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The Price of Aid: The Economic Cold War in India
Debates over foreign aid can seem strangely innocent of history. Economists argue about effectiveness and measurement―how to make aid work. Meanwhile, critics in donor countries bemoan what they see as money wasted on corrupt tycoons or unworthy recipients. What most ignore is the essentially political character of foreign aid. Looking back to the origins and evolution of foreign aid during the Cold War, David C. Engerman invites us to recognize the strategic thinking at the heart of development assistance―as well as the political costs.
In The Price of Aid , Engerman argues that superpowers turned to foreign aid as a tool of the Cold War. India, the largest of the ex-colonies, stood at the center of American and Soviet aid competition. Officials of both superpowers saw development aid as an instrument for pursuing geopolitics through economic means. But Indian officials had different ideas, seeking superpower aid to advance their own economic visions, thus bringing external resources into domestic debates about India’s economic future. Drawing on an expansive set of documents, many recently declassified, from seven countries, Engerman reconstructs a story of Indian leaders using Cold War competition to win battles at home, but in the process eroding the Indian state.
The Indian case provides an instructive model today. As China spends freely in Africa, the political stakes of foreign aid are rising once again.
In The Price of Aid , Engerman argues that superpowers turned to foreign aid as a tool of the Cold War. India, the largest of the ex-colonies, stood at the center of American and Soviet aid competition. Officials of both superpowers saw development aid as an instrument for pursuing geopolitics through economic means. But Indian officials had different ideas, seeking superpower aid to advance their own economic visions, thus bringing external resources into domestic debates about India’s economic future. Drawing on an expansive set of documents, many recently declassified, from seven countries, Engerman reconstructs a story of Indian leaders using Cold War competition to win battles at home, but in the process eroding the Indian state.
The Indian case provides an instructive model today. As China spends freely in Africa, the political stakes of foreign aid are rising once again.
512 pages, Hardcover
Published February 19, 2018
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December 15, 2025
Saw this book referenced in Montek Singh Ahluwalia's BACKSTAGE: The Story behind India’s High Growth Years.
This book covers a slice of economic history of the 1955-1975 centered around the politics of foreign aid.
The central theme is to introduce the concept of "development politics" where individuals and factions within the Indian government & bureaucracy aim to secure foreign aid in order to advance their domestic economic visions.
Thereby the development trajectory of a nation is influenced heavily by how much foreign funding each ministry and minister can secure rather than what is objectively the best for the nation.
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The main gist is that the Soviets were interested in funding big publicity projects in heavy industry while the Americans were interested in agricultural productivity reforms.
And of course, any Soviet funding was contingent on public sector recipients while the Americans prerequisite was that it go to the private sector.
Both these focuses were driven by the self interest of the respective countries.
The Soviets could use their expertise to build flagship projects for publicity while the Americans could get their companies to build fertilizer plants.
As I read this book, I wonder how different Indian history would be without these external monetary influences.
Would early independent India have been able to have such a huge focus on public sector companies without the Soviet money?
At one point, the Soviet Union was the "buyer of the last resort" - buying up all the excess capacity despite having sufficient domestic supply.
Might not the misguided focus on public sector died an early death without the Soviet investments & backstopping?
The Americans gave India food aid (as they had excess agricultural capacity) till almost the mid/late 60s when the Indo-Pakistan conflicts occured and pretty much ended in 1971 over the Bangladesh issue.
India had its Green Revolution in the 70s, whereby it attained self sufficiency in food production. Do they have it earlier without American food aid?
And lots of other fascinating examples in the book.
The tone of the book is a bit dry but not academic level. Hence, it'll be an interesting book only if you are interested in the somewhat obscure topic.
This book covers a slice of economic history of the 1955-1975 centered around the politics of foreign aid.
The central theme is to introduce the concept of "development politics" where individuals and factions within the Indian government & bureaucracy aim to secure foreign aid in order to advance their domestic economic visions.
Thereby the development trajectory of a nation is influenced heavily by how much foreign funding each ministry and minister can secure rather than what is objectively the best for the nation.
---
The main gist is that the Soviets were interested in funding big publicity projects in heavy industry while the Americans were interested in agricultural productivity reforms.
And of course, any Soviet funding was contingent on public sector recipients while the Americans prerequisite was that it go to the private sector.
Both these focuses were driven by the self interest of the respective countries.
The Soviets could use their expertise to build flagship projects for publicity while the Americans could get their companies to build fertilizer plants.
As I read this book, I wonder how different Indian history would be without these external monetary influences.
Would early independent India have been able to have such a huge focus on public sector companies without the Soviet money?
At one point, the Soviet Union was the "buyer of the last resort" - buying up all the excess capacity despite having sufficient domestic supply.
Might not the misguided focus on public sector died an early death without the Soviet investments & backstopping?
The Americans gave India food aid (as they had excess agricultural capacity) till almost the mid/late 60s when the Indo-Pakistan conflicts occured and pretty much ended in 1971 over the Bangladesh issue.
India had its Green Revolution in the 70s, whereby it attained self sufficiency in food production. Do they have it earlier without American food aid?
And lots of other fascinating examples in the book.
The tone of the book is a bit dry but not academic level. Hence, it'll be an interesting book only if you are interested in the somewhat obscure topic.
Displaying 1 of 1 review