"Dead Aid" Not Quite Dead On

Dead Aid is an interesting, provocative look at the foreign aid industry and its effects on Africa. Dambisa Moyo, who formerly worked for Goldman Sachs and the World Bank, draws a conclusion not unknown to others in the field: development aid (as differentiated from humanitarian aid) has not only done little good for the nations of Africa but has indeed caused great harm. While I don't necessarily disagree with her conclusion, I didn't find her arguments particularly convincing.

There is no question that much of the aid intended to build economies in Africa has been grossly wasted, stolen, and misused. There is little to show for the trillions of dollars that have been poured into the continent--a failure with numerous causes. But Moyo's main premise is that aid itself is the cause, that it creates a culture dependent on foreign handouts and rife with corruption that, according to the author, apparently wouldn't exist if aid weren't available. I find both arguments hard to swallow, especially since they are based mostly on the logical premise of cum hoc ergo propter hoc (with this, therefore because of this). In this thinking, when aid is given, the recipients don't develop other resources, therefore aid causes them to not try. It's the same argument that's been used for years to oppose welfare programs applied in this instance not to individuals, but to entire nations. I find that a little facile. I suspect aid fails more often because it is poorly structured and managed, an argument that Moyo essentially dismisses out of hand.

Whether you agree with Moyo's reasoning or not, you have to seriously question the solutions she proposes. While outlining a litany of worthwhile approaches to economic development including micro-lending, opening markets in the developed world to African products, and more foreign direct investment (FDI), her silver bullet is a solution only an investment banker could love: the bond market. Somehow, Moyo expects the magic of the free market financial system to end corruption in Africa, stop wasteful spending, and power the continent out of poverty. I react to that proposal the same way Jaime Talon, one of the lead characters in my novel, Heart of Diamonds, did when confronted by a similar argument about a panhandler in New York: "What matters is that right now--today--that man over there is hungry. Somebody needs to do something about that, not just ignore it and hope the holy and all-powerful market economy will provide a solution."

I have to ask, given the brilliant performance of Wall Street and Fleet Street in providing structured finance for America and Europe, how can we expect them to solve the problems of Africa? These are the people who brought us sub-sub-prime mortgages wrapped in gilt-edged bond ratings and called gold. Their ability to assess risk and police wasteful government spending in Kinshasa is rather suspect, at least to me. I also fail to see how corrupt leaders and their minions will be any less likely to steal funds from private lenders than they are from the World Bank. Perhaps my most significant objection, though is when Moyo says the developing nations will be better served paying ten percent interest (the rate she quotes for emerging market debt in 2007) than the 0.75% they are charged by the World Bank. How does that work to anyone's advantage other than the investment bankers?

Don't misunderstand my review. I agree with many of Moyos' conclusions and her objections to the current approach to foreign aid. Mandating the purchase of American products with American aid dollars, for example, is enormously wasteful, self-serving, and undoubtedly harms the African farmers and manufacturers such aid could help. She's also dead on when she calls for an improved business climate in Africa so that direct investment, both foreign and local, stands a better chance to succeed.

Pulling Africa out of the swamp of poverty is a complex operation. I applaud Dambisa Moyo for presenting a provocative set of arguments in clear, understandable layman's prose. Dead Aid brings an important subject into the public eye.

Dave Donelson, author of Heart of Diamonds a romantic thriller about blood diamonds in the Congo.

Chicago Reader Comments On Congo Aid

The most recent question from my Chicago reader is more of a thought-provoking observation:

"I think you are right on the mark about the distinction between investment and aid. It is important for the development of the DRC to benefit other countries because it will improve the quantity and the quality of the assistance provided. Sadly, I suspect those in power who resist foreign investment simply lack the education necessary to understand complex economic principles. I am only speculating on this point, however. What do you think?"

I think you may have carried your speculation a bit too far in the wrong direction. The DRC has many very well educated leaders in government and otherwise. This may be a benighted country, but that doesn't mean its citizens are backward or unsophisticated.

Those who resist foreign investment are simply expressing opinions based on short-term thinking similar to the insistence by the US Congress that only American steel should be used in infrastructure projects financed with stimulus funds. Or the US limits on foreign ownership in industries like shipping, aviation, and broadcasting. Or building a wall across the Mexican border. There are plenty of "educated" people all over the place who take extremely simplistic approaches to complex issues.

Dave Donelson, author of Heart of Diamonds a romantic thriller about blood diamonds in the Congo.

Food Riots Have Many Fathers

Food rioters in Somalia have joined those in Haiti, Egypt, Cameroon and Burkina Faso to protest the brutal jump in food prices around the world.

Culprits on both the supply and the demand side have caused the current crisis. Everything from weather to a new taste for richer foods are to blame, exacerbated by import curbs and agricultural subsidies by rich nations and export bans by poor ones. Even the well-intentioned but controversial move to biofuels has impacted markets. There may be a silver lining, though, as sky-rocketing prices and the resultant food riots around the globe might prompt some meaningful long-term changes in both trade policies and aid practices.

Weather is a well-recognized demon in the food markets, of course. Most recently, a prolonged drought in Australia's wheat belt has cut supply at the worst possible time. On top of that, though, is a long-building increase in demand for richer diets in the booming economies of China and India. Those same economies are in some part responsible for the soaring cost of oil, which makes food production and distribution an increasingly expensive proposition. The concurrent rise in the price of natural gas and potash, both used to produce fertilizer, hurts too.

Diversion of a significant part of the U.S. corn crop to ethanol production, that silver bullet meant to solve both global warming and America's addiction to foreign oil, also impacts food prices, although not significantly according to most experts. The USDA reports that American farmers grew 13.1 billion bushels of corn last year. Of that, 22% went to make about 7 million gallons of ethanol. That still left enough to feed the domestic market, push exports to record levels, and store a 10% surplus. While the price of corn has more than doubled in the last three years, it's still a very, very small factor, contributing less than 3% to the overall rise in food prices.

The biggest culprits, though, are national policies that warp the supply-demand equation. The rich nations aren't the only ones to blame, either. Both India and Vietnam, the world's number 2 and 3 rice-exporting countries, have imposed limits or complete bans on rice shipments outside their borders in order to shield their own populations from the perceived shortages. Indonesia enacted similar measures. The ripples have been felt as far away as the U.S., where major retailers have put limits on the amount of rice that customers can buy. Considering that worldwide rice production was up in 2007, this can only be a result of increased demand.

Unfortunately, export restrictions also reduce local farmers' incentives to grow more since lack of access to international markets reduces their return. Meanwhile, an even greater portion of the world's food supply must come from high-cost producers in North America and Europe, both big exporters, but both also heavy subsidizers of their own farmers. The rich nations' protective import restrictions further reduce the poor farmers' chances of competing in world markets, thereby giving them little reason to plant at more than subsistence levels.

All this has created turmoil in world food markets, which may in turn create some real policy changes at several levels. The current round of global trade talks broke off twice in the past two years, mainly over the issues of subsidies and price controls. With food riots spreading, however, it's becoming harder and harder to justify crop price support systems. Business Week reports that there's optimism about change from both sides of the table, quoting positive statements from Indian and U.S. trade officials. Even the American Farm Bureau Federation says there's room for change in their normally protectionist stance. They are far from the only parties to the talks, however, so nothing is certain.

Another long-overdue change may come in U.S. food aid policy, which has persistently required developing nations to use the rescue funds to purchase American crops and transport them on American ships. George Bush's recent call for not only another $770 million in emergency food aid but for 25% of that to be purchased from local producers in recipient regions is a positive sign. It remains to be seen, of course, whether the super-influential U.S. farm lobby will allow that to happen.

Dave Donelson, author of Heart of Diamonds

Tags: romantic thriller, Congo, blood diamonds

Foreign Aid That Delivers On Its Promise

Can foreign aid improve conditions in the developing world? The debate continues as even commentators like the NY Times' Nicholas Kristof can't find data to support either side. What few argue, however, is the impact aid dollars have had on health care in the third world. Literally millions of lives have been saved as a direct result of foreign aid programs of that type.

The Center for Global Development reports that routine childhood immunizations funded by aid has nearly eradicated measles as a cause of childhood death in seven African countries since 1996. Some 18 million children have been saved from river blindness since a regional control program for the disease was launched in 1974 in West Africa. Infant deaths due to diarrhea in rural Egypt fell 82% as a result of an aid-financed national campaign on oral rehydration therapy.

Progress has been made in the fight against malaria, too, as well as HIV/AIDS, although these pandemics are far from over. Not surprisingly, the greatest gains have come in relatively peaceful, stable countries like Zambia, Uganda, and Botswana, where secure, reliable delivery systems have been developed to accompany the medications, supplies, and education that make the programs work. Scandals have rocked some efforts, but strong public support for governments willing to crack down on the perpetrators has kept efforts on track.

We may never know if the IMF's macro economic approach is better than Grameen Bank's micro finance operations, but we do know that foreign aid directed to solving regional health programs can be successful.

Dave Donelson, author of Heart of Diamonds

Tags: romantic thriller, Congo, blood diamonds

Gotta Give Bush Credit

I never thought I would utter words of praise for George W. Bush, but I have to give him credit for accomplishing something positive. His support for initiatives to battle HIV/AIDS and malaria in Africa have actually made a difference in the lives of millions of people.

While in Uganda researching Heart of Diamonds, I met a British doctor who ran a small clinic near Bwindi. His facilities were primitive by our standards (a hand-cranked centrifuge!) and he counted the local traditional healer as an ally, but he stated unequivocally that the Bush initiatives were both well-intentioned and well-executed.

Distribution of antiviral drugs and equipping and building new clinics to treat AIDS patients is not only fighting the disease, but laying the groundwork for longer-term positive changes in many societies as well. As fewer children die from AIDS, for example, African families can be induced to have smaller families, which in turn makes it possible to invest more in the education and nutrition of each individual child.

The fight against malaria, though, may actually be more important. Malaria takes a million lives a year in Africa—and debilitates millions more. The simple distribution of insecticide-laden sleeping nets, if continued, can actually eradicate the disease completely! The parasite that causes the infection reproduces in human red blood cells—and gets there only by a bite from a female Anopheles mosquito. Stop the bites, and the parasite can’t reproduce. Stop enough bites, and it may die out.

Nets cost a few dollars, which is still beyond the means of many Africans. That’s where Bush’s support has made a difference. Millions of nets have been distributed at reduced prices (manufactured in Africa, too, which creates jobs), and millions more are slated to be handed out. According to some experts, malaria could be eradicated as early as 2012.
Dave Donelson, author of Heart of Diamonds

Tags: romantic thriller, Congo, blood diamonds