Aid in Africa

I just read Dead Aid by Dambisa Moyo, who is originally from Zambia, worked for Goldman Sachs for awhile, and went to Harvard and Oxford.  Moyo discusses that why there hasn’t been vast improvement in development even with the $1 trillion-plus that the West has given to Africa.  She argues that aid is actually hindering growth – in that there is no accountability, it incentivizes governments not to find solutions or other forms of revenue, it puts and keeps corrupt officials in power, and it hurts domestic growth.

One example of the hurting domestic growth:

There is a mosquito net maker in Africa…enter vociferous Hollywood movie star who rallies the masses, and goads Western governments to collect and send 100,000 mosquito nets to the afflicted region…with the market flooded with foreign nets, however, our mosquito net maker is promptly put out of business.

Her solution:  tell African countries that their aid flow will end in five years.  This will force the country to find other, more accountable forms of financing such as trade, FDI, bonds, remittances, and micro-financing, all leading to a more accountable government, a strengthening of institutional infrastructure, and growth.

Another interesting point from this book:  Africans believe that the Chinese are more helpful than Americans because of all their FDI. The Chinese also give their investments without conditions of reform or policy, and simply require that the specific project of building a road or power infrastructure be done.  And the Chinese make sure the recipients of their money are accountable.

Moyo also criticizes Jeffrey Sachs‘ vision of the Millennium Development Goals, and they’ve had a few responses to each other here and here.

It’s tough to wrap my head around all of it.  Yes, if we cut aid that will result in immediate issues and perhaps deaths of the poor.  But, would continuing aid at current and increased levels just perpetuate the current environment, and hurt more than those who suffer while countries scramble to find more accountable funding?