Dambisa Moyo, a renowned Zambian economist has just launched her new book, Dead Aid. As the title suggests, she is not a big fan of foreign aid, at least not in the format in which it has been predominantly disbursed to African countries over the last several decades (to be exact, a trillion dollars over the past 60 years). She is especially critical of celebrities who, however well-intentioned in their aid efforts, ultimately perpetuate negative stereotypes about Africa. She says:
“Taking a picture with a starving African child—that doesn’t help me raise an African child to believe she can be an engineer or a doctor.” Instead of aid, Moyo recommends other paths to financial and democratic independence: bond issues, trade, foreign investment. (…) She recommends shutting off all foreign aid to Africa within 10 years.
Not everyone agrees and the book has spurred intense debates. Yet undeniably it makes several very good points. Moyo concludes: “The African issue should be championed by the African leaders charged with delivering long-term growth for their people. Anyone else offering opinions is pretty much moot.” And many Africans second that – among them James Shikwati, the founder and Director of the Inter Region Economic Network (IREN), an independent Kenyan think tank promoting economic freedom as the driving solution to poverty in Africa. You can watch his CIPE Development Institute presentation on this subject here (free registration required).
Foreign aid is a contentious topic. The key disagreements run between those who think that industrialized countries should devote even more resources to foreign aid and those who see aid in a form of official development assistance (ODA) as, on balance, harmful to developing countries. Does foreign aid work? Dr. Boris Begović, President of the Center for Liberal-Democratic Studies in Serbia, takes on this very important question in his CIPE Development Institute presentation (free registration required).
The conclusion reached by Dr. Begović and most analysts is that aid works far less effectively than private investments and it often undermines good governance and development prospects due to significant institutional side effects. But if aid does not spur development, then what does? The alternative is good economic policies. Donors must recognize that their contribution to development should be helping countries create and foster sound market and governance institutions. And the recipient countries should capitalize on the opportunities for market-led growth. Dr. Begović puts it well:
“Aid leads to growth only with good economic policies. It is economic policies that matter. If economic policies are good, then there will be growth, no matter whether there will be aid or no aid.”
You can learn more about CIPE Development Institute here.
NPR (National Public Radio) has recently held an interesting debate on the effectiveness of foreign aid in Africa featuring six experts with opposing views on the subject. A recording of the entire debate is available online. Here are a few key excerpts:
John McArthur, associate director of the Center for Globalization and Sustainable Development at the Earth Institute at Columbia University, said: “Let’s talk about some of those successes. There’s the smallpox eradication that happened around the world, of course, thanks to the U.N.’s World Health Organization that set the target, set up a Smallpox Eradication Unit and got rid of the disease. There’s the fight against AIDS. In 2002, we had perhaps 50,000 people on anti-retroviral treatment in Africa.”
William Easterly, a professor of economics at New York University, countered: “We’ve already spent, as official donors, $600 billion in aid to Africa over the past 45 years, and after all that, children are still not getting the 12-cent medicines (to fight malaria). … So aid would be a great thing if it worked. But the sad tragedy is that — and this is really one of the scandals of our generation — money meant for the most desperate people in the world is simply not reaching them.”
David Rieff, a contributing writer to The New York Times Magazine and contributing editor to The New Republic, emphasized the lack of incorporation of local knowledge into administering foreign aid: “The problem with aid, in short, is that it sets itself up as the kind of know-all and end-all. …Aid, by definition, is outsiders telling people in a place how to do it.”