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.

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.