Realsociology

For committed sociology, agains neoliberalism

A summary and criticism of Dambisa Moyo’s assertions in Dead Aid

Posted by Realsociology on March 4, 2012

In this blog post I summarise Dambisa Moyo’s views on the problems with Aid as a strategy for development – she is talking about Official Development Aid rather than Emergency relief aid.

I’m mainly drawing from her writing at the end of chapter 3 and the whole of chapter 4 – and I offer up a few criticisms all the way through – before you read this through – please note my main criticism of Moyo’s work –

The main criticism I have of Moyo is that she uses statistics that show correlations between a high level of aid receipts and poor economic growth and then attempts to imply causality (aid causing poor growth) by using emotive, highly selective, anecdotal and even hypothetical (she invents a country – Dongo) ‘evidence’ to back up her assertions.

I say ‘imply causality’ because she never actually uses the word ‘cause’ – but the reader is left with the impression that this is what she is driving at. The end result for the less well informed reader is that they are stuck with a number of ‘easy to understand memorable case studies’ which imply that aid causes poverty – even though Moyo never actually says as much – possibly because she might think that there is actually insufficient evidence to make the case which she alludes to.

Anyway, here is my interpretation of the criticisms Moyo makes about the role of aid in development and a few criticisms that some people might make of Moyo’s work.

Criticism 1 – Aid does not bring about economic growth

At the end of chapter 3 – Aid is not working, Moyo starts to outline her basic criticism of Aid – This basic criticism being that aid has not effectively promote economic growth in Africa – Over 1 trillion dollars has been pumped into Africa over the past 60 years and there is little to show for it. In fact, according to Moyo, aid is malignant, it is the problem!

Moyo explains this through the following hypothetical example

 ‘There’s a mosquito net maker in Africa. He manufactures around 500 nets a week. He employs 10 people, who each have to support upwards of 15 relatives. However hard they work, they cannot make enough nets to combat the malaria-carrying mosquito.

Enter vociferous Hollywood movie star who rallies the masses, and goads Western governments to collect and send 100, 000 mosquito nets to the affected region, at a cost of $1 million, the nets arrive, the nets are distributed and a good deed is done.

With the market flooded with foreign nets, however, our mosquito net maker is promptly out of business. His ten workers can no longer support their dependents. 

Now think of what happens 5 years down the line when the mosquito nets are torn and beyond repair, we have now mosquito nets, and no local industry to build any more. The long term effect of the ‘aid injection’ has been to decimate the local economy and make the local population dependent on foreign aid from abroad.

Backing this up with some stats, Moyo goes on to point out that ‘even the most cursory look at the data suggests that as aid has increased over time, Africa’s growth has decreased with an accompanying higher incidence of poverty. Over the past thirty years, the most aid-dependent countries have exhibited growth rates averaging minus 0.2 % per annum.

Moyo also argues that a direct consequence of aid-driven interventions has been a dramatic descent into poverty – citing Zambia as an example, and the fact that when aid flows were at their peak between 1970 and 1998 – poverty in Africa rose to a staggering 66%.

The problem Moyo has here is that she fails to present sufficient evidence to make her case – it’s well known that the later part of the period above was a time of global economic slowdown compared to the previous 20 years, which itself could play a major role in Africa’s poverty, as could be the case with the debt crisis. One could also simply cite Botswana and Ghana as case studies of aid-recipient countries that have grown to counter her one example of Zambia.

Criticism 2 – Aid Encourages Corruption, which in turn retards growth

Unlike the previous section, Moyo does use a reasonable amount of statistical (drwn mainly from Transparency International) and case study evidence in this section…

According to Moyo – If the world has one image of African statesmen, it is one of rank corruption on a stupendous scale. One of the best examples of this is Mobutu, who is estimated to have looted Zaire to the tune of $5 billion. He is also famous for leasing Concorde to fly his daughter to her wedding in the Ivory Coast shortly after negotiating a lucrative aid deal with Ronald Regan in the 1980s.

Having provided a couple more examples of ‘classic African Dictators’, Moyo then cites that classic statement made in n 2004 by the British envoy to Kenya, Sir Edward Clay,  who complained about rampant corruption in the country, commenting that Kenya’s corrupt ministers were ‘eating like gluttons’ and vomiting on the shoes of foreign donors. In February 2005 (prodded to make a public apology), he apologised, saying he was sorry for the ‘moderation’ of his language, for underestimating the scale of the looting and for failing to speak out earlier

Moyo further argues that at least 25% of World Bank Aid is misused. One of the worst examples is in Uganda in the 1990s – where it is estimated that only 20% of government spending on education actually made it to local primary schools.

According to Moyo, while it is not the only cause ‘aid is one of the greatest aides to corruption’ – arguing (Actually it might be more accurate to say ‘asserting’ given the lack of evidence in this section of her book) that ‘with aid’s help, corruption fosters corruption, nations quickly descend into a vicious cycle of aid’.

However, Moyo now drifts from the data and starts implying causality by asserting that growth cannot occur in an environment where corruption is rife, citing the following (un-evidenced) reasons (among others).

  • Corruption leads to worse development projects – corrupt government officials award contracts to those who collude in corruption rather than the best people for the job. This results in lower-quality infrastructure projects.
  • Foreign companies will not invest in countries where corrupt officials might siphon off investment money for themselves rather than actually investing that money in the country’s future.
  • Aid is corrosive in that it encourages exceptionally talented people to become unprincipled – putting their efforts into attracting and siphoning off aid rather than focussing on being good politicians or entrepreneurs.

Criticism 3 – Aid Corrupts Civil Society

Dambisa Moyo: Spreader of Neoliberal Hegemony?

OFFERING NO CONCRETE EXAMPLES OR EVIDENCE TO SUPPORT HER POINT, in this section Moyo asserts that Africa needs a middle class which trusts each other in order for development to occur. The problems is that in an aid environment, governments are more interested in lining their own pockets rather than encouraging entrepreneurs, meaning that the middle class cannot expand until it reaches that ‘critical mass’ which leads to sustained growth.

Criticism 4 – Aid undermines social capital

ONCE AGAIN OFFERING NO CONCRETE EXAMPLES OR EVIDENCE TO SUPPORT HER POINT, here Moyo argues that… In an aid dependent environment, there is no need for you to trust your neighbour and no need for your neighbour to trust you… Foreign aid weakens social capital by thwarting accountability mechanisms, encouraging rent-seeking behaviour, siphoning off scarce talent from employment positions and removing pressures to reform inefficient policies and institutions.

On the above two points it is also worth noting that these criticisms are really just fusions of the previous two criticisms of aid – that it prevents economic growth and breeds corruption.

Criticism 5 – Aid and Civil War

Moyo points out that there are three fundamental truths about conflicts today: they are mostly born out of competition for control of resources; they are predominantly a feature of poorer economies; and they are increasingly internal conflicts.

She then goes on to say that ‘this is why foreign aid foments conflict. The prospect of seizing power and gaining access to unlimited aid wealth is irresistible’. Unlike in the previous two sections, here she offers up one example to support her argument (Sierra Leone) before reminding us that aid also causes conflict more indirectly by reducing the prospects for economic growth.

The Economic Limitations of Aid

Having outlined five downsides of aid, Moyo then outlines its economic limitations – suggesting that there are four – once again lacking examples

  • Aid reduces savings and investment – assertion, no examples
  • Aid can be inflationary – assertion no examples
  • Aid chokes off the export sector (Dutch Disease) – cites unreferenced IMF studies
  • Aid causes bottlenecks due to low absorption capacity – Uses Uganda as an example

Aid and Aid Dependency

The end result of all the above is that aid leads to Aid Dependency – to the extent that aid makes up 13% of the average African country’s GDP. According to Moyo, this throws up the following problems

  • It makes Africans lazy
  • It leads to low tax revenues (no need to tax the citizenry if money is flooding in from outside!)
  • Citing Boone (1996) – it leads to bloated inefficient public sectors.
  • Finally, it leads to Western donors being able to call the shots.

In the final section of the chapter, Moyo pays homage to Peter Bauer, and briefly mentions that both William Easterly and Paul Collier disagree with the ‘one size fits all’ aid approach to development – before introducing the next sections of the book which are devoted to explaining why Africa should adopt free market (encouraging FDI/ Issuing bonds etc.)  rather than aid driven solutions to underdevelopment.

Criticisms of Moyo

Really, I’d just like to go back to what I said at the beginning and say that…

The main criticism I have of Moyo is that she uses statistics that show correlations between a high level of aid receipts and poor economic growth and then attempts to imply causality (aid causing poor growth) by using emotive, highly selective, anecdotal and even hypothetical (she invents a country – Dongo) ‘evidence’ to back up her assertions.

I say ‘imply causality’ because she never actually uses the word ‘cause’ – but the reader is left with the impression that this is what she is driving at. The end result for the less well informed reader is that they are stuck with a number of ‘easy to understand memorable case studies’ that imply aid causes poverty – even though Moyo never actually says as much – possibly because she might think that, really, there is insufficient evidence to make the case which she alludes to.

One has to reflect on why Moyo is so selective – I think it unilekely that an Oxford and Harvard Graduate has failed to read widely enough for this to be innocent – Especially when the author has 8 years at Goldman Sachs under her belt….so could it be that this is simply an overt attempt to promote a neoliberal anti aid agenda?

9 Responses to “A summary and criticism of Dambisa Moyo’s assertions in Dead Aid”

  1.   Haswell Beni Says:

    Are you from Afica yourself? or have you been on an AID and Development Project to Africa youself? Or are you just applying the scientific approach to your criticisms. I have not yet read Dambisa’s book. I am a Malawian native and carried out aid project teams to Malawi several times and my observations during the projects coincided with the title of this book. I will wait to say anything concrete. But as I read through your sriticisms and it shed some light to some factors.

  2.   agence immobiliere taroudant Says:

    Very nice post, Thanks for this publishing. Really help me a lot.

  3.   Sjketner Says:

    You are falling victim to a type of pragmatism whereby you believe all principles must be supported by a statistic to be valid. It simply isn’t true. The core arguments of her work have implied proofs that anyone with a cursory understanding of economics should understand.

    Lets take the mosquito anecdote. Opportunity cost and the law of unintended consequences are universal principles of all economic activity. It is self-evident. For every action, some other potential must be sacrificed, for every action, there are consequences (good and bad) that could not be foreseen.

    If you deny that Moyo is right that rampant corruption stagnates economic growth you should read Theory of Moral Sentiments by Adam Smith, or Moral Markets by Paul Zak. The fundamental fuel of all market activities is not greed, but trust. In the absence of trust, capital accumulation and capital investments break down. There is no need for a statistic, it is a principle of human action. If I don’t trust someone, I am less likely to give them my money. If I don’t trust that my intellectual property will be respected, or physical property, I have less incentive to take entrepreneurial risk.

    The alternative seems to be that you then believe Moyo is wrong, and giving money to dictators makes those societies wealthier, and that markets function great when the leaders of society are excessively corrupt.

    If that’s the case, where’s your evidence?

  4.   shabani Says:

    no aid in Africa without exploitation of Africa. i shabani mitambo political science student university of Dar es salaam-Tanzania

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