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Where Dambisa Moyo’s right, and where she’s wrong

I’ve just ordered Dambisa Moyo’s new book, “Dead Aid“. For the past couple of weeks, Moyo has been on a full-scale media blitz, talking with Deborah Solomon in the New York Times Sunday Magazine, trading quips with Stephen Colbert, chatting with Forbes and lunching with the Financial Times.

Unfortunately, it’s hard to get more than the basics from these interviews – Moyo is accomplished, extremely smart, has extensive experience with African finance, and argues that aid has been a very bad thing for Africa thus far. It wasn’t until I got to hear an hour-long interview of Moyo by Tom Ashbrook on On Point that I got a more complete understanding of her views. I came away from that experience agreeing with her on many points, and violently disagreeing on others. An interview in Guernica, forwarded by my friend Nathan, helped me put the finger on what I think she misses, which I’ll explain here.

Moyo isn’t the first person to critique aid as ineffective, insulting or corrupting. William Easterly offers a thorough and sometimes devastating critique in “The White Man’s Burden“, looking both at failed institutions and the good intentions that encourage their support. She’s not the first African to take a crack at the argument either. Andrew Mwenda, a Ugandan journalist, has been railing against aid for years now, picking a fight on the TED Africa stage with Bono and dismissing international aid efforts in a memorable interview with Der Spiegel. But Moyo’s worth listening to, because her argument is a bit more careful than Mwenda’s, and comes from a deeply informed perspective.

She is careful to distinguish between emergency assistance and systematic development aid – Mwenda found himself gently smacked down at TED by former Nigerian finance minister Ngozi Okonjo-Iweala, who told a harrowing story about saving her sister’s life during the Biafran war. “When someone is saving a life, you don’t care that it’s aid – you want the person to be alive.” Bilateral and multilateral aid for long-term economic development is Moyo’s target, and it’s a better target than emergency food aid, disaster aid or medical aid designed to prevent the spread of infectious diseases.

Moyo argues that aid is a corrupting influence on governments because it’s easy money. Governments that have to provide social services by taxing their citizens are more likely to be accountable to them than those that rely on oil profits or aid, both forms of (comparatively) easy money. As an international financeer, Moyo would like to see governments go through the difficult process of floating international bonds to raise money for infrastructure projects – the process forces governments to be more open and transparent, and probably leads to better governance. (It’s rarely discussed that Moyo’s employer, Goldman Sachs, is in the business of floating such bonds, or that her role within GS is to sell these securities. I note this not because I think Moyo is doing anything unethical, more to point out that she walks her talk.)

I’m with her so far, though I agree with Paul Collier that her timing stinks – the capital markets are probably closed to African states for some time to come, which is a shame as the continent is projected to grow this year. And I agree with her on several other important points. Moyo talks about the psychologically corrosive nature of aid, and the danger that if the continent is seen as an aid recipient, it will slow investment. I agree entirely that trade is more important than aid to the continent, and I think she’s wise to advise people who care about Africa to consider supporting microfinance projects… though I’m not confident that microfinance is going to help build the infrastructure many African nations so desperately need.

But Moyo has a special hatred for aid that I don’t fully understand or accept. Not only is she skeptical about its benefits – she seems to draw a bright line between international aid and government corruption. I’m actually fine with that line being drawn – what I don’t get is why she can’t acknowledge that corruption can be a massive problem in African states interacting with the free market as well.

Jake Whitney in Guernica tries to pin Moyo down on this point, asking whether more kleptocratic rulers like Mugabe wouldn’t steal tax revenues as easily as aid revenues. Moyo counters that the population would rise up instead and overthrow dictators stealing tax dollars:

Guernica: So the only reason his government is still standing is because of aid, you’ve said. Let’s take that one step further. If aid were to be cut off, would you expect the people to just simultaneously rise up and throw him out of office or…

Dambisa Moyo: Yeah, they’d rise up. Look at Madagascar. Last Wednesday, there was a coup there. As a matter of fact, there’s been four coups in Africa in the past six months. Each situation is different, but in Madagascar, some aid money had been cut and the government was not investing in the domestic citizenry or even paying the army. So the army staged a coup.

Guernica: It happened quickly? Not a prolonged struggle with a lot of bloodshed?

Dambisa Moyo: Yes, [in Madagascar] it was quick. There was some bloodshed in some of these [coups]. But Mugabe has been smart by keeping the army on his side. If you feed the army, they won’t overthrow you.

As it happens, I’ve been following the situation in Madagascar pretty closely, and I haven’t seen a single account of events that resembles Moyo’s explanation of the situation. The account that I’ve found most convincing puts the blame not on aid, but on corruption and free market investment. The change of power wasn’t an army coup, as Moyo states, but a popular uprising led by the mayor of Antananarivo. The mayor and his supporters had a number of grievances with the president, but one major concern was a pending deal to lease huge amounts of agricultural land to Daewoo. Some Malagasy citizens saw the president’s purchase of an expensive executive jet as evidence that Daewoo had bribed the government to sign an otherwise unpalatable deal. That deal has now been scrapped, and the country is still struggling with questions of who’s in charge – so much for Moyo’s assertion that the months of political uncertainty have been “quick”.

I don’t really mind that Moyo’s not up to speed on all the details of the Madagascar strife – it’s not been well or widely reported. But I worry that her anti-aid, pro-market bias, as expressed in her misinterpretation, leads her to be “over-optimistic“, as Paul Collier (who taught Moyo both at Harvard and Oxford) characterizes her views. Collier believes that Moyo overfocuses on aid, which he describes as “a sideshow” in our debates about African development. And he wonders whether Moyo’s too optimistic about for-profit development, whether investment comes from China or international financial markets.

While I think increased trade is the way forward for Africa, it’s a terrible mistake to assume that private-sector investment will somehow be less subject to corruption, mismanagent, theft and fraud than international aid. Bribery is so rampant in the mining and energy sectors that a partnership of NGOs (those damned NGOs!) have teamed up on a project called “Publish What You Pay” to increase transparency in those sectors. The recent Siemens bribery scandal should remind us that some companies bribe so routinely that they’ve got entire departments dedicated to filling suitcases with cash. Now that’s easy money.

So is Moyo wrong to target aid? Maybe not. Africa needs trade and investment to build the infrastructure the continent lacks, generate jobs and move to a paradigm where government spending is based on taxation, not on external aid. A focus on African poverty and disease probably damages the climate for investment.

But pulling the plug on aid alone isn’t going to do it – kleptocratic governments are already figuring out how to tap Chinese investors, global oil companies and Bavarian engineers for bribes. Here’s my less inflamatory and significantly less viral suggestion: Africa needs good journalists, citizen and profesional, who work tirelessly for transparency. It’s impossible for citizens to hold their governments accountable unless someone is watching their interactions with donors, investors, lenders and international businesses closely. And if you’re looking for places on the continent to invest, the most important map may well be a map of world press freedom, not one of oil or mineral reserves.

(Needless to say, there’s a risk to writing a post like this before reading her book. If she’s got a chapter on press and transparency, or if she’s sufficiently critical of private sector corruption, I promise to eat my words here on the blog.)

10 thoughts on “Where Dambisa Moyo’s right, and where she’s wrong”

  1. Pingback: moyo’s aid. at Where They Are

  2. The market is probably less vulnerable to a certain type of corruption: corruption which increases inefficiencies. Moyo wants growth and that requires efficient markets and the informational feedback loop that comes from them. If corruption in the private sphere is leading to bad investments, etc, then the free market will kill those more rapidly than the aid economy. Perhaps there is some type of corruption that actually is efficient (short term fix since institutional changes require time).

    (None of this is to say that the need for good journalism/transparency isn’t and overlooked and important part).

  3. Thanks it is a powerful word -“When someone is saving a life, you don’t care that it’s aid – you want the person to be alive.”

  4. Also haven’t read the book, but the free trade argument is very problematic given the myriad obstacles Africa faces in competing on an equal footing with rich countries, such as agricultural subsidies.

  5. Would not Aid be more efficient if IMF and the Donors could not impose their rules? So far as I can see, they did not and do not seem ready to admit they are wrong. At the G20 Summit, IMF pledge to change but it sounds like a husband promise to her wife ready to give him a last chance instead of doing the right thing: divorcing. International Aid do not work mostly because IMF and World Bank both failed but also because Donors want to look smarts, not to realy help recipient countries to be free from their “generosity”.

  6. Ethan, as you will see when you read the book, she does not talk about transparency and accountability in private sector investments and governance at all. She does, implicitly, acknowledge that the rule of law in regard to ‘doing business’ must be clear – moribund regulations and laws must be strengthened and reformed in order to attract investments.

    Moreover, she notes and then dismisses concerns about China’s investments that have “not strings” attached – unlike the ones from European banks, for example – and pay no heed to corruption, and environmental or human rights abuses. She notes the “favorable” view many Africans have of the Chinese and asserts that African governments need to regulate labor and environmental stipulations on their own, accountable to their own populations.

    She then goes even further, noting that “Africa is getting what it needs” in this trade-off without illusions. She writes: “Africa is getting quality capital that actually funds investments, jobs for its people, and that elusive growth. These are the things aid promised, but has consistently failed to deliver.”

    Overall, while her soundbites, smarts, and press appearances in the West (one wonder why she is not doing the same PR blitz in African countries, incidentally) are impressive, the book is not – it is missing not only what you note but is also poorly sourced and for the most part, largely polemic rather than thoughtful.

    It’s a huge opportunity missed to have a very serious and substantive debate on aid — led by African thought leaders, reformers, and politicians.

  7. Pingback: Jesse’s Blog » Blog Archive » Appropriate aid is the new charity (but it sucks less)

  8. Kevin — your questions on the role of corruption in increasing market efficiency (and of the market in dampening corruption) are interesting. There’s a whole body of literature on it–eg I’m assuming you’ve know of his work already, but if not, google Johan Graff Lambsdorff — the founder of Transparency International’s corruption index. He has some fascinating insights into symbiotic relationships between corruption and market forces–its not as much, or at least as obviously, about efficiency as you might think.

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