Aid is necessary. Aid works. People like Dambisa Moyo, the Zambian economist who in her controversial book Dead Aid proposed phasing out development aid to Africa in five years, “don’t know what the reality in Africa looks like”.
That was the message John Kufuor, who was president of Ghana from January 2001 until January 2009, came to deliver to a congress held in The Hague on Saturday on the occasion of ’60 years of development aid’. Also present was the Dutch development aid minister, Bert Koenders (Labour).
Less money around
Koenders needs people like Kufuor more than ever. Faced with dwindling political support, Koenders has had to announce some serious cuts in the development budget this year. Less money, fewer recipients, seems to be the new slogan. And because Koenders’ budget is also linked to the gross national product, it is set to decrease even more under the impact of the economic crisis.
John Kufuor has a reputation for integrity. Under his presidency Ghana became an example for the rest of Africa. The economy grew considerably, and the political situation stabilised. Moreover, Kufuor did not try to extend his rule but left quietly when his second term as president was up. When US president Barack Obama visited Africa last July he chose Ghana to spread his message of good governance in Africa.
“I worry that development aid is decreasing,” Kufuor told NRC Handelsblad. “Of course the donor countries have to monitor case by case to see that the money is well spent. Donor countries have to get their money’s worth.”
One example of a successful project, according to Kufuor, is a school meals programme in his own Ghana. For the past four years Ghana has been aiming to provide each pupil under 15-years old with one hot meal a day. More than 600,000 children are now part of the programme, which is supported by the Netherlands.
Critics have reproached Kufuor for being too docile towards institutions like the World Bank or the International Monetary Fund (IMF). During Kufuor’s first term Ghana joined the HIPC programme for Heavily Indebted Poor Countries. It provides debt relief and low-interest loans in return for which countries have to bring inflation under control and get their state finances in order. An often heard criticism of the HIPC programme is that the budget cuts that go with it often come at the expense of the poorest citizens of those countries.
“Ghana has become less dependent [on aid] since I took office,” Kufuor defended himself. “It was thanks to the debt relief that we were able to get a market economy off the ground. Consequently, credit rating agencies like Standard&Poors and Fitch raised our rating. We were able to raise 750 million dollars in government bonds on the international market, which allowed us to invest in health care and the infrastructure.”
Kufuor had to admit that the government bonds have recently taken a hit because of the worldwide economic crisis. Ghana even had to go back to the World Bank for help. But Kufuor is not discouraged. “Compare it to a baby that is learning to walk. It’s trial and error. In 2001 Ghana was bankrupt. Last year, when the world’s strongest economies were suffering from the crisis, Ghana still managed 7.3 percent growth.”
Kufuor said he agrees with Rwandan president Paul Kagame, who believes the ultimate goal of development aid should be to make itself redundant. But he strongly disagrees with Zambian economist Dambisa Moyo, who also happens to have Kagame’s ear.
Moyo says aid to Africa should be cut entirely because it only leads to inertia and corruption. A graduate from Harvard and Oxford, who has worked at the World Bank and Goldman Sachs, Moyo has become the darling of the critics of development aid since the publication of her book, Dead Aid, earlier this year.
“Mrs. Moyo is not the voice of Africa,” Kufuor said. “She lives in an ivory tower, far away from the reality of Africa. Perhaps she should go back to Zambia to see how much that country still needs help. Maybe then I will pay better attention to her.”
It was during her studies at Harvard that she first started wondering why Africa is the only continent that is forever struggling. Later, as she was working on her thesis at Oxford, she tried to figure out why poor Asian countries like South Korea or Thailand managed to join the world of emerging nations when no African country did. For the next eight years, she worked for the US investment bank Goldman Sachs. Gradually her conviction grew stronger: Africa will never get on its feet unless it makes a clean break with the system of development aid.
It is aid itself that is keeping Africa poor. This in a nutshell, is the argument Moyo develops in the first half of her book, Dead Aid, which came out last month. She is referring only to government aid, not to emergency humanitarian aid or charity. “Development aid simply doesn’t work,” she says. “It was supposed to lead to sustainable economic growth and a reduction of poverty. Name one African country where this has happened.”
Dead Aid caused a sensation in Great Britain. Here was a young, successful, educated African woman trespassing in a world dominated by middle-aged white men. Economist like William Easterley and Jeffrey Sachs. Rock stars like Bono and Bob Geldof. What’s more: she was arguing for pulling the plug on development aid.
“The danger is that this book will get more attention than it deserves,” wrote The Guardian. “Her proposal to phase out aid in five years is disastrously irresponsible: it would lead to the closure of thousands of schools and clinics across Africa, and an end to the HIV antiretroviral, malaria and TB programmes, along with emergency food supplies, on which millions of lives depend.
In The Independent , Paul Collier, a renowned development expert and Moyo’s former mentor, wrote that “Moyo is to development aid what Ayaan Hirsi Ali is to Islam,” a reference to the Dutch-Somali politician whose critique of Islam has forced her into hiding. Like Hirsi Ali, she is criticizing the system from the inside.
Moyo is unfazed by the criticism. “I don’t see why Bono should be the one to determine Africa’s economic policy,” she says during a hurried fried squid lunch in Oxford. She is due at a reading shortly, and later tonight she is a guest on Newsnight, the popular BBC current affairs programme, together with Nobel Prize winner Muhammad Yunus, the Bangladeshi who developed the concept of microcredit.
She speaks fast, without pausing for breath. “I am fairly aggressive,” she admits. Asked about her age, she offers instead that the average life expectancy in her country of birth is between 36 and 37. “I have passed that particular milestone.”
If most people have focused on the first half of her book, Moyo herself thinks the really explosive material is in the second half. There she offers African government a series of tools to balance their budgets without the need for development aid: issue government bonds; attract foreign investment; boost exports by concentrating on emerging markets like India or China; put remittance, the money sent home by Africans living abroad, to good use… “It’s not rocket science,” she says. “Other countries have done it with success.”
Your verdict about development aid is pretty harsh.
Moyo: “I’m really not saying anything new. In fact, I’m plagiarising. I quote other people’s research. As early as the sixties, Peter Bauer, the development economist, was describing development aid as ‘a tax on poor people in rich countries that benefits rich people in poor countries’. He was ignored. In the world of development aid it is not a secret that it just doesn’t work. But aid organisations and celebrities like Bob Geldof are keeping the myth alive. My own family suffers the consequences of development aid every day.”
What are those consequences then?
“First and foremost the widespread corruption. The people in power plunder the treasury and the treasury is filled with development aid money. The corruption has contaminated the whole of society. Aid leads to bureaucracy and inflation, to laziness and inertia. Aid hurts exports. Thanks to foreign aid the people in power can afford not to care about their people. But the worst part of it is: aid undermines growth. The economies of those countries that are the most dependent on foreign aid have shrunk by an average of 0.2 percent per year ever since the seventies.”
But surely donor countries have checks and balances. They demand good governance.
“But at the end of the day they let the African countries get away with it. World Bank research has shown that 85 percent of development aid was used for other than the intended purpose. Donor countries are propping up the most corrupt regimes. From 1980 until 1996, 72 percent of World Bank aid went to countries that did not abide by the rules. The need for donor countries to just keep on giving appears to be insatiable.”
So why do Western countries keep on giving if it doesn’t help?
“The cynical answer is: because it distracts attention from the trade barriers they have erected in order to protect employment in the West. These trade barriers cost Africa an estimated 500 billion dollars every year. That’s ten times the amount Africa is given in development aid. And because they secretly don’t believe that Africa is ever going to pull it together. They feel sorry for the Africans. So they buy themselves a conscience.
But hasn’t Africa progressed enormously at the social level? In 1960, fifty percent of children went to school. Now that’s 82 percent. Child mortality has dropped by more than half in the past thirty years. Don’t you care about this?
“You can pay school fees for a 12-year-old girl. You can makes sure she has an education. You can say: look what development aid can accomplish. But what good is that for the girl is she can’t find a job after she leaves school? Because they are no jobs to be had. Every time I go home to Zambia, there are more street children. They can read, they can write, they speak English. And the only thing they can do to make a living is to hustle. More and more parents in the countryside are keeping their children out of school. If there are no jobs in the cities anyway, they say, the children might as well start working on the land right away.”
But isn’t pulling the plug on development aid a recipe for mass mortality?
“Only the elite will feel the pain. The poor won’t even notice the difference. It’s not like they ever saw any of that money anyway.”
Development aid experts like to point out that for decades the rich nations have used development aid as a weapon in the cold war, as an instrument of foreign policy. Unlike you, They plead for more and better direct aid.
“So where are we going to direct the aid now? In the sixties aid was supposed to be used for big infrastructure projects. In the seventies it was poverty. In the eighties it was structural changes and financial stabilisation. In the nineties it was democratisation and good governance. In the past sixty years 1.000 billion dollars in development aid has gone to Africa with nothing to show for it. How many times do we have reincarnate development aid before we can admit that it’s just not working?
Rwandan president Paul Kagame has approached you because he too would like to get rid of development aid.
“The president has been critical of development aid repeatedly in the past. But he is still dependent on it for 70 percent of his budget. He read an article about me in the Financial Times during a flight. He saw a chance to rid Rwanda from development aid. He wanted me to come to Rwanda right away. I was to meet with his ministers, who would then spend the weekend debating development aid.
“We discussed how to get a credit rating report as a country, how to sell government bonds, how to attract foreign investors, how to find new trade partners… ‘Just imagine,’ I wrote in my book, ‘that one by one African governments would get a phone call from the donor countries: “We’re phasing out your development aid over the next five years.”‘ An adviser to president Kagame told me: ‘We want to be the ones to make that phone call.'”
Do you expect other African countries to follow Rwanda’s example?
“Most African leaders find it much more convenient to just cash the development cheque every year. This way they don’t have to take action. They can do whatever they want. There is no one to call them to account.”
Paul Collier, your old professor at Harvard and Oxford, thinks you are far too optimistic about African countries getting access to world financial markets.
“With all due respect but I have worked in the financial markets. I know what investors want. It is not an easy road to take. But it’s possible. The reward is sustainable growth.
“I grew up in a country where every kind of initiative was either dismissed or suppressed. They can’t. They won’t. I’m fed up. Let’s try something new. Because the old approach clearly doesn’t work.”
Isn’t this the worst possible time to try a new approach now that the credit crunch has paralysed the financial markets?
“These are challenging times. But it’s not because the American and European markets are out of reach that all markets are. There are gigantic financial reserves in China and the Middle East just screaming for investment opportunities. And even if the markets are closed, all the more reason for African countries to start preparing for when they open up again. This apocalyptic situation isn’t going to last forever. So go practise your roadshow for investors. Why should they invest in your country and not another? Your answer is going to have to be convincing.”
Paul Collier also feels that you underestimate the specific problems of Africa.
“The problems of Africa are gigantic: they are historical, geographic, tribal. But there is nothing we can do about that. Should we just resign ourselves to the fact that Africa will never develop? How much longer are we going to keep using colonialism as an excuse? Can we finally move on?”
Another one of your old professors, Jeffrey Sachs, is proposing to double development aid to Africa to 100 billion dollars per year.
“I don’t get that. I think it’s hypocritical. At Harvard he was always saying that Russia, Poland and Bolivia had to adapt to the free market even if it was going to hurt. But when it comes to Africa, he has a whole other recipe. Is he saying that Africa is fundamentally different from the rest of the world? Is he saying that Africa will never get it together? Is he saying there is something terribly wrong with this continent? I would love to debate him. His arguments are emotional. They have little to do with economics or logic.