From prominent pastors to politicians to professional rock stars, everyone it seems has a heart and a plan for Africa. But good intentions don’t always translate into good results. And when things seem to go wrong for so long, we ought to ask some hard questions and not automatically do more of the same. In Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa Dambisa Moyo, an economist and native of Zambia, is not afraid to ask hard questions about her own continent.
Why is it that Africa, alone among the continents of the world, seems to be locked into a cycle of dysfunction? Why is it that out of all the continents of the world Africa seems unable to convincingly get its foot on the economic ladder? Why in a recent survey did seven out of the top ten ‘failed states’ hail from that continent? Are Africa’s people universally more incapable? Are its leaders genetically more venal, more ruthless, more corrupt? Its policymakers more innately feckless? What is it about Africa that hold it back, that seems to render it incapable of joining the rest of the globe in the twenty-first century?
The answer, says Moyo, “has its roots in aid” (6-7). Not everyone will agree with every part of Moyo’s analysis (for example, see this debate between Moyo and Hernando de Soto on one side of the aid issue and Stephen Lewis and Paul Collier on the other). But no matter your opinion on aid, a conversation about its effectiveness is long overdue. Everyone would do well to investigate Moyo’s claims and carefully consider her recommendations.
Dead Aid is a short, pungent, provocative book. The thesis is simple and controversial: aid is the problem, not the solution. “In the past fifty years,” she writes, “over US$1 trillion in development-related aid has been transferred from rich countries to Africa. In the past decade alone, on the back of Live 8, Make Poverty History, the Millennium Development Goals, the Millennium Challenge Account, the Africa Commission, and the 2005 G7 meeting (to name a few), millions of dollars each year have been raised in rich countries to support charities working for Africa.” Sounds good, right? But has the more than one trillion dollars in assistance made Africa made people better off? Moyo says “no.” In fact, she argues that aid has helped make the poor poorer and growth slower. “The notion that aid can alleviate systemic poverty, and has done so, is a myth…Aid has been, and continues to be, an unmitigated political, economic, and humanitarian disaster for most parts of the developing world” (xix).
The history of aid to Africa is more than fifty years old. Through the decades, there have been different agendas, from industrialization in the 1960s to poverty in the 1970s to development in the 1980s. More recently, Moyo argues, we’ve seen the rise of “glamour aid.” In the last decade, “Africa became the focus of orchestrated world-wide pity.” From Bono to Bob Geldof to Brangelina, Africa has become the cause du jour of the stars.
When Moyo talks about aid she is not thinking so much about philanthropy and emergency assistance. These have pluses and minuses of their own, but what Moyo protests is aid in the form of government-to-government transfers of wealth or transfers from international institutions like the World Bank or the IMF. This kind of aid does more harm than good. And yet giving money to the poor (or telling others to do it for us) feels so intrinsically right, even necessary for our moral authority, that there is rarely serious debate about the merits and demerits of aid. You’d have to be ethically backward or at least pathologically uncool to question foreign aid. As one critic says, “my voice can’t compete with an electric guitar” (27).
Why doesn’t aid work? Moyo offers several reasons.
(1) Aid encourages graft and corruption. With so much money being handed over, and given the sin nature we all share (my point, not hers), it’s no wonder aid often gets redirected to the wrong places.
(2) Aid politicizes a country, diverting people’s attention from productive economic activity to political life where the “real money” is. Likewise, aid has often been used as a political tool by rich countries to prop up failing regimes in the interest of advancing ideological agendas (e.g., advancing democracy over communism or vice-versa).
(3) Aid erodes trust among people. “By thwarting accountability mechanisms, encouraging rent-seeking behaviour, siphoning off scarce talent from the employment pool, and removing pressures to reform inefficient policies and institutions, aid guarantees that in the most aid-dependent regimes social capital remains weak and the countries themselves poor” (39).
(4) Aid encourages conflict as competing parties try to snatch up foreign wealth.
(5) Aid causes a number of macro-economic problems: reduced savings and investment, inflation, and a stifled export sector.
(6) Aid creates dependencies. One you adjust to living with aid, you have a hard time learning to live without it. Countries become dependent on outside benevolence for continued survival.
(7) Aid kills local initiative. It may sound like a great idea to send free mosquito nets to Africa and you or your church may feel great doing it, but what happens to the indigenous net-makers once our freebies arive? He can’t compete with free nets. So he and his employees will lose their one means of livelihood. Even more devasting is the lesson learned: “Don’t bother trying to match supply with demand on your own. Someone else will just give the supply for free.” Any solution which takes away from the Africans’ ability to come up with their own solutions is not the right solution.
So What is the Solution?
Obviously, there is no quick fix for Africa’s woes. Nevertheless, Moyo outlines a promising strategy. In addition to cutting off aid (yes, she wants it cut off), Moyo argues for a host of free-market solutions.
African countries with the sufficient credit ratings should issue bonds in the emerging-market. Africa should welcome the flow of foreign direct investment (FDI), even from China. Accordingly to Moyo, the Chinese are actually doing more to help Africa because they are not giving away something for nothing. The Chinese are investing in African infrastructure so they can make money. This investment provides jobs and encourages African initiative instead of giving aid, which creates a coterie of political elites.
Not surprisingly, Moyo is a strong proponent of free trade, especially in the agricultural sector. Americans and Europeans frequently place tariffs on agricultural imports. This protects home-grown products and locks emerging markets out of the global economy. In the long run both sides lose with high tariffs because other countries usually respond in kind with high tariffs of their own. To make matter worse, African countries impose the highest tariffs of all on goods coming from other African countries.
Similarly, because the United States subsidizes its agriculture sector to the tune of 15 billion annually, Africans have no room to compete. “These subsidies have a dual impact. Western farmers get to sell their produce to a captive consumer at home above world market prices, and they can also afford to dump their excess production and lower prices abroad, thus undercutting the struggling African farmer, upon whose meagre livelihood the export income crucially depends” (116).
Finally, Moyo also encourages smaller reforms, including micro-financing ventures, increased savings, and less taxation on remittances–the money Africans abroad send home to their families in Africa. Above all, good governance, rule of law, and established property rights are necessary if Africa is to prosper as so many other emerging nations have in the last fifty years.
The Take Home
No doubt, Moyo’s descriptions of the problem and prescriptions are not shared by all economists. But almost every economist now agrees that (1) aid has very often not worked well and (2) aid by itself is not the answer. As Christians we too often settle for the futility of good intentions. We don’t want anyone to interrupt the feel-good express that is charity and the chiding of governments to give more aid. But we don’t have to choose between heartfelt concern for the plight of the “bottom billion” and careful thinking about how to help them. We can and must do both. The passion of Bono and your college advocacy group may be inspiring, but their ideas may still be deeply flawed. If just giving Africa more stuff were the answer, the problem would have been fixed decades ago. Tackling poverty in the developing world requires more than generous hearts and stricken consciences. It requires careful research, honest inquiry, and an understanding of economics that enables us not only to try to do good, but actually to do it.