominate the legislature but that it unlikely to have this effect when the opposition has a strong legislative presence.

5. Violation of term limits

A term limit is violated if an incumbent changes the number of terms permissible, abolishes the limit, or fails to hold an election before the end of the initial term spell.

• The estimate risk of term limit violation declines as the level of democracy aid increases.
• Economic aid has no statistical association with the risk of term limit violation.

Diverse effects

These results produce several insights into the relationship between foreign aid and democratic consolidation. They show that democracy and governance aid is consistently associated with consolidation in African democracies, across all four measures of consolidation processes. Equally consistent is the finding that economic aid is statistically unrelated to democratic consolidation. Dietrich and Wright argue that while donors may be able to use economic aid to buy reforms, such as multiparty elections, which are fairly cheap, they would be more successful in promoting democratic consolidation through aid aimed at specific democratic projects.

Another interesting result is that democracy aid has a higher impact on both reducing the likelihood of multi-party failure and promoting the fairness of elections in countries in countries with high party institutionalization and no history of dictatorships based on personality. The authors posit that this is because in countries where the incumbent uses state resources to buy electoral dominance, elections are more likely to entrench the incumbents in power for the long-term and therefore raise the cost of losing. Aid in this context may simply serve to reinforce winner takes all politics. In contrast countries where institutionalized politics is the norm this problem is avoided and thus aid should have a greater effect.

Why does democracy assistance have a positive impact on democratic consolidation?

It is important now to consider why it is that democratic aid has this positive relationship to many aspects of democratic consolidation. Dietrich and Wright provide us with two possible reason why this might be the case. First democracy assistance is often aimed at strengthening public institutions and strengthening civil society, this may lead to a leveling of the political playing field as more channels through which opposition voices can be heard are created. In countries with strong government institutions incumbent parties can use these to deal with an increasingly robust opposition and are thus less likely to be threatened by the persistence of multiparty politics or increasingly fair elections.

Second, democracy aid may be associated with higher chances of incumbent turnover and a lower risk of term limit violation due to its ability to reduce the stakes associated with winning and losing elections. If politics is institutionalized then the cost of being out of office will be reduced due to there being fewer opportunities to extract rent. Furthermore if institutionalization has created fairer politics then the cost of losing an election is reduced because the chances of winning power again in the future are increased. Put simply democracy assistance helps institutionalize democracy by creating a more competitive electoral system, thus reducing both the political and economic cost of not being the incumbent.

Dietrich and Wright conclude by pointing out that one factor not considered in this paper, which may have an effect on aid-receiving countries prospects for democratic transition and consolidation is the channels through which donors choose to deliver these finances. Aid which promotes democracy by directly funding civil society may have a very different effect on democratic consolidation than funding leaders who invest democracy aid in building state institutions.