Why Aid is Not Working and How There is Another Way for Africa

By Dambisa Moyo

Book Review by Jason Benedict

Dambisa Moyo is Zambian born economist.  She earned a graduate degree from Harvard and a post-graduate degree from Oxford and worked with both the World Bank and Goldman Sachs.  In Dead Aid she passionately makes the case that the US$1 Trillion Africa has receive in aid over the last 40 years has not only failed to produce development, but has actually been regressive.  Over this same period Africa has posted negative growth and African’s are worse off today than in the 70’s in terms of real per capita income, with over half of Africa’s 700 million people living on less than one dollar a day.  Moya makes a distinction between humanitarian aid, which she believes we have a moral obligation to, and systematic bi-lateral or multilateral aid.

She tracks the history of systematic aid in Africa from its origins in Bretton Woods in 1944 through a succession of philosophical and political attitudes towards aid over the last 60 years. Aid has been used as a tool for industrialization, a remedy for poverty, a weapon in the cold war, an incentive for policy change.  This history of aid culminates with the current mentality towards aid which the author dubs glamour aid.  She laments a time when the spokespeople for African development are not African leaders but pop musicians, movie stars and new philanthropist.  A common thread in all of this is good intentions and misguided policies that have been categorically ineffective.

Like a court room prosecutor she marshals evidence condemning aid.  First she deals with other competing explanations for Africa’s plight: geographical, historical, cultural, tribal, institutional.  She argues that while these factors are legitimate, none of them can adequately explain the problem.  Other places in the world have faced similar development hurdles and overcome them, but no other continent has received such regular and systematic aid.   She continues by explaining that aid creates a vicious cycle.

Aid provides ready cash for corrupt regimes while simultaneously disconnecting them from their people and disenfranchising African voters.  These corrupt regimes, unaccountable to their people with a steady stream of cash, are free to tamper with the rule of law.  Leaders are disincentivized from creating transparent institutions and protecting civil liberties.  This creates an unattractive environment for foreign and domestic investment.  Less investment means less growth and fewer jobs and a downward spiral of poverty[1].

She then prescribes a number of remedies.  The nexus of the problem is governance: African leaders must become the primary proponents of African development.  Aid should be tapered off and simultaneously used as a market development incentive.  African countries should turn to the capital markets and raise money through instruments like bonds. Every effort should be made to foster trade.  The author gives China as an example of a nation that sees the potential of Africa not as a charity case but a trading partner.  She highlights strategies that are working like micro-credit, diaspora remittances and savings efforts used to unlock dormant capital.

Critical thinkers will find this a compelling if not flawless book.  While I agree that systematic aid has certainly compounded Africa’s problems she may not go far enough in addressing the complexity of the issues.  She sees foreign direct investment (FDI) as the engine of development, I would agree that FDI is key, but contend that more than investment is needed to develop a robust and growing business sector. I would have liked to see more of an acknowledgement of the need for human capital development and entrepreneurship.  Another controversial item is her suggestion that in certain cases a free market benevolent dictatorship may be more conducive to the development needs of Africa than dysfunctional democracies.   I would contend that the former is in short supply.  While she certainly makes a compelling case for the effectiveness of Chinese foresight, I would have preferred a little more analysis of the potential for a mixed bag in Sino-African relations[2].

I heartily recommend this book, and I believe it successfully argues that it is time to change our perspective towards Africa.

[1] Page 49.

[2] Moyo did write a subsequent book on China entitled Winner Take All.