American Foreign Aid before and during the War on Terror: An Empirical Examination
Hasnat, Baban, The Journal of Social, Political, and Economic Studies
The paper uses time series and cross-section data to examine the impact of the Global War on Terror (GWOT) on the U.S. bilateral aid allocation in 144 countries. For its theoretical and conceptual basis, the paper draws on international and development economics. It uses descriptive statistics (1996-2007) to analyze the data and multivariate analysis (1996-2006) to test the hypotheses. The paper finds that aid allocation is affected by the GWOT. While the GWOT may have increased the amount and the number of countries receiving aid, the paper finds that the degree to which aid focuses on low income countries has not changed.
Key words: Foreign Aid; Global War on Terror; "9/11"; Muslim Countries.
Foreign aid has been an important part of American foreign policy for decades. Recently, the American foreign aid budget has increased to a historic level. The increase is significant since it came during the Bush presidency, an administration that was very critical of foreign aid, arguing that much of the aid was wasted and did not serve American interest. These views changed with the tragic events of the 9/11 terrorist attacks. The administration overhauled the foreign aid regime, created new institutions to deliver aid, and increased funding to help poor countries. Eliminating poverty in far-away countries was seen as a tool for fighting poverty as well as terrorism. Linking poverty with security is not a new idea in American foreign policy circles, as a similar argument was made during the Cold War. Is the increase in aid due to the new security imperatives? The purpose of this paper is to investigate whether the pattern of U.S. foreign aid shows any fundamental policy shift after 9/11. More specifically, it tries to understand the impact of 9/11 and the subsequent Global War on Terror (GWOT) on U.S. foreign aid policy. Did the countries in the front line of GWOT receive more aid? Did the countries that are known to have sympathy towards the terrorist agenda receive less aid? Did the coalition of the willing partners receive more aid? Did 9/11 affect the allocation of aid to Muslim countries? The paper utilizes the latest internationally comparable data available on country characteristics and foreign economic assistance, which only go through 2007 at the time of completing the manuscript (December 2009).
A Brief Literature Review
The extensive literature on foreign aid contains two streams of research - one dealing with motives for aid and the other with aid effectiveness. Our review is restricted to the first, since we want to understand if the new security concerns have any effect on U.S. aid policy. Lancaster (2007) starts with a simple question: why do countries give foreign aid? She provides a tidy classification of the purposes of foreign aid. Historically, it has been used for four main purposes - diplomatic (i.e., international security, international political goals, etc.), developmental, humanitarian relief, and commercial (Lancaster 2007, p 13). After the Cold War, foreign aid has been provided for new purposes such as promoting economic and social transitions, promoting democracy, addressing international public goods issues, and mitigating conflicts and managing post-conflict transitions. In reality, it is not easy to categorize aid into such neat purposes, as purposes are invariably intertwined with one another (Lancaster).
Security concerns and international political goals have always been a part of foreign aid. The Marshall Plan, the first major U.S. foreign aid program, was implemented to rebuild Western Europe and repel communism after World War II. During the Cold War, both the U.S. and the Soviet Union used aid to realize strategic goals.
China and Taiwan have also used aid to gain support and recognition for their governments. After signing the U.S.-brokered Camp David peace agreement, Israel and Egypt became the largest recipients of U.S. foreign aid from 1980 until very recently. …