The breakfast room of the Hotel Balzac on the Champs-Elysees is slowly filling up with the well-heeled when Dambisa Moyo makes her entrance in an oyster-colored sheath dress and platform heels half as high as her calves. She is, if not demure, very ladylike, tightly controlled and girlishly friendly. After attending a party in Paris the night before, she knows most of the people making their way to their 76 euro (US$97) breakfasts and says “hello” to them in her quiet American accent.
She is forthright, however, on the subject of what she refers to as “the book” rather than her book: Dead Aid, which was published this month and in which she argues, in no uncertain terms, that foreign aid has been bad for Africa and must stop.
People are listening. Rwandan government ministers read her book and asked for a meeting. A piece she wrote on the subject in a national newspaper drew responses from policy directors of three major charities. Paul Collier, a former mentor whose theories about the effects of geography and resources on economic growth she draws on, began his review of Dead Aid by comparing her to Dutch feminist Ayaan Hirsi Ali, whose critique of Islam has forced her into hiding. Many people will disagree vociferously with her; many will think she is being recklessly contrarian — but, as Collier pointed out, they cannot easily dismiss her.
It isn’t just her string of degrees — a bachelor’s in chemistry from Lusaka, Zambia, a master’s in finance from the American University in Washington, a master’s from Harvard University’s Kennedy School of Government and a doctorate in economics from Oxford — that has people listening. Nor is it her past jobs as consultant at the World Bank and head of economic research and strategy for sub-Saharan Africa at Goldman Sachs or the fact that Dead Aid is written by an African woman in a time when critics bemoan a lack of big-idea books from women. The reason Moyo is garnering so much attention is that everyone knows things aren’t quite right and that something must be done.
Moyo would be the first to admit that others before her have made the argument that aid simply doesn’t work. William Easterly makes the case in The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good, while Peter Bauer, the Hungarian-born economist to whom Moyo dedicated her book, argued that large transfers of aid were a mistake as far back as the 1960s.
It is a common argument in Africa, too: Moyo’s mother, chair of a leading Zambian bank, and her father, a linguist-turned-anti-corruption campaigner, couldn’t believe she was spending evenings and weekends on writing tens of thousands of words about what they felt was self-evident.
“They were kind of, like: ‘So what? It’s kind of the emperor has no clothes. Yes, nice book. Great that you could articulate it, and you can turn the pages, but everybody knows it doesn’t work,” Moyo said.
Moyo makes it clear at the outset what kind of aid she means. She does not mean humanitarian and emergency aid; she does not mean charity-based aid given to specific organizations and people on the ground to achieve specific things. Moyo herself sits on the boards of several charities, one of which distributes antiretrovirals.
Moyo is hopeful about a new attitude to food aid, whereby the money is used to buy food from farmers within a country and distribute it to those in need instead of flooding the market with foreign food that undercuts local growers. But she is critical of “systemic aid,” the vast sums regularly transferred from government to government or via institutions such as the World Bank.
Moyo paints a dismaying picture of the history of that aid, beginning with the realization at talks in Bretton Woods, New Hampshire, in July 1944 that Europe would need massive injections of cash to get back on its feet, as well as 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 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. There were also other, not particularly altruistic imperatives: The Cold War had begun and “aid,” Moyo writes, “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 in order to pay off already 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 in order to pay off what they owed — they simply sank deeper into debt.
The 1980s also saw aggressive trade liberalization and privatization: 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 decimation of local industries that could not compete. By the end of the 1980s, 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 says, with campaigns to send large amounts of new aid “and thus the prospect of fresh debt, all over again.”
More than US$1 trillion has been sent to Africa over the last 50 years. What has it all achieved, Moyo asks.
“Between 1970 and 1998, when aid flows to Africa were at their peak, poverty in Africa rose from 11 percent to a staggering 66 percent,” Moyo says, adding that roughly 600 million of Africa’s 1 billion people are trapped in poverty.
Although Moyo concedes that aid has done some good on a local level, 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,” she said.
This is particularly true in Africa, 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 US$50 billion of aid? I mean, come on,” she said.
Why is Africa different? Wisely, perhaps, Moyo doesn’t get entangled in generalities about colonial guilt and only refers 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?”
This pity, in her reading, has been devastating for Africa. It has meant a blind eye being turned to corruption. Aid, like oil or diamonds, has a potential to tempt. The West’s pity has also 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.”
Nor is it just the developing countries that become dependent: Around 500,000 people depend on disbursing aid for their livelihoods, Moyo estimates.
It is self-perpetuating: The lending must continue in order for debts to be serviced. And, Moyo says, this fuels civil war because it becomes worth fighting over resources.
Over the past 50 years, 40 million Africans have died in war, a number equal to the population of South Africa.
Increasingly, over the last decade, the stick that accompanies the carrot has been a demand for “good governance.” This means transparent institutions, rule of law and lack of corruption, but in practice is often equated with multi-party elections.
Moyo says with scorn: “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 — Ethiopia, in my case, where Moyo said 97 percent of the government budget is attributed to foreign aid — Moyo saw the aid economy in action in the form of flash 4x4s, high salaries and 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. You hardly ever saw participation from domestic policymakers in designing and discussing what was, essentially, our future — Africa’s future. I mean, there are so many classic examples of people’s lives essentially being shaped and designed by policy that’s not domestically constructed,” she said.
Moyo cites the donor who refused to give any aid unless an entirely new town be constructed in Zambia, despite the government’s protests that they would be left holding the baby, as indeed happened; and former US president George W. Bush’s requirement that two-thirds of the US$15 billion he gave to fight AIDS go to pro-abstinence programs and none to any establishment that provided abortions.
It’s partly about power and purse-strings and partly a PR issue, Moyo said.
“There are many well-spoken, smart African leaders who should be on the global stage,” she said.
Given that not many are, it is a case of who gets to do the talking, and increasingly this is people like musicians Bob Geldof and Bono, the most visible representatives of what Moyo calls “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,” Moyo said.
But what she’s particularly keen on is that people pay attention to her solutions. First is the issue of bonds. To those who object that this is yet another kind of debt but with higher interest rates, Moyo answers that this is part of the point: Aid lending has been far too lenient. Fifty-year terms are offered with low interest rates and more money is lent even if a country defaults. Yet capital markets are not forgiving of corruption: Mess up once, and that’s it.
“Where private capital trumps aid every time,” she writes, “is on the question of governance.”
Moyo’s critics say this is a tricky position to hold in today’s 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 Moyo is bullish: It is a unique opportunity, she says, for a complete systemic overhaul.
Moyo 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 the US has done in the last 50. A great point in their favor is that they give the impression of striking business deals between equal partners, Moyo said. 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; that China could eventually want to protect its investments in Africa by force; that it might undercut local industry and take jobs from Africans.
But Moyo 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.”
Moyo is not the first to note that free trade is freer for some than for others, that trade protection means that each European cow gets US$2.50 a day in subsidies — “more than what a billion people, many of them Africans, each have to live on every day,” she said — but her solution is not just to keep banging on the doors of the EU and the US. Instead, Moyo suggests turning elsewhere — to Brazil and India and China, which has 1.3 billion people, and only 7 percent arable land.
“What an opportunity,” she said.
Moyo advocates more microfinance, efficient banking of savings and remittances. Thirty-three million Africans live abroad and many send money home. In 2006, remittances accounted for 40 percent of Somalia’s GDP.
Her biggest and most controversial solution is that all aid should be cut in the next five years. But isn’t this cavalier and deeply irresponsible? Wouldn’t it damn millions to even more suffering? The West would find it very hard to watch.
“It’s hard to watch already. There are many countries where 70 percent of the population is living on less than US$1 a day. If we continue down this path, the extreme could be that we end up with huge uprisings. Remember that in a lot of these countries 50 percent of the population is under the age of 15. In 10 to 15 years, you have so many people on the streets who have no jobs, no prospects, that you end up in a situation where the state implodes. And we’ve already seen that in Africa, in cases like Somalia. There are no vested interests, there’s no growth, there are no jobs, no prospects for the future. Most Africans, I believe, if you went to them and said this is going to be tough but we’re going to assure you that your children are going to have a better future, I’m pretty sure most families would [be] willing to make the sacrifice. That was how America was built. Families made major, major sacrifices so that their children would have a better life. And Africans are willing to do that. They are not different. They have the same aspirations and hopes that everybody else has,” she said.
Isn’t Moyo playing into the hands of governments that would like to wash their hands of such responsibilities?
“Quite the contrary. They absolutely should be involved. Things like disease, risk of terrorism, political instability, are no longer contained by borders and probably never really were. It’s actually beneficial to the world as a whole to see Africa as an equal partner as opposed to a drag on the economy,” she said.
But is Moyo suggesting yet another capitalist experiment on Africa?
“I’m going to paraphrase Obama’s inaugural speech. Capitalism is undoubtedly, unquestionably, the system that has best delivered and reduced poverty, bar none. Even with its flaws. There is not another system that has delivered more. So does it need reform? For sure. Does it have to be regulated better? Definitely. But to think that we should now ignore everything that it has done for the past 200 years is foolhardy,” she said.
Probably the answer is a careful combination of Moyo’s proposals and other ideas: Christian Aid, for example, suggests plugging the corporate tax loopholes that mean poor countries lose a minimum of US$160 billion a year. More aid, Collier said, should be in non-cash form: in peacekeeping, security guarantees, trade privileges and governance.
Moyo may not have all the answers, or even the right ones, but the fact is that aid levels are dropping whether we like it or not. The Catholic aid agency CAFOD recently estimated that the global economic crisis and the weakening pound could cut US$41 billion in real terms out of the UK foreign aid budget over the next seven years.
Moyo is determined to begin an urgent conversation, one not confined to suited white men and middle-aged rock stars. When she was writing the book, she said, she also wasn’t trying to reach “economists, because we already know. Dead Aid was really targeted at African policymakers and anybody, globally, who’s interested in seeing Africans become an equal partner in the world.”
“I wanted to talk to anybody who watches TV and sees a poor starving African child and thinks, ‘This is ridiculous,’ but at the same time is interested in finding a long-term solution ... who thinks, ‘I actually want to see these countries really rise up from this horror into something where the country and its people contribute meaningfully — not just to their countries, or to their continent but to the world as a whole,” Moyo said. “I want people to call their MPs [members of parliament] after reading it and say: ‘Hang on, you’re asking us to give more aid — do you know that there are actually other alternatives?’”
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