The Dead Aid debate so far

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. (more…)

Unexploded bombs, and other G20 excitment

So here I am in the cavernous media centre at the London Summit.  Some of the main excitement of the day so far: (a) the police found an unexploded World War Two bomb sunk in the dock next to the Excel centre, and will be detonating it shortly; and (b) there are free bacon sandwiches.

Plus, it turns out that one of the other G20 voice bloggers is Daniel Kaufmann – now at the Brookings Institution, before that at the World Bank.  He’s one of the top governance experts in the world (the FT’s words), and was one of the World Bank staffers who really put pressure on Paul Wolfowitz during the 2007 graft kerfuffle – if you recall the letter that he and other Bank staff sent to Wolfowitz, it read

The credibility of our front-line staff is eroding in the face of legitimate questions from our clients about the Bank’s ability to practise what it preaches on governance.  In these circumstances, we cannot credibly implement the governance and anti-corruption strategy.”

Hats off for that.  Next up: bloggers’ press conference wit Douglas Alexander coming up shortly.

Time to dump 0.7

The Economist has a piece on its website today bemoaning the effect of the credit crunch on aid flows:

It is unclear how aid flows are responding to the slowdown but the most recent data (which predate the crisis) hardly encourages hopes of a substantial expansion. Aid from OECD countries fell between 2006 and 2007, partly because of an exceptionally high level of debt relief in 2006. Disregarding this one-off effect, aid only crept up by 2% in 2007. And as a new report from the OECD points out, a 1970 United Nations target for aid of 0.7% of rich-country GDP remains a distant dream. Only Sweden, Norway, Denmark, Luxembourg and the Netherlands have reached this target. The average contribution is 0.45% of GDP.

And this sum was calculated before donor countries were hit by an economic crisis that has shifted priorities dramatically. Moreover, the size of the overall pot in rich countries will shrink as economies contract. Maintaining current levels of aid implies the unlikely earmarking of an even greater share of GDP.

Ah, the target of giving 0.7% of GNI to development assistance: bow your heads in reverence.  But hang on a minute.  Why are we all paying so much attention to a target that’s (a) not based on any assessment of how much money is needed to achieve any defined set of objectives, and (b) nearly forty years old?


Dead aid?

Former Goldman Sachs economist Dambisa Moyo has just published a new book entitled Dead Aid: Why Aid is Not Working and How There is Another Way for Africa. There’s an outline of the argument in this op-ed in The Independent from 2 February, e.g.

I have long believed that far from being a catalyst, foreign aid has been the biggest single inhibitor of Africa’s growth. Among its shortcomings, aid is correlated with corruption, fosters dependency, and invariably instils bureaucracy that hinders the emergence of an essential entrepreneurial class. For Africa to grow in a sustained way, foreign aid will have to be dramatically reduced over time, forcing countries to adopt more transparent strategies to finance development.  What the credit crunch has effectively done is to instigate this process by default …

The development finance policy that has been the hallmark of consistent growth across the world has almost universally comprised a mix of four essential elements: Trade and commerce, Foreign Direct Investment (FDI), microfinance, and access to international capital markets.

As such, despite negative headlines over China’s expanding role in Africa’s burgeoning economy, African governments should be minded to accelerate alliances with China and the rest of the rapidly emerging world. Rather than continue to spend millions of dollars each year attempting to gain greater access to Western trade markets, they should focus their attention on markets such as China, where, with 1.3bn people to feed and just seven per cent arable land, African produce is welcome.

And with roughly $4 trillion of foreign reserves, China is undoubtedly a better bet for much needed FDI in the foreseeable future than its Western competitors. Furthermore, the reserves profile of not just China but also the Middle East suggests a class of new investors with likely appetite to take on African risk via the bond markets.

As Moyo observes, the credit crunch is likely to have the effect of accelerating this debate, especially as publics in developed countries show lower enthusiasm for spending overseas as the full extent of spending cuts at home becomes evident in a couple of years’ time.

All this presents a major strategic challenge for the development community – where the orthodox narrative has arguably ossified in recent years, especially as no-one (donors, NGOs, developing country governments) has had much of an incentive to ask the really hard questions about aid.

The question now: will they all dig in for a defensive game, or is a serious process of strategic renewal finally in prospect?