Book review:Can we live in Africa without aid?

Dr. Moyo’s lecture was aimed at setting the tone for the high-level discussions which will centre on mindset change for development, with a view to making Rwanda a dynamic economic player in the region. Last week on Friday Dr. Dambisa Moya the author of “Dead Aid” visited Rwanda and gave a public lecture to an audience of government officials. Her lecture about the possibility of having a aid-free African continent precede government’s annual ‘National Leadership Retreat’ which is to take place in Rubavu this week. Dr Moyo’s invitation to speak to the country’s government officials, the general public and local media aimed at setting the tone for the high-level discussions which this year will centre on mindset change for delivery and development, with a view to making Rwanda a dynamic economic player in the region and globally. During the lecture Dr Moyo, economist strategist at Goldman Sachs, set out strong views on how aid has not only failed to work for Africa but has also given rise to numerous factors preventing African economies from achieving sustainable growth. According to numerous reviews of her book Dr. Moyo is to aid what Ayaan Hirsi Ali is to Islam. Here is an African woman, articulate, smart, glamorous, delivering a message of brazen political incorrectness: cut aid to Africa. Aid, she argues, has not merely failed to work; it has compounded Africa’s problems. Moyo cannot be dismissed as a crank. Educated at Harvard and Oxford, she heads the Africa strategy of a major bank. Nor can she be dismissed as a renegade who has rejected her roots. She is deeply wounded by the lack of development in Zambia, her home country. So what is she saying? The first stage in her argument is that aid is easy money. If governments had to rely upon private financial markets they would become accountable to lenders, and if they had to rely upon taxation they would become accountable to voters. Aid is like oil, enabling powerful elites to embezzle public revenues. She catalogues evidence, both statistical and anecdotal.But the core of her argument is that there is a better alternative. Governments could find money for development through financial markets, both international and domestic. Historically, the governments of those countries that have successfully developed funded investment by recourse to international markets. In order to borrow, they needed decent credit ratings; to get the ratings, they had to be transparent and prudent. The discipline of transparency and prudence were as important as the money in promoting development. Some of the stronger African governments have at last started down this road. She also sees huge scope for innovations in micro-finance, such as the group borrowing pioneered by the Grameen Bank in Bangladesh. What should we make of these arguments? As it happens I taught Moyo both at Harvard and Oxford, but her ideas are decidedly her own. I think that they deserve to be taken seriously. The function of aid is not to make us feel better about ourselves; it is to promote development, and if a well-informed African tells us that we are inadvertently having the opposite effect, we had better take heed. So is there solid evidence to refute her claim that aid worsens governance and so impoverishes? Unfortunately, the research on whether aid is effective is frankly shambolic. At the level of an individual project we can often show it is effective, but this misses Moyo’s point: that what matters is the overall impact on the society. There is indeed some evidence that aid tends to worsen governance, though whether enough to offset its beneficial effects is unresolved. Certainly, the evidence is sufficiently troubling that respected experts share her concerns. Adrian Wood, formerly chief economist of the Department for International Development, has argued that there should be a ceiling to aid as a proportion of the budget. The consensus academic view, to the extent there is one, is probably that large aid inflows, like large oil revenues, tend to reduce government accountability to citizens. However, cutting aid may not be the best response. My preferred alternative is to strengthen its potential for “governance conditionality”: aid agencies should insist on both transparent budgeting and free and fair elections. That said, I have to admit that Moyo has a good retort. She shows how feeble aid agencies have been: when occasionally one gets tough, others compensate. Within aid agencies, performance is judged predominantly by short-term criteria such as how much aid is disbursed, rather than longer-term effects on accountability. Based on past behavior, a government could assume that the aid would keep flowing more or less regardless of what it did.However, even admitting the severe limits of donor ability to improve governance, I doubt that many of Africa’s problems can be attributed to aid. It is, in my view, something of a sideshow. Because it lends itself to a simple morality story of guilt and reparation, it receives more attention than is warranted. Paradoxically, despite her radically different argument, Moyo has ended up with the same punch line as the conventional, politically correct diagnosis: Africa’s problems are the consequence of our transgressions. By the same token, I think that Moyo’s message is over-optimistic. She implies that, were aid cut, African governments would respond by turning to other sources of finance that would make them more accountable. Ends