BOOK REVIEW: DEAD AID, BY DAMBISA MOYO
By James Staunton
Kofi Annan doesn’t review a lot of books. Nobel peace prize winners or people who’ve served as Secretary-General of the UN have better things to do with their time than review the latest Dan Brown. But he took time out to review Dead Aid – “a compelling case for a new approach to Africa” – and that tells you something of its potency. It’s written by Dambisa Moyo, an African articulate woman, delivering a message of brazen political incorrectness: cut aid to Africa. Foreign aid, she argues, has been bad for Africa, and must stop.
That’s a pretty punchy hypothesis, but you can’t write her off as just another nutter with a book to sell. Educated at Harvard and Oxford, she’s the heads of economic research and strategy for sub-Saharan Africa at Goldman Sachs, having previously worked for the World Bank. No. She’s the real deal.
And the figures she illustrates her arguments with are startling. Between 1970 and 1998, when aid flows to Africa were at their peak, poverty in Africa rose from 11% to 66%.
What are her arguments? The first stage in her argument is that aid (and by ‘aid’ she doesn’t mean humanitarian or emergency aid, mobilised in response to calamities; or charity-based aid, given to specific organisations and people on the ground, in order to achieve specific things – she means government to government aid) is easy money. If governments had to rely upon private financial markets, they would become accountable to lenders, and if they had to rely upon taxation they would become accountable to voters. Aid is like oil, enabling powerful elites to embezzle public revenues. She catalogues evidence, both statistical and anecdotal.
But the core of her argument is that there is a better alternative. Governments could find money for development through financial markets, both international and domestic. Historically, the governments of those countries that have successfully developed funded investment by recourse to international markets. In order to borrow, they needed decent credit ratings; to get the ratings, they had to be transparent and prudent. The discipline of transparency and prudence were as important as the money in promoting development. Some of the stronger African governments have at last started down this road.
Is she right? Does her alternative vision hold together? Well, I’m not an economist, but for one, her timing’s all off. I can imagine the opportunity for African governments to raise money on international markets has evaporated even more rapidly than UK mortgage finance. The global financial crisis has drastically reduced investor appetites for risk. Irrational exuberance has been replaced by irrational caution.
But we must hope Moyo is right. Britain has just implemented the sharp cuts in aid that she wants to see. Although this was achieved inadvertently, as a result of the sharp depreciation of the pound rather than by a cut in the sterling-denominated budget, it will have the same effect.
