Week 7: Dead Aid

Dambisa Moyo, author of Dead Aid

In Dead Aid, Dambisa Moyo gives four examples of alternative sources of funding for African economies, as it is her opinion that simply giving aid isn’t working and that African countries have to have more sustainable economies to grow. The alternative sources of funding are sovereign and private bond markets, foreign direct investment (FDI), international trade, and microfinance. I agree with Moyo that simply giving these countries aid isn’t working and that these alternative sources of funding should be put to use. Without developed countries doing different things for developing countries, such as microfinancing by loaning to small businesses, their economies won’t be able to grow and there will be little improvement. FDI is my favorite alternative source of funding. Although Africa doesn’t have a good reputation for being business savvy, the benefits of FDI when large countries like China are helping can be more jobs, more advanced technology, and more stimulation of the economy. Aid in the past has been unsuccessful, driven by industrialization, the struggle against poverty, a lack of development, corruption in the government, and “glamour aid,” so countries must try alternative sources to actually see a change in these countries who need help.

 The Washington Consensus is a set of policies that Washington-based financial institutions have applied to third-world countries which have led to more problems. These policies include:

-Fiscal discipline

-A redirection of public expenditure priorities toward fields offering both high economic returns and the potential to improve income distribution, such as primary health care, primary education, and infrastructure

-Tax reform

-Interest rate liberalization

-A competitive exchange rate

-Trade liberalization

-Liberalization of inflows of foreign direct investment

-Privatization

-Deregulation

-Secure property rights

The originator of the phrase Washington Consensus, John Williamson, has been a critical voice about the consensus, saying that the consensus has led to crisis and misery.

Where Zambia is located in Africa

What stood out most to be in Moyo’s TED talk “Is China the new idol for emerging economies?” are all of the statistics that Moyo listed about illiberal democracies. She said that Freedom House reported that even with fifty percent of countries being democratic, seventy percent are still illiberal meaning their citizens don’t have the right of free speech or free movement. More still, freedom has been declining for years. This talk really made me realize how much of an impact our help as a country can have on developing countries and how they really need other countries’ assistance to improve and become more independent. Another part of the TED talk that really made me think was at the end when Moyo showed a picture of herself and explained how she had been born in Zambia when Africans weren’t even issued birth certificates and how now she’s giving talks to people all over the world and has not only met many influential people, but has become an influential person herself.

Angelina Jolie in Africa

When Moyo quotes a critic of the western aid model, saying, “My voice can’t compete with an electric guitar,” the issue she is referring to is the past aid method of glamour aid. Glamour aid is when celebrities are the ones speaking about aid and issues in third world countries, rather than leaders with actual knowledge of the issues. She gives the example of people voting for a president just because a celebrity has endorsed him. Celebrities who largely participate in glamour aid to charities are Angelina Jolie and Bono, among others. Moto means that people will listen to the celebrities who are more popular rather than people like Moyo who know more about what is going on.

With Rwanda president Kagame’s remark, he is talking about how the reason that there hasn’t been a lot of progress in Africa with all of the aid is that a lot of the aid is spent sustaining client regimes while little of the aid actually goes to developing Africa.

Paul Kagame, President of Rwanda

Moyo backs her point of aid not working in Africa with many examples. One example is the historical factor, as for many years other countries have come to Africa and taken control, destroying their nations and building governments that didn’t work for Africa. Colonialism and slavery were at the forefront of this. Another example of why aid isn’t working is simply geographical. Although Africa has many natural resources, it is harder for them to take care of plants and animals so they are less prosperous.

One solution Moyo offers is slowly giving less aid to Africa. Africa has become addicted to aid and thinks of it as permanent so they rely on it. I think this could work for Mali, as they have been gradually improving in the world development indicators over the past few years. In 2010, the poverty headcount ratio was at 43.6% as compared to 55.6% in 2001. Though still a large amount, with the notice that aid will not be given soon, I think it would give Mali an incentive to improve. Senegal’s poverty headcount ratio has also reduced from 55.2% to 46.7%, so I think this solution might work for Senegal as well. Another solution that Moyo offers is building democracies. I think that this could definitely work for Mali, as they just had an issue with corruption and rebel forces invading the northern part of the country, however Mali already has a republic. Senegal already has the government system of a republic, too.

Jeffrey Sachs, author of the End of Poverty

In The End of Poverty, Jeffrey Sachs suggests official development assistance (ODA). I side more with Moyo’s points as ODA just means more money, while Moyo’s solutions are smaller but could give far more long-term progress in my opinion. Moyo’s solution of bonds also gives developing countries a way to pay developed countries back once they are more well off.

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