A New Darling of the Right: African Author Pans Foreign Aid to Africa

I'm going to weigh in briefly on a book I haven't read, Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa. Yes, that seems like the worst kind of uninformed post, but I'm going to take the liberty because the argument made by author Dambisa Moyo is a familiar one to anyone who's taken a hard look at international development issues.

Moyo, a former World Bank official who spent 8 years at Goldman Sachs working in "the debt capital markets, hedge fund coverage and in global macroeconomics teams," is the Right's latest darling. A Zambian native, she can advocate slashing direct aid to the developing world with some degree of insulation from the kind of criticism others might receive if they were to make the same argument.

In a nutshell, it goes like this: with the exception of emergency disaster relief, foreign aid has failed. It hasn't brought the developing world out of poverty and we should therefore consider it a well-intentioned but demonstrably ineffective tool and instead focus on unleashing the miracle of the free markets -- by fighting corruption, increasing micro-lending, strengthening capital markets and etc. (none of which is necessarily bad).

There are a number of problems with this, but foremost among them is that it starts with the assumption that foreign aid is intended primarily to decrease poverty. That's simply not the case; foreign aid has always been first and foremost a geopolitical tool. As such, "best practices" in terms of what would bring real and sustainable development are routinely relegated to an afterthought. Big, flashy projects that bring esteem to a country's elite and put cash into the pockets of foreign contractors are routine. The imperative to create projects with local "ownership" -- considered vital to an aid program's success -- is too often dismissed.

A former professor of mine tells the story of wandering through the Egyptian desert at the height of the Cold War -- when Egypt was playing the U.S. against the USSR for ever more aid. He stumbled upon a dam project financed by the World Bank and the U.S., and was surprised to see the Egyptian workers using donkeys to haul gravel out of a pit, at the bottom of which sat several dozen relatively new tractors. "Why are they using donkeys instead of those John Deere tractors?" he asked his guide. "Because the sand destroyed their engines within a few weeks," was the response. "We told them it would happen, but they were all excited about 'mechanization'." 

It's not an unusual tale. Consider some of the problems that Anup Shaw describes ...

Evan Osbourne, writing for the Cato Institute, also questioning the effectiveness of foreign aid and noted the interests of a number of other donor countries, as well as the U.S., in their aid strategies in past years. For example:

• The US has directed aid to regions where it has concerns related to its national security, e.g. Middle East, and in Cold War times in particular, Central America and the Caribbean;

• Sweden has targeted aid to “progressive societies”;

• France has sought to promote maintenance or preserve and spread of French culture, language, and influence, especially in West Africa, while disproportionately giving aid to those that have extensive commercial ties with France;

• Japan has also heavily skewed aid towards those in East Asia with extensive commercial ties together with conditions of Japanese purchases;

Osbourne also added that domestic pressure groups (corporate lobby groups, etc) “have also proven quite adept at steering aid to their favored recipients.” And so, “If aid is not particularly given with the intention to foster economic growth, it is perhaps not surprising that it does not achieve it.”

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