Dead Aid: Why aid is not working and how there is another way for Africa
Dambisa Moyo, 2009
Allen Lane, London
Paperback £14.99;
ISBN 978-1-84614006-8
At the beginning of World Trade Week (8th-12th June 2009) it is worth reflecting Some 500 million people have been lifted out of poverty in the last ten years across the world. 80% of these have been directly helped by the economic growth that has arisen from increased trade flows. The UK’s Department for International Development estimates that a 10% increase in trade openness will lead to a 4% increase in per capita Gross Domestic Product (GDP).
Now international trade is threatened by the global economic downturn. For example, economists expect to see an average reduction in exports of 9% across the world. While the anticipated reduction in exports in developing countries is somewhat lower, 3-4%, this still represents a serious threat to the growth and development that the international community has been striving to embed.
Against this backdrop, Damisa Moyo’s book, Dead Aid: Why aid is not working and how there is another way for Africa is a timely reminder of the vital importance of trade not aid. By her own admission, her arguments are well-rehearsed. The goals of international development aid, those of poverty reduction and sustainable development, have simply not been realised. Economic growth, she argues has at best been volatile and amongst the most aid-dependent countries has actually shrunk since 1970. When aid flows to Africa were at their peak, between 1970 and 1998, the poverty rate in Africa actually rose from 11% to 66%.
Her central idea is that if the developed world removed aid to Africa, then it would have to stand on its own two feet. She doesn’t argue for an immediate end to aid but instead argues that it should be tapered down to nothing over a five year period. Governments across the continent would have to work to address issues of infrastructure, education, poverty and economic stability simply because they would not be able to get any help from outside.
Nor does she argue that there is no scope for the philanthropic support to education, health and general welfare provided by the big aid agencies and charities. But she does point out that if the governments had a five year timeline when all resources were going to be shut off, it would make them put in place the systems that addressed the need for international support in the first place.
The book canters through a history of aid to Africa and why it isn’t working: the $60billion that has been donated over that time has created a poverty trap, not a route out of poverty. Rather than being the solution to the problem, it is the problem itself. The more aid is donated, she goes on to argue, the more the benefits of aid are distributed unequally; inherent corruption gets worse the more money that flows in and even if there is economic growth, the fact that it is driven by aid does not make it sustainable. It often leads to income inequality, inflation and ultimately addiction to aid. She argues for a three stage plan to reduce this dependency: create an economic plan that reduces aid dependencies progressively, ensure that the plan is supported by policies that do not make the country live beyond its means and finally, build infrastructures and institutions that are transparent and robust that will support economic growth as it happens.
In the end, what she is calling for in the case of Africa is, “a new level of consciousness, a greater degree of innovation and a generous degree of honesty about what works and what does not” as far as development aid is concerned. Her motivation in revisiting the debate about aid is to reduce hardship, not to increase it and although her medicine tastes nasty in the short run, the force with which she puts the “shock treatment” argument cannot be ignored. She is not suggesting that the developed world shuts off all support, merely that the focus should be re-oriented towards helping the governments to build the right infrastructures and policy mechanisms for enabling “base of the pyramid” development. To this extent, her argument is plain, simple and, as she says, “dead easy to implement.”
Like any visionary, the analysis she provides is compelling if somewhat lacking in detail. It is unashamedly market-based and will ultimately stand or fall on the ordinary people of Africa: how they can really utilise the new economic plans, the new financial credibility and the infrastructures and institutions of growth that would be created once aid flows are shut off. It is not new, and it does not cover in any depth some of the base-of-pyramid work that organisations like the International Finance Corporation and the commercial wing of the United Nations Development Programme are increasingly delivering, This offers a trade-based approach to development that perhaps ameliorates some of the desperate consequences of a sudden switch to a no-aid policy.
Above all, Dambisa Moyo’s book places the debate about economic development and its entrepreneurial base in the mainstream of government and economic thinking. The book is compelling, well written and full of interesting facts that make it a page-turner – something rare for an economist to have achieved.