In direct contention with the pervading assumption that international aid is critical for the survival and eventual growth of the most impoverished countries, Dambisa Moyo contends that aid has actually inhibited these countries from achieving sustainable economic growth. Instead of providing a basic level of sustenance for a country, aid encourages corruption and locks a country into a cycle of debt that prevents viable economic sectors from developing. In this opposition, Moyo recommends a combination of foreign direct investment, intentional and regional trade, bond markets, increasing domestic savings, and reducing the costs of remittances while tailoring these options to the specific circumstances of each country.
Response:
Moyo makes a compelling argument against broad intergovernmental aid. Nevertheless, one of the primary arguments of Jeffrey Sachs, the developer of the Millennium Development Goals and author of The End of Poverty, is that targeted aid to local communities that increases GDP per capita above $300 breaks the poverty trap and allows for economic progress to begin. Until that trap is broken, households cannot amass enough capital for reinvestment, which is critical for economic growth. As Moyo notes, massive flows of aid to any given country do not produce this effect. Rampant corruption, a lack of growth, and rent seeking by public officials become the norm. In short, aid may be able to alleviate poverty and jumpstart an economy but the problem is with the implementation. Unfortunately, there may not be a reliable way to deliver aid to local communities in Sachs' vision on a broad scale. In which case, stopping aid and pursuing other avenues for raising capital as Moyo advocates may still be the best way to spur economic development throughout Africa.
Secondly, Moyo does not discuss the complexities of trade barriers thoroughly enough. There is little question that Western subsidies on agriculture create a severe impediment to growth throughout emerging economies. However, there is a valid geostrategic argument to be made for not removing the subsidies. Without subsidies, most Western countries would most likely import that vast majority of their food products, creating a potential weakness during conflict.
Taking a realist perspective, removing trade subsidies would tilt the balance of power to countries that may violently challenge the Western hegemony, a risk not worth the increased growth in the developing world. There are also counterpoints to the geostrategic argument as well. A neoliberal would likely argue that increased economic prosperity will result in a greater adoption of democratic norms and then use democratic peace theory (democracies seldom fight each other, therefore, if every country is a democracy there should be relatively little war) to argue that concerns for the balance of power are largely irrelevant. Moyo merely acknowledges that there is a geostrategic argument but does not attempt to debase or critique it.
The Bottom Line:
A pivotal book. Moyo strikes an excellent balance between readability and thoroughness, referring to numerous academic studies throughout the book while keeping the writing and content easily accessible. Whether you are involved with development policy or have simply bought the latest (RED) iPod, you need to read this book.
For more reviews and a summary of Moyo's main points, find us at Hand of Reason.
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Top reviews from other countries
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Elizabeth SmalowskiReviewed in Brazil on May 27, 2017
Boa síntese de aspectos pouco divulgados
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