#14 Moyo - Dead Aid

"It has long seemed to me problematic, and even a little embarrassing, that so much of the public debate about Africa's economic problems should be conducted by non-African white men. From the economists to the rock stars, the African discussion has been colonized as surely as the Africa continent was a century ago." - Niall Ferguson

Dead Aid: Why Aid is Not Working and How There is Another Way for Africa - Dambisa Moyo

Dead Aid proposes just what it suggests - the death of aid.

 

This is an excoriating and engaging assessment of aid, presenting both the story of Africa's failed past under its shackles as well as an envisioned successful future free from it. Dambisa Moyo 'makes a compelling case for a new approach' (Kofi Annan) to development in Africa; one that is presented in an honest and unapologetic way. It is time for a new era of development.

 

Side note: the aid addressed is not humanitarian/emergency aid, but rather concessional loans/grants.

 

The first thing that comes to my mind when I hear the word 'aid' is an image of a dazed black child with flies hanging around their head, and a voice-over of someone pleading me to text XYZ and donate X pounds to help give this child a future. From its innocent beginnings based upon the success of the Marshall Plan in helping the reconstruction of Europe following WW2, aid in Africa has grown into a culture of moral obligations whereby governments are judged by how much they pledge, celebrities are praised for their humbling assistance, and it is seen as an innate, unspoken necessity that the West helps Africa - it has become embedded in our psyches that aid is the answer to Africa. I have never encountered an explicit rejection of aid before; sure, I had read of the negative implications that it had generated and marvelled at the corruption and regression it had manifested, but I had always simply fallen into the cyclical indoctrination that aid was the answer. How to solve the problems that aid had generated? Send more aid - just a different type. Fundamentally: send more aid to solve the problem of aid. Ironic? If you remove the implications and devastation it has caused, the idea is simply farcical. The primary thesis of Moyo's argument is that aid is the disease of which it pretends to be the cure. She argues that a series of phone calls needs to be made outlining basically, that the 'aid taps' are going to be turned off finitely in 5 years time, slowly reducing African countries' dependance on it year by year. Otherwise, why would African governments turn to other more developmentally sustainable but less easily attainable sources of GDP, when they can quite happily exist upon money sent to them freely by aid donors?

 

Although I agree with Moyo in that aid has precipitated more damage than it has helped the development of African countries, and with her ideal of a world without aid, I wasn't entirely convinced by the theoretical assumption that aid, specifically in itself, is the cause of all the problems. I would argue conversely that it is the management and implementation of aid that has led to the negative implications that have arisen. Perhaps aid was given in the wrong form, at the wrong time, or with the wrong motivations? Evidence that aid itself is not an entirely evil ideal is illustrated by the success of the Marshall plan in the mid-20th century; the plan involved concessional loans to European countries by the US so as to help them recover from the destruction of WW2. Two important factors:

1) The aid given did not constitute the majority of the receiving countries' GDP.

2) The fourteen countries receiving aid, including the UK, Germany, Austria and Norway, already had functioning economies and infrastructural developments (at least, before the war - anyway, they had been achieved and could be re-attained).  

Now compare this with the state of the African countries receiving aid: the predominant characteristics denote countries which lack[ed] sufficient economic and political development, where aid comprises the majority of their GDP. There was little (if not nothing) for the aid to help develop - no structured plans or investments opens the way for manipulation and corruption of aid. This, coupled with the way in which aid is often blindly given and managed, will perhaps inevitably encourage corruption and disaster. Hence, fundamentally aid is not the source of Africa's failure - it is the way in which aid has been managed, the environment into which it has been fed, and the motivations (take the cold war motives of blindly gaining allies, regardless of who their support fed - be it barbarous, egotistic dictators or otherwise) behind aid. One may even go so far as to argue that the reason why aid has not worked in Africa, is because it is a Eurocentric/West-centric (is that a word???) ideal - based upon European/Western success, implemented by the West. Regardless, it is surely not aid itself in the most basic of principles that is responsible. Whatever you think about aid and its relation to Africa's economic failure, Moyo's suggested alternatives are worth considering.

 

"Study, after study, after study (many of them, the donors' own) have shown that, after many decades and many millions of dollars, aid has had no appreciable impact on development. For example, Clemens et al. (2004) concede no long-term impact of aid on growth. Hadjimichael (1995) and Reichel (1995) find a negative relationship between savings and aid. Boone (1996) concludes that aid has financed consumption rather than investment; and foreign aid was shown to increase unproductive public consumption and fail to promote investment."

- page 46

 

Before discussing Moyo's propositions, I'll quickly conclusively list some of the implications she underlines due to aid in Africa:

• Tension between the Macro and the Micro (I have never studied Economics nor economic theories before, so this was all new and challenging to me - would recommend reading up on it briefly prior to tackling the challenges of Moyo's writings (or like me, ask some of your friends who study Economics to give you a mini lesson...)). The example Moyo uses to illustrate this tension is of a mosquito-net supplier: although donors sending in supplies of mosquito nets may seem great, it inevitably puts the local supplier out of a job, which in turn leads to a negative multiplier effect and gradual spiral of decline.
• Aid is 'fungible' - it is easy to manipulate. Such describes in part the success of corrupt leaders and dictators who store the money for their own needs in foreign banks, ignoring the population it was in fact intended for. Aid thus also fosters a military culture, and increases the risk of corruption - if the people "in charge" have access to the money, people will fight for these positions and seek to dominate others. As the rich get richer, the poor get poorer.  
• Foreign aid short-circuits the power of the middle class both in their existence, and in their ability to hold the government accountable for the expenditure of funds. So aid encourages a lack of transparency (opacity).
• Aid reduces Foreign Direct Investment (FDI) into African countries as potential investors are wary of the over-dependency upon aid.
• Aid leads to a cycle of inflation, and reduces the competitiveness of exports. Think the Dutch Disease.
• Africans are squeezed out of managing themselves by aid-dependency.  Aid could effectively be seen as a way for the old colonial powers to retain a political hold over African countries.

There are four elements constituting Moyo's replacement of aid:

1. The Bond Market
2. FDI - linked with the current investment in Africa by Asia, specifically China.
3. Trade
4. Banking on the Unbankable - Grameen Bank structure (i.e. micro-lending), Kiva, remittances, and saving.

Of all the constituents suggested by Moyo, I found FDI and Banking on the Unbankable most convincing and sustainable in a way accessible to Africa as it is in its current state. It may just be that my limited understanding of economics means I don't totally comprehend her propositions, but I wasn't as convinced by the Bond Market in terms of accessibility for the majority of African countries; it may be suitable in the future, but as an immediate and sustainable solution, it appears to carry too many risks to be effective with the level of economic and political development held by most African countries at present. At the time of the novel's publication (2009), Africa formed just 1% of world trade, despite its large population and richness in commodities (see page 118). One of Moyo's suggestions hinted at greater trade both within African countries as well as between them and other countries; such would require a reduction in trade barriers and tariffs, improvements to infrastructure in Africa so as to increase accessibility, in addition to perhaps the formation of a system such as the EU. Although this suggestion connotes multiple opportunities for growth and development, and hints at being sustainable in the long term for Africa, it may not be so in the short term nor for other countries. Again, like the Bond Market, I found the idea may be better proposed once Africa has established a steady growth rate with a low dependency upon foreign aid. The two ideas I did however engage with, were those of FDI and Banking on the Unbankable (as aforementioned). Both seem both accessible and effective in the short term, as well as sustainable in the long term on a local, national and international level.

 

After reading Africa: Altered States, Ordinary Miracles by Richard Dowden, I was convinced that China's growing role in Africa was nothing other than unsustainable and self-concerned. Unlike Dowden's largely negative depiction of Chinese investment in Africa, Moyo's is one largely of praise. Looking back at both comparatively, each present a rather tainted and biased perception - one focuses almost exclusively on the negative implications, and the other on the positive implications. But looking at them both together, a less biased and more effective summative view can be concluded. I still think that elements of the Chinese investment into Africa are unsustainable - largely the neglect of environmental measures and the predominant use of Chinese labour rather than native, as well as the self-serving motivation of investing in commodities for themselves - but on the whole, if such issues were rectified, Chinese investment may be on the whole rather more preferable to that of the aid-obsessed West. Moyo points out quite frankly that whereas the West views Africa as a helpless child, Asia sees it as a less fortunate equal with opportunities for the future; on page 110, Moyo points out numerous surveys revealing that on the whole, Africans view Asian investment as preferable and better than that of America or the West. I can see where they're coming from: whilst the West supplies aid, most of which is never seen or experienced by the population, Asia cuts this manipulative switch in the circuit and builds the infrastructure, supplies the tools, and engages with trade. Asia is acting, the West is stalling. As to the sustainability of Asia's role in African development, I agree with Moyo's opinion that it is up to African governments to step in and regulate challenges of Asian FDI, for Africans to actively engage with the investment and take control of their future. Many have begun to do so, brightening the future of their development greatly. Something which sprung to my mind when reading of Asian FDI in Africa was, 'why doesn't the West then invest the money they're sending over as concessional aid in other ways? Why not use the money to build the infrastructure and services, or buy local produce and distribute it to those who need it?'. Obviously there arises the question of a lack of sustainability and local investment into these services; but utilizing would-be-concessional-aid money in ways such as Asian FDI may be a viable alternative.  

 

"To the Excellencies and officials of Europe: We suffer enormously in Africa. Help us. We have problems in Africa. We lack rights as children. We have war and illness, we lack food... We want to study, and we ask you to help us study so we can be like you, in Africa."

 

- Message found on the bodies of Guinean teenagers, Yaguine Koita and Fode Tounkara, stowaways who died attempting to reach Europe in the landing gear of an airliner.

      

The question remains: who is it that has to act and extricate Africa from aid's central position of dominance? Moyo argues that seeing as the West were the ones to introduce the problem of aid, they should be the ones to stop it. I think it falls to both Africans and non-Africans; it's an international responsibility, although obviously, some are more accountable than others. In order to be effective and sustainable on all fronts, the decision to cut concessional aid and focus on other developmental methods needs to be a cooperation between Africans and Westerners. Yes, the responsibility of terminating aid needs to come from and be acted upon by the West, but the movement towards other methods will be unachievable and pointless without African cooperation.

"It's time to stop pretending that the aid-based development model currently in place will generate sustained economic growth in the world's poorest countries. It will not. The question is how do we get African countries to abandon foreign aid and embrace the Dead Aid proposal? They can do it voluntarily - as South Africa or Botswana have done - but what if they don't, choosing the soft option of aid instead? [...] What if, one by one, African countries each received a phone call (agreed upon by all their major aid donors - the World Bank, Western countries, etc.), telling them that in exactly five years the aid taps would be shut off - permanently? Although exceptions would be made for isolated emergency relief such as famine and natural disasters, aid would no longer attempt to address Africa's generic economic plight. What would happen? Would many more millions in Africa die from poverty and hunger? Probably not - the reality is that Africa's poverty-stricken don't see the aid flows anyway. Would there be more wars, more coups, more despots? Doubtful - without aid, you are taking away a big incentive for conflict. Would roads, schools and hospitals cease being built? Unlikely. What do you think Africans would do if aid were stopped, simply carry on as usual? Too many African countries have already hit rock bottom - ungoverned, poverty-stricken, and lagging further and further behind the rest of the world each day; there is nowhere further down to go. Isn't it more likely that in a world freed of aid, economic life for the majority of Africans might actually improve, that corruption would fall, entrepreneurs would rise, and Africa's growth engine would start chugging? This is the most probably outcome - that where the real change exists to make a better life for themselves, their children and Africa's future generations, Africans would grab it and go. If other countries around the developing world have done it sans aid (generated consistent growth, raised incomes and rescued billions from the brink of poverty), why not Africa? Remember that just thirty years ago Malawi, Burundi and Burkina Faso were economically ahead of China on a per capita income basis. A dramatic turnaround is always possible." - pages 144/145

 As the African proverb cited at the novel's conclusion says, the best time to plant a tree is twenty years ago. The second-best time is now.

Until next time,
C 

P.s. (31st Oct) - this was in the news this morning: http://www.bbc.co.uk/news/uk-politics-29843938.