ECONOMY

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before. This is true whether the intervener is a democracy, an autocracy, a multilateral
effort, or the United Nations.
Foreign aid follows a similar pattern. Aid-giving, like military intervention, can be
a useful approach to achieving policy gains for domestic constituents. Democracies
are more likely to give aid than are autocracies. Aid is more likely to be received by
autocrats than by needy democrats according to the domestic perspective because
democratic donors and autocratic recipients have something to trade; namely, policy
concessions from the recipient in exchange for money from the donor.
An autocratic prospective aid recipient can more readily afford to make policy
concessions to the democratic donor than can democratic prospective recipients of
aid. Autocrats are maintained in power based on their distribution of private goods
to their small group of supporters rather than on their emphasis on providing public
goods in the forms of generally desired policies. Autocrats can get money needed to
maintain their coalition of backers by entering into an aid for policy deal.
Democratic leaders seeking aid bear a higher political cost for making policy
concessions in exchange for money than do autocratic recipients. The core backers of
a democrat depend on public policy benefits more than private benefits in choosing
whether to continue to support the democratic incumbent or switch to another
candidate. Consequently, a democrat seeking aid in exchange for policy concessions
must receive more aid than an autocrat because the political costs associated with
making a policy concession are greater in democracies than in autocracies.
Democratic donors survive in office by satisfying their constituents through policy
choices. At the margin, gaining policy concessions on salient issues (e.g. help with
the war on terrorism) from other states can improve a democrat’s political survival
prospects. If it happens that the people in a democracy particularly desire a policy
that alleviates poverty in recipient countries, then there is not much constraint on
granting aid to a democracy, but if the donor’s domestic constituents seek policy concessions,
as often seems to be the case, then they face a trade-off between promoting
economic well-being and policy gains through aid.
Substantial evidence supports the dismal conclusion that aid has had only a small
impact on improving economic growth, health care, education, social welfare, freedom,
or governmental accountability (Easterly 2001). Perhaps this is because aid
agencies like USAID, the World Bank, or the IMF do not understand how to promote
economic growth. That interpretation, however, is inconsistent with another body of
evidence that shows that aid is most likely to go to small coalition, poor autocratic
regimes but that the largest amount of per capita aid goes to the larger/coalition
and/or to relatively well-off countries (e.g. Egypt, Israel, Marshall Plan) rather
than to the poorest countries. As Bueno de Mesquita and Smith (2004) showtheoretically
and empirically, foreign aid is most likely to be given by wealthy polities
whose government depends on the support of a large coalition. Aid is most likely
to be given to poor governments dependent on a small coalition so that the leaders
can commit to follow policies the donor (democratic or otherwise) wants even if
the recipient’s citizens do not like the policy. From this domestic perspective, foreign
aid is a deal between those who value a policy concession on the one hand—public