Foreign aid - a global foreign policy tool for Germany

Bachelor Thesis, 2007

141 Pages, Grade: A



Dedication and acknowledgements


Abbreviations / Acronyms

List of illustrations

O. Introduction

I. Foreign Policy, International Relations (IR) and Development Theories
I. 1) Foreign Policy
I. i) a. Foreign aid as a Foreign Policy Tool
I. 2) IR Theories.
I.2) a. Constructivism
I. 2) b. Utilitarian Liberalism
I. 3) Development
I. 3. 1) Development Theories
I. 3. 2) Foreign Aid
I.3.2) a. Foreign aid and Multilateralism

II. German Foreign Policy and Development Aid
II.2 German Foreign Policy since PostWorld War Two (WW2)
II.3 German Foreign Aid Policy or Development Cooperation
II.3.1 21st Century Challenge: From Development Aid to Poverty Alleviation
II.3.1.a) Global Causes of Poverty
II.3.2.b) Germany's Endeavour against Poverty
II.3.2 21st Century Challenges: Global Good Governance
II.3.3. 21st Century Challenges: Development Aid as a Global Foreign Policy Tool

III. Germany's Africa Policy
III. a) German Democratic Republic (GDR)
III. b) Federal Republic of Germany (FRG).
III.1 Global Security Policy:
Germany's Quest for Profile through its Africa Policy
III.2 UN Millennium Development Goals (MDGs) .
III.3 Debt Relief
III.3.1) Germany and Debt Relief.
III.4 Germany and the G
III.5) Germany and EU

IV. Impact of (German) Foreign Aid to Africa
IV.1 Germany and Environmental Policy
IV.2 Germany's Country Concentration in SubSaharan Africa.
IV.2.1 Madagascar
IV.2.2 Ethiopia
IV.3 Africa and Foreign Aid: Reflecting Half a Century of "Development Assistance"
IV. 3.1 Advocates of Foreign Aid
IV. 3.2 Critics of Foreign Aid
IV. 3.3 SouthNorth Flows
IV. 3.4 On the Road to End Foreign Aid

V. Conclusion

VI. Annexes
Glossary of aid terms

VII. Bibliography

Dedication & acknowledgements

To those living in injustice and poverty, may light shine upon you one fine day!

To my mother Saholy Ravelojaona, with all my love and gratitude.

And last but not least, I would like to thank my supervisor, Dr. Isabelle Calleja, for her time and help.


In global affairs, the issue of poverty alleviation has intensified the question over foreign aid. Both the North and the South have their responsibilities in allowing the gap between them to widen, and this global issue worsening. However, dominant countries are able to dictate and influence international relations so as to enhance their interests. Less powerful countries on the other hand remain in a dependent position, having little choice but to accept the conditions set, while they also seek to secure their interests.

In the context of this paper, the aim is to illustrate how foreign aid to Africa has been a global foreign policy tool for Germany. Foreign aid has allowed the growth of German markets for its exports, and thus boosting its economic status at a global level. Foreign aid has also provided employment for those working in the international development cooperation sector. Hence by becoming a powerful economic player, Germany has also gradually increased its status as a global political player. Within the context of global security challenge, foreign aid has also been used as a global foreign policy tool in the context of fighting poverty and the promotion of democracy under the banner of good governance. Foreign aid has also helped in promoting local projects in the developing countries, where for instance German environmental expertise remains necessary. However, the poverty plight has worsened over the last decades, and this thus questions the use for foreign aid. Radical critics argue that it has not been effective in developing Africa but rather contributes to its continuous dependency and hinders genuine economic development. And it has been sadly furthering the process of poor subsidizing the rich through the South-North flows. Ultimately, only time may improve the situation of global inequality, through all ongoing projects. The North-South gap however ultimately seems to have become a spiraling cycle with foreign aid considered the ultimate cure for all ills of the South. However, a status quo has been established in the global economy and it would be difficult and would take a long time to change it. Any recommendation would therefore be for fairer trade and the continuing efforts towards improving the situation in the South through sustainable projects with the environment as a major consideration.

Abbreviations, Acronyms

illustration not visible in this excerpt

List of illustrations

The institutional set-up of German Development Cooperation in

Supporting the developing countries’ own efforts: the five criteria of official German development co-operation

2005 BMZ budget

Regional profile of Sub-Saharan Africa

EU Member States’ shares of budget aid and EDF

Disbursements of EU AID 1990-1993

Maps of divided Germany,

Political map of re-unified Germany

Map of Africa

Development assistance for employers/ Germany and the world economy

Bilateral official development assistance: net disbursements, 1950-

Distribution by region (DAC country and multilateral ODA)

Bilateral Official Development Assistance to Africa: net disbursements, 1950-84

Total flows to developing countries, 1964-2003

Breakdown of Federal Republic of Germany’s total ODA into bilateral and multilateral, 1964-2003

Total flows to developing countries, 1970-2003

Total net disbursements

Official development assistance (ODA)

Other official flows

Private flows at market terms

Private development cooperation

Total flows to developing countries 1998-

Financing German ODA (in million Euro and in percentages)

Net bilateral ODA disbursements by country, year-by-year comparison, 1999-2003

Net multilateral ODA flows to multilateral institutions and EU, 1999-2003

Multilateral development assistance, contributions by industrialized countries,

Bilateral ODA- grant funding for non-governmental organizations (NGOs)

Bilateral ODA commitments by sector

Germany, gross bilateral ODA, 2003-4

Official development assistance from the industrialized countries, as % of GDP

ODA is in decline

Who gives how much? development assistance per head

The richest are the meanest

More for the East, less for the South?

Who gets how much?

Changes in development assistance

Comparison of development budget and returns from development assistance

Comparison of donors, change since

Progress and achievements of development cooperation.

Development goals in Sub-Saharan Africa

Target 2003-2015

DAC simulation of 2010 ODA based on recent donor commitments as of 14 November

Total DAC ODA to Sub-Saharan Africa 1985-2004

Share of debt relief grants to net ODA from DAC donors, 2005 (Preliminary data), amount in $ million

Commitment to Development Index

Germany Scores 2003-

O. Introduction

By the end of the Second World War various developments in international relations took place such as the reconstruction in Europe which has led to the beginning of aid programme under American sponsorship. This was also the period of growing multilateralism, as major international institutions such as the United Nations (UN), World Bank and International Monetary Fund (IMF) were established. In the European colonies Africa and Asia, a wave of nationalism led to the decolonization process, followed by the era of independence. They were now the ones in need of aid mainly due to the gap in economic development that led to their poverty. Besides, it has been argued that the international focus was less turned in the direction of Europe; the old continent would still continue to be the pole where the two remaining superpowers allowed the iron curtain to fall, dividing the Communist East and the Capitalist-Democratic West. Germany, as being a loser of the war, its division formally established the GDR (German Democratic Republic) and the FRG (Federal Republic of Germany), each side of the country undertook its own foreign policy, shaped by the ideological context and strategic interests of the Cold War. The Western side followed a diplomacy of non-recognition of the East through the Hallstein Doctrine, though substituted by a policy of rapprochement or Ostpolitik when the former failed to succeed. In the 1970s, both entered the United Nations separately until in 1990, the reunification process allowed the whole of Germany to be represented in this multilateral forum. Since then, Germany has sought to become a permanent member of the Security Council.

The multilateral forum has been since then, the key context for German foreign policy’s endeavour at attaining an international profile. For instance, when the process of European integration took shape, Germany along with France, was to be a key actor. Germany is also an important member of NATO (North Atlantic Treaty Organization) and G8 (Group of 8). This multilateral framework has also developed to become the context in which post-modern and modern states attempt to deal with the different crises around the world, which hamper peace and security. Among the new security issues are migration, terrorism, HIV/AIDS and other diseases, weapons of mass destruction, and smuggling. However, it has been argued that poverty remains an important consequence of the gap between the North and the South, which then leads and breeds the security issues just mentioned.

Despite the vast potential of resources in its soil, which still attract former colonisers and other interested parties, the African continent remains nonetheless the home of poverty. The years after independence have witnessed a boom in foreign loans, which was soon to culminate in the debt crisis of the 1980s. The World Bank's Structural Adjustment Programs (SAPs) were to accompany the loans as terms of conditions imposed by the donors, which were mainly used to spread a neo-liberalist agenda, i.e. to reduce the role of the state so as to allow the market to rule, which is also seen as the cause of the growing North-South gap. Indeed, the South is asked to liberalize and free its markets, while the North still subsidizes its agricultural sector. The issue of development has thus been a continuous concern for both the North and South. It is also the subject of a wide debate in particular with regard to foreign aid, which some sees as further enhancing poverty and undermining local economies. Foreign aid is however an important aspect of a donor's foreign policy since it is an approach pursued in order to ensure a return of interests though it may appear as a win-win strategy.

In the case of Germany, foreign aid can be argued to have been a tool to enhance its global profile and status.

The aim of this paper is to illustrate how foreign aid to Africa has been a global foreign policy tool for Germany.

The first chapter will provide a theoretical background and will address foreign policy and foreign aid as a foreign policy tool, the different theories of International Relations, the theories on development, and foreign aid. This chapter will thus allow a better understanding of foreign aid as a soft power tool for German foreign and development policy within the post-WW2 multilateral context, which served as a constraining structure for German political power and as a means for a gradual search for higher international profile, and primarily for the country’s national economic interests.

Chapter two will show how German foreign policy and development aid evolved over the years, with foreign aid becoming an international economic soft power tool during the Cold War years as West Germany became the strongest economy in Europe, it was however a period during which a divided Germany was not totally sovereign since being under both Superpowers’ aegis. However with its reunification in 1990 Germany has affirmed its global presence, so that continuity is still present and German development aid has remained a global foreign policy tool in the context of fighting poverty and the promotion of democracy under the banner of good governance.

Germany’s Africa policy is the focus of the third chapter. We will see how the Utilitarian Liberalist theory has been the key approach despite the humanitarian aspect brought forward by the UN, G8 and other institutions. Poverty in Africa has now become a global security challenge that can only be addressed from an interdependent approach, but German foreign aid to Africa has declined following its reunification. The multilateral forum thus seems to be an arena for states’ power struggle to be achieved through their foreign policy and through any tool they will use to maintain or increase their position.

In the last chapter, we shall deal with the impact of (German) foreign aid to Africa, taking the case of German environmental policy as an important area of focus for the cause of poverty alleviation in German development policy, followed by short case studies on Madagascar and Ethiopia. The debate over the necessity for foreign aid will also be mentioned, along with the key weaknesses of foreign aid, the South-North flows issue, and the perspective of ending foreign aid.

Finally, we can argue that on the whole foreign aid to Africa would never be disinterested. Despite it implies some moral obligation; foreign aid has helped promoting Germany’s global quest for profile, used as a foreign policy tool to boost national economic interests. A status quo has been established in the global economy and it would be difficult and would take a long time to be changed.

I. Foreign Policy, IR and Development Theories

Ever since the Westphalian order set the parameters for sovereign nation-states as the main actors of international relations, foreign policy has been mainly focused on high politics, i.e. the need to defend national interests through security, defence, or macroeconomics issues. However, with the development of IR theories in the 20th century, the presence of non-state actors and issues of low politics such as environment or poverty have gradually been acknowledged to a certain extent due to the globalization effect, which has also made the North-South gap more visible following the era of widespread independence of nations, hence the need for the North's development policy.

This chapter will be divided into three main sections, which are: foreign policy and foreign aid as a foreign policy tool, IR theories, development theories, and foreign aid. Each section will be dealt with the various academic views related to it. This theoretical framework will serve as a basis for understanding the following two chapters on German foreign policy and German development aid, which will then be illustrated with its Africa policy as a case; and in demonstrating the argument that German foreign aid policy to Africa has indeed been used as a foreign policy tool over the years.

I.1) Foreign Policy

Webber & Smith define foreign policy as "composed of the goals sought, values set, decisions made and actions taken by states, and national governments acting on their behalf, in the context of the external relations of national societies". Hence, those states, which have considerable power, i.e. through their size, status, resources, or population, may attempt “to design, manage and control the foreign relations of national societies, specifically their external economic relations". In this context, the study of foreign policy describes countries as 'Great Powers', 'Middle Powers' or 'Small States' so as to indicate their "scope and responsibilities of foreign policy".[1]

However, the other side of the power coin remains the need to preserve this power. Hence, sustaining national security, in order to face the different changes in world politics, has always been an important foreign policy aim. In this post-Cold War era, new security issues such as environmental degradation, migration and refugees, or terrorism are now “challenging items on the foreign policy agenda".[2] This also reveals the result of the ever-growing gap between North and South, which one could argue started in the independence era of the 1950s, and may have been aggravated among other reasons by the flow of foreign aid to, and the lack of fair trade with, these new ‘independent states’. Within the context of this paper, we will focus on Germany as representing the North, while Sub-Saharan Africa, the South. The following section will analyse foreign aid as being a soft power foreign policy tool for the North to the developing countries of the South.

I.1) a. Foreign Aid as a Foreign Policy Tool

One can argue that on the whole foreign aid has always been a foreign policy tool for donor control over the developing countries ever since the ‘end’ of colonialism, from the 1950s onwards. According to Lancaster (1999) foreign aid has always been a tool of statecraft often used as a means of coercion and as a way of exercising power in order to "encourage or reward politically desirable behaviour on the part of the government receiving it".Along with him, McNeill (1981) also agrees that foreign aid is a tool to exercise power over poor nations. He wrote:

One way in which a country can attempt to influence the policies of another is by promising to provide, or threatening to withhold financial or material assistance. Such a leverage may be exercised not only in the direct interest of the donor, but also for other reasons. It may be exercised by multilateral donor agencies as well as by individual countries.

Another supporter is Ayittey (1999) who also observed that "economic development assistance in Africa has over the decades been used as an instrument by the donors to achieve a variety of non-economic objectives such as a containment of communist expansion in Africa".[3]

Moreover, according to V. Milner, foreign aid's role is :[4]

- To influence the recipient's policy choices or other behaviour
- To alter the recipient state's behaviour or policies
- A central form of positive sanction and hence a primary tool of statecraft

J. Ishengoma then concludes that "aid has been always an element of neo-colonialism". Working from empirical evidences (Hancock, 1989; Lancaster, 1999; and Rugumamu, 1999) he emphasized that "aid programs have a tendency to be donor driven, both in the sense of being tied to the donor governments’ diplomatic and geopolitical objectives in Africa and elsewhere and in the sense of having program design and implementation tightly controlled by the donors".[5]

Foreign policy, and foreign aid as inherent to it, can however be better understood within the theoretical framework provided by the various schools of thought in IR, which I am now going to describe.

I.2) IR Theories

Originating in the writings that analysed the First World War, IR Theories have since then evolved into a vast umbrella of schools of thought, each attempting to analyse the complex state of international or nowadays global affairs, and states’ foreign policy therein.

A Realist perspective on foreign policy is directed towards a "state-centric view" and mainly focuses on high politics and strategic interests. With regard to development assistance, the September 11, 2001 event has for instance influenced donor countries into giving foreign aid along Realist lines. Indeed, it led most powerful states to rethink and reconsider their aid approach in terms of strategic and national security interests within the context of the 'war on terror' launched by the USA as the remaining superpower. In this context, Neo-Realism argues that state's foreign policy behaviour is mostly influenced by the "effects of the international system's anarchical structure", which lead states to struggle for their survival.[6]

However, in reality foreign policy can also be co-operative. The Pluralist view believes that changes to domestic and world politics centrally influence foreign policy. Indeed, with the increasing global transformations and its related problems such as poverty, diseases, or climate change, states cannot merely act on their own to address these issues but should rather seek co-operation through regional integration or existing institutional forums[7] In this context, Keohane and Nye's (1989) notion of 'complex interdependence' is for instance illustrated by Germany's effort towards European integration or support of African initiatives such as NEPAD. Lothar Rühl has termed Germany's foreign policy behaviour as "a principled multilateralism", i.e. "a commitment to institutionalized and put international relations on a legal footing".[8]

On the other hand, the Dependency school tends to illustrate the situation of African politics, as it views the world as "one of profound inequalities between states and within societies".[9] Consequently, according to this view developing countries have "few realistic policy choices", i.e. they easily "succumb to a form of economic servitude upon rich states and international financial institutions”. While in regional concerns, they would “become preoccupied with immediate threats to their national security that arise from arbitrary borders (a legacy of the colonial period) and unresolved territorial claims". The dependency school thus emphasizes that "for such states, the making and implementation of foreign policy is often a matter of reflexes, in the sense that the actions are demanded if not compelled directly by pressing national need and dependence on others."[10]

Other schools support a Globalist approach and believe in the lack of structure such as power, influence, and their subsequent rules; but rather assume that "in the area of global security, (..) the security and integrity of different countries or regions have become linked".[11]

In the context of this study, however, it will be shown that the constructivist and utilitarian liberalist approaches seem to best portray Germany's perspective on foreign policy and its aid policy towards Africa.

I.2) a. Constructivism

Constructivist adherents emphasize the importance of identities, norms and culture in world politics. They think that it is not structure but rather process which assumes that "identities and interests of states are not simply structurally determined, but are rather produced by interactions, institutions, norms, culture".[12]

In explaining the constructivist view, Rittberger et al. argue that being part of social theory, constructivism does not hold onto rationalist assumptions that “actors pursue their exogenously determined preferences according to a logic of consequentiality". Rather norms, i.e. “value-based, shared expectations about appropriate behaviour", become the key "independent variable of constructivist foreign policy theory".[13] A sharp contrast from neoreaslim and utilitarian liberalism is then given through Rittberger's distinction between homo oeconomicus, i.e. "actors as self-interested individuals or organizations whose behaviour results from rational calculations concerning costs and benefits"; and homo sociologicus, i.e. "the actor plays a social role (or rather several roles) which he has acquired through a process of socialization".[14]

The constructivist approach also argues that both international and domestic factors greatly influence a country's foreign policy. Rittberger et al. for instance distinguishes the two research traditions: transnational constructivism, which takes the "influence of norms that are shared by international society" into account, and societal constructivism, which rather emphasizes the norms "shared within domestic society", with the legal order, party programs, parliamentary debates, and public opinion data, being the indicator. A. Pradetto describes the norms influencing German foreign policy as "enshrined in the Grundgesetz (Basic Law), in its laws, and in the rulings of the Bundesverfassungsgericht (Federal Constitutional Court, FCC)". These norms are firmly entrenched and illustrate the important role played by Germany's "specific historic experiences", i.e. national-socialism, war, and defeat in the peacefully-leaned German foreign policy culture.[15] The Basic Law for instance mentions that "all state authorities and citizens [have] to respect human rights", or that German foreign policy must be committed to "cooperative internationalism" by transferring "sovereign powers to intergovernmental institutions".[16] By the 1960s, this foreign policy culture coined by Hanns W. Maull as "civilian power", had been consolidated.[17]

Besides, the constructivists analyze Germany's foreign policy as unlikely to change, and when it does, only to "the extent to which the relevant norms have themselves changed".[18] Continuity has indeed mainly characterized German peaceful diplomatic approach ever since the end of the Second World War (WW2). In this context, research by Smyser suggests that German negotiation process and skills are mainly influenced by its "cultural tradition", which are characterized by the following four aspects:

- Geography - due to its central location, Germany not only feels the need to cultivate relations with its neighbors as well as other countries, but also often holds a mediating role.
- German philosophy - Hegel's dialectics and logic seem to have influenced the "strong interaction of German national interests with European and international interests.
- German economic power - the fact that Germany is the third largest economy in the world has an impact on international relations.
- History - the catastrophic experiences of isolation under Bismarck and Hitler taught Germany that it must show a greater "commitment to community participation". It is in this line that Germany sees in multilateralism and international organizations, "a possibility to exercise influence through a community and for a community".

Along with these four characteristics, Smyser lists "seven features which guide German diplomacy and negotiation style". The first three are aiming at:

1. Rehabilitation of and honourable place for Germany in world politics
2. Security and stability
3. Reliable allies and a sense of community

While the last four are the means to reach these aims:

4. Conceptual logic
5. Tenacity and persistence
6. Logically framed compromises
7. Use of economic (as opposed to a more coercive political or even military) assets

Smyser's prognosis also supports the view of "continuity in the negotiation behavior of the Republic of Berlin" and on the whole considers diplomacy, as it was, is and will be the key tool in Germany's survival and success.[19]

Following this description of the Constructivist approach, the next section will be dealing with the executive-interest group relations and aid policy through the utilitarian liberalist lens, which best portray Germany’s foreign policy and foreign aid policy to Africa.

I. 2) b. Utilitarian Liberalism

The Utilitarian Liberal approach of foreign policy analysis places a particular emphasis on domestic interests. Authors such as Frieden (1991), Gourevitch (1986), Katzenstein (1978), and Schattschneider (1935) argue that foreign policy behaviour of states “mirrors the interests of the dominant domestic societal and political actors". For instance regarding German agricultural trade policy, the interests of German farmers will not only be considered but also protected. The same holds for German development aid policy, with the presence of the interested and influential export industry. Utilitarian liberalism therefore considers actors as "self-interested" and rationally pursuing "largely materialistic goals". In this context, the fundamental actors are not 'unitary states' (along with the 'realist' view), but rather "individuals and groups” such as voters, interest groups, political parties, bureaucrats, or politicians.

According to this school of thought, the desires and interests of the "dominant societal actors" do influence and drive international politics with their main interest being survival, in the sense of retaining their 'resources' or power. For instance, presidents and prime ministers aspire to their re-election, while national administrators, fear of gradually becoming evicted and are therefore reluctant to give up competencies [to supranational institutions]. The executive, who mostly uses aid for political purposes (as it provides another foreign policy tool) must also care about the commercial interests of aid suppliers in the country. Since these interest groups are the direct beneficiaries of aid policies being profit maximizers, they would generously provide for campaign contributions. These private actors such as companies obviously seek to sustain their competitiveness on the global markets and therefore expect their government to back their endeavours. In this context, the Ifo Institute of Economic Research in its study in 1999 found out that “one billion euro of development aid triggers long-term export growth of up to three billion euro and generates an increase of GDP of up to ten billion euro”. Concerned with membership decline and losses of contributions, unions, on the other hand, require from their government to “pursue macroeconomic policies with a view to enhancing employment opportunities”.[20]

Moreover, Hancock (1989) argues that aid to a large extent benefits those he calls “international civil servants in the aid industry”. He observed that "year in year out … there can be no doubt that aid pays the hefty salaries and underwrites the privileged lifestyles of international civil servants, development experts, consultants and assorted freeloaders who staff the aid agencies themselves". Hancock then concludes that, "the expense of hiring and keeping development experts in the field eats up a surprisingly large slice of the official aid budget". McNeill (1981) also stresses that foreign aid "indirectly takes care of the business interest of donors especially at the project and sectoral levels."[21]

On the whole, the importance of resource dependency contributes to the fact that it provides those “societal actors in policy networks strong incentives to advocate policies that are consistent with the expectations of those actors who control the resources that are of critical importance to them".[22]

This section on utilitarian liberalism has given us a perspective for a better understanding of some of the interests that are inherent to donors’ development aid policy. However, also important are the different succeeding theories that attempted to shed some light on the issue of ‘development’ in the Third World, which are now going to be explained.

I. 3) Development

The term 'development' is not so easy to define as it carries with it its own complexity, since it is subjective and might thereby suggest contradictory meanings. Indeed, according to J.K. Black, "like other terms that have acquired a positive connotation, development is user-friendly: it means whatever one wants or needs it to mean".[23] In this context, although development suggests "diametric opposites", it is still commonly upheld as a ‘necessary evil’ since it is:

a standard borne by those who would promote the interests of the affluent and the powerful as well as by those who would serve the unaffluent and the unpowerful; by those who would expand the reach of the most industrialized states and those who would shield the least-modernized from nefarious influences; by those who would stress the virtues of entrepreneurship and individualism and those who would nurture community and collective concerns; by those who would pursue strategies of top-down initiative and decision-making and those who advocate a bottom-up, or grassroots approach; and finally, by those who would exploit and maim 'mother nature' for the benefit of either business or labor in today's world, as well as by those who concern themselves with a bountiful and livable environment for future generations.[24]

As an issue which mainly surfaced as a result of the independence era in the South, development is still essentially part of the economic realm and was never really dealt with the traditional politics-focused studies of IR, centred on the North, i.e. USA and Western Europe. According to Jacobs et al., "a profusion of economic theories provide explanations for specific expressions of development, but none links all the pieces into a unified theory that adequately defines the central principles, process and stages of development".[25]

I.3.1) Development theories

Development theory, which focuses on "the diagnosis of the central problem", has been a topic of divergence. In the 1950-60s, a consensus was reached among academic scholars that "traditionalism was the problem and modernization was the solution". However, more than fifty years later, the trend has been reversed as current scholars, are now facing the "flotsam of modernization (..), [and] are tempted to search for grounding in tradition" since "technology's mixed blessings, often favored only a minority". Some of the dramatic consequences of modernization are for instance: "chronic unemployment, chronic inflation, unpayable debts, denationalization of resources, environmental degradation, and a deepening of dependency".[26] Thus, in order to deal with these issues, a bottom-up approach already suggested in the 1980s is now being seriously taken into consideration under the new 'partnership paradigm' (i.e. to allow the recipient countries' governments to "step into the 'driving seat' and develop their own poverty reduction and growth strategies", while donors would provide support[27]) innovated by the first Poverty Reduction Strategy Paper (PRSP). This bottom-up approach in its broad proposal "calls attention to health and education, to more effective locally based problem-solving techniques (vs. enhancing productivity and diffusing technology), promotion of community development through self-help, sustainability of the process enabling collective decision-making and collective action".[28]

However, J.K. Black suggests that "the states that promoted the view of harmonious interests have [also] been those that were expanding their economic horizons and seeking to penetrate markets previously closed by colonial arrangements or nationalistic protectionism".[29] Modern capitalist economies have indeed been by and large influenced by the liberal internationalist school of the 19th-20th centuries, illustrated by Adam Smith's Laissez-faire principle, i.e. less government intervention, and David Ricardo's theory of comparative advantage, i.e. states should specialize in those goods they could produce most efficiently, while trading for goods in which other states had the advantage.

Let us now turn to the various theoretical approaches to development.

Development and modernization theorists in the 1950-60s, applied the doctrine of liberalism to explain economic growth and social change, or its inexistence in the Third World. These theorists include the economists' view (i.e. arguing that development is "to be measured through aggregate data on gross national product (GNP) or per capita income), the social scientists' view (i.e. believing in "the beneficial effects of the spread of Western-style education and communications"), and the political scientists' view (i.e. emphasizing the importance of "participation and institutionalization and their consequences with respect to stability").

The cultural causation view, which is for instance spread by Samuel Huntington, who argues that, "if we fail to see development and democratization taking place in the Third World, it may be because those are distinctively Western goals". He further assumes that "aspirations to wealth, equity, democracy, stability, and autonomy emerge from Western, particularly Nordic experience, and that other cultures may prefer simplicity, austerity, hierarchy, authoritarianism, discipline, and militarianism".

The interdependence view, propelled by renowned IR scholars such as R.O. Kehoane and J.S. Nye, suggests a theory of transnational relations and complex interdependence linked to the "new vulnerability on the part of the industrialized states to economic problems in the Third World".[30]

The Marxism and Marxism-Leninism view bear the name of its theorists, Karl Marx and the former Russian leader Vladimir Lenin. The former argued that there is an important contradiction in the capitalist system as it leads to the "draining off of 'surplus value' - the gap between what workers earned for their labor and what they paid for goods and services - into profits". On the other hand, the latter advocated a theory of imperialism and affirmed that "capitalism had been able temporarily to circumvent the problem of overproduction through the conquest of foreign peoples and the establishment of overseas colonies".

Dependency theory, which was influenced by the work of Raûl Prebish who led the UN Economic Commission for Latin America (UNECLA), argues that economic integration could be a remedy to the situation. Disagreeing with modernization and development theorists, these theorists believe that "investment and aid [are] means of extracting capital from client states".[31] In this manner low levels of development for instance in Sub-Saharan Africa is seen as mainly caused by “reliance and dependence on more economically developed countries". Critics, however, tend to compare Africa to the successful Asian countries such as of South Korea and Taiwan to illustrate the flaws of such theory, as these countries "developed through a process of import-substitution" while "backed up with heavy investment of American capital". On the other hand, other dependency theorists such as Frank however consider that "underdevelopment is not basically a consequence of traditionalism" but rather "systematically created by colonist exploitation".[32] Indeed in the case of Africa, ties to the former colonizers are still present, namely in the areas of trade; and thus prohibit among other factors successful South-South regional integration and cooperation. In this context, the Center-Periphery model and world system theory promoted by scholars such as Immanuel Wallerstein or Johann Galtung suggest that "elites of client states are dependent upon elites of the center for assistance in exploiting and suppressing their own peripheral populations".[33]

Moreover, Neo-Marxian views adopted by Paul Baran, Paul and Samir Amin resulted in the merging of the Prebisch-Singer thesis [i.e. dependency theory and its focus on the world divided into a 'center-periphery', "where the Third World was regressing into becoming the producer of raw materials for First World manufacturers and were thus condemned to a peripheral and dependent role in the world economy"] with the Luxemburg thesis ["Imperialism is the political expression of the accumulation of capital in its competitive struggle for what remains still open of the non-capitalist environment."[34] ]. Their influence was illustrated by many Third World governments adopting "the language and policies of the structuralists and/or the Neo-Marxians in the 1960s and 1970s".[35]

However, with the failure of these policies a Neo-Liberal countermovement was formed and included P.T. Bauer, I.M.D. Little, Deepak Lal, Bela Balassa, Anne Krueger and Harry G. Johnson. Neo-Liberalism mainly blamed government intervention, and thereby the presence of vast bureaucracies and state regulations, in thwarting development as it "suffocated private investment and distorted prices making developing economies extraordinarily inefficient".[36]

Nonetheless, in the mid 1980s 'economic development' was challenged by a call for ' human development '. This approach advocates the expansion of human freedom and the flourishing of people, following the Kantian perspective: "so act as to treat humanity, whether in thine own person or in that of any other, in every case as an end withal, never as means only". Among proponents of human development theory are Paul Streeten and Amartya Sen, a Nobel Prize Laureate in Economics. Sen's capability approach holds that "people are the real wealth of nations" so that development's basic aim is to "enlarge human freedoms".[37] In this line, since 1990, the United Nations Development Program (UNDP) publishes its Human Development Report, the principal goal being "human freedom".[38] In essence Human Development theory is an economic theory influenced by "ecological economics, sustainable development, welfare economics, and feminist economics".[39]

Following this section on development theories, let us now turn to the tool that has been used for more than fifty years to pursue development strategies and aims in the South. The next section will deal with foreign aid by bringing forth both recipient and donor's perspectives of aid, followed by an overview and analysis of foreign aid. While the last section of this chapter will address foreign aid within the context of multilateralism, which has been and still is an important framework for Germany’s foreign policy in general, and foreign aid in particular.

I.3.2) Foreign aid

International aid has evolved throughout the last fifty years. Changes have occurred as aid was related to technical assistance in the 1950s, while a decade later; it was given in order to "fill trade and investment gaps". Then after another ten years, aid was provided so as to offer "basic human needs". In the 1980s, during the debt crisis, aid was to assist structural adjustment or was in the form of debt relief. The 1990s witnessed "humanitarian assistance in combination with support for rehabilitation of countries after the civil wars". Now in the early twenty first century, aid is given to allow human development and the prevention of violent conflicts but also as a way to "foster democratic governance". On the whole, various events in international relations which mainly took place during the twentieth century led to the challenges in "the motives, aims and character of international development aid". These were: decolonization; the Cold War; the wars in Vietnam, the Middle East and Southern Africa - "three areas where the North-South conflict and the East-West conflict coincided" -; the oil crisis and the world economic recession of the 1970s and 1980s; the end of the Cold War; new internal conflicts; and economic and cultural globalization.[40]

In the wake of their independence, several factors led developing countries to demand aid. According to Clifford and Little these were: the fall in commodity prices from 1952, the running out of their external reserves by 1958, the cessation of grant aid due to independence, the different expenditures brought along with the phase of independence (e.g. overseas representation, new buildings for government and parliament, compensation for expatriates), and “the growing demands for a better material standard of living”.[41] On the other hand, from the donor’s perspective, giving aid implies the satisfaction of some national interests in return. For instance, “commercial motives have been strong; [so that] Germany, Italy, and Japan, began in the 1950s to compete for new markets, and export credit (frequently confused with aid) has been a major weapon”.[42] Commercial interests, however, may still depend on humanitarian concerns, i.e. “the whole benefit of aid to the donors arises via the enrichment of the recipient”[43]. Besides, the interest in economic development must then also be considered since, “the primary self-interest of the Western powers lies in promoting the kind of régime which will be both viable and as non-aggressive and favourable to Western ideas as possible, and that reasonably egalitarian economic development is a means to do this”.[44] The political or strategic factor is also to be considered not only during the Cold War scenario, but also with the argument that “development possibilities in a country depend very much on the political situation”.[45]

In analyzing the bases of aid programmes, J. Pronk defines three categories, which are: charity, economic and political. The first includes aid against "hunger, misery and despair". The second deals with efforts for local "self-sustained economic growth". And the third aims at "reducing the potential for conflicts, supporting peace, the promotion of democracy, the preservation of political independence of former colonies and the maintenance of a sphere of influence for Western donor countries".[46]

Tisch and Wallace on the other hand define the two main aspects of foreign aid purpose as either morally altruistic, i.e. following an 'idealist' perspective; or politically selfish, along with the 'realist' approach.[47] The pro-strategic interests school which comprises authors such as Mc Kinlay and Little, Maizels and Nissanke, and Sumberg and Sogge argue that "foreign economic and political stance of the donor and the security interests are the sole motor behind aid flows". They come to the conclusion that "self-interest prevails and supercedes duty-bound aid", that "ideology and commercial advantages (..) are the primary motives", and that "foreign policy objectives had such an impact on aid flows that more funds went to strategically important countries (Israel, Egypt) than to the least developed recipients". A more radical view also suggests that "development aid is an instrument of control, used to perpetuate unequal social and political relations among and within the states of the world capitalist economic system”.

On the other hand, those who support the 'needs' argument such as Lumsdaine, Trumbull and Wall, and McGillivraz remind us that "donor economic and political interests have mattered less than donors' humanitarian convictions and their belief that peace and prosperity is only sustainable within a just international order".[48]

In his analysis of development, Pronk, as we have noted earlier from J. K. Black, agrees with the "dualistic process" of development, which includes a high "potential for conflict". He emphasizes that development must often imply "shocking traditional cultures, uprooting existing social networks and economic structures" or in other words, it entails "a change in status quo". Given this context in which development takes place, Pronk then suggests that "countries should be helped to stabilize, to adjust, to perform and to develop, rather than being expected to achieve all this under their own steam". Within this perspective, "aid does not create development, but it does help in seeking, finding, choosing and following the right development path".[49] Following this view, the CBO study also notes that "foreign aid - in the best of circumstances - will play only a modest role in promoting economic development and improving human welfare." Indeed, this study acknowledges that the amount of foreign aid usually transferred to developing countries is only 2 or 3 percent of their gross national product. Thus, it remains important to focus on other factors such as “the quality of a developing country's government and the economic policies it pursues".[50] Foster & Killick however do not seem to share this view and rather argue that "many African countries already receive large aid inflows relative to the scale of their economies and budgets".[51]

After this overview of foreign aid, the last section of this chapter will approach foreign aid within the framework of multilateralism. The multilateral forum has been providing the structure for constraining German power following WW2, and has become an important framework for German foreign policy as we have seen earlier from the Pluralist and Constructivist perspectives.

I. 3.2) a. Foreign Aid and Multilateralism

The United Nations (UN) includes in its Charter, the aim “to achieve international co-operation in solving international problems of an economic, social, cultural or humanitarian character”. The UN member states are therefore to encourage the promotion of international “higher standards of living, full employment, and conditions of economic and social progress and development”.

According to the CBO study, the positive aspects of multilateral aid should be[52]:

- Less political motivation
- Tendency to give aid to the poorest countries
- No tied aid
- Possibility to "purchase goods and services at the lowest possible cost and maximize the real value of aid flows"
- The objective of an aid program will not be undermined "through other economic policies such as import quotas"
- Capacity to "make longer-term and more stable commitments for aid geared to the resources needs of the recipient".

On the other hand, the study argues that flaws lie in the fact that multilateral agencies are often not experienced in institution-building, and the lack of an independent judiciary in the donor country may hinder “the protection of property rights, enforcing contracts, and maintaining the rule of law".[53]

Tisch & Wallace also stress the status quo factor by noting that "multilateral aid enhances the stability of the international system of states, thus increasing stability for all". However, they also consider the positive facets of multilateral development programs as “the ability of multilateral agencies to initiate and maintain credible discussions with recipient states on sensitive domestic policy issues”.[54]

With regard to Germany, the conducting of multilateral aid programmes is underlined according to these arguments[55]:


[1] Webber M. & Smith M., Foreign Policy in a Transformed World (Prentice Hall, Essex, 2002), pp.9-10, 14

[2] Webber M. & Smith M., Foreign Policy in a Transformed World (Prentice Hall, Essex, 2002), p.19


Ishengoma J., Towards the Termination of Foreign Aid in Sub Saharan Africa: A Proposal and Reflections from an African Perspective

[4] Milner H., Why Multilateralism? Foreign Aid and Domestic Principal-Agent Problems

[5] Ishengoma J., Towards the Termination of Foreign Aid in Sub Saharan Africa: A Proposal and Reflections from an African Perspective

[6] Webber M. & Smith M., op.cit., pp.21-22

[7] Ibid., p.22

[8] Pradetto A., The Polity of German Foreign Policy: Changes since Unification, (Palgrave Macmillan, Great Britain, 2006), p.22

[9] Webber M. & Smith M., op.cit., p.23

[10] Webber M. & Smith M., op.cit., p.23

[11] ibid., p.24

[12] Theories in International Relations


Rittberger V. et al., Wolfgang Wagner, "Norms and Foreign Policy: Constructivist Foreign Policy Theory"


Rittberger V., Approaches to the Study of Foreign Policy Derived from International Relations Theories

[15] A. Pradetto, op.cit., p.15

[16] Ibid., p.16

[17] Ibid., p.21


Henning Boekle,Volker Rittberger, Wolfgang Wagner, "Norms and Foreign Policy: Constructivist Foreign Policy Theory"

[19] C. Normann, Review of : W. R. Smyser (2003), "How German negotiate: logical goals, practical solutions"

[20] Rittberger V., Approaches to the Study of Foreign Policy Derived from International Relations Theories

[21] <>

German involvement in United Nations development cooperation


Rittberger V., Approaches to the Study of Foreign Policy Derived from International Relations Theories

[23] Black J.K., Development in theory and practice - Bridging the gap, pp.1, 3, 4, 5

[24] Ibid., p.15


Jacobs G., Robert Macfarlane, and N. Asokan, Comprehensive Theory of Social Development

[26] Black J.K., op.cit., pp.16-17, 20, 23


Warrener D.& Perkin E., Synthesis paper 6 progress on harmonization and alignment in the UK

[28] Black J.K., op.cit., p.21

[29] Ibid., pp.16-17, 20, 23

[30] Black J.K., op. cit., p.24

[31] Ibid., pp.26-28


Development versus Dependency theory

[33] Black J.K., op.cit., p.29


[35] Economic Development

[36] Economic Development




[40] J. Pronk,, Catalysing development? A debate on aid, p.2

[41] Clifford J. M. & Little I.M.D , International aid (George Allen & Unwin Ltd, Great Britain, 1965) p.18

[42] Ibid., p.20

[43] Ibid., p.79

[44] Clifford J. M. & Little I.M.D, op.cit., p.90

[45] Ibid., p.85

[46] Pronk J., op.cit., p.3

[47] Tisch S. & Wallace M. B., Dilemmas of Development Assistance - the What, Why, and Who of Foreign Aid, (Westview Press, Great Britain, 1994) p.5

[48] Schüring E., History obliges

[49] Pronk J., op.cit., p.17

[50] The Congress of the United States, Congressional Budget Office, "The role of foreign aid in development"

[51] Foster M. & Killick T., What Would Doubling Aid do for Macroeconomic Management in Africa?

[52] The Congress of the United States, Congressional Budget Office, "The role of foreign aid in development"

[53] Ibid.

[54] Tisch S. & Wallace M., op.cit., pp.52, 54

[55] Malek M.H., Contemporary issues in European development aid (Avebury, Great Britain, 1991) p.60

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Foreign aid - a global foreign policy tool for Germany
University of Malta
B.A. (Hons.) International Relations
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Jennie Robinson (Author), 2007, Foreign aid - a global foreign policy tool for Germany, Munich, GRIN Verlag,


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