Why Africa Doesn't Want Foreign Aid
The Nation, March 17, 2009
In a provocative new book, Zambian economist Dambisa Moyo argues that foreign aid in Africa, one of the most haloed sacred cows of the liberal establishment, has been an “unmitigated political, economic and humanitarian disaster,” an idea that “seemed so right” but is in fact “so wrong” that, like asbestos or the Hummer, it should be phased out entirely within the next decade.
Why? Well, he who pays the piper calls the tune. Foreign aid, in some African countries, has become government’s primary source of revenue, Moyo points out. In Ethiopia and Gambia, for example, a whopping 97 percent of the government’s budget derives from foreign aid. Such governments become dangerously untethered from the citizenry upon whose tax dollars they no longer rely, she says.
Local communities, propped up with aid-fueled schools and clinics, are no longer required to build mutual trust to create social institutions. Small businesses selling socially useful commodities–food, clothing, mosquito nets–are cruelly shuttered out of business by avalanches of well-intentioned donations. The effect is anti-democratic, destabilizing, soul-crushingly “malignant,” Moyo writes, and “exceptionally corrosive” to government accountability, civil society and the prospects for economic development.
Aid-powered governments, insofar as they are accountable to anyone, answer only to their donors, who in turn, despite all their hopeful propaganda are even less accountable to the poor, Moyo says. It’s true, beside the dashed hopes of local peoples, there’s not much consequence to a failed aid project. When aid dollars are diverted toward despots’ lavish wedding parties or, less spectacularly, to interventions that are inappropriate or ineffective, reports are duly written, filed away and ignored. To wit: World Bank analyses have revealed that 85 percent of foreign aid is diverted away from its originally intended purpose. After $300 billion in foreign aid, the rate of poverty in Africa grew from 11 percent in 1970 to 66 percent in 1998. Foreign aid plows on regardless, with nary a wiggle on the steering wheel.
There’s a political logic to this paradox, although Moyo doesn’t quite come out and say it. Being seen to be helpful trumps actually being helpful, as anyone who has been loudly offered dishwashing help ten minutes after the last plate has been dried can readily understand. Presidents tout foreign aid programs to distract their constituencies from unpopular wars and failing domestic programs, or to win hearts and minds in some distant geopolitical battle. That’s why so many foreign aid agencies spend much more time trumpeting disbursements rather than tracking outcomes. Disease-prevention projects fail to measure the baseline levels of sickness before they commence; aid workers tout their distribution of helpful tools, not whether people actually used them.
That doesn’t preclude foreign aid from being helpful, of course. Through foreign aid programs, children are vaccinated. Schools are built. Water-treatment facilities are constructed. Lives are saved! Moyo doesn’t dispute this. But for her, isolated gains can’t counterbalance the negative, destabilizing effects of massive flows of foreign aid on an economy, especially when there are, she says, much more effective ways to bankroll Africa’s development. She argues in favor of foreign investment (e.g, China’s $900 million invested in Africa in 2004), microloans as per Grameen Bank and Kiva.org, more efficient use of foreign remittances, and better trade deals. The liberal establishment, she says, has completely sidelined these sources of financing in their nearly religious conviction that foreign aid is the “only solution” to Africa’s problems, a conviction spread in no small part by aid agencies’ and NGOs’ fundraising activities, not to mention the likes of “glamour aid” advocates such as Angelina Jolie.
Some reviewers have suggested that today’s economic scenario has mooted Moyo’s call for an end to foreign aid, because everybody’s going to be cutting foreign aid anyway. But the real challenge in pursuing Moyo’s proposal is political, not economic. The international aid community has largely redefined African poverty and illness as not just obstacles to development but as emergencies in and of themselves. Malaria’s toll is likened to a jumbo jet full of children crashing every single day: a disaster, a tragedy, one that requires urgent quick-fixes, now. Economist Jeff Sachs calls extreme poverty a “global emergency.” The global bigwigs at Davos see it as a “development emergency.” Foreign aid, in this perspective, is not just about patiently shepherding fellow countries along the development path. It’s as morally imperative as keeping a finger in the dike. Moyo essentially sidesteps this dilemma by excluding humanitarian and emergency aid from her critique of development aid, even though politically, at least, they’ve become one and the same.
There’s much in this slim book that will rankle. Moyo’s argument that reliance on foreign aid is the reason for Africa’s descent into poverty is less than convincing. True, there’s a correlation between the extent of foreign aid and the growth of poverty, but there are any number of equally plausible counter-explanations for that, including the exact opposite of hers (that is, more aid was needed). Moyo worked as an investment banker at Goldman Sachs for eight years, and shares her profession’s seemingly endless optimism about the uplifting power of profit-seeking investors. And since the book was written before the global economy’s slow-mo train wreck, Moyo’s supposition that private investors are itching to sink money into emerging African economies is now, sadly, out of date.
Nevertheless, she’s right, of course. Economic development cannot be “shoe-horned” into poor countries, plotted by Western experts with minimal if any input from Africa’s elected leaders and policymakers. Moyo is brave to say it. (Her bravery doesn’t end there, either–she recently picked a public fight with none other than U2’s Bono.) And at least some African leaders agree: last month, after hearing Moyo speak, cabinet members in Rwanda vowed to end their reliance on foreign aid.
Readers may not be so inclined, these days, to listen to well-coiffed economists spouting bold plans and promises. But for those who care to truly get development right, Moyo is, I think, one investment banker to whom we should pay heed.
Courtesy of The Nation.