Book review: Dead Aid by Dambisa Moyo

There is a new best-seller amongst people working in development. It's Dambisa Moyo's provocative "Dead Aid". The book can be found in all bookshops on major African airports or cities with an expatriate community working in development. "Dead Aid" is a critique of development aid that is poised to become a bestseller amongst frustrated UN, NGO and other people working in development in Africa like it was "Lords of Poverty" by Graham Hancock some years ago.
Dambisa Moyo is certainly not the first one to offer a critique of development aid. In fact, most of what Moyo writes has been said before by people like Peter Bauer, or more recently William Easterly. She is not even the first African to raise a critical voice on development aid. There are others like the Kenyan economist James Shikwati who are also outspoken about their rejection of western aid to Africa. The reason why her book has gained more attention than the books of other critics has probably to do with her personal background. Moyo is a highly successful academic and business women from Zambia with experience working for the World Bank and for Goldman Sachs. This personal background together with her clear-cut and merciless critique makes it easy to catch the attention of readers interested in development.

In essence Moyo's book is about aid effectiveness. This is certainly not a new subject and is being discussed by academics and aid practitioners since years. Especially with the advent of the Millennium Development Goals and the calls by aid advocates like Jeffrey Sachs, Bono and Bob Geldoff to double development aid to Africa the question whether aid actually works has been at the forefront of discussions. Moyo's contribution to the discussion of aid effectiveness is a simple one. She denies outright that the official development aid of about 1 Trillion US Dollars that was given to Africa since the end of the World War II has achieved anything. But that's not all. The twist in Moyo's argument is that development aid is not only not the solution to Africa's development problems, but that development aid is actually the real problem. According to Moyo it is the official development aid that has corrupted African politicians and taken away the self-initiative of Africans. Moyo's policy recommendation is therefore a radical shock-therapy for Africa. She suggests that all official development aid should be stopped within an agreed timeframe of five years.

Now, how good is the empirical basis of Moyo's argument? She claims that the African countries receiving large amounts of development aid have also had the worst growth rates and that conversely those that received little, like say Botswana, had the best growth rates. This observation is well true. Her argument in essence is that development aid causes bad economic performance. However, it is not surprising that Western donors would select countries with low development indicators to receive development aid and not the ones with relatively good ones. There is therefore not necessarily a causal link between receiving development aid and showing bad performance on economic growth as Moyo claims. Rather the link is that donors consciously choose countries with bad economic performance as they are in more need to receive aid.
Another claim that Moyo makes is that despite the 1 Trillion US$ Dollar spent on development aid in Africa poverty levels in many countries have not significantly declined and in some countries poverty is actually increasing. On the whole this observation again is true. However, if from the 1 Trillion US$ Dollar we deduct all the money that was spent to prop up corrupt governments during the cold war times, like Mobutu's Zaire, and all the money that actually stayed in the West through tied aid and interests paid on soft loans the actual figure in US$ that was spent on poverty reduction would be a lot less than the 1 Trillion US$ Dollar. Nevertheless, Moyo is right that the results are not impressive and the aid industry should seriously look into how to combat corruption and increase aid effectiveness in Africa.

One element that Moyo points out that needs serious attention is the so called micro-macro paradox. Moyo brings the example of an African mosquito net producer that goes out of business because western donors donate mosquito nets for free. This is not the best example as western donors could and often do buy Mosquito nets locally. A better example for the micro-macro paradox would be for example a water project in a dry region. On the micro level the water project might improve the living conditions of say pastoralists in a dry area as they have easier access to water. However, this easier access might also lead to an increase in cattle herds that is beyond what the dry environment with scarce grazing opportunities can sustain. So in the end the well intentioned water project might on the macro level lead to a destruction of the environment on which the larger community depends and thus in the long rung increase poverty instead of reducing it. Moyo is right that the micro-marco paradox needs much more attention. However, she is wrong not to mention the undeniable benefits that a myriad of development projects have brought to many individuals in Africa.

Moyo's book adds to long list of uni-causal explanations why Africa is lagging behind with its development indicators. After the blame has been put on the slave trade, colonialism, imperialism, capitalism, globalization, bad governance, geography and unfavourable climate conditions, Dambisa Moyo now lays all the blame on development aid. As some people, like say Jeffrey Sachs, Bono and Bob Geldof, maybe overestimate the power of development aid to do good and to bring sustainable change, Moyo certainly overestimates the power of development aid to do bad.

In her book Moyo doesn't stop with the analysis of what went wrong in Africa, but she dedicates half the book to what she sees as the solution to all the woes and ills of Africa. Her policy recommendations are essentially packed in what she calls the "Capital Solution". This capital solution entails a greater openness of African states to financial markets. In her view the money flows of financial markets should as soon as possible replace the aid flows. Certainly Africa needs better integration into international financial and commodity markets and most of all Africa needs more entrepreneurs. But whether all the good things for Africa will come from open capital markets is at least questionable given the recent financial crisis that originated in the very same institutions that Moyo thinks will save Africa. Moyo's policy recommendations for Africa are clearly influenced by her experience and the world view gained whilst working for Goldman Sachs.
The other policy recommendation of Moyo, namely to stop all development aid to Africa within five years could entail serious humanitarian and political risks. What would happen to the hungry in Africa? Is it really realistic that after decades of neglect governments would suddenly wake up and feed the hungry? And what would be the chances that there will be more failed states in Africa to be added to the list of Somalia, Sudan, Zimbabwe, Chad and D.R. Congo?
To sum up provocative solutions like the ones presented in "Dead Aid" are good to make headlines and sell a book. To serve as real policy recommendations they are however rather to simplistic. Nevertheless, the book is well worth reading and has taken the discussion of aid effectiveness to a larger audience than the usual academics and aid practitioners.

Robert Moosbrugger

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