Skip to main content Accessibility help
×
Hostname: page-component-7c8c6479df-ph5wq Total loading time: 0 Render date: 2024-03-17T06:34:45.031Z Has data issue: false hasContentIssue false

4 - Why multilateralism? Foreign aid and domestic principal-agent problems

from Part II - Variation in principal preferences, structure, decision rules, and private benefits

Published online by Cambridge University Press:  22 September 2009

Helen V. Milner
Affiliation:
Princeton University
Darren G. Hawkins
Affiliation:
Brigham Young University, Utah
David A. Lake
Affiliation:
University of California, San Diego
Daniel L. Nielson
Affiliation:
Brigham Young University, Utah
Michael J. Tierney
Affiliation:
College of William and Mary, Virginia
Get access

Summary

INTRODUCTION

Why do countries sometimes use multilateral strategies and institutions for pursuing their foreign policies? Since World War Two the advanced industrial countries – basically, the OECD countries – have chosen to distribute part of their foreign aid through multilateral organizations, such as the European Union (EU), World Bank, IMF, UN, and regional development banks (RDBs). In particular I want to understand why these countries have chosen to delegate varying amounts of aid to these international organizations over the past 40 years. The delegation of aid-giving to multilateral organizations is surprising; it reduces a country's control over its own foreign policy and has the potential to increase principal-agent problems associated with all spending programs. The other choice that these countries had was to use their own bilateral aid agencies to select projects and oversee aid expenditures, which was the traditional practice prior to the 1960s. So the question addressed is why delegate the provision of foreign aid to a multilateral organization instead of using traditional bilateral channels.

The total amount of such multilateral aid is not inconsequential. For instance, the World Bank gives aid in two main forms. The International Bank for Reconstruction and Development (IBRD) uses its donor subscription base as collateral to borrow money on world capital markets, which it then lends at below market interest rates to developing countries. In 2001 the IBRD committed roughly $10.5 billion in low interest loans (World Bank 2001a).

Type
Chapter
Information
Publisher: Cambridge University Press
Print publication year: 2006

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Save book to Kindle

To save this book to your Kindle, first ensure coreplatform@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.

Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Available formats
×

Save book to Dropbox

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.

Available formats
×

Save book to Google Drive

To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.

Available formats
×