Bang for our buck: American foreign aid, foreign policy, and democratic diffusion

Many scholars have sought to investigate the impact foreign aid has on recipient states. Much of the literature suggests that the strategic linkages of the donor-recipient dyad are key in explaining outcome variance. This paper examines that assumption further by looking at the relationship between US aid outlays and their impact with respect to democracy. Because the diffusion of democratic values has been a pillar of American foreign policy dating back to the Wilson era, one might expect American aid to be linked to good governance. I argue, however, that the national security concerns at the time assistance is disbursed has a significant effect on this goal. In a heightened security environment (Cold War), aid and democracy should be negatively associated. In a lowered security environment (post-Cold War) it should be positively linked. I examine aid’s impact during these two periods and add yet another era, post 9/11. If security concerns are peaking once again due to the war on terror, American assistance may have shifted from prompting positive political change to the procurement of terror combating alliances. Moreover, the conditionality of democratic improvement placed on aid is diminished when partner states are aware of their strategic value. While democracy is said to be an elixir to conflict, in the pursuit of these non-state actors, current American foreign policy may be harming its growth. I use the Freedom House democracy index, USAID data, and Cox proportional hazard models to test this relationship across distinct time periods between 1972 and 2010