Foreign aid is not working

“Aid has been, and continues to be, an unmitigated political, economic, and humanitarian disaster for most parts of the developing world,” according to Dambisa Moyo in her controversial new book Dead Aid: Why Aid is not Working and How There is Another Way for Africa. Moyo has dared to speak the unspeakable, and cast doubt on the prevailing Western assumption that aid is a good thing, and that governments which increase their levels of giving are making life better for people living in poverty.

The book starts by explaining that its objections do not relate to emergency aid (in response to urgent disasters) or charity-based aid (although the author does take some pot-shots at charities); instead, it relates to systematic aid from governments or institutions such as the World Bank. More than US$2 trillion in aid has been transferred from rich countries to poor countries over the past 50 years, but the poorest countries are no better off. Many argue that aid is more effective in good policy environments, but Moyo argues that the facts simply do not support this. She says that aid is a silent killer of growth, causing corruption and bad governance because recipient governments have less incentive to be accountable to their citizens, and civil wars, reducing savings and investment, and choking exports.

In part II of the book, the author gives her ideas about how to replace aid. Whilst I find her critique of the economic and political consequences of aid reasonably compelling, I find her proposals less compelling. She recommends that developing countries replace aid with funds raised through international bonds markets, but she does not explain why corrupt governments that steal aid would not steal money raised through bonds. She advocates increasing engagement between African countries and China, but overlooks the fact that Chinese aid with no strings attached causes just as much harm as anyone else’s aid. The book is easy to read and makes a useful contribution to the debate, but in my view the recommended actions still come up short of the mark.