Giving alms to Africa remains one of the biggest ideas of our time — millions march for it, governments are judged by it, celebrities proselytize the need for it. According to writer Dambisa Moyo, a former economist at Goldman Sachs and the author of “Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa,” calls for more aid to Africa are growing louder, with advocates pushing for doubling the roughly $50 billion of international assistance that already goes to Africa each year.
Aid Makes the Poor Countries Even Poorer
Over the past 60 years, at least $1 trillion of development-related aid has been transferred from rich countries to Africa, according to estimates, but the per-capita income on the continent today is lower than it was in the 1970s. The number of people living on less than a dollar a day, currently more than 50 percent of the population (more than 350 million people), has nearly doubled in two decades. African countries pay close to $20 billion in debt repayments per year, which writer Moyo says is a stark reminder that aid is not free, pointing out that in order to keep the system going, debt is repaid at the expense of African education and health care.
More Aid, More Conflict
Foreign aid often focuses on the self-interests of the donor, rather than the needs of the recipient, according to an analysis by Erika Lal of Azusa Pacific University. A study conducted at Brigham Young University found that aid contributes to conflict in localized clusters. By looking at foreign aid projects in Sierra Leone, Mozambique and Angola during both conflict period and nonconflict periods, the researchers determined aid is positively associated with conflict.
Even IMF Warned That Aid Doesn’t Work
In 2005, the International Monetary Fund warned that governments, donors, campaigners and pop stars need to be far more modest in their claims that increased aid will solve Africa’s problems. In a report titled “Aid Will Not Lift Growth in Africa,” the IMF cautioned that “we need to be careful given the chequered history of aid, that we do not place more hopes on aid as an instrument of development than it is capable of delivering.” The report studied duration, type of donor and governance record of recipient and concluded that aid did not boost growth. But despite such comments, no serious efforts have been made to wean Africa off this debilitating drug.
More Aid Hampers Growth
Rather than pumping aid to African nations, the IMF suggested that governments focus on trading with Africa instead. Raghuram Rajan, the fund’s chief economist and co-author of the reports, and Arvind Subramanian, head of macroeconomic studies, argued that aid contributes to a country’s rising exchange rate, which hampers growth. In addition, increased aid contributes to poor productivity by depressing exports, the IMF research shows.
More Aid, More Corruption
As many observers have pointed out, aid often enables corruption. Jeffrey Winters, a professor at Northwestern University, told the U.S. Senate Committee on Foreign Relations in 2004 that the World Bank had participated in the corruption of roughly $100 billion of its loan funds intended for development. The African Union has estimated that corruption was costing the continent $150 billion a year, as international donors were apparently turning a blind eye to the simple fact that aid money was inadvertently fueling graft. According to corruption watchdog agency Transparency International, Mobutu Sese Seko, Zaire’s (Democratic Republic of the Congo) president from 1965 to 1997, reportedly stole at least $5 billion from the country while being backed by Belgium.
Free Money Keeps Bad Governments in Power
A constant stream of “free” money is a perfect way to keep an inefficient or simply bad government in power, writer Dambisa Moyo points out. As aid flows in, there is nothing more for the government to do — it doesn’t need to raise taxes, and as long as it pays the army, it doesn’t have to take account of its disgruntled citizens. No matter that its citizens are disenfranchised (as with no taxation there can be no representation). All the government really needs to do is to court and cater to its foreign donors to stay in power, with no incentive to seek other, better, more transparent ways of raising development finance.
How Free Mosquito Nets Can Be Harmful
Even what may appear as a benign intervention on the surface can have damning consequences. Moyo provides the example of the mosquito-net maker in small-town Africa. If he employs 10 people who together manufacture 500 nets a week, typically these 10 employees support upward of 15 relatives each. If a Western government-inspired program generously supplies the affected region with 100,000 free mosquito nets, this promptly puts the mosquito net manufacturer out of business and his 10 employees can no longer support their 150 dependents. “In a couple of years, most of the donated nets will be torn and useless, but now there is no mosquito net maker to go to,” Moyo writes. “They’ll have to get more aid. And African governments once again get to abdicate their responsibilities.”
The More Aid, the Less Attractive for Investors
The aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment. Aid also increases the risk of civil conflict and unrest because of the idleness it creates in young people. The fact that over 60 percent of sub-Saharan Africa’s population is under the age of 24 with few economic prospects is a cause for instability. The stigma associated with countries relying on aid should also not be underestimated or ignored. Moyo writes that it is the rare investor who wants to risk money in a country that is unable to stand on its own feet and manage its own affairs in a sustainable way.
Instead of Food Aid, a Better Idea Is Supporting African Farmers
Food aid often kills growth for African farmers. In fiscal year 2013, the U.S.’s Food for Peace provided approximately 1.1 million metric tons of food aid, valued at approximately $1.4 billion, in 46 countries. But the bulk of the aid went to the African continent — in many cases buying American-grown food that has to then be shipped across oceans. As a result, local farmers are often put out of business — instead of the money being used to buy food from farmers within the country and then distribute that food to the local citizens in need.
Erika Lal of Azusa Pacific University
IMF report titled “Aid Will Not Lift Growth in Africa, IMF
Writer Dambisa Moyo, a former economist at Goldman Sachs and the author of Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa,
US AID http://www.usaid.gov/what-we-do/agriculture-and-food-security/food-assistance/quick-facts/fiscal-year-2013-food-peace