Oda, Democratic Transitions, and Consolidating Democracy: Japan and Korea vs the United States and Thailand



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ODA, Democratic Transitions, and Consolidating Democracy:

Japan and Korea vs. the United States and Thailand
Dennis Patterson

Department of Political Science

Texas Tech University

113 Holden Hall

Lubbock, TX 79409

dennis.patterson@ttu.edu

David Lektzian

Department of Political Science

Texas Tech University

113 Holden Hall

Lubbock, TX 79409

david.lektzian@ttu.edu



ABSTRACT: ODA, Democratic Transitions, and Consolidating Democracy: Japan and South

Korea vs. the United States and Thailand

Japan’s Official Development Assistance (ODA) was long criticized for its low quality, but more recent investigations have shown it to be less economically self-interested and more sensitive to humanitarian goals than originally thought. These differences seem to be irreconcilable, but they can be explained by the different approaches analysts took in their evaluations of Japanese ODA. Which side offers a better understanding is important to be sure, and we address this debate by focusing on Japanese ODA and democratization, a question that neither side addressed very thoroughly. Specifically, we ask if Japanese ODA helped promote democratic politics in some recipient nations even though the promotion of democracy was not its intention. Our analysis will show that the answer is positive, and to demonstrate how this occurred, we complete two tasks. First, we develop a theory of how foreign economic aid encourages democratic political development in authoritarian nations, and, second, we test it using the economic and political experience of post-armistice Korea.


Evaluations of the quality of Japanese Official Development Assistance (ODA) are characterized by areas of agreement and disagreement. On the one hand, all assessments agree that the content of Japan’s ODA, that is, such things as the ratio of ODA that is tied versus untied and the ratio of multilateral to bilateral aid has improved over time. Scholarly assessments also agree that, in the last two decades, the content of Japan’s ODA has revealed a growing concern with environmental outcomes.1 Moreover, all scholarly and professional evaluations have concluded that the increasing quality of Japan’s ODA has rendered it more reflective of the ODA practices of other Development Assistance Committee (DAC) members of OECD.

On the other hand, there is disagreement over whether the quality of Japan’s ODA was actually as low in quality as initial assessments had concluded. The 2004 peer review of Japan’s ODA agreed that it deserved low grades for both political and economic reasons. Economically, Japan’s ODA received low grades because higher than average shares of its ODA had to be used by recipient nations to purchase goods and services produced in Japan.2 Second, Japan’s ODA received low grades for its economic quality because it contained higher than average shares of loans as opposed to grants, and, third, because it had lower than average proportions that went to the world’s least developed countries.3 Politically, Japan’s ODA received low grades for quality because, among other things, it did not reflect any concern with the human rights records of recipient nations or whether those nations were making progress toward democracy.

These descriptions were empirically accurate, and, as criteria for judging the quality of a country’s aid practices, they supported the conclusion that the quality of Japanese ODA could be improved. Later assessments did not dispute that Japanese ODA involved high proportions that were tied, bilateral, and perhaps distributed more to potential trading partners than the least developed economies of the world. They did, however, conclude that Japanese ODA was of higher quality, both politically and economically, than earlier assessments granted.4

These starkly different conclusions can be explained by how these two groups of analysts proceeded to determine the quality of Japan’s Official Development Assistance. One group focused on the Japanese government’s motivations for extending international economic aid by gleaning the country’s preferences from ODA-related documents published by those ministries and bureaus that were involved in determining which countries would get which type of ODA and in what amounts. These include such agencies at the former Ministry of International Trade and Industry (MITI) as well as the Ministry of Foreign Affairs (MOFA) and conclusions followed very closely the well-known script that Japanese ODA was a tool of the nation’s foreign economic policy to promote Japanese companies. Later, more positive assessments were obtained by analysts conducting large-N statistical analyses that used the amounts of ODA received by various countries as the indicator of ODA quality. Specifically, these methods examined the actual characteristics of those countries that received what relative amounts of Japanese ODA to paint a more positive picture of the quality of Japanese ODA.

While differences of approach account for these contrasting assessments of Japanese ODA, the fact that differences of opinion persist over its quality in political terms is puzzling. First, most assessments have simply ignored this question of the political impacts of Japanese ODA simply because, by design, Japanese ODA has been overtly non-political.5 Indeed, Japanese officialdom purposely kept its foreign giving out of politics, and this official position relegated any justification a scholar would have for studying such a relationship.

There is little doubt that the motivations behind Japanese ODA were principally economic,6 which is why it is puzzling that the findings of such scholars as Tuman et. Al. (2006 and 2009) found its distribution patterns to reflect attention to and concern about political goals. This puzzle then suggests to us that it is quite possible that the provision of foreign aid that is utterly economic in intent, Japan’s ODA can be attendant to distinct political impacts. This is the problem we address in this paper and we do so by focusing on how Japanese ODA that has been economic in intent could be attendant to sizable political impacts, particularly, the promotion of democratic political development.

To determine whether Japan’s ODA helped promote democratic political development in recipient nations, we depart from the manner in which scholars have traditionally evaluated the quality not only of Japanese ODA in particular but also of all foreign aid in general. This is not a criticism of the extant literature because we acknowledge that existing scholarship was skillfully directed to the problems it was designed to address and has advanced our understanding of how foreign aid can both enhance and inhibit a recipient nation’s progress toward democratization.7 Rather, we pursue a different approach because we know that Japan’s ODA was not officially distributed to achieve political goals, and this has kept analysts from examining its political impacts in a way that could adequately address this question.8

We intend to show that, even though Japan’s ODA was designed and implemented with its own economic interests in mind, it nonetheless helped promote democratic political development in certain cases. One of these cases was South Korea, which provides an opportunity for us to uncover the mechanisms that connect economically motivated foreign aid to political changes that ultimately result in transitions to democracy that are consolidation. The case of ODA relations between Japan and Korea is also important because it reveals how economically motivated ODA can help lead to a democratic transition in a different way than delineated in the literature. Specifically, Wright (2009) showed that the ability of foreign aid to induce dictators to initiate democratic reforms is tempered by the size of their distributional coalitions and the level of economic growth in their respective countries.9 The Korean case, however, offers a somewhat contrary example as the values that measures of these factors took on were frequently in ranges that should have made its democratization less likely.10

We begin this effort with a more in-depth discussion of how past scholarship has evaluated the quality of Japanese ODA and then turn to the theoretical perspective we employ to determine how foreign aid can promote democratic political development even when its primary intent is to benefit a donor nation economically.


Evaluating Japan’s Official Development Assistance

Japan’s postwar Official Development Assistance began as reparations to the nations that were occupied by its military forces in the Pacific War and before.11 Reparations payments continued for many years, but, throughout the postwar period, their amounts declined as the Japanese government replaced these monies with economically oriented ODA. Over time, Japan Increasingly became a major actor in the distribution of economic aid to the developing world, particularly in Asia. The period from the late-1980s to the 1990s is particularly significant because it is at this time that the aid amounts Japan provided to recipient nations dramatically increased, leading it to become the world’s largest provider of ODA for a period of time.12

It is also at this time that Japan’s ODA was increasingly scrutinized both by DAC members and by Japan scholars. Initially, evaluations of Japanese foreign aid focused on ODA at its source, that is, how programs for providing funds to recipient nations compared to DAC standards for such giving.13 Criticisms at this time noted that Japanese ODA was essentially economic in orientation and designed to promote Japanese business interests, specifically, exports in finished goods and imports of needed raw materials. These kinds of negative evaluations should be no surprise because many analysts viewed Japanese ODA as the international expression of a domestic economic policy that was designed to create advantage for Japanese companies while actively promoting domestic economic growth and technological development. This view of Japanese ODA, and that of Japan’s political-economic system overall, is the product of what is known as the “revisionist” or “developmental state” model of Japan.14 While scholars relied on it to different degrees in their assessments of Japanese ODA, virtually all agreed that ODA was the principal economic tool used by the Japanese government to promote trade with recipient nations, providing Japanese firms with benefits they otherwise would not enjoy.

Subsequent to these initial assessments, a different set of scholars reexamined Japanese ODA. While they were similarly interested in the quality of Japanese ODA, they proceeded in a different manner, specifically, by focusing on its actual distribution across recipient nations. The analyses they produced were mostly large-N statistical studies that found Japanese ODA to be distributed across recipient nations in ways contrary to those assessments that accepted the basic premise of the “development state” model, and, thus, of higher quality than initially thought.15 For example, Tuman, et. al., (2009) found that a recipient country’s level of trade with Japan and GDP per capita were both negatively associated with the amount of Japanese ODA they received, which indicates that more Japanese ODA went to the world’s LDCs compared to countries with which Japan shared higher values of trade.16 This same study also found that countries engaged in human rights abuses received relatively lower shares of ODA from Japan, indicating that its foreign aid was more sensitive to international political norms than originally suggested.

While the different conclusions of these two sets of studies seem irreconcilable, they do reflect the fact that, even though Japanese ODA was primarily economic by design, its distribution across recipient nations may have reflected certain political goals. We know that Japan’s ODA decisions were, from time to time, directly subjected to political influences. Sato (1994) notes that the Ministry of Foreign Affairs, in response to criticisms the country received given some of its past foreign policy decisions, had begun to issue statements that Japan should pay more attention to such political matters as human rights.17 Moreover, there are numerous cases where the Japanese government deliberately used its ODA to accomplish political goals. These include all instances where Japan used foreign aid to reestablish and improve diplomatic relations with selected nations, particularly former enemies in the Pacific War, and they also include Japan using its ODA to get the Korean government to commute the death sentence it initially imposed on Korean opposition leader, Kim Dae-Jung.18 To be sure, such instances suggest that Japan’s ODA distribution patterns have been more complicated than the original view allowed, but they also reinforce the importance of the larger question of whether ODA that is essentially economic by design must at the same time be “…indifferent to human rights and democratization, ” as Arase (1994a) has argued.19

As the literature discussed above suggests, the issue is that economically oriented foreign aid can lead to certain desirable political outcomes, like support for the process of democratization, but this literature has not provided us with a theoretical perspective that helps us be very specific about how economic aid that promotes the donor’s economic interests by promoting trade with recipients. Again, while scholars recognize that there is an overall correlation between economic development and democracy, the literature on democracy promotion generally assumes that foreign aid must be politically targeted to promote democracy in recipient nations.20 Contrary to this, we will show below that foreign aid that is designed specifically to serve the economic interests of a donor nation, by encouraging trade with recipient nations, can still help promote democratic transitions, and this effort begins with a discussion of the theoretical perspective that reveals how this happens.



Foreign Aid and Democratic Political Development: A Theoretical Perspective

Completing an analysis of the political impacts of Japanese ODA requires a theoretical perspective that tells us how and why economically motivated foreign aid can promote democratic political development. This is not to say that scholars have ignored this issue because many aspects of this relationship have been explored theoretically.21 Rather, as stated above, the point is to emphasize that determining whether or not ODA’s economic impacts are partner to encouraging democratic political development in authoritarian countries that are ODA recipients requires a different approach than witnessed in the literature. First, we must investigate how foreign aid affects a recipient nation’s level of international trade with donor nations as well as other nations, and, second, we must also determine how any increases in international trade brought on by ODA affects extant political conditions in recipient nations. The latter determination point requires that we offer a way to assess whether such impacts have the potential to lead to a democratic political transition.

The relationship between a nation‘s level of international trade and how it divides politically begins with the seminal work of the economists Wolfgang Stolper and Paul Samuelson (1941), who developed a theory of the impact that trade protection had on real wages in order to explain who gains and who loses from expansions of free trade. This is the well-known Stolper-Samuelson Theorem which, in conjunction with the Heckscher-Ohlin general equilibrium framework out of which it was derived, posited that owners and intensive users of abundant factors will gain from expansions of free trade while owners and intensive users of scarce factors will benefit from protection. This means that, when ODA leads to the expansion of a recipient country’s international trade,22 the owners and intensive users of that country’s abundant factors will benefit economically while the owners and intensive users of that country’s scarce factors will be hurt economically.

Expansions and contractions of international trade can be partner to profound political implications. As Rogowski (1989) noted in his seminal work, the beneficiaries of expanded trade will endeavor to maintain and promote its expansion,23 while those who are hurt by expansions of trade will prefer and seek protection.24 Moreover, Rogowski (1989) noted that, as the beneficiaries of expanded trade become more economically powerful, they also become better able to engage in the political action necessary to advocate for maintaining the expanded trade that provided them with increased economic benefits in the first place. This means that such groups become more able to overcome the collective action obstacles they encounter in attempts to maintain their increased wealth and growing power.

These observations lead to a set of expectations about how foreign aid that encourages expanded international trade will affect the political dynamics of a recipient nation, and to determine if such impacts involve promoting democratic political development, we must define the groups that are in power versus those that are potential challengers. While undoubtedly oversimplified, we begin with a simple definition of power relations in an authoritarian country by dividing economically (factor) based groups into those that are within the authoritarian government’s distributional coalition and those that are potential challengers to that government. We next assume that the total amount of political power (PT) in the authoritarian country being examined can be represented as the sum of the power possessed by the government and its distributional coalitions, PG, and those who would be challengers, PCH. This distinction leads to the following identity, PT = PG + PCH.25

Before ODA is dispensed to a recipient nation, we assume that the owners and intensive users of those factors who support the government will be more powerful than the owners and intensive users of factors who do not. Expressing this relationship as a ratio, we have PG / PCH > 1. Given that ODA can result in increased international trade, power relations between government supporters and challengers may change, and this depends on whether government groups and potential challengers are the owners/intensive users of abundant or scarce factors. When the owners and intensive users of the recipient country’s abundant factors are within the authoritarian government’s distributional coalition, something we would expect in authoritarian countries that have large trade portfolios, foreign aid that increases trade will benefit the authoritarian government economically, increasing its ability to maintain itself in that country’s dominant political position. Under such circumstances, receipt of ODA that expands trade is very unlikely to lead to democratization. Specifically, this is the scenario where economically oriented foreign aid is least likely to lead to a democratic transition as it represents the case where the post-aid power ratio is greater than the pre-aid power ratio, that is, (PG / PCH )t < (PG / PCH)t+n.26

On the other hand, when the owners and intensive users of the recipient country’s abundant factors are potential challengers to the incumbent authoritarian government, receiving foreign aid that increases trade will help create the conditions that make a democratic transition more likely. This is because, as the ODA helps increase the level of international trade in which a recipient country engages, the result will be not only an increase in the wealth of the potential challengers but also a growth in their overall political wherewithal. These changes will result in shifts in the relative power of these two sets of groups, which will then raise the likelihood that the benefitted groups will challenge the government and perhaps initiate a democratic transition. This is the scenario where economically oriented ODA is likely to lead to a democratic transition, that is, when the post-aid power ratio is less than the pre-aid power ratio or (PG / PCH )t > (PG / PCH)t+n.

With these relationships defined, we now have a set of expectations about how economic aid, such as the aid that Japan extended to Korea, will influence a recipient country’s potential for a democratic transition. These expectations are summarized in Table 1. We define the impact of ODA as either helping to expand the level of trade in which a recipient country engages or exerting no impact in which case a recipient country’s level of trade remains the same.27 In the case where aid helps increase trade, democratic transitions become more likely when potential challengers are the owners or intensive users of the country’s abundant factors and these groups are not part of an authoritarian government’s distributional coalitions. On the other hand, when governing groups are the owners/intensive users of abundant factors and ODA increases trade, the authoritarian government gets stronger, rendering a democratic transition increasingly unlikely.


Political and Economic Developments in Post-Armistice Korea

As mentioned above, we test this set of expectations by using the case of post-armistice Korea.28 Today, the Republic of Korea is an economically vibrant and solidly democratic country in Northeast Asia. According to 2011 data, South Korea is the 12th largest economy in the world, exporting high tech goods, like sophisticated electronics and automobiles, as well as capital. What is interesting, however, is that it was only a short time ago that Korea was one of Asia’s most economically underdeveloped nations. Indeed, in the 1970s, Korea’s GDP was smaller than that of the Philippines. In terms of economic progress, this means that Korea’s economic ascendance is not only a relatively recent phenomenon but also something that is truly remarkable in terms of its scope.

Korea’s post-armistice political trajectory, while somewhat different in terms of timing, has been no less dramatic. Because it remained in a virtual state of war after the 1953 armistice, forces opposed to Korea’s democratization enjoyed a position of political strength, rendering the emergence of democratic politics not just difficult but unlikely, even in the long term. This authoritarian advantage, which persisted long after the Armistice of 1953, does not mean that there were no attempts by opposition movements to make the country more democratic but rather that the status quo was maintained in large part by the strength of the authoritarian leadership. To be sure, there were elections to the Korean presidency, and there were movements that advocated for democracy. However, the signature authoritarian government in Korea during this period achieved its power through coups and maintained it with the aid of a very strong and alert military. As a result, movements advocating democratization were suppressed and sometimes brutally.29

This pattern of successful repression to any regime challenge in Korea persisted until the late 1980s. It was at this time that Korea, once again, witnessed movements for democracy. The pro-democracy movements of the late 1980s, however, were different in that they succeeded in effecting a complete transition to democratic politics. This change in Korea’s political system is clearly reflected in measures political scientists use to capture a country’s level of democracy.30 As shown in Figure 1, until the early 1980s, Korea received some of the lowest possible scores on the Polity IV and Freedom House scales. From this time to 1987, Korea’s level of democracy was upgraded slightly but still remained solidly negative. These negative polity and Freedom House scores changed at the end of the decade when the country successfully transitioned to democracy, after which it continued to solidify its democracy, earning very high, positive scores on both indicators. The point is that, unlike other countries struggling with the democratization process, once the transition occurred in Korea, there was no turning back as its democratic politics became stronger as time elapsed.

What is interesting about Korea’s political transformation is not just that it resulted in a consolidated democracy as quickly as it did, but rather why the democratization movement in the late 1980s was successful but earlier attempts were suppressed. As stated briefly above, Korea experienced numerous movements for political change prior to the late-1980s. Indeed, the Japanese surrender to the U.S. south of the 38th parallel at the end of the Pacific War was immediately followed by citizen movements to establish a new regime for an independent Korea.31 These movements involved extensive citizen participation that often met with repressive efforts that sometimes became violent. Korea’s movement for democracy of the late 1980s, however, led to an entirely different outcome despite the fact that it challenged an increasingly strong authoritarian state that initially responded with repression and some violence. The question then is why the late 1980s produced such a different political outcome, and we answer this question in the following section by connecting Japanese aid to Korea’s growing international trade and ultimate democratization in accordance with the theoretical perspective discussed above.

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