ON THE EFFICACY OF AFRICA AID

AID ADDICTION

One of the best things I've read in recent days is this piece by author and economist Dambisa Moyo in the Wall Street Journal this weekend, titled "Why Foreign Aid is hurting Africa".  Whether one agrees or disagrees with the premise of her piece (and her book, Dead Aid), she makes some arresting points:

"Giving alms to Africa remains one of the biggest ideas of our time -- millions march for it, governments are judged by it, celebrities proselytize the need for it. Calls for more aid to Africa are growing louder, with advocates pushing for doubling the roughly $50 billion of international assistance that already goes to Africa each year.

Yet evidence overwhelmingly demonstrates that aid to Africa has made the poor poorer, and the growth slower.

The insidious aid culture has left African countries more debt-laden, more inflation-prone, more vulnerable to the vagaries of the currency markets and more unattractive to higher-quality investment. It's increased the risk of civil conflict and unrest (the fact that over 60% of sub-Saharan Africa's population is under the age of 24 with few economic prospects is a cause for worry). Aid is an unmitigated political, economic and humanitarian disaster."

She doesn't stop there:

"Over the past 60 years at least $1 trillion of development-related aid has been transferred from rich countries to Africa. Yet real per-capita income today is lower than it was in the 1970s, and more than 50% of the population -- over 350 million people -- live on less than a dollar a day, a figure that has nearly doubled in two decades.

Even after the very aggressive debt-relief campaigns in the 1990s, African countries still pay close to $20 billion in debt repayments per annum, a stark reminder that aid is not free. In order to keep the system going, debt is repaid at the expense of African education and health care. Well-meaning calls to cancel debt mean little when the cancellation is met with the fresh infusion of aid, and the vicious cycle starts up once again."

The whole piece is worth reading, again, regardless of whether one agrees with her views on this or not.  I just ordered her book, and look forward to adding it to my reading list.

Comments

[Kasi]

Aid is stimulus package with wrong motives and it comes with some interest as well.

Nothing is free except office internet :-)

cheers.

[Ian Culpin]

Again the financial institutions must accept some of the blame by providing mechanisms to channel the illegal gains from graft and corruption into safe havens. Surely ethical codes can be revised to exclude those about whom the only "good" thing is their credit rating. It won't stop the graft and corruption but it might keep the ill gotten gains in the local economy.

[Alex Tolley]

"Yet evidence overwhelmingly demonstrates that aid to Africa has made the poor poorer, and the growth slower."

What is the evidence for this - so alternative world where Africa did better without aid?

Certainly aid has not been done well, especially by the bid institutions like the World Bank. African nations often have themselves to blame with their kleptocracies. However, aid has clearly helped in other areas - healthcare, disease eradication, even food, in some cases.

Ideally what is required is a change in the way many African countries rule themselves, and the institutions and legal frameworks that need to be put in place.