A Zambian economistis stirring up debate over aid. Dambisa Moyo,formerly with the investment firm Goldman Sachs, argues that financial assistancehas created a culture of dependency in Africa and should be cut. She's making herviews known on the lecture circuit in the US and Europe and with her new book,called .
The debatecomes as activists worry that the global economic crisis could bring a drop inoverseas development assistance. According to the OECD (Organization forEconomic Cooperation and Development), last year industrialized countries provided119 billion dollars in overseas assistance to the developing world, with morethan 22 billion dollars going to sub-Saharan Africa.
Dambisa Moyo saysaid to Africa has failed. In her new book, , Moyo says poverty rates in sub-Saharan Africa have increased over thepast 40 years from 11% to 66%. At the same time, donors have given thecontinent billions of dollars in development funds.
Moyo, a graduate ofOxford and Harvard, says aid harms Africa in a number of ways.
In remarks in Aprilto the Carnegie Council in New York, she said aid raised by internationalcelebrities and NGOs sometimes help prop up ineffectual leaders. It also relievesgovernments of one of their primary duties ? providing services for theirpeople.
"In many African countries," says Moyo, "the government is basically not involved in society. They have completelyabdicated their responsibility. They don't have to cater to their people, theyspend their time courting the donors to get more money. That basically meansthat they have abdicated their responsibilities."
But Moyo saysmarket mechanisms could also sanction corrupt leaders:"[The markets wouldjust shut down on them]," she says,"if African governments borrowed money from theinternational capital markets and claimed to investors that they were going toinvest it in productive activities to grow the economy and pay back theinterest and the principal but then spent the money on keeping themselves inprivate jets or whatever and did not use the money productively."
Moyo saysinternational lenders perpetuate dependency on foreign aid. She says the International Monetary Fund often writes acountry's development policies. Incontrast, IMF officials say they invitenational governments to come up with their own development strategies, whichthe institution usually agrees to support.
"Basically," says Moyo, "we end upin the situation where African governments, even today, are spending about $20billion in interest payments every year. That money is being spent to keep thesystem in place. So you pay a little bit of money to the World Bank and theyre-lend to you. Or you pay a little bit of money to Norway or the UnitedKingdom or U.S. aid agencies, and then you get the money back."
Moyo says aidalso feeds conflict. In states without developed private sectors, factionsfight for the only entity that has a pool of cash, the government.
She says aidalso causes inflation: Economists say that aid can drive up exchange rates,damaging growth by making exports more expensive.
"Think about this as dollarsgoing into, let's say, Kenya," Moyo explains. "You send them a billion dollars going in [whichbuy up the national currency]. It means that the Kenyan shilling becomes less available, soit becomes more scarce, meaning that it becomes stronger, so it appreciates.That kills off the export sector, because nobody wants to buy Kenyan goods ifthe shilling is so expensive."
The economist sayswithout aid, governments would have to raise taxes by strengthening the privatesector or collect them from private citizens. This, she says, would create anexpectation of accountability on the part of citizens.
In Ethiopia, she says that could bedone by selling phone licenses to companies. With competition, phone rates would drop. At the same time, thegovernment could raise revenues by taxing phone calls.
"Ethiopia," she says, "is thesecond-largest population in sub-Saharan Africa. Nigeria has about 100 million people.Ethiopia has about 90 million people. The mobile phone penetration rate is twopercent in Ethiopia, so about two percent of the population has a mobile phone,compared to the average in Africa, which is about 30 percent -- One in threeAfricans has a phone. Compared tothe fact that there are now 30 countries that have over 100 percent mobilephone penetration rates [meaning people have more than one mobile phone].
"Why am I telling this story? Because we have a lot of evidence now thatmobile phones are very, very important and they can be very, very influential in terms of providing jobs andgenerating an income. I'll give you a specific example.