WIREDGOV

Recent cuts to foreign aid have raised serious humanitarian concerns. They also offer vital insights into the relationship between development and security going forward.

As aid budgets come under mounting pressure, there has been a revival of ‘transactional’ arguments that development aid can help bolster security. The problem is that this reasoning relies on a chain of elements, some of which have not received much scrutiny in empirical work. First is the question of whether development aid actually curbs armed conflict.

A Double-Edged Sword

Conceptually, the answer is ambiguous, as development aid is typically a double-edged sword. On the one hand, we know from an impressive body of evidence that poverty and desperation are powerful breeding grounds for armed conflict. In this context, aid programmes may create jobs and attenuate poverty, making fewer people willing to enrol in paid engagements on the battlefield, such as joining a warlord. In the literature, this is often called the ‘opportunity cost effect’.

On the other hand, inflows of aid may increase the availability of valuable, appropriable commodities, stoking rent-seeking behaviour and armed conflict. This second, countervailing force is the ‘rapacity effect’.

Given these two opposing forces, it is unsurprising that empirical studies have found a whole range of contradictory results. For instance, a series of articles have highlighted that aid and cash transfer programmes can exacerbate armed conflict, while others suggest they may contribute to a drop in fighting. One challenge with all these statistical findings is that they focus on particular randomised controlled trials (RCTs) or ‘natural experiments’, where a treatment group in one country or in a subcountry region is compared with a control group in the same local setting. This makes it difficult to rule out displacement or spillover effects. Conflict may decrease in ‘Country A’ but surge in neighbouring ‘Country B’, as armed groups move elsewhere. This is what economists call a ‘partial equilibrium’ analysis, which does not account for ‘general equilibrium’ effects.

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