Dead Aid

curse because it encourages corruption and conflict, while at the same time discouraging free enterprise. Moyo recounts some of the more egregious examples of aid-fueled corruption. In the course of his disastrous reign, Zaire's president, Mobutu Sese Seko, is estimated to have stolen a sum equivalent to the entire external debt of his country, U.S. $5 billion. No sooner had he requested a reduction in interest payments on the debt than he leased Concord to fly his daughter to her wedding on the Ivory Coast. According to one estimate, at least U.S. $10 billion, nearly half of Africa's 2003 foreign aid receipts, leave the continent every year. The provision of loans and grants on relatively easy terms encourages this kind of thing as surely as the existence of copious oil reserves or diamond mines. Not only is aid easy to steal, as it is usually provided directly to African governments, but it also makes control over government worth fighting for. And, perhaps most importantly, the influx of aid can undermine domestic saving and investment. She cites the example of the African mosquito net manufacturer, who was put out of business by well-intentioned aid agencies doling out free nets. Mexico offers four alternative sources of funding for African economies, none of which has the same deleterious side effects as aid. First, African governments should follow Asian emerging markets in accessing the international bond markets and taking advantage of the falling yields paid by sovereign borrowers over the past decade. Second, they should encourage the Chinese policy of large-scale direct investment in infrastructure. China invested U.S. $900 million in Africa in 2004, compared with just U.S. $20 million in 1975. Third, they should continue to press for genuine free trade in agricultural products, which means that the U.S., the E.U., and Japan must scrap the various subsidies they pay to their farmers, enabling African countries to increase their earnings from primary product exports. Fourth, they should encourage financial intermediation. Specifically, they need to foster the spread of microfinance institutions of the sort that have flourished in Asia and Latin America. They should also follow the Peruvian economist Hernando de Soto's advice and grant the inhabitants of shantytowns secure legal title to their homes so that these can be used as collateral. And they should make it cheaper for emigrants to send remittances back home. In Dead Aid, Dembisa Moyo does not pull her punches. In A Perfect World, she writes, what poor countries at the lowest rungs of economic development need is not a multi-party democracy, but in fact a decisive, benevolent dictator to push through the reforms required to get the economy moving. In other words, rushing to elections before economic growth has got underway is a recipe for failure. But her most radical proposal comes in the form of a question. What if, she asks, one by one, African countries each received a phone call telling them that in exactly five years, the aid taps would be shut off, permanently? The phrase shock therapy fell into some disrepute in Eastern Europe in the 1990s. Yet that is precisely what Dembisa Moyo wants to give her African homeland. It may seem draconian. Yet it is worth remembering that, as she points out, just 30 years ago, Malawi, Burundi, and Burkina Faso were economically ahead of China on a per capita income basis. Indirect investment and rapidly growing exports, not aid, have been the key to China's economic miracle. Africa needs to learn from Asia. This is strong medicine that is being prescribed. But no one who listens to dead aid will doubt that Dembisa Moyo's primary motivation is to reduce, not to increase, hardship. This is an African view of Africa's economic problems. The result is a book that manages to be, at one and the same time, hard-headed and big-hearted. This individual was left wanting a lot more Moyo and a lot less Bono. Preface In July 1970, ninety students graduated from the University of Zambia in the country's capital Lusaka. Among them were the university's first black graduates, including some ten young women.