Apr 14, 2020
The book by Dambisa Moyo which was published in the year 2009, focuses on revealing the truths of the large sum of Western Aid to the African countries. This book discusses the very sensitive issue of the effectiveness of aid. The author has focused on ‘Dependency Theory’, discussing that the donor countries of aid and the recipient countries develop a dependent relationship from which the donor countries are benefitted leaving recipient countries at risk. This develops an exploitative relationship where by depleting the resources of recipient countries the donor countries are benefitted.
Moyo depicts the negative impact of Aid and proposes the alternative to it. She argues, aid has harmed the African nations, and there should be an end to this vicious cycle of aid. The negative consequences of aid are portrayed as: rampant corruption, bad governance donor country dependencies, poor institutional administration, weakening of local entrepreneurial efforts, unsustainable economic growth and all of this ultimately leads to stagnation of economic prosperity. The author repeatedly argues that though in the past 60 years African nations have received more than 1 trillion USD, but despite all this aid, the situation in Africa has not improved rather it has regressed. It is discussed that there are alternatives to current aid system: developing private sector and rejuvenating trade, savings by economic policy. The author points out a hypothetical situation where a deadline is set for aid in order to gradually reduce it as the phrase “shock therapy” (p. 11). The idea is that once aid decreases, alternatives will be automatically implemented in order to maintain a certain level of spending resulting in an “aid-free world” (p. 78). On the other hand countries which have taken alternative route are shown successful such as: Botswana. The author questioned the role of international institutions such as the IMF, World Bank as tools of the structural development process by the West. This book targets an audience that is composed of IGOs, NGOs, aid donors, the governments of African and western nations. The objective of this book is to illustrate how African countries are trapped in the vicious aid cycle of exploitation. The book further offers a menu of solution which will gradually free Africa from aid dependency and sustainable economic prosperity. The author first analyses the problems arising from the situation called “aid-based development model” and the arguments about why aid is not working for African nations. Then the author suggests “Dead Aid model” which can be seen as the alternative and solution to the existing problems in order to trigger development in Africa. The dependency theory is anchored in this book which is justified by that, “Aid results in a need for more aid creating a vicious circle of corruption, market distortion and further poverty” (p. 17).
It has to be mentioned that the author does not condemn all forms of aid. At first she distinguishes between three types of aid: first, humanitarian or emergency aid which refers to aid targeting natural catastrophes; second, charity-based aid which is collected by charitable organizations and disbursed to local institutions or people on the ground; and finally, systematic aid designating a form of aid which is directly transferred to the government, either through a bilateral or multilateral way. While all types of aid could be criticized, she argues that the first two types of aids that is charity-based aid and especially humanitarian aid will continue to play an essential role in development or reconstruction policies. By contrast, she condemns systematic aid as the reason responsible for the economic stagnation of Africa. Systematic aid, in the form of grants or concessional loans, greatly hampers development for two reasons: First, since the money is directly transferred to governments, the political and economic conditions are distorted. Second, systematic aid is not strictly regulated and does not impose conditions in case of default, which implies increased leverages for governments and reduces incentives to efficiently manage the aid monies. In addition, it has been discussed that how aid policy gradually encouraged democratic environment in African countries after the failure of 1960s growth agenda, 1970s emphasis on the poor, 1980s focus on economic stabilization and adjustment According to the author, “it was left to Western democracy to save the day.”(p. 35) The alternative route to development suggested is through entrepreneurial means such as foreign direct investment.
The author with the help of aid-based development model portrays how aid has become unproductive and it is generating negative consequences which hampers development process. These consequences can be divided into four main categories: political, social, economic and dependency-related problems. The author chose corruption as the very first reason for which aid does not work for Africa. From a political perspective, aid facilitates corruption since it is directly handed over to the government and most of the governments ended up using the aid on financially unproductive sectors including meeting up the expenses of personal luxuries. This leads to a reduction of expenditure directed at public services and significant decrease in domestic and foreign direct investments. Corruption consequently raises another issue which is stagnant bureaucracy. Getting a business license can take up to two years with multiple layered processes associated with it which eventually discourages both the domestic and international investors and entrepreneurs to start up a business. The author complained corrupt government with its incompetent bureaucracy has drawn a little attention to this fact. Second, aid weakens the whole social construction of the country. Because aid acts as a substitute for tax revenues, the government is not depended on tax collection and so the accountability mechanisms existing between the government and the citizens are destroyed. As a result, flooded with aid, the government pays little attention to the fact that tax can be a good source of self-dependency. This has a parallel effect on the citizens that tax paying culture is not grown for definite reasons. The author however does not mind if the country holds an authoritarian government. According to her, ‘a decisive benevolent dictator’ is desirable rather than a multiparty democracy if they make necessary reformation happen. Thirdly, large amount of inflows of aid money drives to a higher consumption rather than savings, this leads to the reduction of domestic savings and therefore domestic investments. This causes inflation and a severe problem which can be economically termed as dutch disease. The author further discusses that poor countries do not have adequate absorptive capacity to effectively use the money provided as aid, which creates bottlenecks. It creates an unending cycle of dependency on aid. These are the adverse effects aid can have on the economy of any country. Moreover, other aid-dependency related problems are enlisted as African governments tend to consider aid inflows as a permanent and unlimited source of income. For this, they do not develop their own long term economic development plans, it creates laziness in the policy makers and they become more dependent on aid inflows. On the other hand, aid-dependency reduces the ability of African governments’ to freely decide and form their own economic and political policies, portraying that they are controlled by western political will (Collier, 2007). Another ponderous issue for Africa is civil war and civil conflict. According to Collier, the difficulty of reform in ethnically diverse small countries may account for why Africa persisted with poor policies for longer than other regions. So the author suggested a united forum for African countries just like EU.
The author argues that in the then financial pressure and economic crisis back in 2009 the donor countries had good enough reasons to stop the flow of aid and start looking for alternatives. As an alternative to aid the author suggests the “Dead Aid model” (p. 136). This model posits new ways of financing development agenda and the development policy which will bring economic prosperity and growth in the African countries. The implementation of the model includes several drastic measure: First, in order to get rid of the aid-dependency, there should be a gradual reduction in aid over a period of five to ten years. In this time, as alternatives to aid a range of free-market tools should be implemented. The author admits that the ways to manage these financial tools will be different for different countries, depending on the circumstances of a single country (pp. 145–146). Foreign direct investment is highly suggested by Moyo as it will attract capital flows to the continent. The author further suggests that how well public budget is panned is a crucial factor in driving economic growth. Another measure suggested by the author is the strengthening of institutions and the accountability mechanism, which would facilitate the natural emergence of good governance in the corrupted countries of Africa. Borrowing bonds in the international markets as a solution is given an immense weight. Moyo considers China as Africa’s friend and dedicates a whole chapter about why Asian investment should be preferred over western aid.
The suggested alternatives to aid by the author are: developing absorptive capacity and infrastructure, issuing bonds on international or domestic capital markets to finance development, enhancing economic and trading integration within the countries of the African continent itself, building micro-financing institutions to foster poor people’s ability to create enterprise, facilitating remittances transfers from as a source of external funding, enabling savings by creating a more innovative and efficient financial sector as well as a legal system free of corruption as a tool to finance investment. According to the author, there are a wide range of alternatives which can reduce aid dependency for the African countries which do not foster corruption, ensure transparency, create a value chain in the economy, strengthens public services etc. However, the author has not proved the feasibility of the implementation of these solutions.
The argumentation of the author is credible to a degree that in the periods before the end of Cold War, aid was given to countries in the Africa that had autocratic regimes. (Johnson, 1967) The authoritarian leaders were further empowered through aid. An example is Mugabe in Zimbabwe. The beneficiaries of this structural adjustment such as Niger, Togo, Zambia and Cote d’Ivore were also under autocracy, yet they benefitted in the form of aid from the World Bank and IMF, which ultimately led to the fostering of poor leadership and economic backlog. But such a conclusion leads to further debates due to the fact that other countries with prospering economy such as Singapore, Korea, Malaysia, Indonesia, Taiwan, Thailand, Chile, Peru did also face dictatorship, therefore, the allegation cannot be imposed on aid only. Leadership and strong goodwill to serve the state is a big issue which always impeded on the way to success, most importantly, with which aid has nothing to do. However, it needs to be considered that the allegation here is not only made on aid itself but to the entire scheme of structural adjustments and the relevant policies which play their part in the fostering of poor leadership as a whole.
The depiction of entrepreneurial alternatives by the author is quite drastic. Countries’ economies have emerged from poverty and developed through venturing into international market. Zambia is shown undertaking local currency-denominated bond in the international market. Hence considering poverty traps as the real cause of Africa’s poverty which induces more aid injection, does not hold. (Sachs, 2005). The success of Botswana supports the argumentation of the author and is an anti-thesis of Sachs because despite being rich in resources, it has avoided the stated poverty traps such as corruption, resource conflicts, authoritarian governance etc. Botswana was under democratic rule and it has managed to grow its economy consistently. However, it must be taken into consideration that one or two success story cannot be an ideal solution for all given the diverse geopolitical, cultural, political and social situation each country possesses. The author herself admitted this lack of unification.
The authors ideas are also supported that aid hurts people whereas it was supposed to help (Lawler, 2009). From a long-term perspective aid has not been able to eliminate poverty and spur economic growth in the continent of Africa rather the situation deteroited. Therefore, the author is right in her arguments that aid might be ineffective and that it has to gradually abolish itself for the betterment of aid receivers themselves. She is also right in claiming that Africa’s economic, political and social situation should be improved through good governance and a strengthening of the private sector.
The author logically states that African governments themselves need to have incentives to actively participate in the process of poverty elimination and be able to play a crucial role in their own development. The author could successfully bring about an African perspective in the question which is often monopolized by Western donors or international institutions. Her proposal of an “exit-strategy” (p. 71) from aid-dependency seems maybe too radical but it is justified to say that a discussion about its possibility is necessary (Easterly, 2003).
There are some weaknesses which can be found in the argumentation of the author. While discussing about grants and concessional loans as systematic aid, the author did not discuss about technical cooperation which leads the author to a narrow discussion of aid in terms of homogeneity. The book’s scientific thoroughness has been widely criticized. Many examples, explanations and figures are indeed not proven by sources and the arguments too intensively use simplifications, generalizations and are supported by a selective use of evidence. For example, the author brings Saudi Arabia and Switzerland describing that the first has a futile and extremely hot weather and the latter has no coastline. She then concludes if these two countries with their hostile situation can succeed, it is possible for the African countries too. But we have to remember that Saudi Arabia has a little population with rich oil reservoir while Switzerland has a very strong position as a banking centre alongside with a strong interventionist government in the Europe. The book dedicates a whole chapter on China showing it as an alternative to aid (p. 96-108). It leads to questioning whether it is about anti-Western sentiments or if it is truly about depicting alternatives that would work for Africa. If investment is indeed good for Africa than aid, there still remains the question that whether China’s engagement in Africa has anything to do with China paving inroads in Africa to capture her own interests. The same way aid is used to advance interests can be argued for China’s heavy investment in Africa. The dependency theory can still be valid on the context of china with a new veil of FDI.
The author while depicting the negative consequences caused by aid fails to show evidence of what the case would be in the absence of it. The current position of African development seems bad given the trillions of dollars that have been injected in the economy. On the other hand it is hard to determine whether the absence of aid would have made African economies any better. Thousands of schools and clinics will be closed all across the Africa. At present over two million Africans infected with HIV are receiving antiretroviral medicines under this aid programme. If we just take Tanzania into account, abolishment of school fees, distribution of textbooks and building new classrooms have given 3 million children an opportunity of receiving basic education under aid supported policies. Senegal and Zambia has a huge success story of cutting down school drop-outs. Improvement in Africa’s health sector due to foreign aid can never be denied. So aid had nothing but deteriorated is not a very strong stand if we look upon the health and education sector. The proposition for foreign direct investment may seem very appropriate. But in many cases, the effects of foreign direct investment are equally as bad when capital flight to countries of origin takes place. Furthermore, there are incidences of environmental pollution in oil companies of Niger Delta (Omeje, 2004), poor working conditions for locals with minimum wages. In sum, “foreign direct investment has no better financial growth evidence in comparison with aid. It is like choosing a better evil from two evils. This does not also curtail the issue of corruption and poor leadership” (Bach, 2011). Then again. FDI is a paradox for Africa because of low human, institutional and public capital, low absorptive capacity and low political stability.
The objective of this book is to show that in Africa aid did not work effectively as it should have been. It further argues that because of the aid flow, the leaders turned out to be incompetent having no vision to prosper in the absence of aid generation. In addition, aid has fostered corruption. Conflict, discouraged local savings and lack of internal capital generation has added new dimensions with the vast amount of aid. However, there are important questions about whether aid can be harmful in some circumstances, and whether this harm outweighs the good that aid can do.
Arguing against aid, the author proposes foreign direct investment, international market participation and investment with China. Though, there is no evidence to show that the proposed alternatives would not generate the same problems as aid. The institutions of governance are also not discussed as a cause for Africa’s poverty wanting. One problem arises from this that Moyo’s analysis gives fuel to those who are dubious of global responsibilities. Despite the shortcomings, Dead Aid shows no complacency in depicting aid as poor alternative for Africa’s economic growth. The fact that the author is a well-educated African with great experience in the field is a strong reason to make aid donors and recipient to look into the manner if aid is indeed a cause for stagnated economic growth in Africa. The need for other alternatives should be explored for a better Africa.
BibliographyAlan Whiteside, ‘Dead aid: Why aid is not working and how there is a better way for Africa’ (2010) 5(2) Global public health 197-198. Ayodele Odusola, ‘Addressing the Foreign Direct Investment Paradox in Africa’ (United Nations: Africa Renewal, 06 June 2018)
Zesan Ferdoush Badhon is a third year student at the Department of International Relations, Bangladesh University of Professionals (BUP).