Why Dambisa Moyo Is Wrong To Say Aid Is Dead, And Why Her Alternatives Are Troubling

In her widely acclaimed book Dead Aid, Dambisa Moyo argues, as the title suggests, that aid is not working for the state of Africa, proclaiming instead that there is “another way” for the continent.

The first third of Dead Aid is spent giving the argument, stating that aid to the poverty-stricken continent has not worked, and that there must exist another solution to the problem. To say that aid has not worked in the context of Africa is a strange statement, as it has both elements of truth and falsehood within it.

As an African herself Moyo must be aware of the West’s habit of classifying the continent as simply a single poor impoverished country. Think “there are kids starving  in Africa” or “You’re going to Africa? Ebola is in Africa!” With this being the case, to say that all aid to Africa is not working is to deny the obvious examples of the countries where it has.

A Guardian article from 2012 shows the very positive impact that aid has had on the state of Ghana. Though there is much work still to be done before Ghana can become fully self-reliant, aid has helped the country to meet the “millennium development goals on poverty and hunger, and boasts a growth rate [at the time of writing] that places it among the best-performing economies in the world.” Millennium Villages – projects led by Earth Institute, Millennium Promise and UN agencies – have “recorded crop yield increases of between 85% and 350% and reductions of up to 50% in the incidence of malaria.”

It seems that in Ghana at least, aid is very much alive and kicking.

With that pedantry out of the way, we shall continue.

Despite the obvious problem with saying that aid to Africa has not worked, a lot of the points that Moyo raises in the first third of her book are valid. To generalise across the entire continent is unhelpful and misleading, but one cannot argue with the facts and statistics put forward. Chief among the points raised was the issue of corruption. The political elite using the aid money that they received for their own benefit, rather than for the benefit of their people. It seems that this reason is the overwhelming factor as to why Moyo believes aid is not working.

Huge sums of money enter Africa through aid packages and handouts, but very little of it arrives at its intended destination. In bizarre logic however, Moyo decides not to condemn the corruption of the officials whose pockets it is lining, and propose methods of tackling this, but instead chooses to target the issue of aid itself. She suggests, as a way to counteract this rampant corruption, eliminating aid in it’s entirety, albeit over a period of 10 years, slowly weaning the countries off of their dependency.

I do agree that weaning African states off of aid is a good thing, but I do not agree that due to corruption aid should be stopped.

If a sportsman is cheating or bending the rules during a game, you do not outlaw the game completely and stop playing it. You make, amend, and enforce rules which would prevent the sportsman from cheating at the game. Or at least make cheating less likely.

Would the issue of aid be such a large problem in Africa if there was not rampant corruption? Would the aid programmes actually work to the benefit of the countries if the money was to reach its intended target?

Aid itself is not the inherent problem with poverty in Africa, though there is an inherent problem with aid in Africa.

As an aside, aid, how it functions, what its aims are and so forth, has changed in the last few decades, and indeed is still changing. Evolving in order to better achieve its aims. No longer is aid simply hand outs from rich to poor, instead it is more of a leg up. An initial boost in order to bring the poorer nations up to a level where they no longer need our support. At least this is what occurs when it is done correctly. The charity that I work for Renewable World, for example, seeks to paint itself out of the picture with its project installations. If the communities where we work still need us after a five years, we have not done our job correctly. Our goal, as all poverty alleviation projects goals should be, is self-sustainability.

With aid limp and lifeless, and benefiting only the corrupt officials who run the African states, Moyo recommends that the solution to Africa’s problems lies in capitalism. Opening up the markets, trading both internationally and regionally, acquiring bonds and loans, and using external sources of finance to achieve economic growth. Such a solution though, does not seem to promote self-reliance, instead it seems to further promote dependency on external sources, in this case the international market. Judging from Moyo’s CV (she spent time with both the World Bank and Goldman Sachs) it should have been expected that her solution was to open up African countries to loans and fund managers.

In a strange oxymoron of an argument Moyo lambasts the corruption that comes with large amounts of money heading into African states, and proposes a solution to the problem that involves large amounts of money heading into African states. The true capitalist twist in this warped logic is that that the money that she proposed to flood into the countries, will not be the free aid money, but loans with interest rates and repayment dates.

I must admit that Moyo is far more educated on the topic of economics than I am. She has numerous qualifications and degrees from various institutions and, as mentioned earlier, has a history of working with some of the world’s biggest names. I on the other hand, do not possess such degrees and have very limited knowledge on the issues of bonds and credit ratings, but where I see an obvious problem, and a solution that contradicts itself, I will speak up. Hence this article.

I respect what Moyo says in her publication because she is quite obviously an incredibly intelligent person, but I cannot be alone in thinking that her solution to the problem of poverty in Africa has more than a few contentious proposals.

Personally, I have always thought that the only way for African states to improve the situations they have found themselves in and to get out of poverty is through the nationalisation of their industries, and public control of their resources. Following this the proceeds that are made from their sale should be distributed among the population. As I am sure we are all aware, Africa is an incredibly rich continent, despite being so poverty stricken. It has large resources of oil, diamonds, tanzanite, gold, and other precious metals. The problem is not that Africa is poor, but that Africa is exploited.

I wonder what would happen to Africa’s nation states if one day they decided to follow the same path as countries such as Saudi Arabia, Norway, or Venezuela. Paths that meant that the countries natural resources belonged to its people rather than foreign companies.

Moyo speaks of “ensuring the longevity of infrastructure” and contributions ” to a country’s longer-term potential.” But what she prescribes do not seem to fit in with these statements. I don’t see how selling off your resources to the highest bidder, and opening up your markets for foreign companies will help the long term future of African nations. Certainly in the short term things will improve, but it can only improve up to a point. With major industries and businesses owned by foreign companies, the majority of the wealth that will be created will not remain in the country.
Profits will be removed, ownership will be lost, the country will become dependent on the West once again, and will be at the mercy of the multi-national corporations and financiers.

Moyo uses the example of toll roads, correctly saying that tolls “only make sense if the people can pay them”, but this begs the question, where then does this money go? The people of Wales and England are able to pay tolls, indeed when crossing from England into South Wales motorists have to pay a toll to cross either of the bridges that connect the two land masses. This toll money does not all go to the UK government however, but instead 50% of it leaves the UK completely and goes to France and the USA. (Both Severn Bridges were made by the organisation Severn River Crossing Plc, who are 35% owned by Vinci, a French construction company, and 15% owned by Bank of America.)

It is important to create and develop a society where the population have the ability to pay for tolls, taxes, and products, but just as important as the creation is the issue of where this money will then go. If it remains in the country then the economy will improve, if it goes abroad then the people of the country are improving the finances of foreign companies rather than their own government, and thus their own people.

Is the incentive to improve people’s lives, income and spending power? Or is it simply to ready the country for money extraction through the creation of new markets and customers?

As the book progresses Moyo continues to illustrate examples of policies and actions taken in the West which are detrimental to the situation in Africa. Moyo correctly identifies that poverty in Africa, like most things in life, “comes down to politics.” Despite aid money from the West and pledges to do more about the poverty situation on the continent of Africa, efforts will always be at best limited, and at worst harmful because of political decisions on other topics.

Moyo highlights the “trade restrictions and barriers thrown up around the West” that keep African produce out of Western markets. The issue of government subsidies is illustrated to be particularly harmful to the fight against poverty, hindering other efforts to tackle the problem. By 2005 estimates, members of the Organisation of Economic Cooperation and Development (OECD) spent almost $300 billion on agricultural subsidies. This figure is almost three times the total aid from OECD countries to all of the world’s developing nations.

Could this money, used to subsidise already relatively well off people and businesses, instead be used in the fight against poverty? It could and perhaps it should. The Common Agricultural Policy (CAP) takes up almost half of the entire European Union’s budget, and results in farmers receiving 35% of their total income not from sales, but from EU subsidies. “What this means is that each European Union cow gets $2.50 a day in subsidies” which is more than what a billion people in the world have to live on each day.

As well as this, subsidies to domestic businesses allow them to keep their products prices low and competitive, under-cutting any international exporters that want to break in to new international markets. Furthermore, subsidised farmers “can also afford to dump their excess production at lower prices abroad, thus undercutting the struggling African farmer.” At both home and abroad, subsidies prevent African products from selling, depriving impoverished communities and fledgling businesses of a much-needed source of income.

In what is Dead Aid‘s penultimate chapter, “Banking on the Unbankable”, I believe that Moyo finally touches upon a very real potential solution to the aid problem. Unfortunately, Moyo seems to have missed the significance of what she writes, and this area only receives a small amount of attention towards the end of her book. Nevertheless, its importance should not be ignored.

In this chapter Moyo speaks very highly of the positive effect of remittance – the act of migrants sending money back to relatives in their native African state. She says:

“remittances make an important and growing contribution to relieving poverty. According to a paper by World Bank economists, evidence shows that a 10 per cent increase in per capita remittances leads to a 3.5 per cent decline in the proportion of poor people.”

Moyo continues by saying that:

“household surveys in the Philippines indicate that a 10 per cent increase in remittances reduced the poverty rate by 2.8 per cent by increasing the income level of the receiving family but also via spillovers to the overall economy. Moreover, this 10 per cent increase led to a 1.7 per cent increase in school attendance, a 0.35-hour decline in child labour per household per week, and a 2 per cent increase in new entrepreneurial activities.”

These positive and very promising results come with a warning though, as through remittance a cut of the money is lost when the middlemen take their share. Regardless of this fact, the model of remittance shows that aid can be beneficial to African states. Even with the middlemen taking their share, the numbers are impressive, and if the middlemen were to be eliminated altogether then we could expect even better results from the money transfers. A form of direct giving would be needed, that like remittance, would go directly from people in the richer countries, to people who are struggling in the poorer countries. Luckily, such a movement already exists.

With a new model of functioning, that does not rely on huge sums of money being transferred to governments who then squander it for their own pleasure, and does not rely on middlemen to transfer the money between rich and poor, simple wealth redistribution has the potential to revitalise the dying aid movement.

GiveDirectly are a charity that does just this. They currently operate in Kenya and Uganda and provide unconditional cash transfers to the poorest families via mobile phones linked to bank balances. On their site they say that they are currently averaging 91 cents given straight in to the hands of the poor for every one dollar that is donated. Due to this measurement, and due to the fantastic results that they are seeing, both The Life You Can Save and GiveWell rank them as one of the best charities in the world.

In 2014 alone GiveDirectly gave over $6.6 million dollars, and like myself they believe “that outright gifts are a more effective way to lift people out of poverty than micro-loans, which have to be paid back.” The middleman is cut out, the corruption is avoided, and the results are truly life-changing.

As I said, it is unfortunate that Moyo did not look at this issue in more detail, because if she had then her entire perception that aid is dead may well have been changed. Due to Moyo’s interest in, and history of, finance and economics it is unlikely that she would see GiveDirectly as the beacon of hope that many others have, but this is no more than speculation on my part.

If the reader were not aware that Moyo’s  recommendation has its roots in economics then she spells it out in her own words towards the end of her book.

“It should come as no surprise that Dead Aid prescriptions are market-based, since no economic ideology other than one rooted in the movement of capital and competition has succeeded in getting the greatest numbers of people out of poverty, in the fastest time.”

Such a statement is not entirely true and should not be accepted as gospel. Capital and competition may well provide governments with sources of income via taxation, but it is through spending this tax money on welfare that poverty is overcome. The businesses themselves are not the panacea for poverty, and nor do they provide the means by which people can remove themselves from poverty. Take the UK currently for instance, under the Conservative leadership the country’s businesses may be thriving, but poverty in the UK, especially child poverty, has increased dramatically, as has homelessness and reliance on foodbanks. All of which are things I have mentioned previously on this blog.

Moreover, the majority of people that are now considered to be in poverty in the UK are actually in work, and so this proves that even with market-based economics and competition, poverty may not be defeated, and can in fact thrive. In what is irrefutable proof that markets and competition do not “succeed in getting the greatest numbers of people out of poverty”, Oxfam recently stated “the UK is the world’s sixth largest economy, yet 1 in 5 of the UK population live below our official poverty line.”

To further cast doubt on Moyo’s prescribed solution to the poverty problem, she herself admits that the change she wishes to see may well rely on nothing more than blind faith. To prevent corrupt leaders taking the aid money for themselves, Moyo suggested that aid be stopped gradually over a period of say five years. As the income for the country falls year after year, the pot of gold that the corrupt leaders have access to will get smaller and smaller. As the money begins to dry up Moyo “hopes that any cutbacks (in government spending) would be on the non-essential, frivolous items.”

Such a hope does not fill me with confidence, nor does it do anything to support Moyo’s overall argument. Relying on “hope” is not a valid suggestion and completely negates all of the groundwork that Moyo had put in over the previous 146 pages.

These state leaders that Moyo hopes will cut back on “frivolous items” are the same leaders that she so heavily criticised for being corrupt in the first half of her book. I don’t see why a corrupt leader would sacrifice their life of luxury just because foreign countries began to lower their aid donations. Cutting off the supply of aid to these nations will do nothing but hurt the people you intend to help. Like embargoes, it will have next to no effect on the leaders and the elite who sit at the top of the pyramid, but instead will punish the poor even further.

In what can be seen as an attempt to justify cutting off aid, Moyo then focuses on the instances whereby aid has helped to prop up dictators. I don’t dispute the fact that aid money has been used by various despots across the world in order to tighten their grip on power, and give themselves a more luxurious lifestyle. Zimbabwe’s Robert Mugabe is the example given, with Moyo stating: “in fact, without aid, the likelihood is that Mugabe might have been long gone.” Once again though, this is pure speculation and there is no evidence to support this claim.

It may well be true that Mugabe uses aid money to his benefit, but this does not mean that he is only there, in power, because of said aid money. The two may be connected, but this does not mean that one causes the other. Fidel Castro in Cuba remained in power despite no foreign money coming in, so too the Kim family in North Korea. Neither have been propped up by an influx of aid.

Perhaps Moyo believes, or rather “hopes”, that as the aid money dries up the corrupt leader will become nicer, or that their power will wane, as they are no longer propped up by aid, and the people of the country could overthrow them. Neither of these options seem likely however. In a TedTalk entitled “Is China the new idol for emerging economies”, which I have included below, Moyo herself presents the fact that people in African states are less concerned with democracy and more concerned with survival. Food, water, and a roof over their heads are of far more importance than who is running in the next election.

Therefore, the proposal to stop foreign aid to African states that we know have corrupt leaders will benefit nobody. The corrupt leader will not be deposed, they will not be overthrown, and they will not magically have a change of heart. If democracy in Africa is secondary to survival even when millions of dollars/pounds of aid are given to its people, then it will take even more of a back seat when that aid money is stopped completely.

To conclude, I think that some very valid points are made throughout Dead Aid, and though I am by no means an expert, I do not see the Dead Aid model as feasible for the numerous reasons I have listed above. I agree that aid does need to change, but I think the real answer lies closer to something that Moyo all too briefly touches upon. The issue of remittance and direct giving is something that Moyo should have gone on to explore in far more detail, but I feel she did not do this because it contradicts her “market is the answer” solution. Even when she does look at the issue of remittance she is quick to dismiss her own suggestions, or to mutate the remittance/direct giving model to be of more benefit in a capitalist sense.

“One solution that the aid proselytizers could adopt would be an egalitarian approach to donor donations. Instead of writing out a single US$250 million cheque to a country’s government, why not distribute the money equally among its population. So in a country of 10 million people (roughly the population of Zambia) each citizen would get US$25 – a tenth of Zambia’s current per capita income. In line with the Dead Aid proposals, this would in effect be a remittance “donor-style.
“Indefinite grant transfers, however dressed up, are not something Dead Aid favours, but one could envisage how such remittances could be part of an effective financing package were the notions of accountability and repayment incorporated.”

There is no need for the issue of repayment to be brought in here. It corrupts what is essentially a very valid, and very moral method of transferring wealth, and helping those less fortunate. I feel that Moyo is dismissing human nature. People do not want to be reliant on handouts their entire lives, they want to be self-sufficient. Giving a family in Kenya $10 a week for a year is not charity, but an investment in their future. An investment that we may not see the benefits of, in terms of financial returns, but one that may well provide the necessary no-strings-attached financing that the family needs to invest in education, health, or business.

As I am sure Moyo is aware, the people of Africa not want to rely on the West if they don’t have to.

Recommended further reading:

http://www.independent.co.uk/news/world/africa/direct-debit-the-charity-givedirectly-donates-cash-straight-to-people-in-need-9081499.html

http://www.economist.com/news/international/21588385-giving-money-directly-poor-people-works-surprisingly-well-it-cannot-deal

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