Aid props up corrupt governments

Dambisa Moyo’s recently released book Dead Aid contains a number of controversial ideas. This is the first in a series of weekly posts discussing some of those ideas. One of Moyo’s assertions is: “Foreign aid props up corrupt governments — providing them with freely usable cash.” It is interesting to consider this idea in the context of Australia’s recent pledge of $10 million in aid to Zimbabwe, which is still subject to the repressive government of Robert Mugabe.

Over the past several years the UK and other western donors have pumped hundreds of millions of dollars into aid in Zimbabwe, but exceptionally poor governance has caused the country to spiral out of control. This clearly demonstrates that, at the very least, large amounts of aid cannot cancel out the negative effects of very bad government. But where does Mrs Mugabe get all the money to go on international shopping trips, and how can Mugabe’s close associates continue to live in luxury when the rest of the country has gone to ruin?

Corrupt governments can appropriate the benefit of foreign aid directly (essentially by stealing it) or indirectly. If, for example, foreign aid is used to pay for schools, then the government can take the money it would otherwise have spent on schools and use it for some corrupt purpose. So foreign aid definitely helps corrupt governments; whether it actually props them up is a more difficult question. Foreign aid for Zimbabwe has not been enough to cover the government’s incompetence, but there is still no sign of regime change on the horizon.