Examination of Witness (Questions 44-59)
DR DAMBISA
MOYO
4 MARCH 2009
Q44 Chairman: Good morning, Dr Moyo.
Welcome to our Committee. Thank you for coming to give evidence.
For the record, would you give us your name, please.
Dr Moyo: Sure, it is Dr Dambisa
Moyo.
Q45 Chairman: You are an author and
lots of other things.
Dr Moyo: Yes, I am an economist
and most recently I was an economist at Goldman Sachs for the
past eight years. I have just published a book with Penguin press
called Dead Aid: Why Aid Is Not Working and How There Is a
Better Way for Africa. I am a full-time author for this year.
I have another contract to complete a book called How the West
Was Lost, which is looking at the financial crisis and how
it is basically a harbinger for what I view as economic shifts
longer term, global and political, going forward.
Q46 Chairman: We shall look forward
to seeing the outcome from that. I confess that I personally have
not managed to read your book but I have read some fairly full
reviews of it and I think one or two colleagues have read the
entire book. I think it would be fair to say it is a challenging
book and to some of us, perhaps, counter intuitive, but we are
obviously very pleased that you are here to discuss your ideas
with us. Very specifically you have called your book Dead Aid,
and you have said that aid is harmful and you want it to end in
a relatively short space of time. Could you perhaps give us an
indication of in which ways you think aid has been actively harmful,
perhaps with some specific examples from your own experience.
Dr Moyo: Sure. Thank you again
to the Committee for giving me the opportunity to come and have
this very important discussion. I should give you my disclaimer
upfront, which is that I am a very proud African but I am also
a very concerned African, which is why I have taken the time to
write this book. Just to give you a little bit of the motivation
for the book and ultimately my thoughts in the book which I will
be very happy to share with you, a product of many years of academic
and work experience, including in British universities—I
did my doctorate at Oxford in economics—and having spent
many years also in the United States, working at the World Bank
but also completing a Masters degree at Harvard. Through my work
experience and my academic experience but also through the experience
of growing up as an African girl, I have come to the view that
aid is not working and in fact it is being quite harmful in terms
of delivering long-term economic growth and poverty alleviation
to the continent. I would like to start off by explaining what
I mean by aid in the context of this book. Very simplistically,
I define aid in three ways. There is what we call humanitarian
aid, which is the aid that we in the global community send to
places that have been affected by natural disasters. A good example
would be the tsunami in 2004, or, for example, Myanmar (Burma)
with their crisis last year and so on. The other type of aid is
charitable aid, which is relatively small beer to what I am thinking
about. This is the type of monies that individuals, primarily
living in the West but again across the globe, put towards charities
of their choice; for example, girls' education in Zambia (which
is my home country). The book is not dealing with those two types
of aid. Those two types of aid certainly have problems with respect
to implementation and that are very well documented. Also, in
terms of delivery, there has been a lot written about how these
types of aid, particularly charitable aid, leads to promulgation
of NGOs which ultimately, by and large, do not help to deliver
capacity in Africa and in the developing world. But that is another
book. This book is really focusing on the third type of aid, which
is the billion dollar packages of aid that go from government
to government or from multilateral institutions, such as the World
Bank, to African governments. I am focusing on Africa here because
that is what the book really tries to do. Focusing on that very
narrow area, my estimates are that there has been about $1 trillion
worth of that type of aid that has gone to Africa in the past
50 years. (That is again discounting all the humanitarian aid
and discounting the charitable aid.) I feel it is important to
understand that the original architects of the aid model—this
is going back to the post-war era, post World War II, after the
success of the Marshall Plan—had two targets in terms of
aid: (i) it was going to help deliver growth and (ii) it was going
to help with poverty alleviation. It is on those two metrics alone
which I judge the success of aid to Africa. It is on those two
aspects alone that I come to the conclusion that it has not worked.
It is very interesting to me that some people think the book is
controversial, because I think it is obvious and many of the Africans
to whom I have spoken have said, "So what of the book? We
all know it's true that poverty has increased." Just to give
you some numbers, in the 1970s about 10% of Africa's population
was living in poverty. Now around 70% of Africans are living in
poverty, many of them living below a dollar a day. In terms of
growth, with the exception of the past 10 years, which we can
talk about later, we have seen systematically poor growth rates.
My former PhD supervisor would describe it as a "sheering
off". While the rest of the world was in some cases posting
double-digit growth rates, Africa has been declining and in many
cases has posted negative growth rates.
Q47 Chairman: Nobody would argue
with the basic facts you have presented. Obviously the Committee
monitors what our Government does, particularly in the context
of budget support, and their argument is that they are trying
to build up the capacity of governments to run their own programmes
rather than them to have them run for them, but you are saying
that it encourages corruption. That is one of your arguments.
We certainly would be very concerned if there were any evidence
that our Government's money was being misappropriated, because
we are always looking to ensure that it is properly audited. Paul
Collier, in his review of your book, says that what we need is
more transparency and more accountability. Your argument is: "Aid
does not work, therefore do not have it." His argument is:
"Aid does not work if it is not properly directed and not
properly accounted for." Do you feel there is any merit in
that argument?
Dr Moyo: Theoretically, yes, I
believe there is merit in that. However, as a practical initiative
over the 50-odd years that aid has been in play, we have as a
global community and global policymakers tried to ensure that
aid is delivered in a transparent and accountable way and that
has failed. This is via the conditionality programmes. It seems
to me—and I should have prefaced the conversation by saying
that my book is meant to be a positive, constructive book, and,
importantly, the second half of the book comes up with a list
of alternatives. The reason why I think that is important is because
I am offering the global debate a better way of delivering growth,
given that we have tried to deliver and implement aid in many
different fashions which has consistently failed. In theory I
do agree. It would be nice if we could implement aid effectively,
but we cannot. It is not possible, particularly in an environment
where the political system is very weak and government is incentivised
to take aid.
Q48 Mr Singh: In your book Dr Moyo
you mention seven negative effects that aid may have on a country,
such as inflation, Dutch disease and the crowding out of foreign
investment. Are these consequences inevitable or could policies
be adapted to take account of those effects?
Dr Moyo: Policy can be implemented
to take account of those effects. However, it is very expensive
to do that. I give the example in the book of what a government
is required to do in the event that they are facing inflationary
pressure or, indeed, Dutch disease, where the exchange rate strengthens
so dramatically as to kill off the export sector. Very often governments
then issue bonds when the currency is very strong, to try to flood
the domestic market with the domestic currency, so that it can
cause the currency to weaken. Those types of interventions are
very, very costly. The estimate that I put in the book is that
in places like Uganda it cost the government about $100 million,
which they ostensibly do not have to spend on fighting a policy
that a priori is not, to my mind, effective.
Q49 Mr Singh: Was that inflationary
pressure?
Dr Moyo: The specific examples
I used here was on the back of Dutch disease.
Q50 Mr Singh: And you say that was
entirely due to the aid that was going into Uganda.
Dr Moyo: Yes, absolutely. In the
book and in the discourse amongst academics, the evidence is very
stark. I picked one example but across the continent there are
many examples of this.
Q51 Mr Singh: Is there any way of
removing that kind of risk?
Dr Moyo: As I say, I think the
cost of removing that risk would be that the central banks in
these countries would have to intervene in the markets. The procedure
of intervening means that they would have to issue bonds into
the domestic market, which could be inflationary and therefore
cause the currencies to depreciate, which is what you want, but
the cost of doing that and issuing bonds is very expensive.
Q52 John Bercow: You argue that aid
has not worked. Many of us can envisage particular circumstances
in which particular allocations of aid, if undertaken insensitively,
can have the effect of damaging local markets rather than assisting
the recipient population. But I confess that I find it difficult
to get my mind around—and maybe I would have done so better
if I had had the privilege of reading your book which I have not
yet done—how as an overall statement it stacks up to say
"Aid does not work". Specifically, how do you respond
to those who say, "Well, we can demonstrate quite explicitly
how it has worked in certain important respects which are the
focus of the MDGs[1]
and of British Government policy; for example, providing education
to millions of children and HIV/AIDS treatment to millions of
people." Those are, I think we would say, some of the directly
positive consequences and benefits of aid. How would they happen
without the aid?
Dr Moyo: With respect to the MDGs
in particular there have been a number of statements from officials,
from the United Nations but also from the broader development
community—and I am happy to provide the Committee with the
quotes from many of the key officials involved in this—that
they are almost certain that Africa will not meet any of the MDGs,
as they were spelt out, by 2015. In some cases there is a greater
concern—and maybe this is a neo-Malthusian concern—that,
given the rapid population growth in the continent and the fact
that 50% of the population is less than the age of 15 on the continent,
and also given the shrinkage in resources and demand for resources,
that you could see much more instability across the continent.
With respect to the MDGs specifically, it is very clear to my
mind and I think to the minds of the architects of the MDGs, that
those goals are not going to be met whether or not aid has been
pumped in, which we know it has. On the point about the implementation,
I agree with you that very often people who vociferously defend
the fact that the international community should be intervening
via aid would point to education or HIV treatments. I agree that
those types of interventions have helped, but in a micro way.
In reality, to my mind, the goal of aid is ultimately to get Africa
to stand on its own two feet and be an equal partner on the global
stage. I can guarantee that those types of interventions, such
as providing education and scholarships to young children in Africa,
although they might be wonderful in the short term will not deliver
long-term growth. Ultimately—and this is what we call the
micro-macro paradox in the book—you arrive at a situation
where a child may have an education but the economy has not grown.
Very often when I go to my home country I see a lot of young people
on the streets who are in their teens and early twenties who have
a very good command of English and they have a good education
but there are no jobs and so they are on the streets. That type
of situation is what I am really trying to target. In terms of
it being a band-aid solution, absolutely, but that is not what
aid is supposed to be doing. It is supposed to be alleviating
poverty and delivering long-term growth, and on those two metrics
it will not work. The other point I would like to make to the
Committee is that I strongly believe that the whole aid model,
certainly where Africa is concerned, is couched in a sense of
pity for the continent. Rather than take a hard-nosed look at
the effectiveness and the failures of aid over the past half century
as critically as we are looking at the capitalistic model now,
we tend to just brush over it and allow for a situation to perpetuate,
even though we have seen other emerging countries do incredibly
well during the same period that Africa has continued to spiral
down.
Q53 John Bercow: That is a very interesting
response. I cannot help but feel that you have inadvertently,
rather than calculatedly no doubt, parodied or even, dare I say
it, caricatured some aspects of our aid. I have probably almost
spoiled the argument by referring to the MDGs, because it is perfectly
clear that the MDGs are not going to be met—although I think
it would be hard to argue that they are not going to be met because
of the aid: they are not going to be met for a whole plethora
of reasons which we do not have time to explore. But let me come
back, if I may, Dr Moyo, to this question of particular aid currently
provided and to which, because we are the Committee that scrutinises
this, DFID is committed, HIV work. The development assistance
that we provide on HIV is not just in the manner of immediate
relief. It is not just to fight a fire, if I might put it that
way; it is also aimed at strengthening the domestic capacity and
organisational robustness, if I might put it that way, of the
health systems in the recipient countries. It is, in that sense,
intended to build for the long tem.
Dr Moyo: I think the intention
is laudable. In practice I think that is not the case at all.
I must say that I do not have specific evidence in respect to
the DFID programme that is supporting HIV/AIDS, but if you allow
me some indulgence I will give you an example from the United
States.
Q54 John Bercow: Of course.
Dr Moyo: Under the PEPFAR[2]
programme the United States had pledged, under the Bush administration,
anywhere between $15 and $30 billion to 15 countries to focus
on HIV AIDS. There has been a lot written about the parameters
under which that aid is delivered and its effectiveness, but just
to illustrate why it is ineffective in the narrow sense of capacity
building to which you are alluding—because, ultimately,
if we can prove that it is building capacity on the ground and
building domestic capabilities then I would stand down and say
that I am wrong—here is an example of how it does not work.
PEPFAR then gives the money to an additional government organisation
called OGAC[3]—and
I am happy to provide details to the Committee. OGAC then splits
that money across four organisations: Harvard University, Columbia
University, the Elizabeth Glaser Foundation, and Yale University.
After those four institutions are given the money, another set
of institutions, USAID and CDC,[4]
is another layer of bureaucracy. It has not got to Africa at this
point: it is still within the United States. After that level,
it is then split to individual organisations, many of which are
Western organisations that are supplanted into the African continent.
I am sorry to be longwinded about it but, ultimately, the estimate
of the amount of the share of the dollar that ends up hitting
a clinic in Africa is about 20 cents, with no transfer of knowledge
or education to African doctors or African participants on the
ground. The PEPFAR programme, as you know, has been a multi-year
programme. To sit here and say that some people's lives have been
saved because of HIV interventions, I absolutely agree. However,
to sit here and say that there has been a transfer of knowledge
and that it is benefiting the African continent in terms of Africa
attaining the goal of being an equal partner, I disagree.
Q55 John Bercow: I understand your thesis,
but I am not clear how, in the absence of what may be very imperfect
aid, it would be possible to fund basic services like health and
education, and, in particular, what would be put in place to ensure
that the poorest people had access to them rather than those somewhat
above the poorest threshold who could no doubt buy their way in.
Dr Moyo: That is a very important
question. I think it goes to the heart of the matter. Ultimately,
the delivery of services, such as public goods, should be the
responsibility of the domestic governance. Ultimately, it is that
to which we are aspiring. The only way that African governments
can get to a position where they are able to finance that out
of their own public purse is if the economy is growing. The fact
that African governments are not able to deliver those goods because
the public purse is challenged, is ostensibly because we have
been under an aid model. As I said to you earlier, we have been
in a situation where 10% of the population was impoverished and
we are now in a situation where 70% of the population is impoverished.
If we continue down this road, who knows, we could be over 90%
of the population impoverished, and therefore moving away from
what I would call a utopia where the government has taxation and
is representing the domestic citizenry. The point that we are
skirting around slightly—or I am, certainly—is the
issue of the aid model disenfranchising local Africans. The fact
that African governments are more beholden and responsive to the
donor community means that, ultimately, we cannot get to a situation
where African governments are focused on raising the money through
the tax system or growing their economies in an accountable manner
to the point where they can then deliver the social services that
you are talking about. The prescriptions in my book are not meant
to be an immediate aid turn-off. The suggestion is basically that
we should aggressively pursue a model where, on a step-by-step
basis, governments start to move away from the aid model and start
to find alternate ways of financing development, such as raising
taxes through foreign direct investment, through trade, through
the capital markets—and we can talk about that some more—through
micro-finance, and, ultimately, through building these economies
so that they can use the money to provide the social services.
John Bercow: That is very helpful. Thank
you very much.
Q56 Chairman: This Committee is not
responsible, obviously, for the American aid programme.
Dr Moyo: No. I understand that.
Chairman: I think it would be fair to
say that the model you describe in PEPFAR is one which, had our
Government pursued it, this Committee would have robustly criticised
and rebuked. We have a different approach and we want to explore
whether or not there is any qualitative difference and we would
like to think there might be. I am going to ask Andrew Stunell
to take that forward.
Q57 Andrew Stunell: Dr Moyo, you
have put forward an extremely seductive argument and of course
for many voters and governments it is self-serving: "Let's
not give the money, we can find plenty of other things to do with
it." I wonder if I could pick up this point about Africa.
Are we suffering from Dutch disease here or African disease? If
we look at Nigeria, for instance, which has the investment model
with oil and loads and loads of money, there are still the same
problems of poverty and a failure to tackle the issues which aid
is intended to tackle. The alternative model does not seem to
be delivering where it is available in Africa and I would be interested
in your comment on that. Coming back to my second point, if DFID
does not spend its money on aid, what should it spend its money
on in order to achieve the results that both you and this Committee
want to see?
Dr Moyo: Before I answer you,
if you do not mind, might I just comment on the fact that I draw
on the American example. With respect to DFID, I think what I
should do and what I will do is go and look at how many Africans
have been employed and educated and how much capacity has been
built on the back of the multi-year, multi-decade interventions
from DFID, even in the health sector, because I think those are
the kind of metrics that would effectively shut me out.
Q58 Chairman: We would be delighted
to have that information.
Dr Moyo: Yes. Thank you. To your
question with respect to aid versus other countries that are ostensibly
failing across the continent, I would say that you are absolutely
right. I am not saying that aid is the only cause of state failure
or the failure of governments to deliver economic growth. What
I am saying is that aid is a deliberate policy where we sit in
London and we say, "Well, I think we should give African
countries x additional billion dollars," whereas with
something like an oil purse you either have it or you do not,
you are either endowed with oil or you are not. That is not to
say that there are not a lot of issues. Nigeria is a case in point.
Congo (DRC) is an example. The fact that there are many countries
in Africa that are still showing what I view as the challenges
and the negative externalities of aid—corruption, aid dependency,
sort of disenfranchising voters and so on—is really an artefact
of deliberate policy, which is why I think it is important for
us to tackle that policy. That leads me to the second point: What
should DFID do? I believe that the British Government should engage
with Africa in the manner that it engages with other developing
countries of the world. In the best case scenario, as a trade
partner. I personally am not very sanguine, I am not very optimistic
that that is going to happen in my lifetime, but there are things
like helping to support African governments to come to international
markets. The British Government has a wealth of experience in
doing that. Training African governments to participate in the
capital markets and helping them to understand what that process
is is much more beneficial because through the capital markets,
by and large, there is an element of accountability and transparency
that aid does not provide. The other thing they could do is to
help build alliances to the point where they can get Africa to
be an equal partner, as I say, on the stage, as opposed to having
what I would view as an imbalanced relationship between donor
and recipient, where African governments are pretty generally
begging and donors are basically dipping into the largesse of
the British purse without much result.
Q59 Andrew Stunell: Would you say
capacity building of African governments and African civic institutions
should be the highest priority for the application of this money?
Dr Moyo: Here I confess my bias
towards economics. I believe that you will not get strong institutions,
civil liberties, or a transparent or strong judicial system in
a place that is aid dependent because of the corruption and the
negative externalities that I have talked about. In that sense
I believe that the economy is a deep pre-requisite to delivering
on the governance and the democracy and all the positive attributes
of a developed society.
1 Millennium Development Goals Back
2
President's Emergency Plan for AIDS Relief Back
3
Office of the US Global AIDS Coordinator Back
4
Centre for Disease Control and Prevention Back
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