First, this is a false choice. It would only be valid if the choice was *only* between the military and aid and fails to account for the different audiences for soft and hard power (of which more later).
Second, it confuses means with outcomes. @Joe_Nye describes soft power as below. It is the power of attraction. It's not 'vague', more it is hard to use in a deliberate sense. It is best thought of as credit, or reputation that draws allies or partners closer.
So certain resources can have a bias one way or the other. The military is predominantly coercive, and therefore 'hard'. But while exercising can be intended to have a deterrent effect, it also shows professionalism and encourages others to 'be like us'.
Similarly, Trooping the Colour uses the military, but is intended to demonstrate discipline and coordination (as are the oft-maligned Red Arrows). The message is intended to be attractive, associating the UK with organisation and competence. The hard part is measuring effect.
Conversely, as the article notes, diplomacy can be coercive, using sanctions or threatening consequences if others don't act as we wish. 'Hard' or 'soft' power is a description of the use made of *effects* not really the resource generating it.
And it also depends on the audience. Hard power is usually aimed at adversaries, soft power usually at allies, or at least those we wish to draw closer to us.
So the fact that aid doesn't deter bad behaviour is a feature, not a bug, even if you accept it as soft power. In fact, whilst much is intended to be an open-ended 'good' some aid is broadly transactional: intended to stabilise situations which might otherwise lead to threats.
This is no bad thing, because in spite of the billions spent on aid, billions more are usually expended if military conflict results as the failure of policy. Before its merger, DFID did a lot of work on trying to measure whether its projects were effective.
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