News and Analysis • Volume 13 • Number 2 • June 2009
2 - Dead Aid or Recovering Patient
Dambisa Moyo’s book Dead Aid has created quite a storm within the development community, which struggles with an appropriate response
by Eveline Herfkens
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Of course, the easy retort is that her recipe - more foreign investment and access to international capital markets - while feasible (and actually happening) at the time she wrote her book, offers no alternative at present: due to the economic crisis foreign money flows have been reversing and there were no international bond issues by African countries in 2008. In fact, Kenya, Nigeria, Tanzania and Uganda have all cancelled plans to raise funds in the capital market. In the meantime, some well-performing African economies are re-evaluating their intentions to phase out official development assistance (ODA).
But regarding her criticism of aid, frankly, I feel the ‘aid-business’ has reacted too defensively. The practices she condemns are exactly the ones the OECD Development Assistance Committee (DAC) and the more enlightened donors have been trying to reform. I see Moyo’s book as a great opportunity for a public discussion regarding aid effectiveness and trade, for which it has always been hard to get public attention. Such attention might create the constituency and political will to finally implement the reforms in aid delivery agreed by all donors in the Paris Declaration of 2005 and the Accra Agenda for Action last year.
I am especially delighted that Africans have joined the debate, which has been dominated for too long by Westerners, some of whom have too often portrayed Africans as incompetent and helpless. It was time for Africans to stand up against the insulting paternalism of some parts of the international aid community. Suggesting that it is up to us to fix global poverty denies the primary responsibility of developing countries to fix themselves - as embedded in the division of labour in the Millennium Goals.
It is high time to attack the underlying myth of Western superiority: we lecture - you listen; we give - you receive; we know - you learn; we take care of things - because you can’t. Undermining Africans’ self confidence, we take over. Neo-colonialism is what I call it. Or, as an African friend of mine put it: “When you move to Africa, you are per definition an expatriate expert. But when I move to Europe, I am only an immigrant.”
Getting rid of these perceptions is essential for public opinion to understand what underpins the necessary reforms as agreed in the Paris Declaration and the Accra Agenda for Action: the recognition that we, donors, don’t develop them; they develop themselves. Only if Africans - not donors - set their development agenda, can aid be used productively.
In particular, Moyo’s point that “without aid, it would be easier for citizens to hold governments accountable” should not be dismissed. Indeed, the attitude of ‘we’ (standing for experts/money) will save Africa or ‘we’ will end poverty, leads to undermining incentives for poor people to demand action from their own government to improve governance, fight corruption and ensure that resources - not just aid, but also the far larger domestic resources - are spent transparently and well.
This implies that donors have to deliver aid in a fashion that does not allow developing country governments to shirk that responsibility, nor shift their citizens’ expectations away from their own governments to those of the donors. Indeed, the type of aid that removes the link of accountability between political leaders and their electorate ultimately perpetuates poor governance and poverty. Aid must be channelled through recipient budgets to allow domestic accountability.
I also agree with Moyo’s observation that too much aid has been driven by donors own economic and geopolitical interests. Where ‘aid’ is given for geopolitical or export promotion objectives, it was never intended to reduce poverty; thus we should not be surprised if it does not.
Finally, she is also right about the importance of trade relative to aid, and the need to make trade rules fairer. Alas, while the EU has pledged more coherence between trade policies and development objectives for more than 15 years, we still fail to provide genuine market access to the poorest countries, or to reform our agricultural policies.
However, I disagree with Moyo’s conclusion that if aid does not work, we should quit the aid business. We should not throw out the baby with the bathwater, but should draw the lessons from its failures and successes. And that is exactly what we have been doing the last decade. Now, seriously, for the first time in aid history we do have an agreed broad-ranging agenda of measures to ensure that aid genuinely contributes to development. The Paris-Accra agreements are not just slogans or buzzwords - each is backed up by a series of practical reforms, deeply grounded in reality, and responding to past failures, including the many ills Moyo points out.
What worries me most about Moyo is that she does not say much new: it has all been said before by Peter Bauer in the sixties and seventies (she was fair enough to dedicate her book to him) and by William Easterly a few years ago. By now it is not good enough for us in the aid business to just say we have heard it and debate the finer points.
It is time to implement Paris-Accra, so that aid responds to genuine local needs, builds local capacity to manage development, and makes governments responsible and accountable. But implementation has been lagging as it demands political leadership and understanding of the rationale for the Paris-Accra reforms by public opinion in general and parliamentarians in particular.
Moyo has done us a great favour by providing the platform, generating interest in these issues in mainstream media, and providing the right arguments for these urgent reforms.
Eveline Herfkens is Founder, UN Millennium Campaign; former Dutch Minister for Development Co-operation; and Chair, ICTSD Board.
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An often overlooked aspect of aid’s corrosive effect on the reform dynamic within developing countries is that aid undermines and corrupts the relationship between the business community and the government. If governments must depend on tax revenue, rather than foreign aid, for the their revenues, they have to engage with and listen to the business community. They have to provide services and, more critically, regulatory frameworks that facilitate business. Tax revenue comes overwhelmingly from business, business owners, and the better-off employees of business. Other government revenue, notably tariffs, comes from the same source.
Foreign aid severs and even reverses this dynamic. Rather than depending on business for revenue, and therefore needing to partner with the business community or at least engage with them, foreign aid-fueled governments become the source of revenue for the private sector. Whether doling out contracts, buying local investment goods (cement, steel), or providing donor-funded infrastructure needed by business, the government becomes the patron of local business.
This reversal of the accountability arrow corrupts the private sector, which becomes a client of the government rather than an indepenent source of political power. “No taxation without representation” becomes “no taxation, no representation.” The private sector comes to rely on illegitimate strategies for business development — corruption, clientelism, etc. — and does not develop the marketing and financing skills needed to succeed in a genuine marketplace. It thus becomes an adjunct of the government, in political terms, as dependent on aid flows as any bureaucrat. It cannot then function as an independent power group lobbying for reform, but becomes another barrier to such reform.