Read Online Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo - Free Book Online Page A
Authors: Dambisa Moyo
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(its improvements mainly spurred by its oil find) and Swaziland. 3 Supporters of aid suggest that these countries have meaningfully lowered poverty, increased incomes and raised their standards of living, thanks to large-scale aid-driven interventions.
However, as in the case of the Marshall Plan, their aid flows have been relatively small – in this instance, generally less than 10 per cent of national income – and their duration short. Botswana, which is often touted as a prime example of the IDA graduate success story, did receive significant foreign assistance (nearly 20 per cent of the country’s national income) in the 1960s. It is true that between 1968 and 2001 Botswana’s average real per capita economic growth was 6.8 per cent, one of the highest growth rates in the world. However, aid is not responsible for this achievement. Botswana vigorously pursued numerous market economy options, which were key to the country’s success – trade policy left the economy open to competition, monetary policy was kept stable and the country maintained fiscal discipline. And crucially, by 2000, Botswana’s aid share of national income stood at a mere 1.6 per cent, a shadow of the proportion it commands in much of Africa today. Botswana succeeded by ceasing to depend on aid.
With conditionalities
Aid supporters also believe in conditionalities. This is the notion that the imposition of rules and regulations set by donors to govern the conditions under which aid is disbursed can ultimately determine its success or failure. In the 1980s conditionalities attached to African aid policies would become the mantra.
The notion of a quid pro quo around aid was not new. Marshall Plan recipients had been required to adhere to a strict set of conditions imposed upon them by the US. They had a choice . . . you take it or you leave it. African countries faced the same choice.
Donors have tended to tie aid in three ways. First, it is often tied to procurement. Countries that take aid have to spend it on specific goods and services which originated from the donor countries, or a group selected by them. This extends to staff aswell: donors employ their own citizens even when suitable candidates for the job exist in the poor country. Second, the donor can reserve the right to preselect the sector and/or project that their aid would support. Third, aid flows only as long as the recipient country agrees to a set of economic and political policies.
With stabilization and structural adjustment in vogue, the adoption of market-based policies became the requirement upon which aid would be granted. Aid would be contingent on African countries’ willingness to change from statist, centrally planned economies towards market-driven policies – reducing the civil service, privatizing nationalized industries and removing trade barriers. Later democracy and governance would make their way onto the list, in the hope of limiting corruption in all its forms.
On paper, conditionalities made sense. Donors placed restrictions on the use of aid, and the recipients would adhere. In practice, however, conditionalities failed miserably. Paramount was their failure to constrain corruption and bad government.
A World Bank study found that as much as 85 per cent of aid flows were used for purposes other than that for which they were initially intended, very often diverted to unproductive, if not grotesque ventures. Even as far back as the 1940s, international donors were well aware of this diversion risk. In 1947, Paul Rosenstein-Rodin, the Deputy Director of the World Bank Economics Department, remarked that ‘when the World Bank thinks it is financing an electric power station, it is really financing a brothel’.
But the point here is that conditionalities were blatantly ignored, yet aid continued to flow (and a great deal of it), even when they were openly violated. In other research, Svensson found ‘no link between a country’s reform effort or
However, as in the case of the Marshall Plan, their aid flows have been relatively small – in this instance, generally less than 10 per cent of national income – and their duration short. Botswana, which is often touted as a prime example of the IDA graduate success story, did receive significant foreign assistance (nearly 20 per cent of the country’s national income) in the 1960s. It is true that between 1968 and 2001 Botswana’s average real per capita economic growth was 6.8 per cent, one of the highest growth rates in the world. However, aid is not responsible for this achievement. Botswana vigorously pursued numerous market economy options, which were key to the country’s success – trade policy left the economy open to competition, monetary policy was kept stable and the country maintained fiscal discipline. And crucially, by 2000, Botswana’s aid share of national income stood at a mere 1.6 per cent, a shadow of the proportion it commands in much of Africa today. Botswana succeeded by ceasing to depend on aid.
With conditionalities
Aid supporters also believe in conditionalities. This is the notion that the imposition of rules and regulations set by donors to govern the conditions under which aid is disbursed can ultimately determine its success or failure. In the 1980s conditionalities attached to African aid policies would become the mantra.
The notion of a quid pro quo around aid was not new. Marshall Plan recipients had been required to adhere to a strict set of conditions imposed upon them by the US. They had a choice . . . you take it or you leave it. African countries faced the same choice.
Donors have tended to tie aid in three ways. First, it is often tied to procurement. Countries that take aid have to spend it on specific goods and services which originated from the donor countries, or a group selected by them. This extends to staff aswell: donors employ their own citizens even when suitable candidates for the job exist in the poor country. Second, the donor can reserve the right to preselect the sector and/or project that their aid would support. Third, aid flows only as long as the recipient country agrees to a set of economic and political policies.
With stabilization and structural adjustment in vogue, the adoption of market-based policies became the requirement upon which aid would be granted. Aid would be contingent on African countries’ willingness to change from statist, centrally planned economies towards market-driven policies – reducing the civil service, privatizing nationalized industries and removing trade barriers. Later democracy and governance would make their way onto the list, in the hope of limiting corruption in all its forms.
On paper, conditionalities made sense. Donors placed restrictions on the use of aid, and the recipients would adhere. In practice, however, conditionalities failed miserably. Paramount was their failure to constrain corruption and bad government.
A World Bank study found that as much as 85 per cent of aid flows were used for purposes other than that for which they were initially intended, very often diverted to unproductive, if not grotesque ventures. Even as far back as the 1940s, international donors were well aware of this diversion risk. In 1947, Paul Rosenstein-Rodin, the Deputy Director of the World Bank Economics Department, remarked that ‘when the World Bank thinks it is financing an electric power station, it is really financing a brothel’.
But the point here is that conditionalities were blatantly ignored, yet aid continued to flow (and a great deal of it), even when they were openly violated. In other research, Svensson found ‘no link between a country’s reform effort or
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