NN42, June 2009
A Safari Towards Aid Effectiveness?
A Matter of Evidence? - Reviewing Dead Aid
By Paul Hoebink, University of Nijmegen
Email: p.hoebink@maw.ru.nlKeywords
Dead Aid; Dambisa Moyo
Summary
The author argues that Dead Aid is not only one of the weakest books written in the last three decades on development assistance; it is also one of the most casual in its use of evidence.
When a Maasai uses his stick and spear to kill his neighbour?s wife, nobody will argue that a stick and spear are not the right instruments for a Maasai to defend his cattle against lion. If we reuse this ?wisdom? to apply it to development assistance, it brings us to at least one conclusion: aid is and has been used in wrong ways many many times in its sixty years history and thus produced often poor results, but that doesn?t say that the instrument in itself is wrong or inadequate and can not be used to bring economic and social progress. Much about the present discussion on aid and aid effectiveness can be said, but a first observation might be that in many articles, books and papers all aid is put in the same kettle and is then being boiled to a strange kind of unitary soup.
Dambisa Moyo is a young Zambian consultant with degrees in economics from Oxford and Harvard, who has worked as a consultant for the World Bank and Goldman Sachs. In her book Dead Aid she goes quite a step further than some of the other recent books on aid to Africa. She accuses aid of being at the root of all the ills in Africa. One quote suffices to show her conclusions and one is coming direct at the beginning of her book:
?This is the vicious cycle of aid. The cycle that chokes of desperately needed investment, instils a culture of dependency, and facilitates rampant and systematic corruption, all with delirious consequences for growth ?. However foreign aid perpetuates poverty and weakens civil society by increasing the burden of government and reducing civil freedoms ?. Foreign aid does not strengthen the social capital it weakens it ?. In the world of aid, there is no need or incentive to trust your neighbour, and no need for your neighbour to trust you ?. Which is why foreign aid foments conflict. The prospect of seizing power and gaining access to unlimited aid wealth is irresistible?. (Moyo, 2009: 49, 58-59)
These are strong statements, strong conclusions and the question is, are they substantiated by a flux of data and reports? Dambisa Moyo uses the 68 pages of the first part of her book to support these conclusions. They are not based on original new research, only on an overview of some of the literature on aid effectiveness. In the second part of the book (83 pages) she presents solutions for financing Africa?s development outside aid, via the international capital markets and via trade. That second part is sympathetic but not new. She fails to explain why expensive euro-bonds are a good alternative to free aid grants.[1] She hails the China-Africa cooperation, which indeed is seen by many in Africa as an important alternative to the US, and rightly so. But she dismisses too easily some of the criticisms coming from Africa itself on this cooperation. She rightly observes that everyone could win from trade and points at some of the trade barriers that are still existing, but she fails to explain why only a few African countries were able to profit from the preferences that the Treaties of Lomé and Cotonou and the Everything But Arms initiatives were offering. That was not only because these preferences were rather limited, but the reasons lie in the African economies themselves and in their social development.
The most contested parts of the book and her presentation in the media are of course her conclusions and statements on aid. In her chapter three in 18 pages she is presenting her proof for the failures of aid, while in chapter four in twenty pages she argues that aid is ?a silent killer of growth?. These chapters are of course the ones where the problems start, because of the outspoken negativity and generalising nature of the statements.
The only ?proof? Dambisa Moyo has for her strong statements are some well-known regression analyses by Dollar, Burnside, Boone, Collier, Easterly, and Svensson, - all World Bank economists, and she could have quoted also some of the same type of analyses from IMF-economists. Then there are also some references to two confidential World Bank reports of 1992 and 1997. That is all. The point of course is that all these papers and regression analyses are highly contested and by many already for a long time are not seen as evidence that aid works or doesn?t work.[2] William Easterly is honest enough to conclude in a recent article: ?There is a vast and inconclusive literature on aid and growth?. He then indicates that ?virtually any result on aid and growth is possible and indeed all possible results have already been presented in the literature? (Easterly, 2008: 18).
What is important for an assessment of Dambisa Moyo?s book is that she only quotes several of the papers that find negative relations between aid and growth or a positive relation between aid and corruption. In her bibliography there is the book by Finn Tarp in which Hansen and Tarp present a devastating critique on the Dollar, Burnside and Collier and a series of other papers, showing also that if they had used other statistical methods, they would have come to quite other, positive conclusions about the relations between aid and growth. This might lead to the conclusion that Dambisa Moyo is too casual in using the sources of her argument.
The same type of casualness (and carelessness)[3] can be found in other places. One is that she puts all donors and thus all aid in the same box, while she should know that not all of them propped up Mobutu with billions of dollars in aid. I quote Mobutu here, because he figures at several places in the book and nowhere does Dambisa Moyo explain why he got this support and why only from such a limited group of donors. In presenting the example of Sierra Leone in her argument that ´aid foments conflict´, she indicates that the leader of the Revolutionary United Front in the peace deal wanted the chair of the board controlling diamond mining. She fails to explain that Sierra Leone in those days did not receive aid at all, and that indeed it was diamonds that fomented the civil war there, not aid.
What is more, I was able to lay my hands on the two World Bank reports she is quoting as follows: ?A World Bank study found that as much as 85 per cent of aid flows were used for purposes other than that for which the were initially intended? (Moyo, 2009: 39). Nowhere in these two reports such can a statement or such a percentage be found. It must lead to the conclusion that Dead Aid is not only one of the weakest books written in the last three decades on development assistance; it is also one of the most casual in its use of evidence.
References
Easterly, W. (2008) Introduction: Can?t take it anymore? In: W.Easterly (ed.), Reinventing Foreign Aid. Cambridge (Mass.), The MIT Press.
Moyo, D. (2009) Dead Aid: Why Aid is Not Working and How There is Another Way for Africa. London: Allen Lane/Penguin.
Footnotes
[1] It cannot only be because aid creates dependency, because Eurobonds do the same and at a far higher price (see the Latin American debt crisis of the 1980s) or the East Asia crisis of the mid 1990s.
[2] I will not go deep into this, the argument against these regression analyses goes as far back as Roger Riddell?s Foreign Aid Reconsidered (1988) and Robert Cassen?s and others Does Aid Work? (1990). See also my review of Paul Collier?s The Bottom Billion in The European Journal of Development Research.
[3] The are many examples of disarray, but to quote a few: she places the Biafra war in 1971, makes UNDP one of the leading aid donors, suggests that Africa received most of the more than $ 2 trillion in aid of the past 50 years (while quoting at the same time Kagame who states that Africa received $ 500 billion), thinks that the US was at the Berlin Conference in 1885, has the idea that the Marshall Plan targeted infrastructure, etc.
Full contents of NORRAG NEWS 42.
Download the full issue of NORRAG NEWS 42 in pdf.
Not already a NORRAG member? Sign up for free here.