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The Facts about Dead Aid by Dambisa Moyo
Dead Aid, a new book by economist Dambisa Moyo, claims that aid is the cause of all of Africa's problems. While ONE has never argued that development assistance is a panacea, the facts are clear that targeted aid does have a positive role to play in promoting development in the poorest countries - especially at this time of global economic crisis. This role must be seen alongside other prerequisites for progress: trade, private investment and improved governance.
As the renowned development economist Paul Collier writes in his book The Bottom Billion: "Aid does have serious problems, and more especially serious limitations. [...] 'But it is part of the solution rather than part of the problem."
Dead Aid makes a number of claims about aid; the key claims are repeated below, along with related facts that didn't make it into the book.
Dead Aid: "But has more than US$1 trillion in development assistance over the last several decades made African people better off? No." (Introduction xix)
The Facts: In a pattern repeated throughout the book, large numbers - including the reference to $1 trillion in development assistance -- are used with no substantiation or citation. Moyo provides no basis for the suggestion that $1 trillion has been spent in development assistance. More importantly, this comment is indicative of a general trend in the book whereby Moyo uses broad statements about aid over time that fail to distinguish between the kind of political aid given to Africa during the Cold War, which was often destructive and misused, and the more targeted aid for poverty-alleviation that has been given to better-governed poor countries since the late 1990s.
This new kind of smart-aid is being delivered in a much more strategic manner and it is delivering real results like the following:
HIV/AIDS - 2.1 million Africans on lifesaving ARVs
Dead Aid: "Aid has helped make the poor poorer, and growth slower." (Introduction xix)
The Facts: There is no statistical basis for this claim. To the contrary, economic growth in African countries increased over the past decade during the same period of time in which better quality aid, aimed at poverty alleviation, also increased.
In the past decade, 18 non-oil exporting countries in sub-Saharan Africa grew at an average of 5.5% per year. One third of all Africans live in these countries. Importantly, these are non oil-exporting economies, so the growth is not based upon that commodity boom. These countries' growth rates reflect the powerful potential of improved governance and leadership combined with aid, debt cancellation, improved trade policies and smart investments.
According to the IMF's Regional Economic Outlook from October 2008, "aid to Africa has picked up since 2000, a period that roughly corresponds to the strongest period of growth in sub-Saharan Africa......There is no clear evidence from the recent acceleration that aid prevents sustained growth. On the contrary, it can be a helpful mechanism for relieving resource constraints."
What threatens Africa's growth now is not aid, but the global economic crisis. The IMF has cut its forecast for growth in sub-Saharan Africa in 2009 from 6.7% to 3.5%. This figure could soon be cut again. Millions of people in Africa stand to be thrown back into poverty because of the crisis.
Paul Collier also weighs in on this point in The Bottom Billion: "Aid does tend to speed up the growth process. A reasonable estimate is that over the last thirty years it has added around one percentage point to the annual growth rate of the bottom billion. This does not sound like a whole lot, but then the growth rate of the bottom billion over this period has been much less than 1 percent per year - in fact, it has been zero. [...] Without aid, cumulatively the countries of the bottom billion would have become much poorer than they are today." (The Bottom Billion" page 100)
And as Collier says, when it comes to tackling poverty: "Growth is not a cure-all, but the lack of growth is a kill-all."
Dead Aid: "With aid's help, corruption fosters corruption, nations quickly descend into a vicious cycle of aid. Foreign aid props up corrupt governments - providing them with freely usable cash." (p. 49)
The Facts: Corruption is always an issue of concern in Africa as in other parts of the world. It disproportionately hurts the poorest people. But the strongest correlations can be found between levels of poverty and corruption - not between levels of aid and corruption. Even if African countries relied solely on private investment, trade flows, and capital markets for economic growth, corruption would still be a factor. As we have all seen, corruption is no stranger to the private sector either.
The effective management of funds - whether aid or from private sector sources - comes down to the quality of governance in any particular country. Sub-Saharan Africa is made up of more than 47 independent countries, each with its own record on this issue. In some countries, corruption continues to slow development and progress. But in others, good governance is on the rise and citizens - community leaders, journalists, church volunteers and parents of schoolchildren - are increasingly holding their governments to account for how they spend their aid and other funds. A number of these citizen efforts are partly financed by development aid. This kind of 'bottom-up accountability' is something that aid is supporting as part of a general drive by donors to improve the way aid works. In September 2008, more than 100 countries signed up to the Accra Agenda for Action, a blueprint overseen by the OECD for making aid more accountable to citizens of poor countries, more transparent, coordinated and efficient.
In Dead Aid Moyo tries to make the case that aid doesn't work by citing a study that showed that only 20 per cent of aid for education in Uganda actually reached schools. There was a significant problem in Uganda with education aid delivery in the mid-90s, but what Moyo fails to include in her book is what happened next. Local parent teacher associations, the Ministries of Education and Finance, international NGOs and donors worked together to dramatically improve aid efficacy by making it possible to track the money to the school door.
By announcing transfers of education funding in newspapers and on the radio, the government informed parent associations of the amount of money their schools should be receiving. As a result of the government's campaign for better tracking and transparency, the percentage of resources reaching schools increased from 13 percent in 1996 to 80 percent in 2002. This model has since been replicated in other African countries, helping to boost overall education policy across the continent and, in combination with increased development assistance and debt relief, has helped drive the enrolment of 34 million school children in the years since. This kind of "bottom-up accountability" is an example of how civil society, aid donors and governments can work together to help improve aid systems and deliver smarter aid continent-wide. In Moyo's hands this is a story of how Africans and aid donors failed; the truth is it's an inspiring story of success.
On the subject of corruption, it's also important to distinguish between aid that goes to civil society groups and aid that goes to governments as budget support, and shades of variation in between. ONE advocates that the better a government scores on governance indicators, the more it should be considered for budget support, the worse it performs, the more aid should go through civil society groups or be withheld. Aid can and should also target the strengthening of transparency, anti-corruption measures and media independence. Facilitating bottom up accountability and entrepreneurial African solutions is the essence of the smart-aid approach.
Dead Aid: "...foreign aid foments conflict. The prospect of seizing power and gaining access to unlimited wealth is irresistible [...] So not only would it appear that aid undermines economic growth, keeping countries in states of poverty, but it is also, in itself, an underlying cause of social unrest, and possibly even civil war [...] Beyond politicization of the political environment, aid fosters a military culture." (pp. 59 -60)
The Facts: Moyo presents no evidence for this claim. Academic Paul Collier has done extensive studies on this topic and states in The Bottom Billion: "On average, as far as we can tell, aid has no direct effect on the risk of civil war" (page 104)
Arguing that aid fuels conflict assumes that all conflicts have the same source, a false assumption. However, according to Collier, "around half of all civil wars are post-conflict situations gone wrong. Aid happens to be particularly effective in raising the growth rate in these situations." (The Botton Billion page 106)
The evidence is plain to see in certain African countries today: aid has played a part in cementing peace after conflict in Rwanda, Liberia and Sierra Leone. As Liberia's respected president Ellen Johnson Sirleaf told the BBC's David Loyn after a meeting in London with British Prime Minister Gordon Brown, stability in fragile post-conflict countries will be threatened if aid is reduced at this crucial time because of the global downturn. She said that it made sense for the richer countries in the world to fund the poorest now, since it would cost much less than paying for peacekeeping operations later. There was a need to "sustain the gains made by African people over the years with such sacrifice", President Johnson Sirleaf said.
Moyo's argument also assumes that all aid flows through African governments. In conflict and post-conflict situations, aid can be channelled through local groups that can help to meet basic needs of populations without offering the incentive for conflict Moyo suggests.
Dead Aid: "Accessing the bond markets is not that hard." (p. 78)
"The capital markets are open, and open for Africa. Any assertions that these countries cannot tap the international capital markets are simply wrong [...] By and large, the countries that have not thus far issued bonds have not done so because they do not wish to, not because they can't." (pp. 92-93)
The Facts: This core part of Moyo's thesis was presumably written before the full impact of the global economic crisis had hit home. Borrowing on international capital markets is now much more difficult for African countries than it was even a year ago. The financial crisis has not only reduced export growth, investments, and remittances from overseas workers, it has also contracted credit markets and opportunities for African governments to borrow in capital markets. We agree that bonds can and should be an important option for well-governed African countries, but unfortunately it is not yet the alterative that Moyo wishes.
Dead Aid: "The Ghanaians did the right thing. There was clearly no need to go down the aid path yet again, and there was a lot of upside to issuing the bond. Although small this time round relative to the investor demand, their approach was prudent - and for this they will be rewarded. In particular their initial success can be the launch-pad for them to win favour from investors and return to the market regularly in future years." (pp. 96-97)
The Facts: Unfortunately, the "rewards" might now take longer to materialise than Moyo envisions. The Ghanaian Finance Ministry recently had to postpone their bond reissue. As it has elsewhere around the world, the financial crisis has made credit much more difficult to access in Africa. As Rwandan economist and head of the African Development Bank Donald Kaberuka told the Financial Times on March 17, countries such as Ghana that were weaning themselves off development aid by tapping into international bond markets could face an additional 10 years of aid dependency.
Of course, the long term aim for African countries must be to move beyond aid, but in the short term, in the face of a global economic crisis, it is more important than ever. Aid can be an important bridge for these countries as they face declining revenues in global markets.
Dead Aid: "What if, one by one, African countries each received a phone call (agreed upon by all their major donors - the World Bank, Western countries, etc.) telling them that in exactly five years the aid taps would be shut off - permanently? Although exceptions would be made for isolated emergency relief such as famine and natural disasters, aid would no longer attempt to address Africa's generic economic plight.
What would happen?
The Facts: Moyo's ideological experiment is reckless and seems to pay no heed to the fact that millions of Africans are on life-saving AIDS medications today paid for by aid. Aid pays to take care of millions more AIDS orphans. It helps fund bed nets to protect families from malaria and helped put 34 million children in school for the first time between 1999 and 2006. Does Moyo really think that her suggestions are going to be so successful that African governments will be able to take over all of those costs in 5 years, particularly in the wake of the financial collapse? Or is Moyo just content to let those on medications paid for by aid get sick or even lose their lives? She fails in her book to pay any serious attention to the consequences that her plan would wreak on the poorest of the poor.
Even the IMF has noted that during the current global economic recession it will be essential to keep aid flows consistent as more and more low-income countries face balance of payments challenges, declining export revenue and investment and will need additional resources to provide essential services to their populations.
Dead Aid: "... in 2005, the United States pledged US$15 billion over five years to fight AIDS (mainly through the President's Emergency Plan for AIDS Relief (PEPFAR) launched in January 2003). But this had strings attached. Two thirds of the money had to go to pro-abstinence programmes, and would not be available to any organizations with clinics that offered abortion services or even counselling." (p. 7)
The facts: Moyo is wrong when she writes that two-thirds of PEPFAR's funding must go to pro-abstinence programs. In fact, about 1/13 - or about 7% -of all PEPFAR funding for focus countries in 2008 was earmarked for abstinence and be faithful programs. PEPFAR funding is broken into three buckets: treatment, care and prevention. The reauthorization of PEPFAR in July of 2008 eliminated the hard earmark that a third of the prevention bucket (again, only about 7% of the overall budget for focus countries) had to go to abstinence/be faithful programs. Many in the AIDS community, including ONE, disagree with even that small ear-mark, but it was necessary to get the legislation through a bipartisan political process. Overall, PEPFAR has been an enormous success, helping to put over 2 million Africans on aids drugs and supporting prevention of mother-to-child HIV transmission during nearly 16 million pregnancies. Moyo had this information before her book was published, but chose to ignore it.
Dead Aid: "There's a mosquito net maker in Africa. He manufactures around 500 nets a week. He employs ten people, who (as with many African countries) each have to support upwards of fifteen relatives. However hard they work, they can't make enough nets to combat the malaria-carrying mosquito.
"Enter vociferous Hollywood movie star who rallies the masses, and goads Western governments to collect and send 100,000 mosquito nets to the afflicted region, at a cost of a million dollars. The nets arrive, the nets are distributed, and a 'good' deed is done.
"With the market flooded with foreign nets, however, our mosquito net maker is promptly put out of business. [...] This is the micro-macro paradox. A short-term efficacious intervention may have few discernible, sustainable long-term benefits."
The Facts: Far from being a case of aid failure, malaria is great example of a recent aid success. But once again Moyo picks one micro anecdote and ignores the mountains of positive evidence. Contrary to her doomsday scenario, there is a job boom in bed-net production and distribution in many African countries because of aid, not in spite of it. Furthermore, bed nets are far more effective than they used to be because of innovative aid and private sector partnerships. The Olyset Net Factory in Arusha, Tanzania began as a 50/50 joint venture between the Japanese Sumitomo Chemical and Arusha-based A to Z Textiles. The factory produces an important public health product and simultaneously boosts the local economy. 3,200 Africans, mostly women, are employed in the factory, which has the capacity to produce over 10 million nets a year. Replicating these models in other countries could not only mean more jobs and economic opportunities for Africans, but could also help meet the high demand for bed nets around the world. Leading experts have said that eliminating deaths from malaria is possible by 2015, and a major component required to reach this target is 730 million bed nets globally. Several African countries have also become successful producers of artemisin, the main ingredient used in first-line malaria treatments. Combined, bed nets and effective treatment can have a dramatic impact on health.
We also need smart-aid to help build the longer term health systems to keep delivering results for Africa citizens. The short term provision of aid-funded bed-nets must be complemented by the longer- term building of systems and training of nurses.
 UNAIDS/WHO. 2008. Towards Universal Access: Scaling up priority HIV/AIDS interventions in the health sector. (UNAIDS) and World Health Organization (WHO). Retrieved from http://www.who.int/hiv/pub/Towards_Universal_Access_Report_2008.pdf
 UNAIDS. August 2008. 2008 Report on the Global AIDS Epidemic. P. 193. Retrieved from http://www.unaids.org/en/KnowledgeCentre/HIVData/GlobalReport/2008/2008_Global_report.asp
  UNAIDS/WHO. 2008. Towards Universal Access: Scaling up priority HIV/AIDS interventions in the health sector. (UNAIDS) and World Health Organization (WHO). Retrieved from http://www.who.int/hiv/pub/Towards_Universal_Access_Report_2008.pdf
 World Health Organization. 2008. "Impact of long-lasting insecticidal-treated nets (LLINs) and artemisinin-based combination therapies (ACTs) measured using surveillance data, in four African countries." Retrieved from http://www.who.int/malaria/docs/ReportGFImpactMalaria.pdf
 UNESCO. 2008. Education for All Global Monitoring Report. 2009. Table 5. Retrieved from http://unesdoc.unesco.org/images/0015/001547/154743e.pdf
 Summers L.H. 1994. Op. cit. and Gage A., Sommerfelt E. and Piani A. 'Household Structure and Childhood Immunization in Niger and Nigeria', Demography, 1997, 34 (2): 195-309
 The 18 countries are Benin, Botswana, Burkina Faso, Cameroon, Cape Verde, Ethiopia, The Gambia, Ghana, Mali, Mauritius, Mozambique, Namibia, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Tanzania, Uganda.
 IMF. October 2008. World Economic Outlook 2008. Retrieved from http://www.imf.org/external/pubs/ft/weo/2008/02/index.htm
 IMF. January 2009. World Economic Outlook. Retrieved from http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm
 Third High Level Forum on Aid Effectiveness. September 2008. Accra Agenda for Action. Retrieved from http://siteresources.worldbank.org/ACCRAEXT/Resources/4700790-1217425866038/AAA-4-SEPTEMBER-FINAL-16h00.pdf
International Development Association. A better managed education system in Uganda. Retrieved from http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/IDA/0,,contentMDK:21308931~menuPK:3266877~pagePK:51236175~piPK:437394~theSitePK:73154,00.html
 BBC News. 16 March 2009. "Downturn risks Africa conflict" http://news.bbc.co.uk/2/low/africa/7947321.stm. March 16
 PEPFAR. 2009 Annual Report to Congress: Highlights. Retrieved from http://www.pepfar.gov/documents/organization/113878.pdf
 DFID. Net Benefits. Retrieved from http://www.developments.org.uk/articles/net-benefits