Sudip Bandyopadhyay’s Blog

In  her recent acclaimed book Dead Aid, Dambisa Moyo describes the state of postwar development policy in Africa today and unflinchingly confronts one of the greatest myths of our time: that billions of dollars in aid sent from wealthy countries to developing African nations has helped to reduce poverty and increase growth.  In fact, poverty levels continue to escalate and growth rates have steadily declined—and millions continue to suffer. Provocatively drawing a sharp contrast between African countries that have rejected the aid route and prospered and others that have become aid-dependent and seen poverty increase, Moyo illuminates the way in which overreliance on aid has trapped developing nations in a vicious circle of aid dependency, corruption, market distortion, and further poverty, leaving them with nothing but the “need” for more aid.

Development is not that hard. We now have over 300 years of evidence of what works (and what doesn’t) in increasing growth, alleviating poverty and suffering. For example, we know that countries that finance development and create jobs through trade and encouraging foreign (and domestic) investment thrive. We also know that there is no country — anywhere in the world — that has meaningfully reduced poverty and spurred significant and sustainable levels of economic growth by relying on aid.  According to Moyo, “if anything, history has shown us that by encouraging corruption, creating dependency, fueling inflation, creating debt burdens and disenfranchising Africans (to name a few), an aid-based strategy hurts more that it helps”.

It is true that interventions such as the Marshall plan in Europe  played vital roles in economic reconstruction. However, the key and often ignored difference between such aid interventions and those plaguing Africa today is that the former were short, sharp and finite, whereas the latter are open-ended commitments with no end in sight. The problem with an open-ended system is, of course, that African governments have no incentive to look for other, better, ways of financing their development.  Africa is on the whole worse off today than it was 40 years ago. For example in the 1970’s less that 10 percent of Africa’s population lived in dire poverty — today over 70 percent of sub-Saharan Africa lives on less than US$2 a day.