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What We're Reading and Discussing: Dead Aid by Dambisa Moyo

By Opportunity International

Every Wednesday, we highlight an article, book or a blog in our “What We’re Reading” series. We feature works that are noteworthy, inspiring, educational or relevant to the work we do at Opportunity. We welcome your comments in the comment field below–tell us what you’re reading, or respond to the piece we’ve highlighted. The following post by Allison Bearden, an Opportunity intern in our Resource Development department, reflects on Dambiso Moyo’s bookDead Aid. As Allison reveals, Moyo discovers that the key to effective international aid is not charity but holistic economic empowerment through investment and microlending. Read more…

According to Dambisa Moyo’s Dead Aid, over the past 50 years more than US $2 trillion of foreign aid has been transferred from rich countries to poor, with over US $1 trillion going to Africa alone. In spite of this substantial influx of money, Africa’s real per capita income today is actually lower than it was in the 1970s, at approximately US $1 a day, making it the poorest region in the world. These chilling facts provoke many difficult questions, including how such a sizable sum of money could have provided such little long-term help to Africans. Are there better methods of bringing about poverty alleviation in Africa?

In Dead Aid, African-born Moyo argues that government-to-government development aid should cease because it has created more harm than help on the continent. The author’s childhood in Zambia, her Ivy-League education, her work experience at the World Bank, and her exhaustive research have led her to believe that “the notion that aid can alleviate systemic poverty, and has done so, is a myth… aid has been, and continues to be, an unmitigated political, economic and humanitarian disaster for most parts of the developing world.”

Though firm in her stance against systematic aid payments from government to government, Moyo is careful to articulate that she is not arguing for an end to emergency- and charity-based aid. Rather, she is critical of the modern understanding of aid-based development, as established in the post-Depression atmosphere of the 1944 Bretton Woods Conference. Following this meeting of nations and the perceived success of the Marshall Plan in Europe, many believed that infusing investment capital in impoverished regions like Africa would encourage economic growth in the same way, and Western governments subsequently began funneling millions of dollars in aid to the developing world. Moyo asserts that applying an economic solution for Europe’s post-war problems to poverty-stricken Africa was a significant error, and argues that aid has since become one of corruption’s greatest allies in Africa, retarding social capital, encouraging civil conflict, and hampering already-weak economies, while also encouraging corrupt governments to fuel their own self-interested endeavors.

All hope is not lost, however. Moyo outlines four alternative solutions to aid that she firmly believes will reduce poverty in Africa in the long-term. The first entails African governments raising money by issuing bonds rather than simply receiving aid. Moyo states that investor interest in emerging countries is on the rise, meaning that there is a substantial untapped market for African governments who choose to seize this opportunity. Secondly, Moyo recommends that African states take steps to attract foreign direct investment (FDI), and also calls on developed countries to follow China’s lead in investing capital in Africa’s infrastructure.China’s potential benefits to Africa are also significant to Moyo’s third recommendation, which is for African states to actively pursue increased trade with China, as well as other burgeoning economies like India. Moyo’s last solution is for African states to encourage banks, hybrid venture capital structures, and micro-lending institutions–like Opportunity International–to operate within their borders. Speaking of the value of microfinance, she says, “Today, microfinance brings groups of people into the economy for the first time by offering the poor a range of savings tools. Beyond the direct capital injection it puts into a borrower’s pockets, it can also be a powerful development tool. Even small loans can boost business productivity gains and contribute to job creation and raise family living standards (better nutrition, better health and housing, and more education).” According to Moyo, the microfinance industry has yet to reach 5% of the customers potentially available among the world’s poor. Clearly it’s time for African states to encourage their populations to engage in microlending.

Dead Aid offers several potential solutions to the problem of persistent poverty in Africa after many years and trillions of dollars of development investment. However, her call for an end to all government-to-government aid raises additional questions, including how to responsibly discourage dependency and corruption without neglecting the immediate needs of the millions of hungry and dejected families currently living in the developing world. In an imperfect world, there will always be challenging questions for which there are no easy answers. What do you think of the perspective that Moyo offers in Dead Aid? Pleas share your thoughts in the comment field below.

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