Reputation concerns in aid conditionality

This paper analyzes the conditions under which reputation concerns induce donors and recipients to respect conditional aid contracts. Donors enforce conditionality if the benefits of improving compliance in future contracts thanks to a tougher reputation exceed the costs of resisting disbursement pressure. The level of conditionality enforcement is optimal if all the costs and benefits of reputation building are internalized by the decision maker. This condition is not satisfied at the World Bank and the IMF, where enforcement is decentralized to country departments which do not internalize the benefits of a tough reputation on other departments. Recipients comply with conditionality if the costs of implementing conditionality are lower than the benefits of securing tranche release thanks to compliance and obtaining future contracts thanks to a good reputation for compliance. Reputation concerns increase recipients’ incentives to comply only if there is some uncertainty on future aid commitments, which is true for successive single-tranche contracts, but not for multi-tranche contracts.     

IMF staff: Missing link in fund reform proposals

Current IMF reform proposals are preoccupied with changing governance structures by reallocating Executive Board chairs and quota shares and with expanding and altering the Fund’s surveillance role, but not enough attention has been paid to whether organizational change at the staff level is also needed. IMF staff have intellectual dominance and discretion in the design of loan conditionality, writing of surveillance reports, and provision of technical and policy advice. There are also clear internal and external criticisms of how the Fund’s organizational culture—that is perceived to be hierarchical, technical/economistic, bureaucratic, and homogeneous/conforming—negatively affects the Fund’s policy output and relationship with borrowing members. This article suggests altering ’how things are done’ at the IMF by making changes to recruitment and organizational structure.

Do donors cooperatively fund foreign aid?

Donor’s demand equations for alternative forms of aid are derived for three allocation processes: noncooperative Nash-Cournot, cooperative Lindahl, and bureaucratic. Based on OECD data for official development assistance for 1970–2001, we apply non-nested tests to distinguish between Nash-Cournot and Lindahl reduced-form equations for 15 major donor nations. Noncooperative Nash-Cournot behavior characterizes many donors, with a few abiding by bureaucratic behavior and none by Lindahl behavior. Joint products are present for multilateral and bilateral giving. Despite the common-pool nature of giving to multilateral organizations, countries derive donor-specific benefits and often view others’ donations as complementary to their own gifts.      

Effects and side effects of European Union assistance on the former Soviet republics

Since the early 1990s the European Union (EU) has been the largest donor to the post-Soviet states. In the last decade it more than doubled development assistance to the region. One of the major purposes of assistance is human rights promotion. At the same time, it is still an open question whether, and under what conditions, assistance can improve human rights in recipient countries. This study applies time-series cross-section (TSCS) analysis to identify effects of external assistance. Using data from 12 post-Soviet states over 20 years, I show that conditions under which states are more likely to display a positive effect are high state capacity and political conditionality attached to economic cooperation agreements. Whereas, when state capacity is lower, assistance might cause a slight deterioration of the human rights situation. In hybrid regimes, assistance is associated with negative effects, indicating that external assistance might induce deterioration of human rights in such regimes.     

Agent permeability, principal delegation and the European Court of Human Rights

A growing body of international relations literature examines the delegation of state authority to international organizations. Delegation is a conditional grant of authority from a principal to an agent in which the latter is empowered to act on behalf of the former. This paper explores the effect of agent permeability to interested third parties on the efficacy of control mechanisms established by principals. Our central argument is that higher levels of agent permeability are likely to lead to higher levels of agent autonomy. Because of this, principals who face a potentially permeable agent are likely to delegate more cautiously—partially, in stages, or with clear limits. We illustrate our argument with a case study of the European Convention of Human Rights and its two principal institutions, the Commission and the Court. We find that principals (contracting states) historically delegated quite cautiously to the Court, clearly concerned about the Court’s autonomy. Court behavior in its first two decades reassured principals while increasing the Court’s permeability. Over time, that increased permeability increased Court autonomy in conjunction with the Court’s growing visibility and experience.

Ownership and conditionality in IMF-supported programs: Back to Per Jacobsson’s time

Using a historical case study this article provides an example of how heterogeneity of interests within a government may affect the interplay between country ownership of reforms and conditionality in IMF-supported programs. The case study also highlights how pro-reformers’ preferences may be conditional on reforms advancing their personal agendas. This suggests a new issue to be addressed by formal models of conditionality. Two main themes emerge from the analysis: (a) the importance of a clear hierarchy to unify heterogeneous interests among decision makers; and, (b) a flexible country-tailored approach to conditionality can contribute to domestic ownership of reforms.

Can America Finance Freedom? Assessing U.S. Democracy Promotion via Economic Statecraft

Recent discourse on U.S. efforts to promote democracy has focused on military activities; especially the strategic and normative perils of democracy promotion at the point of bayonets. This paper explores the United States' use of economic statecraft to foster democratization, with particular attention to democracy incentive and assistance strategies. Incentive approaches attempt to promote democracy from the top-down, by leveraging aid and trade privileges to persuade authoritarian leaders to implement political reform. Assistance approaches aim to induce democratization from the inside , through funding and technical assistance to state institutions, and from the bottom-up , by providing support to civil society and elections. This study finds that while top-down incentive approaches can stimulate democratic change, this strategy tends to work only when aid and trade benefits are conditional; that is, when benefits are withheld until recipient states meet rigorous democratic benchmarks. Washington has historically eschewed democratic conditionality, however, and thus can claim very few aid-induced or trade-induced democratization events. Scant evidence exists to demonstrate that inside approaches—that is, institutional aid—possesses significant capacity to induce democracy. It is the bottom-up approach—empowering the masses to compel democratic change—that has registered the greatest number of democracy promotion successes.     

Change and Continuity in the European Union's Political Conditionality: Aims,Approach, and Priorities

The EU's political conditionality has acquired increasing importance with successive enlargements; this also goes for the period since 2004 compared with that before. The focus here is on change and continuity in conditionality policy with respect to its aims, approach, and priorities. The article presents and applies a three-dimensional analysis concerning the challenge to, the process of, and the management of that policy. Given the need for assessing it in a broad and dynamic context, the discussion revolves around three relationships: between conditionality and post-communist democratization; between conditionality and the enlargement process; and between conditionality and the EU itself in terms of institutional responsibility for enlargement and conditionality matters. This explains how the policy since 2004 has been driven by four factors: more difficult democratization cases from the West Balkans; lessons from the earlier 2004 enlargement involving East–Central Europe; the policy outlook of Commissioner Olli Rehn; and ‘enlargement fatigue’ and stronger pressures from EU actors other than the Commission. As a result, political conditionality has become broader in its scope, much tighter in its procedures, and less easy to control within a less enlargement-friendly environment in the EU and against less certainty about enlargement prospects.     

Small carrots,few sticks: EU good governance promotion in sub-Saharan Africa

The European Union has developed a one-size-fits-all approach to promote good governance reforms in African countries, focusing on strengthening the effectiveness of state institutions while increasingly asking for reforms that also target their democratic quality. Assessing the EU's policies in Angola and Ethiopia reveals, however, that the implementation of this approach is more differential. While the EU has a hard time making the two governments address governance issues, it has been more successful in implementing its policy approach in Ethiopia than in Angola. These differences are largely explained by these countries' different degrees of interdependency with the EU rather than differences in stability and democracy. Unlike Angola, Ethiopia heavily relies on EU development aid, giving the EU greater leverage to push for governance reforms. While conditionality is more effective in making African governments address governance issues, it undermines the legitimacy of the EU's development cooperation, which emphasizes partnership and ownership.     

Determinants of firm compliance to environmental laws: a case study of Vietnam

This paper seeks to develop a model of firm compliance behavior to environmental laws with specific focus on firms operating in Vietnam. Using an institutional approach, the paper employs Scott’s (Institutions and organizations, 2nd ed., Sage, Thousand Oaks 2001) “Three pillars of institution” as the generic theoretical framework for the synthesis of literature on compliance across fields. This study used a questionnaire-based survey to examine the validity of the factors identified in the literature. The method was face-to-face interviews with the managers of 63 enterprises operating in Vietnam. The hypotheses were tested using mean importance ratings, t-test of the means, and factor analysis. Almost all the listed factors determining compliance were found to be applicable to the responding companies. The level of importance placed on different factors were analyzed using Anova test and were found to vary across companies with different sizes and business structures.     

NATO and the war on terror: The organizational challenges of the post 9/11 world

This paper deals with NATO’s ability to contribute to the war on terrorism. The paper highlights the difficulties that the organization has encountered in dealing with a threat that is entirely different from the one that the organization was created to deal with. The paper discusses NATO’s new policies, al Qaeda’s transformation since 9/11, and the nature of terrorism. The paper suggests that although NATO has drafted a number of new antiterrorist policies they are all premised on the idea of fighting a war against terrorism as if terrorism were a well defined military enemy. We conclude by arguing that the organizational behavior demonstrated by NATO is consistent with what Graham Allison and Philip Zelikow predict in their organizational process model and that many of the difficulties encountered by NATO in the war against terrorism are due to the nature of the organization. An erratum to this article is available at .     

Exit, voice, and loyalty in international organizations: US involvement in the League of Nations

Recent challenges to traditional international relations theory have questioned the nature of international organizations (IOs) as agents of powerful state-members and have examined various conduits through which non-state actors can voice their concerns. Yet little work has focused on participation in IOs when a powerful state’s official position contradicts the goals of actors within it. This article examines the archival record of American involvement in the League of Nations’ economic section to explore such a circumstance. I correct the prevailing historical view of American isolationism in the interwar period and argue that participation by advanced, industrial democracies can better be understood as combinations of exit, voice, and loyalty on the part of individual components of state and civil societies.

European experience for East Asian integration: ideas, national interests, and the international circumstance

This paper traces the possibility of East Asian integration through comparison with the early stage of European integration on three different levels: ideas, national interests, and international circumstance. Judging from the European experience, ideas always come first, then national interest contests, and eventually the international circumstance conditions the context. I compare the multilateral approach in Europe with the imperial hegemony competition in East Asia, Adenauer’s regionalization policy in Europe with the Yoshida line of Westernization detouring from Asia, and the US and Russia’s different roles in the two regions as external forces constraining the international order. My conclusion for the future of East Asia is located somewhere between views of procedural divergence and fundamental skepticism. I worry about integration for the sake of integration in which regional integration is presupposed as inherently good. Such discourse will easily be deteriorated and such a blind community simply collapses when circumstances change. For these reasons, there needs to be an adequate discussion regarding for what, by whom, and through which method integration is achieved.     

Uneasy Democratizations - Pariah Regimes,Political Conditionality and Reborn Transitions in Central and Eastern Europe

With the diversity of regime changes in post-Communist Europe, it is important for democratization studies to accommodate cases that do not readily conform to liberal democracy as conventionally defined. Pariah regimes in transition is one category that needs exploring, focusing as it does on the international dimension of regime change. A thematic framework is developed for exploring this phenomenon which is now more visible given tighter conditionality demands by international organisations. This is applied to four cases in Central and Eastern Europe (Belarus, Romania, Croatia and Serbia) and then, in greater detail, to Slovakia which became renowned for its flouting of political conditionality. It is found that these cases are variable examples of pariah regimes, but their commonalities include substantial issues most likely to provoke European opinion, a high level of personalisation of pariah status and a significant influence of international pressures. Also, on the one hand, these pressures may be reduced when security interests of outside powers so dictate; on the other hand, the pull of the 'European core' - in particular, the European Union - has a reinforcing effect on democratization, thus tending to demarcate Central & Eastern Europe from most ex-Soviet republics.     

Strategic considerations in the US–China relationship and the role of European soft power

This paper analyses strategic considerations within the conceptual, the policy and the systemic dimension of US–Sino relations. Furthermore, the role of the EU’s soft power in the context of US–China relations will be assessed. It will be argued that current US–China relations are mainly a function of the current US foreign policy towards China, which doesn’t take into account that an engagement policy towards China needs to be paralleled by an engagement policy towards the East Asian region. A functional equivalent of the EU’s soft power and its approach of bilateral and multilateral engagement of East Asian actors is a missing element in US–China relations. The thinking on China affairs in the USA can be broadly structured into two different schools of thought. On the one side there are those who favour an engagement policy vis-à-vis China. The engagement school argues that bilateral and multilateral cooperation with China needs to be intensified. Traditionally members of this school are found in the Department of State and the Bureau of the US Trade Representative. On the other side there are those who think of China as a threat that needs to be contained. The politicians and experts that belong to the threat school (e.g. in the Heritage Foundation and the American Enterprise Institute) emphasize their fears of China’s future role on the regional and global level. Though China has supported the US’s “war on terrorism” after the attacks of 9/11, Beijing’s increasing military budget, its neglect of non-proliferation agreements (e.g. in its relations with Pakistan) and its behaviour within the Six-Party Talks are taken as examples of the China threat. Security policies do not solely determine the relationship between the USA and China. The US China policy is a function of both the US’s economic and security interests. This explains why Washington follows a dual policy of simultaneous engagement and containment, i.e. a policy of hedged engagement. But the current state of affair of the Sino–US relationship does not reflect the rise of China as a de facto hegemon of an East Asian community. It is the inherent danger of the current US China policy that the missing regional component in US–China relations could facilitate the formation of a fortress Asia. Since Beijing holds the key to Asian regionalism, China should be the main target of European soft power in Asia by exporting the principles of regionalism and multilateralism to Asia. To what extent the EU and its model of intraregional cooperation and integration can influence the objective and trajectory of Asian regionalism will demonstrate partly the extent of Europe’s soft power in the international system.

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The long-term outlook for economic reform in China: resource constraints, inequalities and sustainability

In China, the inequalities generated by the reforms in the last two decades have been increasing. As a result, the unequal regional and sectoral impact of development associated with the growth-maximisation strategy, has given rise to increasingly severe social and economic tensions and contradictions. The threats to political stability posed by these developments remain, for the time being, potential more than real. But the damage which they have caused to the social, economic and environmental fabric of China is already evident. The main critical facts are: 1) the rise in urban unemployment, both de facto and concealed, that has accompanied the halting restructuring programme among state-owned enterprises (SOEs); 2) the massive reservoir of underemployment that affects at least 130 million farmers; 3) the absence of even basic social security provision for the sick, the unemployed and the old; and the highly differentiated access to education; 4) the pervasiveness of corruption and its destructive impact on the normative framework that usually regulates human economic and social behaviour, to the detriment of the social contract between state and individual.Economic and social polarisation associated with China’s growth-maximisation strategy has become the single most important domestic issue facing the Chinese government. Emphasis by the Hun Jintao-Wen Jiabao administration on a new “people-centred” development strategy highlights the urgency of this problem. When added to the pressures of resource shortages and environmental degradation, the case in favour of shifting from growth-maximisation to sustainability appears to be unanswerable. These are the concerns that have prompted government leaders and officials to question China’s existing development strategy and to formulate a “scientific” concept of sustainable and “harmonious” development.The most authoritative explanation of the new strategy was articulated by Hu Jintao in a speech he made in May 2004, which was subsequently republished in the Party’s leading theoretical journal (Qiushi). In it, Hu demanded a radical change in China’s growth model from one characterised by “high input, high consumption, high pollution, and low efficiency” to a new approach, based on “high science and technology contents, good economic benefit, low resource consumption, less environmental pollution, and full exploitation of human resource advantages.” This change in emphasis was designed to help resolve “prominent contradictions”, such as the excessive pace and scale of fixed-asset investment, which threatened not only to exacerbate resource shortages, but also to generate inflationary pressures attendant on excessive expansion of credit.

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The Pinochet Case: 'Forced to be Free' Abroad and at Home

In part one of this article it was posited that the Pinochet case was best understood not as a harbinger of a borderless world of eroded state sovereignty and universal rights, but rather as an indication that those distanced from popular sovereignty and citizenship by the deals struck in a pacted democratic transition may have found their most potent means of forcing a reopening of the particularist national debate on who belongs to, and in, 'the nation'. Here, two phases of the Pinochet case are examined through this prism. The extradition attempt saw Pinochet's victims 'escape' the legalized confines of domestic space only to shape the understanding of national citizenship from afar. The case's surprising development after repatriation revealed the potential coercive power of the cosmopolitan liberal consensus on 'deserving sovereignty' similar to the conditionality associated with the neo-liberal 'Washington consensus' on economic reform. Three primary lessons are drawn: cosmopolitanism may have to be coerced; pacts are not forever; and place and belonging still matter even as justice is 'globalized'.     

The EU/China relationship: not seeing eye to eye?

I consider the endeavours exerted by the EU to develop the relationship with China which it formalised in its 1995 document ‘A Long Term Policy for China-Europe Relations’ (COM(1995) 279 final). I then examine China’s responses which culminated in 2003 when China produced its first ever ‘China’s EU Policy Paper.’ The reasons for this long gap between initiation and response are then explored. Since, obviously, the EU has been driving the relationship, the rationale for this is then looked into and detailed data is provided to support it. Finally, the nature of China’s reciprocation is entertained before the paper concludes that the relationship appears to mean more to the EU because China perceives the EU as only having a limited role within China’s overall global aspirations, of becoming a world power in economic terms, resulting from its impressive rate of economic growth, increasing R&D expenditure, and continually enhancing sophistication of its technology, and politically with its developing links and military prowess.

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Does compliance matter? Assessing the relationship between sovereign risk and compliance with international monetary law

An important theory of international cooperation asserts that governments comply with international law because of the reputational costs incurred by reneging on public agreements. Countries that sign binding international agreements in the realm of monetary relations signal their commitment to an open economic system, which should reassure international market actors that the government is committed to sound economic policies. If the theory is correct, we should observe evidence that noncompliance is in fact costly. I test this argument by examining the effect of noncompliance with Article VIII of the IMF’s Articles of Agreement on sovereign risk ratings. The results show that noncompliance with the agreement mitigates any benefits that accrue to Article VIII signatories. The empirical evidence suggests that, in addition to improving economic and political conditions at home, governments in the developing world would improve their access to financial markets by signing and complying with international monetary agreements.     

IMF program compliance: Aggregate index versus policy specific research strategies

Consensus has grown that the economic reform programs of the International Monetary Fund (IMF) have failed to promote economic development. There is little consensus about how IMF programs should be reformed, however, because we do not understand why IMF programs have failed. Some critics contend that the IMF’s austere policy conditions are inappropriate for most program-countries and cause economic crises to deepen. Other critics argue that the policy conditions are actually ignored, and the IMF program loan ends up subsidizing the bad policies that caused the economic crises in the first place. This debate begs the compliance question. Unfortunately, the study of IMF compliance is not straightforward. IMF agreements span many dimensions, and the dimensions vary from agreement to agreement. Even along one dimension, governments are not held to the same standard. Rather than look at aggregate measures of compliance, this article proposes a return to studying specific conditions as was done in the earliest studies on IMF compliance.