Dead Aid
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Huruma
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The notion that aid can alleviate systemic poverty and has done so is a myth. Millions in Africa are poorer today because of aid: misery and poverty have not ended but have increased. Aid has been, and continues to be, an unmitigated political, economic and humanitarian disaster for most parts of the developing world.
Foreign aid props up corrupt governments – providing them with freely usable cash. These corrupt governments interfere with the rule of law, the establishment of transparent civil institutions and the protection of civil liberties, making both domestic and foreign investment in poor countries unattractive. Greater opacity and fewer investments reduce economic growth, which leads to fewer job opportunities and increasing poverty levels. In response to growing poverty, donors give more aid, which continues the downward spiral of poverty.
The mistake the West made was giving something for nothing. The secret of China’s success is that its foray into Africa is all business. The West sent aid to Africa and ultimately did not care about the outcome; this created a coterie of elites and, because the vast majority of people were excluded from wealth, political instability has ensued. China, on the other hand, sends cash to Africa and demands returns. With returns Africans get jobs, get roads, get food, making Africans better off…..It is the economy that matters.
-Dambisa Moyo
She implies that, were aid cut, African governments would respond by turning to other sources of finance that would make them more accountable … this exaggerates the opportunity for alternative finance and underestimates the difficulties African societies face.
-Paul Collier
I haven't made up my mind and would like to hear arguments for both sides. What do you think?
Comments
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I agree... throwing money at any situation is not a guaranteed positive outcome.
Throwing money at a ton of poor people probably wont do much to help their situation.
It demands more intimate reconstruction at the very least. -
3 obvious problems with aid:
(1) Aid is often provided in a way that is political -- that is accompanied by heavy conditions, whether in terms of incentivizing a certain type of economic policy or playing ball with the lender's military.
(2) When states receive aid, their leaders/institutions tend to siphon off the money in a corrupt way, use it for things that are unsavory at worst and at best only tangentially related to aiding people.
(3) Aid can lead to dependency, and the classic example is with orgs like the WB that fund projects, including some good projects, but in turn put countries in so much debt that they're beholden to it for 30 more years (then the IMF comes in and rearranges the fiscal policy to prioritize debt servicing over social services, which of course hinders development).
The thing about China, is that it invests and trades heavily with the Global South, but if you look at Africa or Latin America, China is only trading with a handful of countries in a meaningful way and on only a handful of commodities. Simultaneously China is outcompeting the very countries who's export markets are being stimulated, especially when it comes to manufactured goods. That has two interconnected effects: first it undermines manufacturing in the receiving countries, and second it leaves these countries dependent on raw-material exports, which reenforces the very triangulation of trade that undermined development in the Washington Consensus era. Plus commodities are volatile as hell, so the window to reinvest the fruits of commodity booms is only open till the bust comes, and states typically aren't especially good opportunists.
When it comes to Chinese investment, that whole business about "demanding returns" doesn't necessarily translate into "making Africans better off." The returns that the Chinese demand are firstly designed to benefit entities in China, not Africa. The investment is largely in primary goods, and while that investment can be accompanied by some development (ie. a road being built) it isn't used to advance mechanisms for processing raw materials, and that processing capacity is what can break a country's dependence. So once again it leads back to triangulation of trade and potentially Dutch disease (the so-called "resource curse").
Doesn't mean that Chinese investment/trade/aid is bad, or even that it is worse than the Western approach, but it is quite a bit more complicated than the whole "chinese noninterventionist investment is a godsend for the Global South" narrative.
(Good book on this subject is The Dragon in the Room, it is more about China and Latin America but also largely applicable to Africa)
As for the Courner comment, it begs for some elaboration. First of all, China prides itself on its "noninterventionist" investment, and that's why borrower countries often prefer it, because it isn't accompanied by structural adjustment programs, so the notion that the Chinese are providing accountability is not in line with their own stated objectives. However, in the long run, demanding returns is sure to translate into demanding debt settlement, so China is talking a good game but down the line there is a good chance that it will insist on all the same kinds of "accountability" that undermined development initiatives from the West. And second, if you gravitate toward a neoimperialist worldview, you have to acknowledge that China is basically conducting an imperial project.
Aid has a bad reputation in some circles, and that is not entirely undeserved, but it does in fact help a lot of poor people in the immediate term and even helps countries in structural terms sometimes. But two important things to note: (1) people have a tendency to think of aid as being all the same and as such are either for it or against it, but a closer look reveals nuance: some aid is for defense, some is for education, some is for health services, some is administered through nonprofits, some through government or intergovernmental orgs, some through investment vehicles, sometimes aid really is aid and sometimes loans are the basis for aid... and each of these approaches is accompanied by a different set of pros and cons. (2) The best hope for developing countries (this is an imo point btw) is not to shift totally from Western to Eastern aid/investment, but rather to diversify sources of aid so that they have leverage in bilateral relations with each core investor.
