Dead Aid

The sensational part about this book is that its author hails from Africa (Zambia) and is calling for the curtailment of foreign aid to the continent. So if she's doing that, then it must be right, right? And Messrs Sachs, Collier, Geldof and [Bono's last name] have all got things wrong and/or they are probably merely scalping a bit of moral high ground?

Of course, accepting such a silly premise at face value would be folly and in no part of the book (except the poor preface from Niall Ferguson) does Moyo really try to push such grounds for her credibility. But it's not exactly kept secret from the reader either. Moyo's degree from Harvard and eight years at Goldman Sachs are probably to be politely excused (as in not detracting from her African-ness) as prerequisites for equipping her to tackle the subject.

So much for that. Actually this reviewer feels that she has already digressed too far on reviewing the author not the book--just like the reviews she read before buying it did. As for the treatment of the subject it is mostly sound. Trade not aid and loans rather than transfers are talked around in a similar way as other writers have done, and the rationale seems plausible. The basic premise is that while a transfer payment might "help"--which in the eyes of many givers is all that should be asked of it--it does nothing to install incentives to do without the help the next time. In fact Moyo's fiercest criticism (and that of others) is that the incentives are rather distorted the other way. The receipt of aid, she argues, encourages more of the plight that motivated it in the first place. Or at the very least, it brings it out into the open in increasing amounts. This much was clear (to this reviewer) the first and last time that she gave coins to a begging child in a poor foreign city (in Asia) in the folorn hope that the gesture might actually reduce the extent to which she was being hassled, rather than multiply it by a factor of ten.

Worse, according to aid critics, most of it gets wasted anyway. Or it props up corrupt regimes (who are the receivers) that care not for the welfare of their people, and are in large measure the cause of their plight in the first place. On this point, the author has plenty of corroboration. Depressingly there are precious few examples of countries where aid "worked"--and apparently it works only when it is brief, and where the single motivation of the recipient is to eliminate their need for it as fast as possible, which (no surprise) means market augmentation coming from property and contract rights and unbribable judges. And unfortunately, this is no small feat (the examples can usually be counted on not all of the fingers of one hand: Botswana and non-African states like Taiwan and South Korea).

Microcredit is lauded towards the end of the book, though given the rather cursory treatment that is actually now quite usual in texts about development economics. The same mechanism of incentives is deployed here as on the macro scale (if you have to pay money back you are careful with it; if someone gave it to you then you're maybe more likely to pass some of it on as favours and produce more waste / destroy value with the rest). However this reviewer would really like to read something a little more involved than what's presented here, and she's slightly disappointed that Moyo's indigenous connection has barely penetrated deeper than papers written at Harvard and Yale. If her birth origins are going to be made as apparent as they seem to have been to sell the book, then the inquiring reader expects something at least a bit special to come from that.