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Economist Dumbisa Moyo argues against aid in her new book "Dead Aid"

Ethiopia - The Failure of Development Aid
Time for Designing an Exit Strategy?


By Tesfaye Habisso

"...If by aid we mean making a difference in the lives of people over the long term, helping people to live in a situation whereby they do not have to face those kinds of emergencies, then obviously aid has failed, because the number of people affected by emergencies has significantly increased over the years...Aid in the short term might have saved lives, but in the long run it seems things are get ting worse..." [Ethiopian Economics Association]

The continuing failure of official international aid to encourage the emergence of a self-sustaining growth in agricultural and industrial sectors, geared to local needs, has led many to question the appropriateness of aid per se. A number of problems with the current system of aid assistance have been identified:

(i)Since some of the aid is in the form of loans rather than direct grants poorer countries may find themselves getting into increasing debt;

(ii)A considerable proportion of any aid package is swallowed up in payments to technical experts, the field-staff of the donor countries, or on the costly housing, transport, and diet arrangements made for them in the host country. As the New Internationalist (1981, p. 9) noted:
Up to 25% of Western aid budgets is spent on experts. After salary, airfares, school fees, various perks and home based overheads are covered, the average British expert costs $ 150,000 a year.

(iii) An important form of assistance to Third World countries is food aid. In the long term food aid can have serious social and economic consequences. Economically it tends to undermine the Third World agricultural sector by depressing local markets and so discouraging local production. Despite farmers’ desire to work and cultivate successfully, local economic conditions mean that there is limited opportunity to get an adequate return on one’s business (Mann, 1969). Socially this can lead to farmers going out of business adding to the huge volume of under-employed and unemployed landless labourers. Politically it can also encourage a subservience to donor states by Third World governments such that they may be obliged to buy surplus donor goods when they are unwanted: for example, Pakistan has had to take surplus US cotton when it had sufficient of its own (Andrew Webster, 1988).

(iv) Aid often increases dependency by being loaned to a country on condition that it is used to purchase goods from the donor country: this is known as aid tying. Almost 70 per cent of British aid is loaned on these terms, which means in effect that aid provides an important market for British manufacturers. As King(1975, p. 9) says, “Aid creates more jobs and leads to the establishment of more industries in the developed than in the developing countries. The main beneficiaries of aid are those countries which provide the bulk of international expertise to developing countries and which export equipment, through direct links with aid agencies and projects, to them.”

(v) Aid beneficiaries in the Third Word tend to be urban centered—the bureaucrats, entrepreneurs, politicians, and industrial workers. The poorest in the rural sectors, those that one might think are supposed to benefit most from aid, particularly food aid, usually end up seeing very little of it.

Aid does not and cannot develop any society. It is not designed to achieve this objective in the first place. Development must be the direct result of people's efforts to take control of their own destiny because nobody owes us a living: We owe it to ourselves. The argument is not whether Africa needs help or not but that it is too weak, fragmented and vulnerable to be able to decide where and when it needs help now. In this situation, aid has created an artificial atmosphere of a few that are kept in power by donor funds and external support without any accountability to their own peoples.

Nobody can point to any society whose development has been the result of external help that remained sustainable. Development has to come from within and not without, if it is to be sustainable. Aid creates aid dependency and aid addiction that undermines Africa's capacity to help itself. A situation where aid becomes the biggest component of the annual budget of a country's recurrent expenditure and almost all of its capital expenditure undermines democracy and accountability to citizens. If our governments are not in power due to our taxes, why should we expect them to be accountable to us? They will be accountable to those who are paying the pipers. That is why our leaders troop to London, Washington, Paris, Brussels and other non-African capitals to show their masters the required allegiance and that they are ‘good guys’. Unfortunately, the same applies to our successful NGOs too. It is immoral that governments that cannot build roads, schools or hospitals but are ready, willing and able to wage all kind of unjust wars, or to perpetrate gross human rights violations against their own citizens without needing any IMF/World Bank aid should turn around to make a claim on the outside world to help them feed, clothe, educate and make their people healthy.

Some of the major recipients of IMF and World Bank aid over a number of years in Africa, like Sierra Leone, Liberia, and Somalia, later became failed states. One World Bank report has even admitted that the three developing countries that have done the most to pull their people out of poverty on a mass-scale are Cuba, China and Vietnam. What the report, however, failed to say was that these are countries that have received no IMF and World Bank aid.

In Africa itself, the countries that have the best infrastructure and most flourishing economies are those that receive very little or no IMF and World Bank aid. Botswana does not receive IMF and World Bank aid but has a flourishing economy with good infrastructure and good governance. A World Bank economic forum report recently ranked Botswana first out of 21 African countries for good governance and the rule of law. According to the survey, Chad, which has received massive IMF and World Bank aid over the years, was rated as having the worst public institutions.

Namibia receives no IMF and World Bank aid either and is noted for its good governance, good infrastructure and low level of corruption.

Most African states do not need aid; they need proper government that respects its people, insures good governance, and puts the public's interest above personal and cliquish interests; they need proper governments willing and ready to root out patronage and corruption, the high cost of public administration and outright wastage of public resources. Why should the World Bank or IMF or anybody give aid to Nigeria, for instance? It has more than it needs but has not got what it deserves in leadership--management of government! So, if the West really wants to help Africa, there are a number of things it can do.

One, Western governments and financial institutions should remove all obstacles to free and fair trade which benefits them at our expense, be it IMF/World Bank, WTO or other unfair multi-lateral agreements.

Two, it should accept that the debt owed by all African nations and the developing world is odious and should be written off immediately for everybody, not just a few favorite strong men rulers who they hope will act or are acting as their foremen in Africa. It does not make for sustainable development for Ethiopia and Uganda, for instance, to have the HIPC privilege if the rest of the Horn of Africa, East Africa and the Great Lakes Region is denied it.

Three, the West should show its true commitment to free trade by removing all the trade, tariff and non-tariff barriers that continue to prevent Africa and other poorer Third World countries from competing fairly in their markets. For instance, the grotesque subsidy enjoyed through the common agricultural policies of the European Union that protects its unproductive and uncompetitive farmers in the industry or the protectionist measures of the US government that advantages its industry must be removed, if the West indeed wants to help Africa.

Four, globalization should be truly global in terms of addressing the global problem of poverty and the freedom of labor to move across continents without any hindrances or impediments whatsoever. Remittances to Africa are now more than total budget for aid collectively and in some countries it may even be more than the national budget. Let these largely illegal immigrants in Europe and America be legalized and they will help develop their countries. Without this, aid to Africa will only be a case of someone beating you and at the same time offering you a handkerchief to wipe your tears. This is the time for African governments to design an exit strategy for their countries to get rid of this aid dependency over a fixed period of time! Aid is worse than AIDS, in the long run. After all, AIDS kills specific number of people who do not take proper care to prevent it; aid on the contrary, kills whole generations and those to come in the future. It is only the commitment and the ability on the part of governments, local people and businesses to retain domestic income and to save more and to invest their savings in things that increase their ability to produce more that will jump-start and accelerate economic development, and, surely, not foreign aid. As the former president of the USA, Ronald Reagan, once stated:

" A society, like an individual family, cannot live beyond its means indefinitely. In fact, if it wants to prosper and grow it cannot even live at its means. It must save and invest for the future. We have not been doing that, and unless this changes we will suffer for it, even if the suffering takes the form of slow stagnation, rather than some blood-curdling cataclysm." [Time, 1981, p.21]

Most foreign aid to developing countries, including IMF and World Bank aid, is about power. Aid has been one of the ways in which powerful institutions like the IMF and World Bank encode their doctrines and impose them on developing countries, to the detriment of those countries.

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Watch C-SPAN Q&A with Harvard and Oxford educated Economist Dambisa Moyo