The Communist Bloc and the Foreign Aid Game

• Date: 01 December 1964
• Published date: 01 December 1964
• Author: David Beim
• DOI: 10.1177/106591296401700413
• Subject Matter: Articles

THE COMMUNIST BLOC AND THE FOREIGN AID GAME
DAVID BEIM
Stanford University
EW
ASPECTS of contemporary foreign policy have been subjected to as little
theoretical analysis as foreign aid. Each year billions more are spent, and the
JL urgency grows for a comprehensive answer to the question: what is foreign
aid and why should a nation give it? In particular, why does the Communist Bloc
give foreign aid, and how can the West utilize an understanding of Communist
motivation?
.
The theory of games illuminates this complex problem. It reveals a clear struc-
ture of self-interest underlying the wide variety of credits, grants, and technical
agreements. It deduces the motivations of a country from its actions, not from its
words. Finally, it provides a rational basis for making foreign aid policy.
FOREIGN AID AS A GAME
Most of the game-theoretic literature concentrates on zero-sum games, i.e.,
situations of pure conflict, simply because these situations are driven by a more
rigorous logic than are non-zero-sum games. The results are quite relevant to war,
UN
voting, and other international situations in which &dquo;winning&dquo; and &dquo;losing&dquo; are
obvious, easily defined concepts, in which all participating nations are either winners
or losers. But foreign aid is a more complex process; attempts to apply zero-sum
game theory here have yielded surprising, sometimes bizarre, results.’ Here at least
we may accept Schelling’s thesis that the subtleties of non-zero-sum games produce
more useful insights than the mathematics of pure confliCt.2 In doing this we sacri-
fice rigor to relevance.
I therefore propose a model of foreign aid as a three-player, non-zero-sum game.
Two of the players, the United States and the Soviet Union, are termed &dquo;active&dquo;
since they make and control the moves. The third player is the world of developing
countries. I shall call this player &dquo;passive&dquo; for now, although its style of play may
become more aggressive later in the game. The three players are not arbitrary coali-
tions of interchangeable players trying to achieve some &dquo;weighted majority&dquo; or &dquo;win-
ning coalition.&dquo; They are rather three classes of nations brought about by political
and economic forces quite unrelated to foreign aid.
Although the United States and the Soviet Union give the great bulk of foreign
aid, some is also given by the allies of these two powers. For the sake of simplicity, I
assume complete unity among these allies. Thus I equate the Soviet Union with the
entire Communist system -
I treat the system as a &dquo;Bloc&dquo; in the true sense of the
word. Competitive aid from different Communist countries and intra-Bloc aid be-
NOTE : Prepared in cooperation with Stanford Studies of the Communist System. I am most
grateful to Jan F. Triska, director of SSCS, for his encouragement and assistance.
1

See, for instance, Arnold Zellner, "War and Peace: A Fantasy in Game Theory?" Journal of
Conflict Resolution (March 1962), p. 39. The more involved, n-player approach of Wil-
liam Riker will be discussed later in this paper.
2
Thomas Schelling, The Strategy of Conflict (Cambridge: Harvard University Press, 1960),
pp. 9ff.
784

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785
tween Communist countries do not enter into this model.3 No such unity, however,
is assumed in the developing world; indeed, the &dquo;passive player&dquo; may be taken as a
single, typical developing country rather than the class of all such countries.
The game is a sort of barter, diagrammed below. Each player pursues a single
goal or payoff: the active players are trying to extend their in fluence as far as possi-
ble, and the passive player is trying to maximize its economic growth. This differing
payoff for active and passive players is the driving force of the whole game. The
moves
consist of agreements between the passive player and one of the active players:
credit, grant, or technical assistance is somehow traded for implicit or explicit influ-
ence. This influence may take a wide variety of forms, but it is always either present
or thought to be present by the active player. The model specifically excludes altru-
istic or humanitarian motives.
The game is non-zero-sum because active and passive players order the utility-
values of aid and influence in opposite fashion: the United States and the Soviet
Union are relatively rich, and can afford the aid, but because of mutual hostility
place a high utility on influence abroad. Conversely the developing world places a
high utility on aid, and will pay the price in influence if necessary. This situation
resembles comparative advantage in commerce, and means that aid agreements are
mutually profitable, bringing perceived advantages to both sides. The two active
players compete for influence in the developing world, although they may eventually
perceive points of common interest. Thus the game is somewhat like a duopoly over
a single market.
But two factors make this model more complicated than a duopoly. First, the
&dquo;market&dquo; can pursue a strategy of its own; optimal strategies for the developing
world will be discussed later. And second, there is no objective scale, no price system,
by which to exchange aid for influence. Indeed, aid can lead to influence in several
different ways, and I shall call these various ways the motivations for foreign aid.
Motivations are conceptually independent of the uses (subsistence, prestige, etc.) to
which aid may be put, although in practice one would expect correlations between
certain motivations and certain types of aid, as we shall see.
The motivations may be roughly divided into two groups: strategic and tactical.
Strategy has greater scope than tactics; in Sir Edward Hamley’s dictum, &dquo;The thea-
ter of war is the province of strategy; the field of battle is the province of tactics.&dquo;
Strategy is longer-run in its implications, while tactics is the daily in-fighting. Strategy
has greater stability over time, more generality and impartiality, while tactics is flexi-
ble and changing.
With this distinction in mind, I list the four precise ways in which it seems to me
that aid can lead to influence.
(a) Foreign aid can promote good will and solidify friendly relations. This is
the most direct and obvious, although probably not the most important way in which
aid achieves influence, for one presumably has influence among one’s good friends.
When aid critics say, &dquo;You can’t buy friends,&dquo; they are pointing out that this is a
3
The same model could be used, with slight modifications, to illuminate subgames within each
bloc, e.g., competitive aid between the Soviet Union and China, but such considerations
are beyond the scope of this paper.

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786
tactical, never a strategic use of aid. It is true, friends cannot be bought in the long
run, but this does not change the utility of aid for short-run manifestations of friend-
ship. Aid given under this motivation is likely to be small in scale but highly publi-
cized. It would probably concentrate on very conspicuous projects, frequently pure
prestige undertakings like a stadium or a radio station. It would include gifts or
small, easy loans with no strings attached. Under exceptional circumstances, how-
ever, this motivation may produce a large, spectacular project which symbolizes, like
an engagement ring, a new kind of relationship between the parties, the beginning
of a new direction in policy, a promise of far greater things in the future. Such a
project must be quite large to be credible; yet even such a large project is essentially
tactical.
(b) Foreign aid can make the recipient country dependent upon the donor, and
the promise of continuance or the threat of discontinuance of aid makes the recipient
country more amenable to agreement with the donor. This is an almost inevitable
outcome of any and all foreign aid, but as a motivation it may be pursued in either
a strategic or a tactical way. As tactics it would amount to an outright bribe, the
extortion of a particular concession in return for specific aid. Strategically, it would
involve an attempt to bring the economy of the recipient country into tight relation-
ship with one’s own. In the tactical case, the donor would presumably offer some-
thing urgently desired by the recipient country. To be sure that bribery were in fact
the motivation behind a given aid move, one would have to display both this desired
object and the specific quid pro quo involved. In the strategic case, the aid would
have to be quite large-scale and continuous to succeed in binding the country to the
donor. It would probably be concentrated in heavy industry, and used as a spring-

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787
board to trade agreements and cultural exchanges which further connect the two
countries. Long-term loans would be used, for they commit the recipient to many
years of continued contact with the donor; outright grants would be avoided, for
they do not lead to dependence. A donor under this motivation would emphasize bi-
lateral rather than multilateral agreements, and would refuse to give his aid through
international agencies, for such agencies disrupt the direct line of dependence be-
tween recipient and donor.
(c) Foreign aid can cultivate a natural ideological ally over the long run. This
is the subtlest and least predictable use of aid, and it can be argued for both sides.
In the West, the argument runs something as follows: Marxist predictions have
failed to materialize within the industrialized nations -
the gap...