Band Aid? Dambisa Moyo - Dead Aid

A new book titled Dead Aid forces us to re-evaluate the concept of systemic aid to Africa.
Author Dambisa Moyo

She makes it clear at the outset what kind of aid she means. She does not mean humanitarian or emergency aid, mobilised in response to calamities; she does not mean charity-based aid, given to specific organisations and people on the ground, in order to achieve specific things (she sits on the boards of several charities, one of which distributes antiretrovirals); she is hopeful about a new attitude to food aid, whereby the money is used to buy food from farmers within a country, and then distribute it to those in need, instead of flooding the place with foreign food that undercuts local growers. What she means is "systemic aid", the vast sums regularly transferred from government to government, or via institutions such as the World Bank.

She paints a dismaying picture of the history of that aid, beginning with the realisation, at Bretton Woods in July 1944, that Europe would need massive injections of cash to get back on its feet (and the concurrent establishment of the World Bank and the IMF). The Marshall Plan did a similar job. Both were so successful in Europe that it seemed sensible to assume that the same paradigm could apply in Africa. But these capital injections, she argues, worked in Europe because they were limited in scope, and Europe had the institutions to make the most of them; this was not true in many African countries. And there were other, not particularly altruistic imperatives: the cold war had begun, and "aid", writes Moyo, "became the key tool in the contest to turn the world capitalist or communist". Geopolitics trumped sense, again and again.

Rising oil prices in the 1970s meant that international banks were awash with money, lax with their policies, and lending at low interest rates; many African countries borrowed large sums to pay off existing debts - until 1979, when another oil crisis prompted banks to raise their interest rates, and those debts could no longer be serviced. In Africa, 11 countries defaulted. When their finances were restructured by the IMF - they were lent money to pay off what they owed - they simply sank deeper into debt. The 80s also saw aggressive trade liberalisation and privatisation: the IMF and the World Bank lent large amounts of cash on the condition that free-market policies were adopted - policies that often led to the destruction of local industries that could not compete. By the end of the 80s debt servicing meant a net reverse flow of money, from poor countries to rich. This could not continue, and campaigns for debt relief soon followed - but they were accompanied, Moyo notes drily, with campaigns, such as Live8, to send large amounts of new aid, "and thus the prospect of fresh debt, all over again".

More than $1 trillion has been sent to Africa over the last 50 years. And what has it all achieved? She wants to know. "Between 1970 and 1998, when aid flows to Africa were at their peak, poverty in Africa rose from 11% to a staggering 66%" - roughly 600 million of Africa's billion people are now trapped in poverty. She would admit that aid has done some good on a local level, however her conclusion is uncompromising: "Aid has been, and continues to be, an unmitigated political, economic and humanitarian disaster for most parts of the developing world" - and Africa in particular, which is "shearing off. The rest of the world is going one direction, on one growth trajectory, and Africa is going completely in the opposite direction. And yet we sit around and discuss sending another $50bn dollars of aid? I mean, come on."

Why is Africa different? Wisely, perhaps, she doesn't get entangled in generalities about colonial guilt, and refers only in one short paragraph to "the largely unspoken and insidious view that the problem with Africa is Africans - that culturally, mentally and physically Africans are innately different. That, somehow, deeply embedded in their psyche is an inability to embrace development and improve their own lot in life without guidance and help." Her argument is that, for whatever reason, the problem is "pity. We don't feel sorry for the Chinese. The Chinese have 30 million people who live like us, if you will. Western standards, but a billion people living in dire poverty. Do you think anybody feels sorry for the Chinese? No. What about Indians? India has a huge proportion of poverty-stricken [people] - does anybody feel sorry for them?"

And the pity, in her reading, has been devastating. It has meant a blind eye being turned to corruption - aid being like striking oil, or finding diamonds, in its potential to tempt. It has meant a kind of continent-wide addiction (with, as the policy director of Christian Aid pointed out in a letter to the Independent, the concomitant "loss of self-control, ability to think forward, the confidence to act for oneself and believe in oneself"). And it's not just the developing countries that become dependent: around 500,000 people, Moyo estimates, depend on disbursing aid for their livelihoods. It is self-perpetuating: multilaterals have to keep lending in order for debts to be serviced. It nurtures, she argues, civil war: it becomes worth fighting over resources. Over the past 50 years 40 million Africans have died in war - equal to the population of South Africa.

Increasingly, over the last decade, the stick that accompanies the aid carrot has been a demand for "good governance". What is meant is transparent institutions, rule of law, lack of corruption; in practice, this is often equated with multi-party elections. But, as she quite scornfully points out, "the western mindset erroneously equates a political system of multi-party democracy with high-quality institutions . . . the two are not synonymous." Many African countries have dutifully held elections - but that hasn't made them any more liberal, or improved the quality of their civil institutions.

Like many of us who grew up in Africa (in my case, Ethiopia, where, she claims, 97% of the government budget is attributed to foreign aid), she saw the aid economy in action - the flash 4x4s, the high salaries, the foreign workers living cushioned lives on nice exchange rates. "In addition it was clear how little say not only the citizens have, but the governments have.

Partly, of course, it's about power, and purse-strings; partly, she believes, it's a PR issue, "there are many well-spoken, smart African leaders who should be on the global stage"; very largely, given that so far not many are, it's a case of who gets to do the talking, and increasingly, it is people like Bob Geldof and Bono, the most visible representatives of what she calls, in a thrillingly withering manner, "glamour aid". "There are African policymakers who are charged with the responsibility of creating policy, and implementing policy. That's their job. Long, long lines of people have stood in the sun to vote for a president who is effectively impotent because of donors or because glamour aid has decided to speak on behalf of a continent. How would British people feel if tomorrow Michael Jackson started telling them how they should get out of the housing crisis? Or if Amy Winehouse started to give the US government advice about the credit crunch? And was listened to? I think they would be perturbed, and worried. I mean, they've completely disenfranchised the very people we've actually elected!"

But what she's particularly keen on is that people pay attention to her solutions, of which there are a few. First is the issue of bonds. To those who object that this is yet another kind of debt, but with higher interest rates, she answers that that's part of the point: aid lending has been far too lenient (50-year terms, low interest rates, more money lent even if a country defaults). The capital markets are not forgiving of corruption: mess up once, and that's it - there is no more cash. "Where private capital trumps aid every time," she writes, "is on the question of governance." Her critics would point out that this is a tricky position to hold in the current financial climate, where countries that have gone to the capital markets, such as South Africa (one of her examples for how to do it right), are already beginning to struggle. But she is bullish: it is a unique opportunity, she says, for a complete systemic overhaul.

She proposes more dealings with the Chinese, who, she says, have done more for Africa's infrastructure and economic growth in the last five years than America has done in the last 50. A great point in their favour is that they give the impression, at least, of striking business deals between equal partners; it is foolhardy to underestimate the animating effect this has on governments used to being preached at and condescended to. There are real worries, of course - the fact that China ignores human rights abuses in its quest for commodities, as in Sudan (the west, she counters, was a willing handmaiden to the rise of many corrupt and violent governments and doesn't have a leg to stand on); worries about empire building, that China will eventually want to protect its investments by force (for the moment, she says, that's irrelevant - what matters is progress now); about undercutting local industry and taking jobs from Africans (this, she says, must be dealt with by policy-makers). She refers to surveys that indicate local people feel things have improved with the arrival of the Chinese, "in terms of living standards, incomes, jobs, and so on. It suggests to me that people feel this new model seems to be working, where Africans are treated as equal partners." It remains to be seen, however, how the general drop in commodities prices over the last few months will affect this optimism; also the fact that Chinese growth is slowing down.

It seems to me that sometimes the ethical grand standing and moral righteousnous of those who advocate aid might be delusional.