Dead Aid by Dambisa Moyo

Dambisa Moyo (thanks to Wikipedia for image)
If you are going to write a book proposing that giving aid to Africa is a bad idea, you are going to find it much easier to do if you are African.  If you are an African with a very solid background in economics so much the better.  As it happens Dambisa Moyo is ideally placed.  She was born in Zambia and has studied at several top UK and US universities and worked at Goldman Sachs.  So she can say things that a European or an American might find it much harder to say.

This book is a very clear minded look at the problem of how to help Africa out of the poverty from which it has been trying to emerge since the end of the colonial era in the fifties and sixties.  The thesis is that far from being helpful, aid has actually hindered development in Africa.  We are invited to look at the the history of aid.  Billions of dollars have been spent.   Little has been achieved.  And that giving aid can actually be harmful isn't the only notion that gets a good kicking in its pages.

First off - is democracy a good thing?  Yes of course, that is something we all believe in.  So isn't it right to push for democratic governments in Africa?  Not really.  It turns out that if you look at how long a democratic regime lasts, its life span is highly dependent on the country's per capita income.  In poor countries democracy doesn't last long.  And it certainly isn't the case that the most democratic countries have the fastest growth rates.  But it is the case that rich countries are more likely to be democratic than poor ones.  So it looks like the best way to encourage democracy is simply to make countries richer.  Adding strings to aid packages probably won't help much and will appear patronising.

Aid itself, even in the best case, can be counter productive.  Moyo illustrates this with a hypothetical example.  A small African company makes mosquito nets, but too few of the population can afford them to seriously hold back malaria.  An aid donor comes in to solve this problem by funding the free distribution of mosquito nets.  This solves the problem for a while but in the process puts the local manufacturer out of business.  The anti malaria programme is now totally dependent on aid because there is no longer a home grown supplier.

But it gets worse.  If the government can rely on aid it doesn't have to tax its population, so it no longer has a direct interest in the well being of its own economy.  Of course we'd all like to believe the politicians would still be motivated by patriotism and idealism.  But we are relying on their good character, not their self interest.

And realistically we know that not everyone who goes into public service does so in the public interest.  For the light fingered statesman, siphoning off aid into their own pocket is easy.  It is a lot easier to rob a distant donor than someone who is actually on the spot.

So has the huge quantities of aid given to Africa helped or hindered the development of the continent? With so many billions of dollars expended over such a long time it is hard to believe that it can have actually been harmful to the people receiving it. But this is indeed the case.  And many of the people involved in the process, people like World Bank officials for instance, know this full well. 

What are the alternatives?  Leaving Africa undeveloped doesn't sound like a great deal for its inhabitants.  And it isn't realistic.  With the population of the planet set to hit 9 billion by 2050 we need the food that African farmers can produce.  They must have access to the technology they need to increase food production.  And once they have produced it, they must be able to sell it on the world market at a price that makes it worth their while.

While aid is superficially attractive Moyo argues that the discipline imposed by raising money in the bond market where investors expect to see a return on their investment gives much better outcomes in the long run.  Or even the short run.  The few African countries that have chosen to raise money on the bond markets have had success in doing so.  But all the time aid is available governments can take the easy way out and avoid the hard work of making investments productive.

China is proving to be a much stronger help to African development than aid from the West.  The Chinese arrive with a different agenda.  They want Africa's resources and are willing to pay for them.  They see clearly enough that to do this effectively they need to do more than just write cheques.  They are investing in the infrastructure as well, and offering educational opportunities to Africans in China. Africa has what China needs: China can offer what Africa wants.   And they are doing it with an aim in mind, to develop Africa's economy to make it possible to use the resources to help the Chinese economy grow.  They don't have the moral hang ups that Western aid donors have about human rights and promoting environmentally friendly policies, so they are easier to deal with.  Moyo has no trouble at all in titling a chapter 'The Chinese are our Friends.'

Trade is the most reliable way to generate a sustainable economy, whether with China or anyone else.  It is here that we find the biggest obstacles.  Both America and Europe protect their markets and subsidise their farmers, locking out the much poorer farmers of Africa.  It has always struck me as perverse that sugar is so cheap in my local supermarket.  We all know how unhealthy a sugar rich diet is.  Shouldn't the government interfere with the workings of the free market.  Increase the price of sugar to decrease the amount of obesity I have thought to myself.

It hadn't crossed my mind that the free market was already being interfered with to prevent farmers in Africa competing.  African countries raise trade barriers against each other as well, so the desire to help your own producers out is a pretty universal one.   The biggest eye opener of the book for me was how similar the amount of aid given to Africa is to how much it loses through trade barriers.  That certainly puts a very different perspective on aid.

In summary, the take home message of the book is that Africa needs not aid but a leveling of the playing field on which it trades.  If aid is phased out while freer trade policies are brought in, Africa has the resources to respond and start its long delayed catch up with the rest of the world.  The Chinese approach of investing in the continent for profit has turned out to be a better one than the superficially more moral Western one.

The tone and structure of the book is a little confused.  The argument isn't well developed - you get most of the points in the first couple of chapters and subjects are tackled at different levels.  She often slips into  economist jargon.  This makes bits of it hard work for non-specialists, but it can be interesting.  Do you know what fungible means?  I didn't and had to look it up.  But she also explains some things about international finance in some detail in plain language which is really good for a general reader.   It isn't that Moyo is confused about the point she is making,  she is very clear on that.  But I think she hasn't decided whether this is an academic book or a popular book.  I think she could have written either or preferably both to very good effect. It is an important subject and one that deserves a wider audience.  It would be great if she could do a version of this book that can be read easily by non-economists.  In the mean time don't let this last minor criticism put you off, this one is well worth putting the effort into reading.