Customer Reviews

Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa

5 star:		(35)
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3 star:		(7)
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Excellent book.

Dambisa Moyo was born and raised in Lusaka, Zambia. Her mother is chairwoman of a bank called Indo-Zambia Bank. Her father, the son of a South African mine worker, runs Integrity Foundation, an anti-corruption organization. Moyo is the former Head of Economic Research and Strategy for Sub-Saharan Africa at Goldman Sachs in London, where she worked for eight years. Moyo has also worked at the World Bank in D.C., where she was a co-author of its annual World Development Report.

Moyo is the author of "Dead Aid", an indictment of the foreign aid industry which was released spring 2009. She argues that Western aid to Africa has not only perpetuated poverty but also worsened it. In the book, she calls for all development aid to Africa to be halted within five years because it has brought dependency.

She insists that largely aid has held back Africans. "You get the corruption -- historically, leaders have stolen the money without penalty --and you get the dependency, which kills entrepreneurship. You also disenfranchise African citizens, because the government is beholden to foreign donors and not accountable to its people", she says.

Because they can count on aid, Moyo argues, most sub-Saharan African countries don't even bother to issue bonds. That would require a country's president and cabinet minister to sell their countries to investors. Moyo has a Ph.D. in economics from Oxford University, and her Master's Degree is from Harvard University's Kennedy School of Government. In addition, she holds a Bachelor of Science in Chemistry and an MBA in Finance from American University. She lives in London.

Matthew Rees (WSJ March 17, 2009) points out that it is one of the great conundrums of the modern age: More than 300 million people living across the continent of Africa are still mired in poverty after decades of effort -- by the World Bank, foreign governments and charitable organizations -- to lift them out if it. While a few African countries have achieved notable rates of economic growth in recent years, per-capita income in Africa as a whole has inched up only slightly since 1960. In that year, the region's gross domestic product was about equal to that of East Asia. By 2005, East Asia's GDP was five times higher. The total aid package to Africa, over the past 50 years, exceeds $1 trillion. There is far too little to show for it.

Ms Moyo believes aid money pouring into Africa, underwrites brutal and corrupt regimes; stifles investment; and leads to higher rates of poverty -- all of which, in turn, creates a demand for yet more aid. Africa, Ms Moyo notes, seems hopelessly trapped in this spiral, and she wants to see it break free. Over the past 30 years, she says, the most aid-dependent countries in Africa have experienced economic contraction averaging 0.2% a year.

America's policy toward postwar Europe is often cited as the model for African assistance, but Ms. Moyo reminds us that the vaunted Marshall Plan was limited to five years and was focused on reconstructing societies ravaged by war. In Africa, she says, the aid spigot never stops flowing. "There is no incentive for long-term financial planning," she observes, "no reason to seek alternatives to fund development, when all you have to do is sit back and bank the cheques."

Ms Moyo is not alone in asking tough questions about good intentions gone awry. Rwanda's president, Paul Kagame, has said of the $300 billion in aid given to Africa since the 1970s that "there is little to show for it in terms of economic growth and human development." Senegal's president, Abdoulaye Wade, has expressed similar sentiments.

Much of "Dead Aid" outlines an agenda for Africa's economic development, such as expanding its trade and developing its banking sector -- that is, creating a reliable system of credit that will allow individuals to earn interest on their savings and businesses to receive the loans they need to grow. While criticizing outsiders for their misguided ideas, she does not ignore Africa's self-inflicted wounds. She notes there are steep obstacles to doing business there. According to the World Bank, nine of the world's 10 most hostile business environments are in Africa.

Over the past 60 years at least $1 trillion in aid was sent to Africa - yet, calls for even more grow steadily louder. Moyo - a native of Zambia, contends that evidence demonstrates that this aid has made the poor poorer. Real per-capita income today is lower than it was in the 1970s. In other words, aid is not part of the solution, it is part of the problem.

Even after aggressive debt-relief campaigns in the 1990s, African countries still pay close to $20 billion in debt repayments per year - at the expense of education and health care. Moyo also asserts that the roughly 500,000 individuals in the "aid business" have no motivation for that aid to succeed; meanwhile, well-meaning individuals such as Bono have choked off debate of its efficacy.

The author claims that the most obvious criticism of aid is that it enables rampant corruption and bloated bureaucracies. In 2002, the African Union, an organization of African nations, estimated that corruption was costing $150 billion/year. Transparency International, a corruption watchdog, states that Zaire's former president is reputed to have stolen at least $5 billion from the country. Across Africa, over 70% of government funding comes from foreign aid - enabling those governments to avoid accountability to local citizens since they pay so little.

In Cameroon, it takes a potential investor about 426 days to gain a business license, vs. 17 in South Korea. Under the auspices of the U.S. Food for Peace program, each year millions are used to buy American-grown food that is then shipped to Africa where it puts local farmers out of business.

Moyo's bottom-line is that other regions should stop the largess towards Africa, and Africa should focus on becoming more attractive to private investment. This includes ceasing to be the source of the world's greatest number of armed conflicts.

Dead Aid is an interesting, provocative look at the foreign aid industry and its effects on Africa. Dambisa Moyo, who formerly worked for Goldman Sachs and the World Bank, draws a conclusion not unknown to others in the field: development aid (as differentiated from humanitarian aid) has not only done little good for the nations of Africa but has indeed caused great harm. While I don't necessarily disagree with her conclusion, I didn't find her arguments particularly convincing.

There is no question that much of the aid intended to build economies in Africa has been grossly wasted, stolen, and misused. There is little to show for the trillions of dollars that have been poured into the continent--a failure with numerous causes. But Moyo's main premise is that aid itself is the cause, that it creates a culture dependent on foreign handouts and rife with corruption that, according to the author, apparently wouldn't exist if aid weren't available. I find both arguments hard to swallow, especially since they are based mostly on the logical premise of cum hoc ergo propter hoc (with this, therefore because of this). In this thinking, when aid is given, the recipients don't develop other resources, therefore aid causes them to not try. It's the same argument that's been used for years to oppose welfare programs applied in this instance not to individuals, but to entire nations. I find that a little facile. I suspect aid fails more often because it is poorly structured and managed, an argument that Moyo essentially dismisses out of hand.

Whether you agree with Moyo's reasoning or not, you have to seriously question the solutions she proposes. While outlining a litany of worthwhile approaches to economic development including micro-lending, opening markets in the developed world to African products, and more foreign direct investment (FDI), her silver bullet is a solution only an investment banker could love: the bond market. Somehow, Moyo expects the magic of the free market financial system to end corruption in Africa, stop wasteful spending, and power the continent out of poverty. I react to that proposal the same way Jaime Talon, one of the lead characters in my novel, Heart of Diamonds: A Novel of Scandal, Love and Death in the Congo, did when confronted by a similar argument about a panhandler in New York: "What matters is that right now--today--that man over there is hungry. Somebody needs to do something about that, not just ignore it and hope the holy and all-powerful market economy will provide a solution."

I have to ask, given the brilliant performance of Wall Street and Fleet Street in providing structured finance for America and Europe, how can we expect them to solve the problems of Africa? These are the people who brought us sub-sub-prime mortgages wrapped in gilt-edged bond ratings and called gold. Their ability to assess risk and police wasteful government spending in Kinshasa is rather suspect, at least to me. I also fail to see how corrupt leaders and their minions will be any less likely to steal funds from private lenders than they are from the World Bank. Perhaps my most significant objection, though is when Moyo says the developing nations will be better served paying ten percent interest (the rate she quotes for emerging market debt in 2007) than the 0.75% they are charged by the World Bank. How does that work to anyone's advantage other than the investment bankers?

Don't misunderstand my review. I agree with many of Moyos' conclusions and her objections to the current approach to foreign aid. Mandating the purchase of American products with American aid dollars, for example, is enormously wasteful, self-serving, and undoubtedly harms the African farmers and manufacturers such aid could help. She's also dead on when she calls for an improved business climate in Africa so that direct investment, both foreign and local, stands a better chance to succeed.

Pulling Africa out of the swamp of poverty is a complex operation. I applaud Dambisa Moyo for presenting a provocative set of arguments in clear, understandable layman's prose. Dead Aid brings an important subject into the public eye.

While this book is about Africa, many of the overall insights, lessons, etc. Dambisa Moyo puts on paper here apply as much to the all but frozen state of postwar development and aid policies in many other parts of the world today. This is easily one of the most important, well-written and documented books on the chronic band-aid solutions to the Third World challenges promulgated not just by celebrities and philanthrocapitalists but First World governments, foundations and other institutions still stuck in the early part of the 20th century. Moyo's remarkable treatise should be required reading for public as well as private sector leaders.

Wow, what a breath of fresh air this woman is. Sure, some of the arguments that have been made in this book have been made before, but Ms. Moyo presents them in a startlingly fresh and direct way. Like many brilliant minds, Ms. Moyo can say a lot with a little and the brevity of this book only serves to aid its piercing--yet reasoned--arguments. This book is, quite simply, a frank assessment of where Africa is, how they got there, and a road map for the rise of Africa going forward--all in a little over 200 pages. I for one hope that the world follows her advice sooner rather than later. Africa is a beautiful place with beautiful people and I wish they could be allowed to rise without the constant tinkering of colonial powers, well-intentioned (yet misguided) liberals and celebrities. An unqualified 5/5 stars and I am a huge new-found fan of this woman.

Dambisa Moyo is not the first to make the argument that the direct-to-government model of foreign aid has been a dismal failure over the last 50 years. She is one of the first African women that has done so in a highly visible way. The former Goldman-Sachs economist has taken a bit of heat for her willingness to question whether the Bob Geldof's and Bono's of the world, while well-intentioned, have helped to perpetuate a sense that Africa is a basket case and is (and will continue to be) a charity case that relies on the willingness and compassion of the developed world. Moyo asserts that Africa is capable of economic development only after the aid that has lined the pockets of dozens of despots, is cut off. She does make exception for NGO's and emergency relief, but believes that Africa's future lies in its ability to raise capital investment and function in a competitive market.

Dambisa Moyo's masterpiece is an economic blueprint intended to serve as a paradigm for weaning Africa off the debilitating aid-dependency syndrome that has kept the continent in perpetual economic stagnancy for decades. Using dependable statistics, Moyo argues that government-to-government or bilateral aid (which should be distinguished from charity-based aid) to Africa undermines the ability of Africans to conceptualize their own best economic and political policies. As she puts it: "The net result of aid-dependency is that instead of having a functioning Africa, managed by Africans, for Africans, what is left is one where outsiders attempt to map its destiny and call the shots."(66) Foreign aid does not only undermine economic growth, it keeps recipient countries in a state of endemic poverty. It is itself an underlying cause of social unrest and possibly even civil war.


Moyo notes that the "prospect of seizing power and gaining access to unlimited aid wealth is irresistible."(59) To buttress her argument, she refers to Grossman (1992) who contends that the underlying purpose of rebellion is the capture of the state for financial advantage, and that aid makes such conflict more likely. In the past fifty years, Moyo observes, over US$1trillion in development-related aid has been transferred from the rich countries of the West to Africa. Yet, aid has helped make the poor poorer; economic growth slower.

According to Moyo, the notion that foreign aid can alleviate systemic poverty, and has done so in Africa is tantamount to a myth. Millions in Africa, she notes, are poorer today on account of aid dependency. Indeed, aid has been and continues to be, an unmitigated political and economic and humanitarian disaster for Africa. Aid is not benign--it is malignant. In short, aid is not part of the solution; it is the problem. And here is how.

Aid breeds corruption in Africa. If the world has one picture of the African continent, it is one of corrupt statesmen. With very few exceptions, African leaders have crowned themselves in gold, seized land, handed over state businesses to relatives and friends, diverted billions of aid-money to foreign bank accounts, and generally treated their countries like giant personalized cash dispensers. According to Transparency International, Mobutu Sese Seko of erstwhile Zaire is estimated to have looted the State to the tune of US$5billion.

Roughly the same amount was stolen from Nigeria by President Sani Abacha and placed in Swiss private banks. The list of corrupt practices in Africa is endless. However, the point about corruption in Africa is not that it exists; the point is that foreign aid is one of its greatest aides. Aid creates a vicious cycle of dependency in Africa; a cycle that chokes off desperately needed investment, instills a culture of kleptomania, and facilitates rampant and systematic corruption, all with deleterious consequences for economic growth. It is this cycle, Moyo posits, that "perpetuates underdevelopment, and guarantees economic failure in the poorest aid-dependent countries" (49).

Aid creates a fertile ground for rent-seeking, that is, the use of governmental authority to take and make money without trade or production of wealth. Because foreign aid is fungible--easily stolen, redirected and extracted-- it facilitates corruption. At a very basic level, an example of this is where a government official with access to aid money set aside for public welfare takes the money for his own personal use. Examples are legion in Africa. Foreign aid programs, which tend to lack accountability, and check and balances, act as substitutes for tax revenues.

The tax receipts that aid releases are then diverted to unproductive and often wasteful purposes rather than the productive public expenditure (education, health infrastructure, etc) for which they were ostensibly intended. Moyo points out that in "Uganda, for example, aid-fueled corruption in the 1990s was thought to be so rampant that only 20 cents of every US$1 of government spending on education reached the targeted local primary school."(53)

Strangely enough, Larry Diamond (2004) observes, Western aid agencies, notably the International Monetary Fund and the World Bank, continue to give aid to African states, with notorious authoritarian and corrupt governments. His list includes Cameroon, Egypt, Zimbabwe, Gabon, Angola, Eritrea, Guinea and Mauritania. Africa is the region that receives the largest amount of foreign aid, receiving more per capita in official development assistance than any other region of the world.

Yet her social infrastructure is in a state of utter decrepitude! Moyo notes that any large influx of money into an economy, however robust, has the potential to create serious problems. With the relentless flow of unmitigated, substantial aid money to Africa, these problems are magnified, especially in economies that are, by their very nature, poorly managed, weak and susceptible to outside influence, over which domestic policymakers have little or no control.

Moyo contends that increases in foreign aid are correlated with declining domestic savings rates. As she puts it, "As foreign aid comes in, domestic savings decline; that is, investment falls."(61) She further observes that with all the tempting aid monies on offer, which are notoriously fungible, the relatively few people who have access to it, spend it on consumer goods instead of saving the cash. As savings decline, local banks have less money to lend for domestic investment.

Worse still, foreign aid has an equally damaging crowding-out effect: although aid is meant to encourage private investment by providing loan guarantees, subsidizing investment risks and supporting co-financing arrangements with private investors, in practice it discourages the inflow of such high-quality foreign monies. Moyo points out that empirical research has shown that higher aid-induced consumption leads to an environment where much more money is chasing fewer goods."(61) This almost invariably leads to price rises--inflation.


Over and above, aid chokes off the export sector. This phenomenon is known as the Dutch disease, as its effects were first observed when natural gas revenues flooded the Netherlands in the 1960s, devastating the Dutch export sector and increasing unemployment. Moyo argues that aid inflows have adverse effects on overall competitiveness, export sector (usually in the form of decline in the share of those in the manufacturing sector and ultimately growth).

In the oddest turn of events, the fact that aid reduces competitiveness, and thus the trading sector's ability to generate foreign-exchange earnings, makes countries even more dependent on aid, leaving them exposed to all the negative consequences of aid-dependency. In countries with weak financial systems, additional foreign resources do not translate into growth of stronger financially dependent industries.

So if foreign aid harbors such adverse effects for African economies why are donors bent on doling it out? And why aren't recipients sagacious enough to put an end to the lethal cycle of aid? Moyo's Dead Aid model provides solid answers to these intriguing questions. She notes that "Africa is addicted to aid. For the past sixty years, she says, Africa has been fed aid. Like any addict, Africa needs and depends on its regular fix, finding it hard, if not impossible to contemplate existence in an aid-less world."(75) Her book provides an antidote, a road map for riding Africa of aid dependency.

Arguing that the aid program in Africa has not worked precisely because it was never conceived with the intention of promoting the economic development of Africa, she proposes alternatives to foreign aid. She notes that like the challenges faced by someone addicted to drugs, the withdrawal is bound to be painful. Nonetheless, if implemented in the most efficient way, the solutions offered in Dead Aid will help to dramatically reduce Africa's reliance on aid money.




Moyo cites Botswana as an example of an economic success story in Africa. Botswana began with a high ratio of aid to GDP but used the aid wisely to provide important public goods that helped support good policies and sound governance and laid the foundation for robust economic growth for the country.

She says this stratagem can be replicated all over Africa. Her alternatives to aid, predicated on transparency and accountability, would provide the life-blood through which Africa's social capital and economies will grow. Her Dead Aid strategy leaves room for modest amounts of aid to be part of Africa's development financing strategy. Systematic aid will be a component of her Dead Aid Model, but only insofar as its presence decreases as other financing alternatives take hold. The ultimate goal, as far as Moyo is concerned, is an aid-free Africa.

In a nutshell, Dead Aid proposes radical solutions to the pressing economic problems of our time. It offers a new model for financing development in Africa's poorest countries, one that offers economic growth, promises to significantly reduce endemic poverty, and most importantly, does not rely on aid. Though Moyo is not the first economic pundit to take Western aid donors to task, never has the case against aid been made with such rigor and conviction. She does not pull her punches.

"In a perfect world," she writes, "what poor countries at the lowest rungs of economic development need is not a multi-party democracy, but in fact a decisive benevolent dictator to push through the reforms required to get the economy moving."(xi) Her most radical proposal comes in the form of a rhetorical question: "What if," she asks, "one by one, African countries each received a phone call...telling them that in exactly five years the aid taps would be shut off permanently?"(xi)

First off, can someone explain to me why this woman is trying to discredit Bono and Bob Geldoff? What make this woman think she knows more than two great musicians, just because she has a PhD in Economics?

Take it easy, I'm just kidding.

With all the fanfare that Angelina Jolie and Bono are getting, with their big tours of the "third world", I began to wonder where the "locals" fit in. While all the celebrities are droning on about poverty in Africa, what do the Africans have to say? Africa has universities, so what do African academics think of foreign aid? Why aren't they the ones speaking on TV?

Dambisa Moyo is from Zambia, has a PhD in Economics, and worked in finance, so she writes with a bit more authority than Bono. She argues that "foreign aid" in the form of World Bank and IMF loans are hurting Africa. The money ends up in the hands of corrupt dictators, who misspend the money while the people starve. Look at Idi Amin, and Mbutu Sese Seku; they lived in high luxury while their nations lacked schools, hospitals, and paved roads. If you want more proof, look at Jean Bedel Bokassa of the Central African Republic; when the money ran out, he literally "ate" his countrymen (pun intended). It's not only Africa that suffers from World Bank loans. In the documentary "Life and Debt", Michael Manley talks about how World Bank loans damaged Jamaica too.

The success stories discussed in the book come from foreign investment, not loans. The investment, however, isn't in Africa's gold and diamond mines, which offer low pay and low skill. The best investment is in industry and technology. Computer chip factories generally pay more, and require more skill (in which the workers can be trained). Ghana, for instance, now has data-entry businesses that pay an hourly wage. The wage is far less than the US minimum, but a lot more than you'd earn in a diamond mine! Yet in this age, 40 years into Africa's independence, the continent is barely industrialized.

Look at the "diamond" issue in terms of labor; the miners get paid a pittance, but the diamond-cutters get paid thousands! Yet none of the diamond-cutters are in Africa; they're in New York, Tel Aviv, and Antwerp! Africa's diamond mines are of no real benefit to the continent because the only job they offer is unskilled labor.

Moyo considers China a friend of Africa. Thanks to Chinese investment, there are paved roads, factories, and businesses that give jobs and skill. But she faults the leaders in Africa as being a blockage to foreign investment. According to her, it takes months to get a business license in Cameroon, while in South Korea it takes a week. Who wants to invest in Africa when the governments make things too damn hard?

One thing Moyo doesn't dwell on is birth control. A woman who has children to take care of is held back. Putting off children can help women economically. Birth control is very popular in India, China, Taiwan, and Japan, and look at how well those countries are doing. When you put off marriage and children until you're 26, you have more time to work, go to school, and develop a career.

Those of us that read The Economist will know that "natural resources", particularly "mineral wealth", can be a ticket to poverty. Technology is what brought India out of poverty in the last decade and it can do the same for Africa. Remember how "King Cotton" dominated the American South and ruined it at the same time? That's what natural resources did to Africa; it attracted dangerous loans that put Africa in debt.

Maybe it's time we started listening to people like Moyo (who has a PhD), and not to people like Bono (who never finished school).

"Galled by the ease with which Dambisa Moyo, a Zambian economist and former investment banker, has risen to prominence this year, activists are circulating detailed critiques of her ideas and mass mailing African non-government organisations to mobilise support against her."

See "Foreign Aid Establishment Runs Scared" on Cato at Cato-at-Liberty dot org , May 23, 2009:

"For good reason aid has been said to involve taking money from poor people in rich countries and giving it to rich people in poor countries."

Dead Aid is an interesting book, and my high school senior gave it a big thumbs up.

I'll keep it brief... This is an excellent book that takes an alternative look at Aid to Africa! This book does so, without being venomous towards the history of European domination over major African interests, or the history of Middle Eastern conquests throughout Africa as well. This book decides instead to take an UP TO DATE and mature look at what can be done from an economic stand point and a leadership standpoint to allow the African continent to raise its head out fot he dregs of poverty that it has found itself in for a while now!

Is everything in this book feasable? I don't know. Is everything in this book THE answer? I don't know. But it definetly gives ppl an opportunity to hear a proud African attempt to create a 10 point program for her beloved country!!!! GOOD READ!!!!