The financial crisis has led to a lot of talk about the failure of ethics in the banking sector. Greed overtook wisdom, we’re told. No doubt this is the case. Yet whilst bankers are to blame, it’s hopelessly naïve to suppose that a ‘return’ to some golden age of ethical business will solve all our problems.
There is a parallel with the expenses claims of British parliamentarians. Caught with their hands in the till, some cried out that the system was to blame for letting them get away with it. For all the cheek of that response, there is a lesson in it.
Individuals must take responsibility for their sins. But if we’re serious about making sure that these things cannot occur again, it really isn’t enough to call for more ethics in business. In fact, I’m beginning to suspect that this is a way to avoid having to enact any real change. As the crisis seems to be settling down, the British Chancellor of the Exchequer Alistair Darling has shied away from significant reform of the regulatory system and chose instead to blame bosses for being irresponsible. ‘Don’t worry,’ we seem to be being told, ‘we’ll just ask bankers not to be greedy any more.’ Forgive me, but I had hoped for something more robust.
It must be conceded that in sharp contrast to the plans of the British government, Barack Obama’s planned reforms are substantive and bold. But on a global level, concerns are growing that the opportunity for broader reform that this crisis provides is being missed as optimism returns alongside talk of ‘green shoots of recovery’. The Bank for International Settlements (BIS), often described as the central bankers’ central bank, published its annual report on Monday. According to the FT, the BIS:
said it was vital that thought be given to the ongoing structure of the financial system while the patient was still on life support. Efforts so far, it concluded, had been a “messy mixture of urgent treatment designed to stem the decline, combined with an emerging agenda for comprehensive reform to set the foundations for sustainable growth”.
It highlighted two main risks: first, that not enough will be done to ensure a durable recovery from crisis; and second, that the emergency action to stabilise the financial system will undermine efforts to build a safer system.
The G8, too, is jumping on board the ‘return to ethics’ bandwagon. MBA graduates have set up their own code of ethics, taking inspiration from the medical profession’s Hippocratic Oath. This is welcome. We do need to create a public environment in which ethics and responsibility are more emphasised (and more respected), but to expect a firm whose raison d’etre is the pursuit of profit to apply the brakes is painfully naïve. Business (and politics) should be conducted on more ethical grounds. This year’s Reith Lectures, given by Michael Sandel, address this point well. But in the meantime (between now and hell freezing over), we need rules that acknowledge people’s tendency to ignore ethics, especially in the heat of the moment. The great theorists of capitalism itself, such as Adam Smith, knew well that the system wasn’t moral. But neither is capitalism immoral – it’s simply amoral. If we want a moral system, we have to bring in the morality ourselves. But to expect bankers to do so on their own is to invite a conflict of interest. We do not expect the players at Wimbledon to make line calls on their own shots and, similarly, we should not expect the financial sector to judge the morality or wisdom of its own practices.
This is an important moment, but it’s not a moment of a new ethical kingdom, or of a new form of capitalism. Instead, we need to return to an older scepticism about the role of private interests in our society and the degree to which the doctrine of self-regulation is a realistic solution.
June 30, 2009 at 11:51 am | More on Economics and development, UK | 1 Comment
In the light of ongoing events in Iran (which sadly seem to be in danger of being utterly overshadowed by the other thing), various commentators have been focusing on why exactly it is that the regime reserves its greatest hatred for Britain? Surely America is the ‘great satan’? Why are we taking the flak all of a sudden? Of course, it’s historical. You can look at pretty much any world trouble spot, rogue state or basket case, and find the legacy of the British Empire behind it somehow. The BBC reports that:
It depends on how far back you want to go.
You could go back to 1813 and the Treaty of Gulistan, under which Persia was forced to concede territory to Russia. The treaty was put together by British diplomat Sir Gore Ouseley and is regarded as a humiliation in Iran.
The myth – or reality – of the devious British was established.
Britain was also instrumental in setting Iran’s borders with India in the 1860s.
Then in the 1920s, British forces in Iran under General Edmund Ironside (later British land forces commander in World War II after Dunkirk) helped put Reza Shah on the Peacock throne. His son was Mohammed Reza Pahlavi, the Shah overthrown in the Islamic revolution of 1979, so there is a direct link back to British actions decades ago.
British support for the formation of the state of Israel in 1948 also provides plentiful cause for suspicion, as does the memory of 1953’s Operation Ajax coup.
Of course, the Iranian regime hardly helps matters. For one thing, the British Embassy in Tehran is located near to the aptly named ‘Bobby Sands Street‘. On Monday, British diplomats in Iran were asked to leave the country. The standard diplomatic response to such provocation has always been the productive method of… doing the exact same thing back to them. That’s what’s known as a proportional response. Or an eye for an eye, if you prefer.
Also on Monday, the authorities in Tehran asked the BBC’s Jon Leyne to leave the country. Additionally, the BBC’s Persian network has been blocked in Iran, leading Auntie to use new satellites in order to maintain the service. (As an aside, I would suggest the BBC’s coverage of the election crisis has not been entirely impartial. While the Corporation, technically speaking, has not favoured either side, I don’t think it’s completely unreasonable to suggest that there is a detectable-if unspoken-tendency to favour Mousavi. But who amongst us could blame them?) Let’s not forget the Revolutionary Guards’ seizure of British sailors in 2007, a low point in Anglo-Iranian relations.
There is no sign that the conflict will abate any time soon. Ayatollah Khamenei’s speech last week featured the following statement:
Just observe the hands of the enemy. They are hungry wolves ambushing and removing the diplomacy [sic] cover from their faces. Don’t underestimate them. I will tell you, diplomats of other countries in the past few days have taken away their masks and [are] showing their true image. The most evil of them all is the British Government.
The Supreme Leader chose not to elaborate. Building on this, according to The Times:
In what must rank as one of the most idiotic statements made by a serving Foreign Minister of an Iranian Government, Mr Mottaki charged that “they [the British Government] sent planes full of passengers to Iran with special intelligence and security ambitions”, providing as evidence of this apparent deluge of spies, the observation that “they had to turn the small flights to Tehran from the UK into Boeing 747 airliners”.
MI6 subtlety FAIL.
UPDATE: (28/06/09) The Iranian authorities have now arrested nine British Embassy staff.
June 26, 2009 at 10:12 pm | More on Conflict and security, Middle East and North Africa | Comments Off
As we push on through the recession, one thing that we haven’t seen enough of is solid original thinking about the causes of the crisis and what can be done to stop such a systemic disaster ever happening again. However Duncan Watts, writing in the Boston Globe, has a bold idea. Not only were banks to big to fail but the system as a whole is simply too complex to exist.
Rather than waiting until the next cascade is imminent, and then following the usual modus operandi of propping up the handful of firms that seem to pose the greatest threat, it may be time for a new approach: preventing the system from becoming overly complex in the first place.
It’s well known that few in the financial sector (let alone regulators) understood the instruments that were being used. Risk assessors refused to believe that a firm like Lehman Brothers could ever fall so easily and as a result, the consequences of such a collapse were not accounted for in risk models. In an ever more interlinked world, the danger of contagion effects means that everyone has an interest in the way the system works. If only a few people understand it, so much the worse for the rest of us.
An alternate approach is to deal with the problem before crises emerge. On a routine basis, regulators could review the largest and most connected firms in each industry, and ask themselves essentially the same question that crisis situations already force them to answer: “Would the sudden failure of this company generate intolerable knock-on effects for the wider economy?” If the answer is “yes,” the firm could be required to downsize, or shed business lines in an orderly manner until regulators are satisfied that it no longer poses a serious systemic risk. Correspondingly, proposed mergers and acquisitions could be reviewed for their potential to create an entity that could not then be permitted to fail… Perhaps what we need is an “anti-systemic risk” law that would aim to avert systemic risk before it is too late.
Watts concedes that this degree of intervention in the market is concerning, but one thing that everyone seems to agree on is that the era of market fundamentalism is over. If we’re willing to allow the state to intervene in bailing out failed banks, why not intervene to prevent them becoming unmanageable in the first place? Think of it as bonsai banking. As E.F. Schumacher said, ’small is beautiful’.
June 22, 2009 at 2:26 pm | More on Economics and development, Global system, North America | 3 Comments
The good stuff - Flickr User BullionVault
It’s well known that in times of crisis, people fall back on the certainties of old. Among these is that gold is a good investment, for gold always holds its value far better than, say, real estate. The current recession is no different. Back in October there was a brief media hullabaloo about people buying up gold in droves, forming queues outside bullion merchants.
Now we are seeing something totally new. Indeed, there is no end to human ingenuity. While Japan has long led the pack in eccentric vending machines (purportedly used underwear being the most famous among many products available), in Germany a bright spark named Thomas Geissler has hit upon just what’s needed in these trying times: gold bullion vending machines! I’m kicking myself for not having come up with that one. According to the FT:
For €30 airport shoppers could buy a 1g wafer of gold, with a larger 10g bar priced on Tuesday at €245 and gold coins also on sale.
When the Financial Times bought the cheapest product it was dispensed in an oblong metal box labelled “My Golden Treasure”, with a certificate of authenticity signed by Mr Geissler but no receipt and the wrong change. Mr Geissler said he hoped to have a more advanced prototype available this month.
Still, I suppose spending your money on gold from a vending machine has to be a better investment plan than that of the woman who saved $1 million in her mattress, only for it to be thrown out by her daughter.
June 17, 2009 at 9:32 pm | More on Economics and development, Europe and Central Asia | 1 Comment
Development charity One.org has released its annual report examining how far G8 countries are meeting their Gleneagles commitment to double aid to Africa. The US, Japan and Canada are headed towards meeting or exceeding their pledges, while Germany and the UK are said to be ’striving’ towards their ‘big commitments’. Unfortunately, France and Italy are letting the rest of us down. Apparently, they account for 80% of the shortfall in aid increases. Italy’s efforts in particular are described as an ‘utter failure’. Bob Geldof is quoted as having commented in a characteristically forthright manner:
Poor, sad Italy. That their economy is in such a disastrous meltdown condition that they must steal from the poor, rob the ill and snatch education from the minds of the young not only beggars the imagination, but must also surely beggar the soul of that most beautiful country. Shame on you. Your government disgraces you.
‘Nuff said.
June 15, 2009 at 9:00 am | More on Africa, Economics and development, Europe and Central Asia, Global system | Comments Off
In the world of Bretton Woods watchers such as myself (and what a world that is), all eyes are on the US Congress, where lawmakers are deciding on the fate of President Obama’s commitment at the G20 to boost the US’s contribution to the IMF by $108 billion. There is no doubt that the Fund needs that money (as part of an overall increase of its resources to £750 billion) but things are not going smoothly on the Hill.
Unfortunately, US politics being what it is, the increased funding is part of another bill… an Iraq war financing bill. Of course, this means that Congressmen and women can’t vote for IMF funds without also voting for war funds and can’t vote against war funds without also voting against IMF funds. (And vice versa.) According to Mark Weisbrot:
from the beginning, the administration has faced tremendous obstacles to getting a majority members of the House of Representatives to vote for the money in an up-or-down vote. This is because many members of both parties are afraid that it would be seen as another taxpayer bailout for the financial industry – and foreign banks at that.
So we are left with a state of affairs in which some Democrats are rebelling against the Bill for war reasons, and others because they want moves on IMF reform (particularly in terms of its dangerously austere lending conditions) in exchange for the increasing funding proposed. Few would argue that this is a sensible and eminently just request. However, the US Treasury (which of course has an enormous degree of sway over IMF policy) has refused to commit to this as a condition of the increased funds. Republicans, meanwhile, ostensibly just want the IMF money put to a separate vote. But (Weisbrot again):
Interestingly, the Republicans are not trying very hard to get the IMF money removed. They are not saying anything on television or in the media. This indicates that they may want this money to pass with only Democratic votes, so that they can attack the Dems – especially those in conservative districts – when the money ends up bailing out the European banks in eastern Europe.
Of course, that’s a solid criticism and no doubt it’d play very well. But at the end of the day, this is exactly what the IMF is meant to do, it’s part of what it was set up for and it’s certainly part of the job of a hegemonic country that claims to be ‘ready to lead once more‘.
June 12, 2009 at 10:52 am | More on Economics and development, Global system, North America | Comments Off
Royal Dutch Shell - Flickr User Lee Otis
After 13 years, Royal Dutch Shell has agreed to pay $15.5 million compensation to settle a court case over its alleged part in the execution of Ken Saro-Wiwa and other Ogoni leaders in the Niger Delta. Much of the backstory can be found here.
Now I’m no judge (not yet, anyway), but $15 million doesn’t seem a lot for a firm with 2008 revenues of $458 billion. Michael Goldhaber, who does know something about law, describes the sum as ‘nuisance value’ from Shell’s point of view.
Yet the fact that Shell settled the day before the trial was due to begin is indicative of the firm’s distaste for either the publicity that court proceedings would create, or the culpability that might be uncovered. According to The Guardian:
Supporters of the legal action said the fact that Shell had walked away from the trial suggested the company had been anxious about the evidence that would have been presented had it gone ahead. Stephen Kretzmann, director of Oil Change International, said Shell “knew the case was overwhelming against them, so they bought their way out of a trial”.
Among the documents lodged with the New York court was a 1994 letter from Shell in which it agreed to pay a unit of the Nigerian army for services rendered. The unit had retrieved one of the company’s fire trucks from the village of Korokoro – an action that according to reports at the time left one Ogoni man dead and two wounded. Shell wrote it was making the payment “as a show of gratitude and motivation for a sustained favourable disposition in future assignments”.
Although, if the case against Shell was so clear-cut, one has to wonder why the Ogoni and their legal representatives chose to accept an out-of-court settlement at all. Regardless of the ins and outs of the case, the mere fact of having brought Shell to trial is a testament to the power of transnational solidarities. And we may celebrate the fact that the Ogoni have finally attained some measure of justice.
Over the past few years, the plight of the Ogoni people and their fight against Shell’s operations in Ogoniland has become the anti-corporate quest for justice par excellence. The cases were brought under the US’s Alien Tort Statute, which is becoming increasingly popular with campaigners seeking hearings against corporate abuses in the developing world. The outcome of this case indicates that multinationals are going to be decreasingly able to get away with underhanded tactics in the further-flung reaches of their operations. In short, this is a significant victory for transnational corporate accountability. Yet one is left with the nagging feeling that a trial would have better served the wider public interest. Consider this, from John Vidal:
The settlement stops the world knowing exactly what was the company’s relationship with the national government and the military, and the extent of Shell’s involvement in the human rights abuses that led to Ken Saro-Wiwa’s execution. The Ogoni had assembled a formidable case and were being represented by some of the most best [sic] human rights lawyers in the world. It could have been intensely embarrassing for the company if it all had come out.
Shell said it had agreed to settle out of humanitarian interests, but everyone on the delta knows that real justice has not been done, and that the environmental abuses continue. The company continues to needlessly burn off vast amounts of gas. The air is still poisoned, children are still sick, there are few jobs, the creeks are polluted and the poverty is intense.
Indeed, Ken Saro-Wiwa’s son told Democracy Now! that:
there’s a bigger picture here. Clearly, there are issues in the Niger Delta, there’s challenges in the Niger Delta, and we need people with solutions. We need-we all know what the problems are. The oil companies know what the problems are. The government knows what the problems are. The community knows what the problems are. But what we need now are the real solutions, and we need them now.
Of course, while this particular case is over, Shell must now face a proliferation of miscellaneous legal claims from other Ogoni, both individually and collectively. Perhaps other cases like that of the Ogoni will see resolution. Next up: Bhopal and Union Carbide? As the Wiwa vs. Shell plaintiffs’ final statement says: ‘the struggle continues.’
June 10, 2009 at 12:19 pm | More on Africa, Climate and resource scarcity, Influence and networks | Comments Off
A few days ago the House of Commons International Development Committee released its latest report (entitled Aid Under Pressure: Support for Development Assistance in an Economic Downturn) and there are a few points which might be of interest to Global Dashboard readers.
As its title would suggest, the report focuses on the impact of the financial crisis on international development efforts. It opens on a grim note with the news that DFID estimates that by the end of next year 90 million more people will be living in extreme poverty as a result of the crisis. Moreover, the WHO believes that up to 400,000 additional children could die as a result. The International Development Committee adds that progress towards the MDGs may have been set back by up to three years.
A major point made in testimony given to the Committee was that initial expectations that the developing world would be insulated from the impact of the crisis have proven false. Whilst the contagion effect of the crisis has only directly harmed western economies, the indirect knock-on effects have applied pressure to transnational business flows worldwide. The World Bank reports that of the 107 counties it categorises as ‘developing’, 40% are ‘highly exposed’ to the downturn.
Unsurprisingly-though quite rightly-the International Development Committee’s response to all this is to insist on the importance of maintaining ongoing aid commitments, as agreed at the G20 summit in July.
Aside from that, the issue of tax havens is highlighted and it would seem that the British government is increasingly committed to making progress in this respect. Gordon Brown in particular has been forthright on this issue, but his government seems somewhat hamstrung at present and we shall have to await developments.
In the wake of the London Summit, institutional reform is back on the agenda. The need to overhaul the IMF and World Bank, particularly in regard to apportionment of votes within those organisations needs to be a priority for the post-crisis politics of global governance. Indeed, reform has been presented as a condition for the boost to IMF funding that the G20 agreed upon earlier this year. Broader questions of operational versatility are also important. In these respects, the Committee’s report is strong on good ideas and analysis, but light on suggestions for how Britain can help bring about the desired changes. For that perhaps we need to wait for the DFID White Paper due later in the summer.
On a seemingly superficial note, the Committee proposes that DFID’s name be changed and puts forward ‘British Aid’ and ‘DFID UK’ as possibilities. The intention, it seems is to increase the ‘visibility’ of UK international development spending. Of course, DFID does a lot more than aid, so I think we can immediately dismiss the first suggestion. As a reserved Brit, the idea of being so brash as to use ‘UK’ on international development work is too reminiscent of the US tendency to splash the Stars and Stripes on aid parcels. It seems… immodest, somehow. But it might be a good idea all the same – US aid is part of its soft power and in the same way, the work of the Department for International Development has the potential to be a significant contributor to British attempts to win ‘hearts and minds’, particularly in countries like Afghanistan. After all, the Committee’s report points out that DFID is the largest donor to the World Bank’s International Development Association. Maybe blowing our national trumpet more boldly isn’t such a bad idea. Though one wonders if there isn’t a snappier name out there somewhere – suggestions welcome, of course.
June 7, 2009 at 11:58 pm | More on Economics and development, Global system, Influence and networks, UK | Comments Off
Yesterday’s Financial Times featured an interesting proposal from Martin Sandbu and Nicholas Shaxson, aimed at evading the so-called ‘Dutch disease‘, in which high rents from valuable natural resource extraction can seriously undermine domestic manufacturing and agricultural sectors, as well as encouraging corruption. The proposed solution is that governments in developing countries should divvy up any revenues between the citizenry. According to Sandbu and Shaxson, this should mean that:
instead of fighting each other for oil rents, political elites would have to bargain with the people for tax revenues. If the government did not tax everything back, direct distribution would dramatically transfer wealth to the poor. This has nothing to do with privatisation: the government could still get funds for roads and schools – but with pressure to spend the money well.
Now, to me, that sounds like a pretty solid and progressive idea. But I’m not so great at spotting potential unintended consequences in the long-term. I’m (rather pessimistically) assuming there must be some. That being the case, perhaps this should be thrown open in the comments section – can any readers spot possible flaws with this plan?
June 5, 2009 at 10:42 am | More on Economics and development | 2 Comments
Here in Britain, the fallout from recent revelations about MPs’ expenses continues. Meanwhile, it seems that World Bank officials have been up to similar tricks. Admittedly we cynics may scoff at their lack of imagination – after all, they haven’t been buying birdhouses or maintaining their moats with public funds. But Peter Bosshard at International Rivers, reviewing a book by former Bank staffer Steve Berkman, highlights some dubious claims all the same (hat tip: Bretton Woods Project). Berkman’s book:
reports how Nigerian officials charged $2,200 for 18 cups of tea and snacks at a roadside stall under a World Bank loan (and got away with it). A project office with eight staff in the same country charged a switchboard for 60 telephones, 48 air conditioners, 14 shredders and 12 refrigerators to the operating expenses of another Bank project – all at prices well above the going market rates. They also claimed expenses for television and video sets at 249,999 Naira apiece – more than ten times the equipment’s street value, but just one Naira less than the amount which triggers stricter controls.
Few will be surprised to hear about World Bank money disappearing – Berkman quotes an internal report which found that ’stealing from Bank funds is the rule, not the exception’. But all the same (and perhaps I’m being naïve), one would have thought that World Bank employees would have enough problems with the endemic low-level fraud that their organisation is known for, without contributing to it themselves. Of course, unlike British parliamentarians, World Bank officials aren’t politicians and being insulated by their institution, will never have to face the wrath of the public.
June 3, 2009 at 5:39 pm | More on Africa, Economics and development | 1 Comment
Dambisa Moyo is rapidly becoming the bête noire of orthodox development circles. Her recent book, Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa has stirred up a good deal of controversy, arguing that that ‘overreliance on aid has trapped developing nations in a vicious circle of aid dependency, corruption, market distortion, and further poverty, leaving them with nothing but the “need” for more aid.’ (Incidentally, you would not believe how long it look me to realise that ‘Dead Aid’ is a play on Live Aid.)
In typically sceptical fashion, Emmanuel Yujuico at IPE Zone points out that ‘you also have to consider that several books have followed the same formula of catchy title plus scepticism about aid. Others have said it earlier–and better.’ He’s right, and people like James Ferguson have been writing on this for a number of years, but it’s worth noting that none of those authors (to my knowledge, at least) were black. As has been noted by Niall Ferguson, who wrote the foreword to Dead Aid, it is pleasing to see a ‘popular’ book on development that has been written by an African woman, rather than an American male. That said, as Global Dashboard’s own Jules Evans points out, Moyo hasn’t lived in Africa for years. Moreover, her career has followed the path of the archetypal high-flying western development worker – Oxford, Harvard, Goldman Sachs and the World Bank.
Back in February, Global Dashboard asked where the Dead Aid argument leaves traditional developmentists: ‘will they all dig in for a defensive game, or is a serious process of strategic renewal finally in prospect?’ Since then, promotional opinion pieces and interviews for Moyo’s book have led to a spate of debates (surely that is the correct collective noun?) within the development blogosphere and wider media that may be able to shed some light on this question.
In the early days of the debate, Francis Fukuyama, writing in Slate attacked Moyo’s critique of loans from international public institutions:
Were it not for the continued availability of concessional loans, she argues, African countries would be forced to get their acts together and meet international governance standards so as to be able to access global bond markets… Moyo’s case that Africa would have good government if it weren’t for the influx of aid stretches credulity.
Indeed, it’s that word ‘forced’ that is troubling. Forced at what cost? ‘Getting their acts together’, one suspects, would involve fiscal austerity still more severe than that demanded by multilateral development loans at present.
A few days ago, Jeffrey Sachs, the big beast of popular development evangelism (and an old teacher of Moyo’s), defended his industry (yes, it is an industry) in the HuffPo. In a dubious rhetorical flourish with echoes of Ha-Joon Chang, he accused Moyo of trying to kick away the ladder she used to get her impressive education (i.e. scholarships, which he equates to aid). Sachs adds:
Of course, most Americans know little about the many crucially successful aid efforts, because Moyo, Easterly, and others lump all kinds of programs – the good and the bad – into one big undifferentiated mass, rather than helping people to understand what is working and how it can be expanded, and what is not working, and should therefore be cut back. Nor do Americans hear that many poor countries graduate from the need for aid over time, precisely because aid programs help to spur economic growth and successfully prepare countries to tackle future priorities.
Yet if Sachs is angry about Moyo not mentioning aid’s successes, he is himself equally disingenuous about the diverse failures of aid regimes over the past half-century. He doesn’t seem to have any answer to this except to demand more aid. In the meantime, here in Britain, the Dead Aid debate reached the Hay Festival last week, where Martin Kettle argued that:
if good intentions could change the world then the advocates of aid would have redeemed Africa a dozen times over. Yet good intentions and admirable motives, while obviously better than malign intentions and suspect motives, are not enough. Africa has 100,000 millionaires. Every African alive today has received roughly $5,000 in aid.
Moyo struck back at her critics (Sachs in particular), with the point that ‘yes an aid-funded scholarship will send a girl to school, but we ought not to delude ourselves that such largesse will make her country grow at the requisite growth rates to meaningfully put a dent in poverty.’
To prevent this post growing to an unwieldy length (and readers’ attentions dwindling in inverse proportion), I’ll let you follow the rest of the debate: Sachs and McArthur reply to Moyo’s reply, at which point William Easterly intervenes on a point of geography. Mo Ibrahim suggested that we need to be paying more attention to something ‘good governance’, though what that might mean is unclear. Kevin Watkins (of the UNDP and Oxfam before that) pointed out that Moyo is tilting at windmills. Indeed, in a phrase I’d like to borrow from Laurie Penny, she is deploying a straw man so large that you’d expect to see Christopher Lee dancing around it. As Watkins rightly says:
most advocates for increased development assistance recognise that aid is not a cure-all for poverty and that trade is critically important (most of Moyo’s evidence on trade is actually lifted from Oxfam). They also recognise that corruption is a serious problem, that aid is often less effective than it should be, and that aid flows have to be managed to prevent economic distortions that can harm growth prospects.
Finally, Saturday’s editorial in The Guardian told us that ‘when a Zambian-born economist like Dambisa Moyo, in a much-debated new book, says aid is part of the problem, and gets a round of applause from many Africans, it is time to listen, although not to agree.’ Quite.
No doubt this is a debate that will continue for some time. This is a well-written set of articles, to be sure, but it’s not clear that any of these writers are really engaging with each other’s core arguments and assumptions. Perhaps it would be better to get them all in the same room, or at least on Bloggingheads.
Of course, common sense dictates that this shouldn’t really be an argument about aid or no aid, but about how aid is spent. The days when money was thrown at the problems of the developing world are well and truly over and development programmes have been getting ever more sophisticated in this respect.
However, it should never be forgotten that these are not purely questions of economics. As we students of international political economy are fond of saying, it’s about the politics, stupid. The choices over how aid is spent cannot be seen solely as ’scientific’ economic decisions – they are socially bound and politically contested. It is in the sphere of politics that the real aid debate needs to be conducted, where the important questions are not about if, but about how aid is to be used.
June 1, 2009 at 2:43 pm | More on Africa, Economics and development | 3 Comments
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