Is the Threat of Foreign Aid Withdrawal an Effective Deterrent to Political Oppression? Evidence from 53 African Countries

Abstract

This study complements existing literature on the aid-institutions nexus by focusing on political rights, aid volatilities and the post-Berlin Wall period. The findings show that while foreign aid does not have a significant effect on political rights, foreign aid volatilities do mitigate democracy in recipient countries. Such volatilities could be used by populist parties to promote a neocolonial agenda, instill nationalistic sentiments and consolidate their grip on power. This is especially the case when donors are asking for standards that majority of the population do not want and political leaders are unwilling to implement them. The empirical evidence is based on 53 African countries for the period 1996-2010. As a main policy implication, creating uncertainties in foreign aid for political rights enhancement in African countries may achieve the opposite results. Other implications are discussed including the need for an 'After Washington consensus'.JEL Classification: C53; F35; F47; O11; O55

Foreign Aid, Instability, and Governance in Africa

“…The results accord with a strand of the literature on the conditionality of development assistance for political governance purposes in recipient nations (Asongu and Nwachukwu ; Carothers ; Crawford ; Faust ; Hayman ; Killick ). Accordingly, development assistance can be a policy instrument employed by developed countries for the promotion of political governance in view of enhancing democratic standards and human rights.…”

“…In essence, calls for regime change by Western nations have been facilitated by drastically reducing the amount of development assistance that Zimbabwe receives from these developed countries (Asongu and Nwachukwu ). Another recent case is the example of Uganda, where in early 2014 an antigay legislation that was signed into law by President Youweri Museveni was not welcomed by donor countries (e.g., Norway, the Netherlands, and Denmark) and the World Bank with suspensions of aid and loans (Asongu and Nwachukwu ).…”

“…Hence, even if a “foreign aid dictated policy” is unpopular in a recipient nation, the leadership in the recipient nation may be willing to compromise by improving political and general governance standards. With the exceptions of some emerging countries in East Asia, more concessions have been made by African countries under the pressure of aid withdrawal by Western nations (Asongu and Nwachukwu , ).…”

“…An alternative way of understanding domestic‐driven governance in this strand is that, countries with improving standards of government are also entitled to more development assistance because “aid volatility” is correlated with improving indicators of governance, provided that such a trend is not limited to a first‐order process of autoregression (Asongu and Nwachukwu ).…”

Linkages between Globalisation, Carbon Dioxide Emissions and Governance in Sub-Saharan Africa

“…The governance indicators which have been defined in the introduction are from Kaufmann, Kraay and Mastruzzi (2010). They are increasingly being used in the African governance literature: Oluwatobi, Efobi, Olurinola and Alege (2015), Raheem (2016a, 2016b) and Asongu and Nwachukwu (2017).…”