Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa

186 Pages·2009·0.96 MB·English

by  Moyo Dambisa

Dead Aid
DEAD AID
WHY AID IS NOT WORKING
AND HOW THERE IS
A BETTER WAY FOR AFRICA
Dambisa Moyo
Farrar, Straus and Giroux
New York
Farrar, Straus and Giroux
18 West 18th Street, NY 10011

Copyright © 2009 by Dambisa Moyo
Foreword copyright © 2009 by Niall Ferguson
All rights reserved
Distributed in Canada by Douglas & McIntyre Ltd.
Printed in the United States of America
Originally published in 2009 by Allen Lane, an imprint of Penguin Books,
Great Britain, as Dead Aid: Why Aid Is Not Working and How There Is
Another Way for Africa
Published in the United States by Farrar, Straus and Giroux
First American edition, 2009

Library of Congress Cataloging-in-Publication Data
Moyo, Dambisa.
Dead aid : why aid is not working and how there is a better way for Africa /
Dambisa Moyo.—1st ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-374-13956-8 (hardcover : alk. paper)
ISBN-10: 0-374-13956-3 (hardcover : alk. paper)
1. Economic assistance—Africa. 2. Poor—Africa. 3. Africa—Economic
conditions—21st century. I. Title.

HC800 .M69 2009
338.91096—dc22

2008055451
www.fsgbooks.com

1 3 5 7 9 10 8 6 4 2
For Peter Bauer
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 to 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.
Contents
Foreword by Niall Ferguson
Preface
Introduction
PART I
The World of Aid
1 The Myth of Aid
2 A Brief History of Aid
3 Aid Is Not Working
4 The Silent Killer of Growth
PART II
A World without Aid
The Republic of Dongo
5 A Radical Rethink of the
Aid-Dependency Model
6 A Capital Solution
7 The Chinese Are Our Friends
8 Let’s Trade
9 Banking on the Unbankable
Dongo Revisited
10 Making Development Happen
Notes
Bibliography
Acknowledgements
Index
Foreword
by Niall Ferguson
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 (Paul Collier,
William Easterly, Jeffrey Sachs) to the rock stars (Bono, Bob Geldof), the
African discussion has been colonized as surely as the African continent was a
century ago. The simple fact that Dead Aid is the work of an African black
woman is the least of the reasons why you should read it. But it is a good reason
nonetheless.
Born and educated in Zambia, Dambisa Moyo also brings to her subject a rare
combination of academic expertise and ‘real world’ experience. Her training in
economics took her from the World Bank to Harvard and on to Oxford, where
she obtained her doctorate. Since leaving the academy, she has spent eight
highly successful years at Goldman Sachs, most recently as Global Economist
and Strategist. It is quite a CV.
And this is quite a book. Though she is not the first writer to criticize Western
aid programmes in Africa, never has the case against aid been made with such
rigour and conviction. Why, asks Moyo, do the majority of sub-Saharan
countries ‘flounder in a seemingly never-ending cycle of corruption, disease,
poverty, and aid-dependency’, despite the fact that their countries have received
more than US$300 billion in development assistance since 1970, The answer she
gives is that African countries are poor precisely because of all that aid. Despite
the widespread Western belief that ‘the rich should help the poor, and the form
of this help should be aid’, the reality is that aid has helped make the poor
poorer, and growth slower. In Moyo’s startling words: ‘Aid has been, and
continues to be, an unmitigated political, economic, and humanitarian disaster
for most parts of the developing world.’ In short, it is (as Karl Kraus said of
Freudianism) ‘the disease of which it pretends to be the cure’.
The correlation is certainly suggestive, even if the causation may be debated.
Over the past thirty years, according to Moyo, the most aid-dependent countries
have exhibited an average annual growth rate of minus 0.2 per cent. Between
1970 and 1998, when aid flows to Africa were at their peak, the poverty rate in
Africa actually rose from 11 per cent to a staggering 66 per cent.
Why? Moyo’s crucial insight is that the receipt of concessional (non-
emergency) loans and grants has much same effect in Africa as the possession of
a valuable natural resource: it’s a kind of curse because it encourages corruption
and conflict, while at the same time discouraging free enterprise.
Moyo recounts some of the more egregious examples of aid-fuelled
corruption. In the course of his disastrous reign, Zaire’s President Mobutu Sese
Seko is estimated to have stolen a sum equivalent to the entire external debt of
his country: US$5 billion. No sooner had he requested a reduction in interest
payments on the debt than he leased Concorde to fly his daughter to her wedding
in the Ivory Coast. According to one estimate, at least US$10 billion – nearly
half of Africa’s 2003 foreign aid receipts – leave the continent every year.
The provision of loans and grants on relatively easy terms encourages this
kind of thing as surely as the existence of copious oil reserves or diamond mines.
Not only is aid easy to steal, as it is usually provided directly to African
governments, but it also makes control over government worth fighting for. And,
perhaps most importantly, the influx of aid can undermine domestic saving and
investment. She cites the example of the African mosquito net manufacturer who
is put out of business by well-intentioned aid agencies doling out free nets.
Moyo offers four alternative sources of funding for African economies, none
of which has the same deleterious side effects as aid. First, African governments
should follow Asian emerging markets in accessing the international bond
markets and taking advantage of the falling yields paid by sovereign borrowers
over the past decade. Second, they should encourage the Chinese policy of large-
scale direct investment in infrastructure. (China invested US$900 million in
Africa in 2004, compared with just US$20 million in 1975.) Third, they should
continue to press for genuine free trade in agricultural products, which means
that the US, the EU and Japan must scrap the various subsidies they pay to their
farmers, enabling African countries to increase their earnings from primary
product exports. Fourth, they should encourage financial intermediation.
Specifically, they need to foster the spread of microfinance institutions of the
sort that have flourished in Asia and Latin America. They should also follow the
Peruvian economist Hernando de Soto’s advice and grant the inhabitants of
shanty towns secure legal title to their homes, so that these can be used as