Author : Sanjeet Kashyap

Expert Speak Young Voices
Published on Jul 05, 2024

As China expands its influence in the Global South and the US and India increase aid, smaller developing nations revert to non-alignment to gain concessions from both.

The Sino-US competition in the Global South: Lessons from the Cold War

Contrary to popular perception, the United States (US)-Soviet rivalry was not just a militarised contest with its spheres of influence, arms race, alliance systems, arms control agreements, tripwire forces in Berlin, and proxy wars in the Third World. Both the superpowers during the Cold War, in their pursuit of demonstrating the superiority of their own economic models, initiated robust domestic welfare programmes as well as generous aid handouts to allies. Further, the US and the erstwhile Soviet Union used economic aid as a tool in the competition for influence in the Third World. The trajectory of the economic Cold War between the two superpowers with universalist ideological visions contains instructive lessons for the current era of great power competition.

Unfolding in the shadow of decolonisation from the mid-1950s onwards, the economic Cold War entailed demonstrating the superiority of their models by bolstering development initiatives in the Third World. On the other hand, the decolonisation imperative for the Third World leaders and officials translated into a striving for rapid economic development while protecting their economic sovereignty. In a paradoxical bind, however, the lack of sufficient state capacity led the Third World officials to rely on external assistance to pursue economic independence. Based on the Indian case study, the development politics in the Cold War era can provide a relevant guidepost for the developing nations to navigate the ongoing Sino-US competition for influence in the Global South. 

The Cold War geopolitics of foreign aid 

Driven by the logic of geopolitical competition, the development politics entailed the superpowers currying favour with the aid recipient nations for geopolitical gains; Indian officials searching for allies in both superpowers to fight their own domestic policy battles; and superpower diplomats seeking leverage in shaping Indian politics and policies. The superpower's obsession with geopolitical rivalry often led to stringent conditionalities attached to the aid offerings that impeded development goals and were detrimental to economic sovereignty. On the flip side, Indian officials with their contrasting visions of development sought international allies and funding to advance their domestic economic policy agenda. In the quintessential non-aligned fashion, they also sought to play off one superpower against the other to extract concessions.

Driven by the logic of geopolitical competition, the development politics entailed the superpowers currying favour with the aid recipient nations for geopolitical gains; Indian officials searching for allies in both superpowers to fight their own domestic policy battles; and superpower diplomats seeking leverage in shaping Indian politics and policies.

The Soviets mostly preferred to fund large, ambitious, and demonstrably visible projects like steel plants, mechanised farms, and dams, amongst others, that helped them score diplomatic gains. On the other hand, much of the US aid to India came in the form of “free money” not associated with any specific project. With their belief in the efficacy of free market enterprise, American diplomats sought to use their funds to promote private sector business and to prioritise the agrarian sector in India’s development strategy. In line with the ideological agenda, their prescription for the Third World included integration with the capitalist world economy and freer domestic markets. In contrast, the Soviet officialdom promoted the central planning and heavy industry model as the pathway for economic development. The superpower geopolitics of foreign aid was driven both by strategic considerations and ideological visions in an intermixed fashion. This dual logic of aid funding rested on gaining diplomatic support from the Third World that would provide a strategic ballast in the globalized rivalry while the development success in the poorest region would vindicate the superiority of their economic model.   

Instructive lessons for the Sino-US competition

There exist striking parallels between the Cold War-era development politics of yesteryear and current Sino-US competition. In a globalised rivalry, both the US and China have used aid as a tool to counter the rival influence. Analogous to the Soviet domination of project-based aid which brought greater public visibility to their diplomatic charm offensive, the Chinese Belt and Road initiative (BRI) has funded a bevy of ambitious and highly visible infrastructure projects around the globe. The US developmental aid, on the other hand, focuses on global health, food commodities, and assistance to MSMEs. 

There exist striking parallels between the Cold War-era development politics of yesteryear and current Sino-US competition. In a globalised rivalry, both the US and China have used aid as a tool to counter the rival influence.

The contrasting economic visions on offer by both the superpowers also hold a resemblance to the ideological dimension of the Sino-US rivalry. As economist Branco Milanovic has pointed out, the US and China today offer alternative models of liberal meritocratic and political capitalism respectively. These contrasting modes of governing capitalism are arguably reflected in their aid approach as well. To be sure, a pragmatic concern with addressing infrastructural bottlenecks lead many nations to accept Chinese aid and technology as the last resort. However, China’s often less stringent aid criteria reflect its ideological comfort in aiding repressive and corrupt regimes. 

In contrast, notwithstanding the occasional strategically driven partnership with authoritarian regimes, the US aid policy generally seeks to promote sustainable development with a stress on environmental standards and anti-corruption measures. Emblematic of the US approach in this domain is the Blue Dot certification initiative. In contrast to China’s opaque and selfish pursuit of development financing abroad, the US talks of an alternative aid approach on the logic of providing a democratic, transparent, and sustainable mechanism in consultation with the local stakeholders. 

The Cold War experience further offers salutary lessons for the domestic politics of aid and infrastructural projects in recipient nations. For Yale professor David Engerman, development politics in India was less about pecuniary interests and more a matter of a clash of economic visions. The domestic constituencies with contrasting development models sought allies in their respective superpower patrons. In a familiar resemblance in the South Asian region today, the domestic politics over foreign aid and partnerships has seen political parties divided over picking either US/ India or China as the preferred benefactor. 

The Global South’s agency

Adopted by a host of Third World postcolonial states including India, the non-aligned foreign policy approach actively sought to leverage such a positioning to accrue benefits from both superpowers. The Third World agency was also reflected in solidarity projects to shift the rules of international economic order, as evinced in the Afro-Asian conference at Bandung, the bevy of NAM summits, and the NIEO initiative in the 1970s. 

At the same time, the Cold War experience demonstrates the limitations of such solidarity bids. The Afro-Asian bloc and the NAM grouping came crashing down under the internal contradictions of competing national interests, including the Sino-Indian rivalry. The NIEO initiative and the G77 moment in the 1970s were predicated on the sudden spurt in the strategic value of Arab oil producers while the US reeled with stagflation. With the major oil-importing developing nations bearing the brunt and the US regaining its economic dynamism, the NIEO moment came to pass. 

The strategy of playing one superpower against another to extract concessions didn’t work out in cases where both superpowers saw through the plot and refused to play the game. An illustrative case would be Homi J Bhabha’s entrepreneurial efforts to seek funding and technology for atomic energy projects without yielding to the nuclear powers on the issue of externally imposed safeguards.

The strategy of playing one superpower against another to extract concessions didn’t work out in cases where both superpowers saw through the plot and refused to play the game. An illustrative case would be Homi J Bhabha’s entrepreneurial efforts to seek funding and technology for atomic energy projects without yielding to the nuclear powers on the issue of externally imposed safeguards. Indian officials saw these safeguards as an affront to their sovereignty. A meeting of the nuclear powers—the US, the UK, the Soviet Union, and France—in Paris in 1960 led to a consensus to uphold safeguards despite competitive pressures to curry favour with New Delhi by partaking in Bhabha’s atomic dreams. 

Conclusion

As China makes inroads into the Global South by wooing smaller states and a worried US and India step up their aid initiatives, the smaller, developing nations have again resorted to the familiar playbook of non-alignment to gain concessions from both sides. China’s BRI project has undergone revisions and adaptation under the influence of local actors, institutions, and norms. The US has consciously sought to incorporate the recipient states’ interests and concerns in its foreign aid strategy. The critique of the Chinese BRI on grounds of corruption, environmental degradation, labour unrest, and uneven distributional gains embodies the tension generated by the interplay of developmental goals, economic sovereignty imperatives, and zero-sum strategic competition. As both superpowers and developing nations prepare to navigate the politics of external economic aid, the lessons of bipolar-era development politics warrant a recall.


Sanjeet Kashyap is a Research Intern at the Observer Research Foundation.

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Author

Sanjeet Kashyap

Sanjeet Kashyap

Sanjeet Kashyap is a Research Intern with the Strategic Studies Program at the Observer Research Foundation. He is also pursuing his PhD research on the ...

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