Dead Aid – Dambisa Moyo

Part 1: The World of Aid

Chapter 1 – The Myth of Aid

The State of Africa

Africa has recently undergone somewhat of a revival. There have been three key factors in this resurgence:

  1. The rise in global commodity prices
  2. Macro-economic improvements that have occurred post-1980’s
  3. Political improvements

16 African nations now host fully-functioning stock markets. The continent is rapidly becoming a profitable place to invest, e.g. Zambeef (agri-business firm) returned 150% on investment in 2007. Bond markets are becoming increasingly strong too. Although it is great to have seen these recent improvements, the continent’s position still poses a gigantic challenge. Average per capita income is $1/day – this is worse than it was during the 1970’s. In Sub-Saharan Africa, the number of people living in poverty doubled between 1981 and 2002. Life expectancy is still very low in comparison to the rest of the world. The Aids epidemic has caused a rise in the death rate. Politically, 50% of the continent is still considered undemocratic and there are 11 fully autocratic regimes (Polity IV). Since 1996 there have been 11 civil wars (see the Conflict Trap chapter of The Bottom Billion). Seven out of the top-ten failed states globally fall in Africa. Why is the continent in such a bad position still? The answer has its roots in aid.

What is aid?

There are three types of aid:

  • Humanitarian or emergency relief
  • Charity-based aid
  • Systematic aid (government-to-government or IFI-to-government)

Systematic aid is by far the most significant in terms of the amount of finance transferred. Within this, many aid payments are made through concessional loans or grants. There is massive debate on how governments use loans and how much benefit this actually does. In recent years the difference between loans (which rack up debt) and grants has been blurred.

Chapter 2 – A Brief History of Aid

The most important origin of modern-day aid flows can be traced back to Bretton Woods, New Hampshire in 1944. 44 countries negotiated the terms of future global financial and monetary management. There are however examples of aid distribution before this however – as far back as 1896 the US was providing food aid and in 1928 the UK Colonial Development Act was introduced as a means to ensure political control over the Commonwealth. The Bretton Woods mission was set up to avoid an economic crash on the scale of the Great Depression of the 1930’s. British economist John Maynard Keynes and US Secretary of State Harry Dexter were particularly influential in these talks. Originally there was a clear delineation between the World Bank and the International Monetary Fund. These institutions were used as a means for pooling investment risk. $250 million in loans were offered for the reconstruction of France – this has to be a major factor in explaining the high standards of living that exist in Western Europe today. 1947 saw the Marshall Plan introduced – this brought $13 billion to Europe between 1948 and 1952. It is now viewed as an unquestionable success. If it worked in Europe, why wouldn’t it work everywhere else?

TBC. This is where I got to before a monkey stole the book from my room in Shimla – sorry Yasmin. No lie.