Wednesday, April 22, 2009

Dead Aid: A Flawed Book on an Important Topic

This brief book has received a lot of attention since it was published just a few months ago earlier this year. The author attacks development aid to Africa with a vengeance, calling it the “silent killer of growth.” Despite the billions of dollars worth of development aid to Africa provided by Western governments over the past four decades, poverty and inequality have in fact increased on the continent. This is not the first book to criticize aid, but the fact that the author is an African woman (instead of the usual white males) has struck a chord with many reviewers and the audience. Dambisa Moyo is livid about what she sees as not only wasted money but as an active hindrance to economic development. All the well-meaning but na├»ve celebrities campaigning for more aid to Africa get an earful from Dr. Moyo, an academic economist who has made her career in the financial sector in the West.

Moyo states the goal of the book in the Introduction: “This book is about the aid-free solution to development: why it is right, why it has worked, why it is the only way forward for the world’s poorest countries” (p. xx). The book is divided into two parts. The first third, ‘The World of Aid,’ provides an history and critique of development aid to Africa and more broadly. Unfortunately, her training in economics—and this being her first book to a general audience—comes through as overuse of numbers and statistics, resulting in numbing and sometimes impenetrable sentences:

“Local debt returned investors 15 per cent in 2006, and 18 per cent in 2007. In the last five years average African credit spreads have collapsed by 250 basis points. What this means is that if a country issues US$100 million in debt, it is saving itself US$2.5 million per year relative to where it was five years ago.” (p. 4)

“Among the top five aid recipients from the Marshall Plan were Great Britain, which received the lion’s share of 24 percent, and France, Italy and Germany, which receive 20, 11 and 10 per cent, respectively. In per capita terms smaller European countries received more support: Norway received US$136 per person, Austria US$131, Greece US$128 and the Netherlands US$111.” (p. 12)

Also her indignation about aid is so rabid that her writing often turns to hyperbole or in other places is painfully simplified:

“This is the vicious cycle of aid. The cycle that chokes off desperately needed investment, instils a culture of dependency, and facilitates rampant and systematic corruption, all with deleterious consequences for growth. The cycle that, in fact, perpetuates underdevelopment, and guarantees economic failure in the poorest aid-dependent countries.” (p. 49)

“In an aid-dependent environment, the talented—the better-educated and more-principled, who should be building the foundations of economic prosperity—become unprincipled and are drawn from productive work towards nefarious activities that undermine the country’s growth prospects.” (p. 50)

All of this makes especially the first part of the book rather tedious. She definitely is no match to more established aid critics, such as New York University professor and former World Banker Bill Easterly whose books The Elusive Quest for Growth and The White Man’s Burden make for thoughtful and entertaining reading.

The second part, ‘A World without Aid,’ luckily lifts the book to a higher level, as Ms. Moyo focuses on the positive rather than bashing what she sees as a crime against Africa. She definitely does not lack in ambition, stating that:

“This book provides a blueprint, a road map, for Africa to wean itself off aid. … What follows is a menu of alternatives to fund economic development across poor countries. If implemented in the most efficient way, each of these solutions will help to dramatically reduce Africa’s dependency on aid.” (p. 75) and “The Dead Aid proposal envisages a gradual (but uncompromising) reduction in systematic aid over a five- to ten-year period.” (p. 76)

Here she launches her ‘Dead Aid strategies’ that, “if embraced wholeheartedly, will not only turn the economic tide in the short term, but also promise longer-term growth” (p. 143). Her blueprint for indigenous economic development in Africa focuses on a set of solutions, notably the development of capital markets, foreign direct investment, trade, and various forms of microfinance. She does also recognize the role of remittances from the overseas diaspora that are so important to many developing countries. Although the remittances are a type of aid—an influx of unearned money into the country from abroad—Ms. Moyo believes this to be less harmful than government to government aid.

Although the solutions presented are basically free-market oriented, the author is principally concerned about how to finance development, rather than the development model itself. She even suggests that it matters little whether the country in question has a capitalist or socialist development strategy. Quoting the Scandinavian experience, she recognizes that governments can raise money on the free markets while using it on a “socialist agenda” of free education and health care (pp. 72-73). In fact, she considers that for such governments using free-market tools to finance development is particularly important.

Furthermore, despite her call for “uncompromising” reduction of aid, she shows certain flexibility in allowing that “more-modest aid programmes that are actually designed to address the critical problems faced by African countries can deliver some economic value” may have some room to be part of Africa’s development financing strategy (p. 76).

And all of her ire is not directed towards aid and the Western nations that provide it, more for their own interest than in Africa’s, in her opinion. She frequently chastises African policymakers for corruption and red tape, reminding us that it is not accidental that FDI avoids Africa.

Dambisa Moyo dedicates an entire chapter, entitled ‘The Chinese are Our Friends,’ to the role of China in Africa. With poorly disguised excitement she describes China’s rapidly emerging engagement on the continent and goes as far as claiming that “in the last sixty years, no country has made as big an impact on the political, economic and social fabric of Africa as China has since the turn of the millennium” (p. 103). She is particularly enthusiastic about the fact that the Chinese involvement is all for commercial purposes—whether FDI or trade—unlike that of the West, which has for long given Africa “something for nothing.” In earlier parts of the book she has fashioned China and other East Asian countries that have developed through their own efforts as role models for Africa. She is well aware of the risks of the relationship with China: that the Chinese companies might underbid local firms or would not hire Africans or that they would have lax safety standards—all the standard issues that worry concerned Westerners when they think of China’s growing influence in Africa. However, Moyo correctly points out that, while Westerners are outraged by Chinese support for Africa’s corrupt and rogue leaders, these same “notorious plunderers and despots” have risen and thrived “under the auspices of Western aid, goodwill and transparency” (p. 108). Furthermore, to her, the pros of Chinese involvement far outweigh the cons:

“Bartering infrastructure for energy reserves is well understood by the Chinese and Africans alike. It’s a trade-off, and there are no illusions as to who does what, to whom and why…To continue to grow at its extraordinarily rapid rate China needs fuel, and Africa has it. But for Africa it’s about survival. In the immediate term, Africa is getting what it needs—quality capital that actually funds investment, jobs for its people and that elusive growth. These are the things that aid promised, but has consistently failed to deliver.” (p. 111)

In the case of trade, Dambisa Moyo is equally harsh on the West as on Africa itself. She rightly reminds us the “elected Western politicians have remained keen to protect their agricultural markets, and win the backing of the powerful farming lobby. The net result is a protective world of trade restrictions and barriers up around the West, to keep African (and other developing regions’) produce out” (p. 115). Yet at the same time she finds that the “most egregious examples come from Africa itself. African countries impose an average tariff of 34 per cent on agricultural products from other African nations, and 21 per cent on their own products” (p. 117).

Regretfully, the many good points that Moyo raises are again undermined by her style. The text is littered with cringe-inducing similes (“seduced by the siren call of aid, African governments sink their ships on the rocks of development demise” – p. 88). And in her fervour she again resorts to hyperbole:

“The West can choose to ignore all of this, but, like it or not, the Chinese are coming. And it is in Africa that their campaign for global dominance will be solidified. Economics comes first, and when they own the banks, the land and the resources across Africa, their crusade will be over. They will have won.” (p. 152)

Quite unnecessarily, in an apparent attempt to liven up the discussion, she invents and uses a fictitious country, the Republic of Dongo, as a dummy against which she places her proposals. Dongo is supposedly some sort of hybrid displaying many of the characteristics of various African countries. However, the decoy adds little more than an additional irritant to the book.

All in all, I read Dead Aid with mixed feelings. Early on, the angry prose and doctrinaire perspective really got to me. Having worked for most of my adult life on international development issues (unlike Dr. Moyo), I was also taken aback by the wholesale dismissal of virtually all development cooperation. Then later when focusing on the alternatives to aid, the book significantly lightened up and the solutions that were proposed started to be much more convincing. There is no denying that the East Asian countries, like China, Korea and Singapore, all experienced rapid development that was not based on aid, at least over an extended period. Surely there are lessons for Africa to be learned there. How countries develop is not straightforward or simple. Each place has its own dynamics and idiosyncrasies to which complex geographical, historical, political and economic factors contribute (see for example Paul Collier’s recent book The Bottom Billion). It is very important that these issues are discussed, without taboos and prejudice. Dambisa Moyo has contributed to the debate with this opinionated and flawed, but still important book.


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