Dambisa Moyo is asked about Haiti, banking and the future

The controversial economist Dambisa Moyo was interviewed recently by the New Statesman. Moyo the author of "Dead Aid" the book that claims that international aid has done more to harm Africa than help it.

In the interview, Moyo is asked about Haiti, the recent banking crisis, and her predictions for the future. Moyo also talks about her own future, previewing her upcoming book and plans to get back into finance. Sophie Elmhirst posed the questions to Moyo.

Your vision for Africa's future is a controversial one. Do you really believe that aid is dead?
If aid were a private-sector business or a political system, it would definitely have gone by now. But here we have a system that has been going on and on and not delivering.

So what's your solution?
There is no evidence anywhere on earth that aid has delivered long-term growth. The countries that have moved hundreds and millions of people out of poverty in our lifetime - China, India, South Africa, Botswana - have not relied on aid to the extent that some African countries do. Can we have a discussion about that?

How do you answer those who say aid is essential to development?
Behind closed doors, pretty much every international aid minister says that there is a fundamental problem with the system. Many African leaders are on record saying that it doesn't work, including Paul Kagame [of Rwanda] and Raila Odinga [of Kenya].

What about in a case like Haiti?
People need jobs. There is no magic trick. You need investment and job creation. Haiti can't come out of this disaster dependent on aid -
it's not viable.

Don't developing countries need the help of rich ones to mitigate the effects of climate change?
The people at the forefront of this agenda are not going to be the aid agencies. In the past, the big development issues were led by western governments and the emerging markets were silent. But now, we've got a situation where they are taking much more of a lead.
...

Has the financial crisis exposed the western economic system as unworkable?
Quite the contrary. Unfettered capitalism does not work, but over the past 300 years capitalism has created jobs and reduced poverty. To turn around and say that it is defunct is really a stretch. The banks didn't do anything illegal. It's completely simplistic to say that they are bad.

Comment: Not "Dead Aid" but Reverse Aid

In one of the most controversial books about international aid in recient years, Dambisa Moyo says that African nations are worse off than they were 50 years ago. In her book "Dead Aid" she uses the figure of $1 trillion dollars when talking about the total amount of money that has been spent in African aid.

However in this commentary from Joy Online, Dr. Nii Moi Thompson challenges the figure and describes why it may not be entirely accurate. At the same time, Dr Thompson shows an unwanted side-effect that some aid loans have on African nations. Dr. Thompson is a development economist who lives in Ghana.

First is the exact scale of the “aid” that Moyo tells us, with irritating frequency, has been “transferred to Africa” over the past 50 years with seemingly no meaningful reciprocity. She parrots the oft-repeated claim of “US$1 trillion,” a figure whose origin and credibility remain murky, at best.

But that’s only half the problem of Dead Aid. The other (unspoken) half is the amount of money that poor countries have transferred to rich countries over the same period.

Perhaps for Moyo there is no data on this other transfer to warrant its discussion, but the case of Ghana (a poster child of the aid-underdevelopment paradox) shows why such an omission cannot be ignored for whatever reason.

In 1994 (five years before donors labeled it “heavily indebted” and “poor”), Ghana’s budget statement made the following grim disclosure about its 1993 performance: “In the second half of the year, Ghana also obtained a Compensatory and Contingency Financing Facility [from the IMF] equivalent to US$65.1 million. At the same time an amount of US$67.9 million was paid back to the IMF, thereby showing a net outflow to the IMF of US$2.8 million.” If every African country in 1993 sent out an average of US$2.8 million more to donors than it received, that would be about US$150 million in net transfers, a princely sum for a continent supposedly hard up for development finance.

Of course we cannot forget the well-known disparity between what donors publicly pledge to “transfer” (headline aid) and what they eventually give to, or for, poor countries (pipeline aid). For example, data from Ghana’s Ministry of Finance shows that between 1990 and 2006, donors promised some US$1.1 billion in aid to the education sector but actually disbursed US$766.9 million
But even here we must distinguish between “disbursements” and “transfers”. Some donors insist, as a matter of commercial policy, that a portion of disbursed aid (sometimes as high as 75%) be spent on imports, including consultancy services, from their home countries; very little money is actually “transferred” to the recipient countries.

Besides the well-known problems with such “tied aid”, poor countries also lose large amounts of their own monies to rich countries through such practices as transfer pricing (self-dealing) and invoice-tampering by unscrupulous multi-nationals, as well as the abuse of tax holidays granted to these multi-nationals ostensibly to help stimulate economic growth in poor countries. In Ghana, some multi-nationals have been known to sell off their assets to others, typically from their home countries, just as their tax holiday is about to expire for them to pay taxes. The tax holiday is effectively extended, depriving Ghana of resources for development and, paradoxically, deepening its aid dependence.

Perhaps rather than Dead Aid we should be talking about Reverse Aid.

Review of the Munk Debate on international aid

Last night in Toronto a big debate over international aid was streamed on line. Dambisa Moyo and Paul Collier were amongst the experts debating whether aid has done more good or bad.

To review some of what happened last night we turn to the Toronto Star, writer Iain Marlow describes which participant drew the biggest applause.

Dambisa Moyo is possibly the only person who can get applause in Canada by saying, after listening to Stephen Lewis speak, "If you listen to what Stephen has said, it's littered with negatives."

It helps, of course, that Moyo is a celebrated African-born, Oxford- and Harvard-educated economist. She is also the author of Dead Aid, a book scathingly critical of current Western aid policies.

The multiple exchanges between Moyo and Canada's celebrated former UN special envoy for HIV-AIDS took place last night at the Munk Debate on Foreign Aid at the Royal Ontario Museum. About 800 packed the auditorium while 300 watched on big screens.

The debate also featured Hernando de Soto, a Peruvian thinker and development consultant, and Paul Collier, an Oxford professor and government adviser.

The debate topic was: "Whether aid has done more harm than good." Collier and Lewis said no; Moyo and de Soto said yes.

But it was really a two-person show between Lewis and Moyo, both extremely passionate and involved personally with the plight of Africa.

At one point, after a vigorous defence of Western foreign aid, Lewis pointed out that Rwanda's president, Paul Kagame, bought Moyo's book for his entire cabinet.

"Did you autograph it?" Lewis asked her. She replied jokingly: "Of course, and they gave me aid money."

Dambisa Moyo's argument gains attention and opposition

Dambisa Moyo, the author of "Dead Aid" has been all over the world promoting her book, and her ideas are beginning to gain some attention. In "Dead Aid" she claims that international aid and assistance has hurt Africa more than helped it. Moyo's position is that aid has led to corrupt governments and has kept the African people from finding solutions to their own problems or be self sustaining.

From the Financial Times, writer William Wallis details some of the opposisition to her book.

It has been easy for critics to poke holes in both her analysis and her solutions. The book does not establish in any scientific way the link between the hundreds of billions of dollars poured into Africa over decades and the poor performance of economies. It also studiously ignores evidence of development assistance working. Kevin Watkins, director of the United Nations' human development report office, says it is the equivalent of "blaming the fire engine because it is near the fire".

International capital markets have meanwhile become punitively expensive places for poor countries to borrow - hardly the solution now.

But the book is only part of the challenge Ms Moyo poses for an industry accustomed to having all the most vocal campaigners on its side. Her ideas are now proliferating across the internet on Twitter, Facebook and YouTube and on countless blogs. She has been interviewed or reviewed by practically every mainstream western media organisation.

Nor is she popular only among aid critics and cash-strapped governments in the west. She has energised many fellow Africans to join in the debate.

Panicked at the prospect that her ideas are gaining traction, Jeffrey Sachs, the US academic and aid advocate, accused her of endangering lives. Ms Moyo's ideas, he said, were "absolutely pernicious, and could lead to the deaths of millions of people".

Rock star Bob Geldof's aid advocacy organisation, One, has also been mobilising opp-osition to her message. However, an e-mail campaign by a One activist encouraging African NGOs to stand up to her arguments at least partially backfired.

"If Africans feel strongly against her ideas then they should not need to be 'mobilised' by your organisation. More effective would be to open fora for debate where differences of opinion are welcome," responded Iris Mwanza of the Centre for Infectious Disease Research in Zambia.

The effectiveness of aid

The new book by Dambisa Moyo entitled "Dead Aid" has reopened the debate on if aid to the underdeveloped world really works. In her book, Moyo makes the claim that cutting off all assistance to Africa would stimulate growth in the continent.

But let's be clear here, international aid has helped, Africa is growing, but it might not be the perfect solution. Of course, we would all want to see Africa self-supporting, but removing all non-emergency aid will not make that happen. Making the aid more effective will help, as well as more free market solutions, which Moyo also proposes.

From this IRIN article that touches on Moyo's book, it examines how Norway has critiqued their own aid and altered it to do more good.

"Norwegian aid constitutes 3 percent of the total aid to Zambia, which was equal to 0.8 percent of Zambia's GDP in 2005. Our report showed that aid is more successful when it is channelled towards technical support. So the dialogue between NORAD and Zambia has become less political and more technical," NORAD's Ase Seim, coordinator of the report, told IRIN. A follow-up report is due to be released in 2009.

An example of a technical programme was computerizing Zambia's Office of the Auditor General, which received $1.6 million between 1997 and 2008, with support for restructuring and staff training, which means there are now regular audits of government activities - making a direct improvement in governance.

The financial downturn has hit Zambia hard in recent months, with copper prices - the mainstay of the economy - dropping dramatically on the back of falling global demand. Shrinking government revenues mean less state spending.

"Right now we are doing the annual audit. However, our budget has been cut by 17 percent by the government because they have less money than last year. So, yes, we have improved our audit methodology through the creation of manuals and computerization in the past few years; in the long term we still have areas that are not fully sustainable without consistent funds," Louis Mwanga, deputy director of Planning at the Office of the Auditor General, told IRIN.

Prescription to African governments

While Dead Aid criticises bilateral and multilateral aid, it also offers some alternatives to prevailing policy, such as the increased use of global capital markets by African policy-makers to raise investment funds: Moyo does not believe that the current financial environment should be a deterrent.

"In the current climate, my prescription to African governments is to focus on ensuring that when the market bounces back, which it will, then they need to be ready to go into the international marketplace to raise bonds. My view is that there is a lot of preparatory work that needs to be done to get bond ratings and to familiarize their countries with international investors."

Controversial economist Moyo takes aim at rock stars

The economist Dambisya Moyo is making a lot of news lately to drum up sales for her latest book "Dead Aid". As a part of the book tour, the economist criticized rock stars who promote African Aid such as Bono and Bob Geldof.

Moyo is of the opinion that foreign aid breeds corruption. She claims that aid makes African leaders more accountable to the donors than to the African public.

From the Sydney Morning Herald, Damiem Murphy records Moyo's complaint to rock starts who try to drum up aid for Africa.

Finally somebody has shown the chutzpah to say "enough already" to those wealthy world-weary worrywarts Bono and Bob Geldof. Sydney-bound Dambisa Moyo, a Zambian-born economist, says the singers have glamorised aid to Africa to such an extent that it is damaging the very people it is supposed to help.

Moyo's book Dead Aid has received huge publicity in the US and Europe, not least because she is been bold enough to speak out against the beatific Bono and the sainted Sir Bob and such feel-good moments as the Live Aid concert of 1985.

Moyo, who is heading to Asia to promote her book, hopes to get to Sydney next month. "Celebrities have raised millions, but it only served to further corrupt governments with the leaders able to steal money without suffering any consequences for years while at the same time the people have been made further aid-dependent. Today Africa is far poorer than it was 40 years ago."

Moyo argues that aid has not only perpetuated African poverty, but also worsened it, and thinks it would be a good idea for all aid to be halted within five years. A firm believer in market forces, she thinks African countries should look towards other sources of finance as India and China did over the years when billions was being given to Africans.

"You get the corruption - historically, leaders have stolen the money without penalty - and you get the dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its people."

An African economist says aid "feeds corruption"

The Australian Broadcasting Corporation featured an African economist turned author who is very critical of international aid. Dambisa Moyo has written the book 'Dead Aid', in it she says that aid to Africa does not work but only feeds corruption and hurts innovation within African economies.

The book surveys the last 60 years of aid and Moyo attempts to point out failures. When Moyo was interviewed by the ABC, host Mark Colvin tried to draw a parralel to Europe.

MARK COLVIN: You say for the last 60 years that makes me think of say the Marshall Plan, which essentially reconstructed Europe; is aid itself a bad thing?

DAMBISA MOYO: From my perspective aid has not worked. Sixty years ago the architects of the aid model were essentially coming out of the Marshall Plan and there was this general euphoria that this type of large capital intervention could work. And in particular, could deliver long-term economic growth and reduce poverty.

And on those two metrics is basically how I'm judging aid in the past 60 years; has it increased growth? Has it reduced poverty? And on those two measures the answers are resoundingly no.

MARK COLVIN: So why would it have worked in Europe and not in say Africa?

DAMBISA MOYO: Europe was being reconstructed, it wasn't being constructed and in that sense there was already some semblance of infrastructure both political and economic infrastructure that was just simply being rebuilt. It had worked previously and all that interventionists were trying to do was rebuild and restructure a system that was already built, which is very different from the system or the situation in Africa.

The second thing, which I think is perhaps more important is that the Marshall Plan was short and sharp, it was five years, it was about $13 billion, in dollars at that time which is about equivalent to $100 billion now. It was very directed and targeted and it was finite.

I mean, if you compare that to the aid that goes to Africa now, essentially the money that goes to Africa's an open-ended commitment. There is no plan to reduce aid or to actively from the policy-makers perspective to try and wean these countries off of aid into a different, better model.

MARK COLVIN: All right; but is it possible to move abruptly from aid to no aid without at the very least a transition period of people having severe hardship and even starvation?

DAMBISA MOYO: First of all hardship and starvation is pretty much par for the course in Africa; I think we've seen enough pictures of that. It's not clear to me, in fact I argue in the book that most average people in Africa do not even see these aid revenues and so for us to worry as an international community to be concerned and to worry that Africans may suffer because the aid is cut off to me seems foolhardy.

I believe that most Africans would actually potentially see an improvement in their lives because they would start to be able to have their government's held accountable.

I don't think we should have another 60 years of aid. In my book I recommend sort of a five-year phasing out period. Ultimately, as an African I would like to see my continent participate on the world stage as an equal partner, not a drag on society.