Trade Not Aid: Africa’s Salvation Lies with a New Approach
The most important and innovative aspect of Dambisa Moyo’s book Dead Aid is not related to content. Think about everything you’ve learned regarding Africa and international development. Where did that information come from? Western leaders? UN officials? Rock stars? It is a curious phenomenon that African people are the least likely source of information regarding their continent.
Born and raised in Zambia, Moyo received her economics Ph.D. from Oxford University. She has worked as a World Bank consultant and at Goldman Sachs. Dambisa Moyo brings a refreshing African voice to the world stage and maintains international aid is actually harming Africa.
The Failed Policy
Moyo makes a strong case citing the astronomical amount of money transferred to developing countries from Organization for Economic Co-operation and Development (OECD) nations over the last fifty years. She then links this tremendous sum to the less than optimal outcomes for the African continent and notes the few examples of countries graduating out of the foreign aid system.
Not only is aid inefficient in Moyo’s eyes, but it leads to corruption, retards economic growth and cultivates dependency. Aid makes up a sizable portion of many African nation’s gross domestic product (GDP), typically 10-20%. With this substantial amount of guaranteed cash flow, African leaders feel comfortable squandering it through offshore banks or giving favors to their cronies. Foreign aid is so guaranteed, not producing results is acceptable. Unlike direct foreign investment, with the requirement to produce returns, aid fosters complacency.
To illustrate aid’s potential economic damages Moyo cites the following example. Imagine a businessperson in Africa launching a small operation to produce mosquito nets to combat malaria. The firm is growing and employing seven Africans. As is common in the developing world, the income from these seven people help support a large extended family as they pay school fees and other necessities. Now a foreign aid organization distributes free mosquito nets. This reduces demand driving down price and the company is forced out of business. Jobs are destroyed and the reverberations are felt by many, harming the local economy.
The Aid Alternative
Moyo advocates that African countries increasingly embed themselves in the global economic system. African nations can issue bonds, essentially loans or IOUs as oppose to receiving aid. This raised money can go towards infrastructure, education and healthcare. She further cites a plentiful history of developing countries issuing bonds to great success. Through bonds, African leaders will be more motivated to produce required returns or risk losing future funding opportunities and damage to their credit rating.
Despite its large population, Africa carries out a disproportionally small percentage of world trade. Some of this is beyond the continents control. Moyo cites the protective trade restrictions, especially towards food in many Western nations. Large farm subsidies keep food costs artificially low in Western countries and restrict the ability of African nations to competitively export.
OECD countries spend about $300 billion USD on domestic agricultural subsidies. This is almost three times the total aid spent. If the developed world truly wants to help Africa, removing these subsidies and creating more avenues for African countries to trade and develop local economies would be astronomically more effective.
Microloans and remittances are two concepts Dambisa feels hold great potential and are underutilized. Microloans bring individuals, often in rural areas into a more formal banking system. Small loans made between individuals of the same community use trust as collateral and allow many to grow their businesses. This empowers citizens to grow their way out of poverty.
China’s growing African presence takes an equally sizable portion of Dead Aid and is highlighted emphatically. Moyo applauds the Chinese emphasis on trade, currently being the third largest trading partner on the continent, only after the USA and France. Moyo’s highest accolades are reserved for China’s tremendous foreign direct investment.
Chinese investments, both public and private, have produced roads, pipelines, railways and power plants in an environment starved for infrastructure. In Moyo’s eyes no country has made as big an impact on the political economic and social fabric of Africa as China. The infrastructure for natural resource model is described to be understood by both the Chinese and Africans which leads to mutually beneficial results.
Moyo’s mosquito net example is powerful but it is too sweeping an economic generalization. The Centers for Disease Control and Prevention estimates the direct cost for Malaria illness, treatment and premature death to be 12 billion USD. This endemic disease then results in a still higher economic growth loss. Moyo does not thoroughly take into account improved population health and its economic effects into her analysis. Despite the flaws in her example, the direct delivery architecture frequently used by both governments and nongovernmental organizations alike warrant stricter scrutiny.
Moyo takes on an enormous task by analyzing aid in a continent of 54 unique nations through 50 years of dynamic history. While admirable, all-encompassing generalizations of aid are made. This is especially noticeable as she relies on cold war era examples and the low hanging fruit among African leaders noticeably Idi Amin of Uganda and Mobuto Sese Seko of Zaire now the Democratic Republic of the Congo. While these individuals are part of Africa’s story, their large mention skew realities when discussing the continent as a whole.
Moyo touches upon some criticism related to the Chinese presence in African but these are fleeting and not analyzed thoroughly. Environmental concerns are mentioned via quotes by western officials complaining about Chinese business practices. Statistics and trends related to these programs are not included nor is the African perspective shared.
African complaints regarding Chinese labor practices are at best lightly touched upon. Moyo glosses over the effects of cheap Chinese goods flooding the African markets and their effect on local businesses. This level of analysis lies in stark contrast to her through analysis and criticism of aid flooding nations with cheap or free goods.
While flaws are present, Dambisa Moyo starts the conversation by asking, can there be a better way? We would be wise to take notice of her concerns and try to hear the voice of the 1.2 billion other Africans whose calls aren’t as visible.
William Pierce holds the graduate assistantship for The Carter Center’s China Program. He is a masters student at Rollins School of Public Health, with a policy and management concentration. Mr. Pierce served in the Peace Corps, living in a Ghanaian village, carrying out public health programs from 2013 to 2015. William holds an executive position in the Rollins Returned Peace Corps Committee. He has worked at CARE International within the new business development department, responding to U.S. government solicitations, including those from USAID. William holds a bachelor of science degree in biology from the University at Buffalo. He speaks Hausa and Buili.