Of all the aspects of international politics nothing has aroused more controversy than foreign aid. It has been a much abused technique for exerting influence in international politics.

In some cases, it has paid great dividends. In others, it goes in waste. Whether it may go in waste, it does have its impact at least upon the recipient nations. There is as such a great controversy about the role of foreign aid in international politics.

Politically, it is a substitute of Imperialism and is, therefore, looked upon by the non-aligned as an expression of neo-Colonialism (colonialism exercised in a new way).

Philosophically, it is prompted by humanitarian considerations which the rich nations have for the poor ones Economically, it is simply an invest­ment of surplus capital in the under-developed countries to gain more returns.


From whatever angle it may be looked upon, foreign aid is a very important instrument of promoting foreign policy objectives. Dwight D. Eisenhower described foreign aid as the least understood function of the Government.

Late U.S.A. President John F. Kennedy stated that he would gladly discontinue foreign aid if he could. But he found he could not. The purposes of foreign aid are very contradictory. Much of the con­fusion about foreign aid has arisen because of its purposes.

Foreign Aid defined and explained:

Before we proceed further it will be worthwhile to explain what foreign aid means. Foreign aid means transfer of money, goods or technical knowledge, from the developed to the under-developed countries.

It is because of this purposes that it has been criticised the most. It is consider­ed to be a modern form of Imperialism and an expression of neo-Colonialism. In fact, the bases advanced for giving foreign aid are clothed in humani­tarian words.


The importance of foreign aid grew after the end of the Second World War when America and Soviet Union emerged as the two super­powers. The difference in their socio-economic systems led them to win over a majority of the countries of the world to their side.

Foreign aid came to be used as an instrument for strengthening the respective bloc. It was used not only as defensive strategy but also as an offensive one. Military equipment was supplied and political modernisation was promoted to the

The end of colonial rule created a strategic and economic vacuum which could not be filled in except by economic and military help from outside. A colonial power like Belgium planned its withdrawal from Congo in a manner that nothing was left in that country in the form of national assets to survive, reconstruct and develop itself.

The newly independent countries were really in need of foreign aid for development and stability. The origin of non-alignment lies in this factor.


In this way,. foreign aid gained importance after the Second World War in two ways. Firstly, it was genuinely needed by the newly indepen­dent nations for political development and stability.

Secondly, the two super-powers tried to use foreign aid as an instrument to involve the newly independent countries on their side. It is the second objective which makes foreign aid assume the form of neo-Colonialism.

History of Foreign Aid:

Foreign aid has been used in international politics for a long time as an instrument of foreign policy. It has been used as an instrument by a nation to secure political advantage. In the eighteenth century, it was offered as a bribe to get certain job performed.

It was given in the eighteenth and nineteenth centuries by Britain to other countries to help them maintain armies.


There has always been economic interdependence between the various countries. But this interdependence has increased very much during the modern age. It would be no exaggeration to hold that the whole world has become one world.

Anything happening in a country has its effect on other countries of the world. That is why it is said that Poverty anywhere constitutes a danger to prosperity every where else.

It explains why the countries aim at the realisation of international social justice. For the realisation of such an international social justice the under­developed countries need assistance from the developed countries.

It would be worthwhile to remember here that aid programmes are beneficial both for the donors and the recipients. It helps the recipients because money, equipment, skill and knowledge received as aid helps in establishing modern economy, political stability and military security.


It helps the donors in gaining some political or commercial advantage. It is another thing that this advantage may come in the distant future. Sometimes the donors attach certain strings (conditions) to aid.

Even if no strings are added, foreign aid helps in establishing friend relations. It is that both the United States and the Soviet Union are trying to win friends by offering foreign aid to the non-aligned countries.

Great Britain was the first country in the world to formulate a programme of foreign aid for economic development. It made programme of Colonial Development and Welfare “in early 1930’s. This programme was intended as political development and economic development of colonies.

It was aimed against Fascist and Nazi propaganda. It is only during the current century, particularly after the Second World War, that foreign aid programmes have been used extensively, systematically and rather aggressively.


It was only after Second World War that the United States started a programme. It started European Recovery Programme to enable the European countries to reconstruct their econo­mies destroyed during the War.

This cost the United States nearly 33 billion dollars. It was done to contain the Communist appeal. This foreign aid programme was later on extended to the developing countries as well.

This has cost the United States more than 135 billion dollars. Even today the United States distributes more than double the aggregate amount spent by all the other aid-giving countries.

The aim of the United States is to contain basically the Communist appeal and to help democracy develop. After the death of Stalin, the Soviet Union also started giving foreign aid in 1953 to win friends for itself.

Today almost all tile in­dustrialised countries such as U.S.A., U.S.S.R., Great Britain, France, West Germany, Canada, Japan, Sweden etc. give foreign aid to the under­developed and developing countries.

Foreign aid is usually provided through bilateral agreement. But a new trend has grown that it involves at present multilateral programme. The donor countries of today give aid to India through, for example, Aid India Consortium, International Bank for Reconstruction and Development and the United Nations Technical Assistance Programme.

Arguments for Aid:

Indeed, the idea behind foreign aid is always national interest of the donor. It has..still been justified on the following grounds—

(1) Economic Argument:

Foreign aid is given by a developed nation to a developing country from the economic point of view. The developed country always stands in need of raw-materials which are produced in the developing countries.

If the United States gives aid to developing countries, it is itself in the economic interest of the United States. By giving foreign aid, the raw- materials in the developing countries grew in abundance, which in return strengthen American economy.

(2) Instrument in gaining Allies:

The second argument says that foreign aid helps in gaining allies in a world divided into intra-bloc competition. It is just with this end in view that both the United States and the Soviet Union compete with each other in giving foreign aid. It helps the donor country in enlisting the support of the recipient country.

(3) Instrument in containing Communism:

Poverty is considered to be an invitation to Communism. The Western countries give foreign aid to contain the appeal and influence of Communism in the world. If the newly independent countries of the Third World are given aid, they will be in a position to establish modern economy and have political stability. America has used foreign aid to get certain Communist countries such as Yugoslavia, Poland and Rumania from under the Soviet domination.

(4) Instrument for political stability and military strength:

Foreign aid helps in achieving political stability and military strength. It would be no exaggeration to say that in areas like Taiwan, South Korea, the American involvement increased to the extent that it assumed more or less direct responsibility for building up military effectiveness.

Foreign Aid is essentially Neo-Colonialism:

Whatever argument might be advanced in support of foreign aid, it is essentially aimed at neo-Colonialism. It is Imperialism adapted to the modern circumstances. It is used to change policies and even Governments so that the recipient country should always play a second fiddle to the donor country.

Opinion has differed on the implications of foreign aid. There are scholars who regard aid as a relatively disinterested attempt to assist the poor countries in development. On the other hand, there are others who regard foreign aid as an instrument for the furtherance of national interest.

It is worthwhile to note here that aid is always clothed in huma­nitarian arguments. The donor country professes to give it from that angle, Both the United States and the Soviet Union argue accordingly.

The public opinion polls and the American Congress debates are always guided by humanitarian arguments. But it cannot be denied that it is always given to further the interests and political objectives of the donor country.

Foreign aid is usually cut off as a punishment. Foreign aid to India by the United States was cancelled during the days of Bangladesh crisis.

So it can be said that foreign aid is an instrument used for rewarding, threatening or punishing. It is basically used in wielding influence over the recipient country. It serves a long-term objective also in the sense that the donor country exploits the raw-materials of.the recipient countries.

It should, however, be remembered that the recipient countries are at present in a position to keep away the strings attached to foreign aid. This has been possible due to the fact that the number of the donor countries has increased.

They are competing with one another in giving aid. The recipient countries can thus receive aid which has no strings attached to it.

Forms of Foreign aid:

Different writers have given different forms of foreign aid. Prof. Hans J. Morgenthau has given six forms of foreign aid. They are humanitarian foreign aid, subsistence aid, military aid, bribery, prestige aid and economic development aid.

Chester Bowles classifies foreign aid in terms of countries: nations requesting aid because of mal-distribution of wealth; nations with inadequate G.N.P. willing to mobilise their own resources; nations lacking the competence; organisation and will to use aid; and nations whose situation is not clear.

However, for our purpose, we shall classify foreign aid as under:

(1) Military aid;

(2) Technical assistance;

(3) Capital grants ; and

(4) Loans.

1. Military aid:

It is the oldest form of foreign aid. It helps in gaining allies. Both Great Britain and France supplied money and material in gaining allies in the European countries. The recipient countries provided men.

Now, the Soviet Union and the United States have allocated considerately amounts of money for military aid. The only objective of this kind of aid is to strengthen the military capability of their respective allies.

It is a way to reduce burden of stationing one’s own military in another country. This kind of aid makes the recipient completely dependent on the donors for the supply of modern equipments, ammunitions, replacement and maintenance of the equipment supplied.

This enables the donors to exercise almost complete control over the military movements of recipient countries.

This policy of arming certain countries by a particular great power against the other country takes the form of cold war. There have been certain areas such as West Asia and Indo-China where this cold war turned into hot war many a time between the countries of region concerned.

In these wars, the smaller countries fight on behalf of the great powers. If North Viet-Nam was supported and given military assistance by the Communist powers, South Viet-Nam was supported by the American bloc. In this way, local conflicts arising out of indigenous causes turn into hot bed of super rivalry.

The most interesting fact about military aid is that the supplier country can direct the course of a local conflict by simply replenishing or withholding supply and spare parts, or worse still by threatening to switch her affections to the other side.

Most of the wars now going on in the Third World fought by increased sophisticated weapons can be intensified or brought to a halt at the will of the supplier. If and when the great powers feel that they need a rest from the tensions of such proxy wars, they can do so by reducing the volume of supplies.

In this way, the recipient countries have to dance to the tune of the advanced supplier countries. This means a serious encroachment upon their autonomy.

2. Technical assistance:

It is the least expensive among the aid programmes with big benefits. One American writer says: “Relatively inexpensive, technical assistance programmes allow personnel from industrialised countries to attack such practical problems such as fishery development, control of malaria, the construction of roads, educational advancement and so forth, and do so on more of personal level than is generally true with regards to economic development assistance.”

It is also a fact that “technical assistance efforts have been a very small portion of total foreign-aid activities since the Second World War.”

It aims at providing technical know-how instead of equipment and funds. Experts and specialists from advanced countries go out to render technical advice on different projects such as malaria control, agricultural mechnisation, public management, teaching programme, family planning and population control, habitat programmes, medical and sanitary facilities, development of indigenous resources etc.

None can deny that the ‘Point Four Programme” and the ‘Peace Crops’ initiated by the United States for development in the field of administration, agriculture, horticulture and education had nothing to do with the political-economic considerations.

Still, the critics point out that such programmes were aimed at introducing a particular kind of culture in these countries. With regard to the eradication of malaria programmes, it is argued that this was initiated with a view to spending the huge stocks of DDT which were lying in the stores of the advanced countries.

The motives for technical aid became more clear when the develop­ing countries began to ask for it with a view to modernising themselves. But it is a pity that technology sold to them is the technology which the developed countries have since discarded.

After the Second World War, the imperialist powers were faced with a large number of industries that had become unproductive and obsolete. They needed to be scrapped. It is this scrap (Kabad Khana) which is being sold to the developing countries at a high price. It has served the industrialised nations by providing them with the capital raised out of the sale of that technology.

Moreover, the transfer of technology has been limited to a few areas that benefit only the imperialist countries. These include :

(i) Industries consuming too much energy.

(ii) Industries that pollute atmosphere.

(iii) Mining and extractive industries to get raw-materials for use in the imperialist country,

(iv) Agricultural production industries to get edibles.

(v) Experimental technology that needs a large scale of trials for development such as electronics, communications, chemicals, drugs and pharmaceuticals.

(vi) Industries which need a large number of labour forces.

Moreover, instead of developing educational and scientific facilities within the developing countries, the imperialist countries encourage higher education in science and other fields in their respective countries.

The trainees from the developing countries, instead of being trained in the area of need of their respective country, are trained in areas for which facilities exist in that country or which serve the needs of the imperialists powers.

The people so trained in Western culture, outlook and aspiration become ineffective in the under developed country. They become alienated from their own country and prefer to settle in the countries where they got training. This results in what we term ‘Brain- Drain.”

3. Capital grant:

Capital grant means aid given by way of gifts. This kind of aid is not paid back. The European Recovery Programmes and Mutual Security Programmes included a large amount of such no repayable donations.

“The American policy-makers sought,” say Robert Wendzei, “to assist because it was presumed to lead, in turn, namely democratic Government, the development of capitalist economic system and a more open society on the part of the recipient.”

“It was also believed that economic development would lead to stability in the system of the recipient and a peaceful foreign policy. It would avoid them being dependent on foreign powers for security and survival.”

It was in pursuance of these objectives that the United States preferred outright transfer of capital goods donations and grants without expecting any repayment. After fifties, most of the new nations opted for non-alignment.

The U.S.A. did not want to give grants to those non-com­mitted to U.S. policy. It started giving such grants through international agencies such as the International Bank for Reconstruction and Develop­ment.

The Bank is also dominated by the imperialist countries. The Bank has not been of any help to the developing countries because of low rate of economic growth and high level of unemployment in these countries.

4. Loans:

Loans are given to be repaid over a long period of time for the development schemes to be run in the developing countries. But these loans also involve exploitation. Loan is given for a particular project approved by the donor countries.

They give loan for those projects only which will be useful to them in the long-run. It means development will be made in the direction fixed by the donor country.

So, there is no exaggeration in holding that such aid “comes at a wrong time, goes to a wrong sector and provided for specified interested purpose.” The loans received by the developing countries, instead of being any help, become a burden upon them.

It becomes difficult for them to repay the loans. Not to say of loans, it becomes difficult even to pay the interest. Sometimes a loan is taken just to pay the interest due to be paid on the previous amounts of loans received.

Communist Aid Programmes:

As described earlier, it was Britain which started foreign aid pro­gramme in 1930’s. The United States started this programme after the Second World War. The Communist countries took to this programme late in 1953. It was because the Communist countries were engaged in consolidating Socialism in their own country. It was after the death of Stalin that Soviet Russia undertook this job.

In the beginning the Soviet Union offered assistance in programmes such as polytechnic institutes, hotels, sports stadiums and hospitals which were not very useful from the economic point of view.

Later on. it changed its policy to help in economic enterprises such as Steel Plants in India and Aswan High Dam in Egypt. The Soviet help was considered fundamental in the development of these countries.

They offered help in fields which were denied by the West. They did not attach strings- Nor did they indulge in political interference in the recipient countries. The Soviet Union did not oppose even the suppression of the Communist parties in the recipient countries.

China started giving aid in 1960’s after it broke away from the Soviet Union. It is given primarily to discredit the Soviet Union. Of course the Chinese aid is not tied to strings, still it is intimately determined by political response of the recipient Government. It shrinks and expands according to the response the recipient country gives to China.

It should be borne in mind that both the Communist countries are not very well off to give economic aid. They give experts for projects of economic development. Whatever financial help they give is returnable in the currency of the recipient country. As a matter of fact the Communist country never launched a separate programme of foreign aid. They regard their aid as a necessary part of cultural exchange in which trade and aid have equal importance.

Political Objectives of Foreign Aid. As we have discussed earlier, foreign aid is essentially a part of neo-Colonialism exercised by the capitalist countries. Let us then discuss the political objectives of foreign aid. These are :

(a) Creation of political stability in the recipient State.

(b) To change domestic and foreign policy of recipient country,

(c) Reward for becoming an alliance partner, and

(d) Help the recipient to achieve its objectives.

(a) Creation of Political Stability in the Recipient State:

Foreign aid is sometimes given to secure political stability in the recipient country. Political stability is achieved through the

(1) creation of modern military force,

(2) extension of military help to put down internal riots and disorders and the established authority, and

(3) raising of prestige of the local regime and military elites. The aid given by the USA, USSR, France and Great Britain to their allies and some of the developing countries served this purpose.

United States extended help to Guetemala and other Latin American countries, South Korea, and other countries, and the Soviet aid to East European countries have been given for this purpose.

The aid given to Pakistan by the United States and to Egypt by the Soviet Union was aimed at elevating the prestige of the regime. India also helps Nepal with this end in view.

Suppression of local disorders has also been one of the major pur­poses of foreign aid. Recent military intervention in Afghanistan, in Czechoslovakia in 1968 and in Hungary in 1956 by the Soviet Union and in Lebanon in 1958 by the United States are such examples.

(b) To change domestic and foreign policy of Recipient Country:

Aid is also used to influence the domestic and external policy of the recipient country. American aid to Pakistan has been enhanced on all occasions because Pakistan has followed American dictates in every sphere.

On the other hand, American aid to India was slashed after the Third Plan period as India did not agree to cut down expenditure on public sector. Aid to India was suddenly stopped when India did not follow US instructions in the Indo-Pak War of 1971.

(c) Reward for becoming an Alliance Partner:

Promises of military and economic aid are given to gain allies in the international field. We find that Pakistan has been receiving both the kinds of aid from the United States because she entered into military alliances with the later. Military hardware that was refused to India even against payment, was given to Pakistan free of cost by the USA.

(d) Helps the Recipient to achieve its objectives:

Foreign aid is sometimes given to help the recipient to achieve its objectives. Soviet Russia gave military help to Indonesia with a view to helping her to settle problems with Malaysia by demonstration of sheer threat of force.

It is for this very reason that the U.S.A. extends helps to Israel and now to Egypt also after the Camp David Agreement of 1976.


It is thus very clear that aid is always given with strings (on certain conditions). It is always the donor country that exploits the advantage received out of that aid. It is rather immaterial whether the donor is a socialist or a capitalist country.

It is the recipient country which stands to lose. Comparatively, however, the aid from a capitalist country is more disadvantageous in terms of consequences. It is seen that the recipient finds it hard to come out of the clutches of the Western donor.

The recipients continue to be exploited as ever. It is thus an instru­ment of domination. Political strings serve as levers of control that restrict the freedom of action of the recipient. It is why the countries of the Third World have been put in relationship of neo-Colonialism by the advanced countries.