New Internationalist

Boon or burden?

Issue 425

Some call it ‘live aid’. Some call it ‘dead aid’. The aid debate is raging. Vanessa Baird introduces the story so far…

Photo by: SVEN TORFINN / PANOS
Some call it ‘live aid’. Some call it ‘dead aid’. The aid debate is raging. Photo by: SVEN TORFINN / PANOS

Who would have thought that the intricacies of ‘international development aid’ could provoke such an energetic and public war of words? But then who could have predicted Dambisa Moyo, the Zambian ex-World Bank and Goldman Sachs economist with a talent for stirring things up?

As she tours the world with her controversial book Dead Aid – a play on the star-studded efforts of ‘Live Aid’ – she says, ‘my voice can’t compete with a guitar’. Don’t count on it.

Her disarmingly simple message is getting heard – and at every level, it seems. Aid isn’t working, she says. In fact, it’s making the poor poorer. It fuels corruption, discourages enterprise, creates dependence and hinders economic growth. It undermines democracy and even, she claims, foments civil war.

Her solution is two pronged. One, cold turkey to get Africa off its aid addiction. Two, attract foreign direct investment to Africa and expand the free market.

There have been howls of protest. As you might expect, many have come from the aid community itself. One of the most vigorous ripostes came from leading economist and director of the UN Millennium Project, Jeffrey Sachs. After tearing into her analysis, Sachs reasserted that aid’s biggest problem is that there is not enough of it. And the rich world’s dismal failure at honouring its donation pledges is to blame.

The response to Moyo within her own continent has been mixed. Impressed by her rousing call for African independence, presidents Paul Kagame of Rwanda and Muammar Gaddafi of Libya both invited her to come and talk.

Liberian leader Ellen Johnson Sirleaf – coincidentally, also an ex-World Bank economist – takes the view that critics of aid like Moyo are ‘a decade out of date’ and that ‘Africa’s turnaround is real’. What is needed at this stage, she believes, is more, better targeted and fully accountable aid.

Moyo’s concerns have certainly struck a chord, not only with tight-fisted conservatives looking for excuses to cut aid, but with people right across the political spectrum. Several books, published just before hers, were already offering sharp critiques of aid. Ugandan activist-academic Yash Tandon makes a clear proposal in Ending Aid Dependence (Fahamu, 2008); Jonathan Glennie’s The Trouble with Aid (Zed, 2008) is more nuanced. While Glennie agrees with part of Moyo’s critique, he profoundly disagrees with her solutions. But he too is calling for radical – and urgent – change, as he explains in the following article.

Dead Aid is published by Allen Lane, London, 2009.

Dambisa Moyo in a nutshell

Dambisa Moyo.

Her diagnosis:  One trillion dollars of development aid to Africa in the past 50 years has made poor people poorer. Aid not only fosters corruption – it breeds it. Africa is not short of money. At least $10 billion – half of Africa’s 2003 aid receipts – leave the continent every year because aid reduces the incentive to save and invest at home. Aid chokes off the export sector and results in laziness on the part of African policy makers who see no need to pursue tax revenues. Public services that the State should provide are funded by aid instead. Over the years Africa has become addicted to aid. ‘Like any addict it needs and depends on its regular fix, finding it hard, if not impossible, to contemplate existence in an aid-less world. In Africa, the West has found its perfect client.’ The net result of aid dependency is that ‘instead of having a functioning Africa, managed by Africans, for Africans, what is left is one where outsiders attempt to map its destiny and call the shots’.

Her prescription: The aid tap should be turned off over a period of five to ten years. The governments of developing countries should raise the money they need by issuing bonds to international investors and they should access capital markets. ‘Capital markets are open, and open for Africa,’ she says. ‘Any assertions that these countries cannot tap international capital markers are simply wrong.’

Africa is an obvious client for foreign direct investment (FDI), though it needs to become far more ‘business-friendly’ to attract it. China, which invested $30 billion between 2000 and 2005, is the model development partner. ‘The mistake the West made was giving something for nothing. The secret of China’s success is that its foray into Africa is all business.’

Moyo’s solutions also include further trade liberalization and greater ‘innovation’ in Africa’s banking and financial sector. But the main thing is to get rid of aid dependency which, she says, has hindered good governance for so long.

Her conclusion: ‘To appreciate the economic prospects in a non-aid environment... requires a long term and selfless vision, and not the myopia that so many policy makers (at home and abroad) are afflicted with today.’

Now read Jonathan Glennie’s case for real aid.

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