Give or Take: Foreign Aid and Foreign Policy Substitutability

Abstract

The article attempts to explain state donations of foreign aid with the application of a general theory of foreign policy. This places foreign aid within the context of a state's creation of a foreign-policy portfolio. The general theory is based upon the assumption that states pursue two goods: `change', defined as the ability to alter the status quo in desirable ways, and `maintenance', the ability to prevent changes in favored aspects of the status quo. By applying the `two-good' model of foreign policy toward an explanation of foreign aid, we are able to derive hypotheses regarding the relationship between state power and foreign aid donations, as well as further implications regarding foreign policy substitutability. The two-good model posits a more complex but better specified conception of foreign policy substitutability, and it implies that state donations of foreign aid are substitutable for other foreign policy choices, such as the initiation of interstate conflict and participation in certain types of alliances, that are directed toward the same goal, namely change. We test these hypotheses using data on official development assistance obtained from the OECD, and additional data from the Correlates of War (COW) Project for 21 states over the 1966-92 period. Our findings indicate that aid allocation is affected by other aspects of a state's foreign policy portfolio. The application of a general framework of foreign policy to the study of foreign aid is fruitful.