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Economist Shuns Africa Aid In Attempt To Find New Fix

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By KARL MAIER

The Tampa Tribune

Published: March 29, 2009

"Dead Aid: Why Aid is Not Working and How There is a Better for Africa," by Dambisa Moyo (Farrar, Straus and Giroux, $24)

Telephones ring on the desks of finance ministers across Africa with news of a pioneering aid initiative: The West plans to halt all low-interest lending and grants to the continent within five years.

That scenario is anathema to the African aid lobby led by the likes of Bono and Bob Geldof. Yet it's precisely what Africa needs, says Zambian economist Dambisa Moyo in her provocative book, "Dead Aid."

Millions in Africa are poorer today because of aid; misery and poverty have not ended but have increased, she writes. Aid has been, and continues to be, an unmitigated political, economic, and humanitarian disaster for most parts of the developing world.

Moyo, who earned her doctorate at Oxford and has worked for the World Bank and Goldman Sachs Group Inc., focuses her criticisms on low-interest loans and grants from governments and multilateral lenders. Together, these make up more than 50 percent of the national budget in many African states.

Africa is addicted to aid, she says. Like any addict, it needs and depends on its regular fix, finding it hard, if not impossible, to contemplate existence in a world without aid.

The West has funneled $1 trillion to Africa over the past 50 years, Moyo notes. Yet more than half of sub-Saharan Africa's 700 million people live on less than $1 a day, and the poverty rate doubled between 1981 and 2002, she says, citing World Bank figures. Real per-capita income today is lower than in the 1970s.

Cutting off aid won't affect most Africans, Moyo argues, because they don't have access to it to begin with; only their governments do. The continent is full of aid-funded roads and schools that stand uncompleted while government leaders ride around in brand-new Mercedes-Benzes, stuff money into foreign bank accounts and travel abroad, sometimes in private jets.
Outright grants and low-interest loans are all too easy to steal, she says. Aid makes African leaders more responsive to Western donors than to their own people and engenders conflict by making government worth fighting over, she adds.

There is another way, Moyo writes. African nations could wean themselves off aid, she says, by turning to international and domestic bond markets, as Asia has done. Borrowing on capital markets requires obtaining good credit ratings, which in turn obliges governments to be more prudent.

African leaders should also encourage more trade and investment from China, press the West for genuine free-trade access for their farm exports, and develop microfinance tools such as those pioneered by Muhammad Yunus, the founder of Bangladesh's Grameen Bank and winner of the Nobel Peace Prize.

Moyos attacks on the corrupting nature of aid echo those of other recent critics, including former World Bank economist William Easterly, author of "The White Man's Burden." She takes the argument further, identifying aid as the main barrier to African development: It crowds out domestic savings and foreign investment, she says, and can hurt exports by driving up the value of local currencies, thus deepening dependence on aid.

Though Moyo is making a valuable contribution to the debate on African development, it's naive to single out aid as the principal cause of the continent's ills. What of the billions of dollars in oil revenue that pours into countries such as Nigeria? Nigerians have become poorer, not richer, in the 40 years since major petroleum production began in their country.

One also cringes when Moyo embraces the concept of the benevolent dictator, arguing that it's impossible to establish multiparty democracies in undeveloped economies. She seems to forget that African history is littered with messiahs in khaki who turned into corrupt dictators.

Nor is it advisable, at the moment, for African countries to raise money on bond markets. The global financial crisis has already forced Nigeria, Kenya and Tanzania to delay plans to sell international bonds. Yet it's hard to disagree with what Niall Ferguson writes in the book's foreword: "This reader," he says, "was left wanting a lot more Moyo and a lot less Bono."

Moyo laments that aid has become part of the entertainment industry, with Bono and other celebrities defining the debate while African leaders remain silent.

Karl Maier writes for Bloomberg News.

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