Dead Aid: Why Aid Is Not Working And How There Is A Better Way For Africa (2009) - Plot & Excerpts
In the first half of "Dead Aid", Ms. Moyo gives a history of aid and an analysis of the primarily negative impact of aid on development and poverty reduction in Africa. Her primary focus is on bi- and multi-lateral aid given to governments. The same analysis and solutions might apply to emergency and charitable aid, but those are not her foci. Essentially, Ms. Moyo says that aid has failed because it has been too easy for corrupt politicians to steal the money or commodities for their personal use and to retain power, it has politicized development because "everybody" sees political office as a way to get a piece of the aid pie, it has ruined local incentive because it undermines local industry. All of that has resulted in increased poverty and deteriorating infrastructure.In the second half of the book, Ms. Moyo lays out several suggestions for change and elimination of aid-dependency. She makes a strong case for market-based solutions: accessing international and local bond markets, increasing international, regional, and local trade, direct investment in infrastructure, enabling and incentivizing foreign remittances, opening access to banking and credit for Small to Medium Enterprises (SME).I've lived and worked in East Africa for most of the past 28 years. While I'm not an economist, I can affirm the realities of the lack of economic development in Kenya. It's actually a mixed bag. I've watched the growth of a real middle class, the development of an information tech sector, the amazing improvement in communications technology, and the development of mobile money (M-Pesa, Airtel Money, Orange Money, etc.). At the same time, except for the ubiquitous use of mobile phones, very, very little of this has helped bring people out of poverty and corruption has continued seemingly unabated. Can that corruption and the seeming lack of poverty reduction be blamed on bilateral and multilateral aid? Ms. Moyo makes, for me, a convincing argument — she is not the only one to have done that.In a July 2005 interview with "Der Spiegel", James Shikwati, a 35-year old Kenyan economist, makes a similar argument and plea for aid to be stopped. "Shikwati: 'Huge bureaucracies are financed (with the aid money), corruption and complacency are promoted, Africans are taught to be beggars and not to be independent. In addition, development aid weakens the local markets everywhere and dampens the spirit of entrepreneurship that we so desperately need. As absurd as it may sound: Development aid is one of the reasons for Africa's problems. If the West were to cancel these payments, normal Africans wouldn't even notice. Only the functionaries would be hard hit. Which is why they maintain that the world would stop turning without this development aid.'"So, while I think Ms. Moyo is on the right track, I also think she is a bit blindly optimistic about the desire of African politicians to see real development and about China's designs on Africa. She is pragmatic enough to recognize that aid-dependency hasn't and doesn't work and that there need to be radical changes in order to stimulate real, sustainable development that will result in real poverty reduction. Not everyone will like her approach. She even advocates that benign dictators in the beginning of development are more effective than emerging democracies — even if that is true (very possible), it's too late for that as most African countries have at least the facade of democracy and local activists are not likely to stay quiet about a return to non-democratic governments. She concludes by saying, essentially, that just as Western countries have dumped aid on Africa, they probably need to take the lead in breaking that dependency by imposing a short deadline for ending aid.While Moyo is writing about macro-aid, much of what she says is applicable to micro-aid that mission organizations and US churches pour into African churches and economies. Her analysis and warnings should be heeded. Dead Aid is an interesting book provocative look at the foreign aid industry and its effects on Africa and Dambisa Moyo who formerly worked for Goldman Sachs and the World Bank, draws a conclusion not unknown to others in the field: development aid (as differentiated from humanitarian aid) has not only done little good for the nations of Africa but has indeed caused great harm There is no question that much of the aid intended to build economies in Africa has been grossly wasted, stolen and misused There is little to show for the trillions of dollars that have been poured into the continent--a failure with numerous causes But Moyo's main premise is that aid itself is the cause ccording to Moyo the notion that foreign aid can alleviate systemic poverty, and has done so in Africa is tantamount to a myth Millions in Africa, she notes, are poorer today on account of aid dependency. Indeed, aid has been and continues to be, an unmitigated political and economic and humanitarian disaster for Africa and Aid is not benign--it is malignant. In short, aid is not part of the solution; it is the problem And here is how and Aid breeds corruption in Africa. If the world has one picture of the African continent, it is one of corrupt statesmen. With very few exceptions, African leaders have crowned themselves in gold, seized land, handed over state businesses to relatives and friends, diverted billions of aid-money to foreign bank accounts and generally treated their countries like giant personalized cash dispensers. According to Transparency International, Mobutu Sese Seko of erstwhile Zaire is estimated to have looted the State to the tune of US$5billion and Roughly the same amount was stolen from Nigeria by President Sani Abacha and placed in Swiss private banks. The list of corrupt practices in Africa is endless. However, the point about corruption in Africa is not that it exists; the point is that foreign aid is one of its greatest aides. Aid creates a vicious cycle of dependency in Africa; a cycle that chokes off desperately needed investment, instills a culture of kleptomania, and facilitates rampant and systematic corruption, all with deleterious consequences for economic growth. It is this cycle, Moyo posits, that "perpetuates underdevelopment and guarantees economic failure in the poorest aid-dependent countries" and Aid creates a fertile ground for rent-seeking, that is, the use of governmental authority to take and make money without trade or production of wealth Because foreign aid is fungible--easily stolen, redirected and extracted-- it facilitates corruption. At a very basic level, an example of this is where a government official with access to aid money set aside for public welfare takes the money for his own personal use. Examples are legion in Africa. Foreign aid programs, which tend to lack accountability and check and balances, act as substitutes for tax revenues and The tax receipts that aid releases are then diverted to unproductive and often wasteful purposes rather than the productive public expenditure (education, health infrastructure, etc) for which they were ostensibly intended. Moyo points out that in "Uganda, for example, aid-fueled corruption in the 1990s was thought to be so rampant that only 20 cents of every US$1 of government spending on education reached the targeted local primary school." and Strangely enough, Larry Diamond (2004) observes, Western aid agencies, notably the International Monetary Fund and the World Bank, continue to give aid to African states, with notorious authoritarian and corrupt governments. His list includes Cameroon, Egypt, Zimbabwe, Gabon, Angola, Eritrea, Guinea and Mauritania. Africa is the region that receives the largest amount of foreign aid, receiving more per capita in official development assistance than any other region of the world and Yet her social infrastructure is in a state of utter decrepitude! Moyo notes that any large influx of money into an economy, however robust, has the potential to create serious problems. With the relentless flow of unmitigated, substantial aid money to Africa, these problems are magnified, especially in economies that are, by their very nature, poorly managed, weak and susceptible to outside influence, over which domestic policymakers have little or no control and Moyo contends that increases in foreign aid are correlated with declining domestic savings rates. As she puts it, "As foreign aid comes in, domestic savings decline; that is, investment falls."(61) She further observes that with all the tempting aid monies on offer, which are notoriously fungible, the relatively few people who have access to it, spend it on consumer goods instead of saving the cash As savings decline, local banks have less money to lend for domestic investment and Worse still foreign aid has an equally damaging crowding-out effect: although aid is meant to encourage private investment by providing loan guarantees, subsidizing investment risks and supporting co-financing arrangements with private investors, in practice it discourages the inflow of such high-quality foreign monies. Moyo points out that empirical research has shown that higher aid-induced consumption leads to an environment where much more money is chasing fewer goods."(61) This almost invariably leads to price rises--inflation and Over and above, aid chokes off the export sector. This phenomenon is known as the Dutch disease, as its effects were first observed when natural gas revenues flooded the Netherlands in the 1960s, devastating the Dutch export sector and increasing unemployment. Moyo argues that aid inflows have adverse effects on overall competitiveness, export sector (usually in the form of decline in the share of those in the manufacturing sector and ultimately growth) and In the oddest turn of events, the fact that aid reduces competitiveness, and thus the trading sector's ability to generate foreign-exchange earnings, makes countries even more dependent on aid, leaving them exposed to all the negative consequences of aid-dependency. In countries with weak financial systems, additional foreign resources do not translate into growth of stronger financially dependent industries and So if foreign aid harbors such adverse effects for African economies why are donors bent on doling it out? And why aren't recipients sagacious enough to put an end to the lethal cycle of aid? Moyo's Dead Aid model provides solid answers to these intriguing questions. She notes that "Africa is addicted to aid. For the past sixty years, she says, Africa has been fed aid. Like any addict, Africa needs and depends on its regular fix, finding it hard, if not impossible to contemplate existence in an aid-less world."(75) Her book provides an antidote, a road map for riding Africa of aid dependency and Arguing that the aid program in Africa has not worked precisely because it was never conceived with the intention of promoting the economic development of Africa, she proposes alternatives to foreign aid. She notes that like the challenges faced by someone addicted to drugs, the withdrawal is bound to be painful. Nonetheless, if implemented in the most efficient way, the solutions offered in Dead Aid will help to dramatically reduce Africa's reliance on aid money and Moyo cites Botswana as an example of an economic success story in Africa Botswana began with a high ratio of aid to GDP but used the aid wisely to provide important public goods that helped support good policies and sound governance and laid the foundation for robust economic growth for the country and She says this stratagem can be replicated all over Africa. Her alternatives to aid, predicated on transparency and accountability, would provide the life-blood through which Africa's social capital and economies will grow. Her Dead Aid strategy leaves room for modest amounts of aid to be part of Africa's development financing strategy Systematic aid will be a component of her Dead Aid Model but only insofar as its presence decreases as other financing alternatives take hold. The ultimate goal, as far as Moyo is concerned, is an aid-free Africa and In a nutshell Dead Aid proposes radical solutions to the pressing economic problems of our time. It offers a new model for financing development in Africa's poorest countries, one that offers economic growth, promises to significantly reduce endemic poverty, and most importantly, does not rely on aid. Though Moyo is not the first economic pundit to take Western aid donors to task, never has the case against aid been made with such rigor and conviction. She does not pull her punches "In a perfect world," she writes, "what poor countries at the lowest rungs of economic development need is not a multi-party democracy but in fact a decisive benevolent dictator to push through the reforms required to get the economy moving."Her most radical proposal comes in the form of a rhetorical question: "What if," she asks, "one by one, African countries each received a phone call...telling them that in exactly five years the aid taps would be shut off permanently?
What do You think about Dead Aid: Why Aid Is Not Working And How There Is A Better Way For Africa (2009)?
I LOVE this book. Read it for a research paper, but couldn't put it down. So glad I came across it.
—book_lover
Interesting approach on aid and Africa.
—MohamedMarzouk
