Friday, June 03, 2011

Night of the Living Dead Aid

This morning I accidentally stumbled on this old blog post from 2009, about Dambisa Moyo's book, Dead Aid, and I thought it was worth resurrecting its rotting corpse and taking another look.

It was a bit of a ranty rambly blog post at the time, and I also forgot to follow up one of the comments, which linked to this radio interview with Moyo, which I've now listened to.

In summary of what I'd said before, Moyo used the book to sweepingly label all (governmental) aid as "bad" and feeding corruption, and so should be stopped.  She also had seemed to have criticism for humanitarian and charity aid.

What particularly worried me at the time (and is still my main reservation) was her apparent faith that the free market would simply "step in" and do everything that governmental aid is failing to do.  Apparently Chinese and other foreign investment will inevitably bring growth to African wealth.

The key contrast in that sentence, if you failed to spot it, is between the words "foreign" and "African".

What she is proposing is that we allow multinational companies to walk in and raid developing countries' natural resources on a scale even greater than what is happening today.  Does she really think that foreign investors making lots of money is going to always have a knock-on benefit for the local economy?

Having listened to her radio interview however, I don't think she means that to happen, it's just that this is what her proposals would lead to.  There's a lot that she says that I agree with.

One of the things she says is that localised aid to people's individual needs is very effective.  She cites Kiva.org, who do a great job of connecting individual donors to people in need of small business loans.  The great thing is that the initial investment generates revenue for the recipient, who can then repay the loan so that the money is available for the donor to recoup or reinvest.

I said at the time, it's the same sort of reason I'm so proud of The Hoja Project.  We provide microfinance loans through our IGPs, we provide education to people who can then invest their new skills and qualifications into a better career, and we do it all by being really stingy and trying to make it all as self-funding as we possibly can.

As well as this, our work is locally relevant - Hoja is run by Oswin in his own community, and with the support of local leaders.  In three years, largely thanks to Hoja's work, average family daily income in Tanga ward has increased from 15p to 41p, while in surrounding wards it's stayed roughly the same.

This is the sort of grass roots stuff I really believe in - I think it's far more effective at building a solid foundation for the future than any governmental aid.

And there is the second point I agree with.  Governmental aid feeds corruption.  Governments who receive large amounts of aid need not rely on their people for taxation, and so are not accountable to the people they are supposed to work for.  [some links on taxation & accountability]

And then you get a Parliament full of MPs who spend much of their time giving themselves pay rises.  Like this.

I'm not going to jump in and agree with stopping all governmental aid (because I'm sure in many cases it's necessary), but I do find myself sighing heavily at every G8 summit where the headline campaign is inevitably to persuade our leaders to throw more money at the problem (a promise they don't tend to keep anyway).

What we need to do more than anything is to persuade our leaders to stop telling fragile economies to open themselves up to free markets.  Seedlings need first to be nurtured to maturity before being planted in the forest.

And that's where Ms Moyo and I beg to differ.

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