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When aid hurts more than it helps

The billions of dollars given annually by foreign countries to African governments, says Dambisa Moyo, gives leaders no incentives to respond to citizens.

Dambisa Moyo, author and international economist, delivered a stern assessment of foreign aid and its effect on Africa when she spoke to a crowd of almost 1,000 students, faculty and staff in Baker Hall on Monday.

“There is not a single country anywhere on earth that has achieved long-term economic growth or meaningfully reduced poverty by relying on aid to the extent that African countries rely on aid today,” said Moyo, who is the author of the New York Times bestseller Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa.

Moyo’s presentation was sponsored by the Speaker Series of the College of Business and Economics, the Martindale Center for the Study of Private Enterprise and the Visiting Lecturers Committee.

In her half-hour address, Moyo asked why 1 billion people on the African continent are still trying to eke out a living after more than $1 trillion of aid has been sent to African governments over the last five decades. She argued that the billions of dollars in aid that foreign countries and institutions like the World Bank and International Monetary Fund give annually to African governments actually hurt the continent.

Relieving governments of their obligation

In countries like the United States, Moyo said, governments provide services in exchange for taxes. If citizens are dissatisfied with government performance, they vote for new leadership. In Africa, on the other hand, direct aid to governments means that leaders do not rely on tax revenue and are not accountable to their people.

“Across Africa,” she said, “infrastructure is provided by the Chinese, national security is provided by the United Nations, and education and healthcare are provided by international agencies such as USAID.

“That means that African governments don’t really give a damn about what the average African thinks.”

This leads to government instability and corruption and gives leaders no incentive to help their citizens by creating jobs and reducing poverty.

Moyo, who called herself an “eternal African optimist,” believes African countries can improve their economies and reduce poverty without direct government aid, which she distinguished from humanitarian and charitable aid. She recommended that governments institute policies that support trade, increase microfinance projects and promote foreign direct investment.

“The complexity of effectively aiding developing countries is enormous,” said Paul Brown, dean of the College of Business and Economics. “Moyo is an extremely influential thought leader in the world of aiding developing countries, and our students and faculty benefit tremendously from exposure to her viewpoints.”

Mark Degenhardt ’11, a finance major in the College of Business and Economics, agreed. “It’s a great experience to have people of her caliber come and speak to us,” he said. “Being able to read her book and discuss an issue that’s relevant now, as opposed to a historical case study, definitely provides us with a current perspective to debate what we’re learning in the classroom.”

Moyo’s talk was followed by a question-and-answer session.

Born in Zambia, Moyo holds a doctorate in economics from Oxford University, a master’s degree from Harvard University and an MBA in finance from American University in Washington, D.C. She has worked at Goldman Sachs in the debt-capital markets and on hedge fund and global macroeconomic teams, and at the World Bank.

Moyo has been described as one of the world’s 20 “remarkable visionaries” by TV personality Oprah Winfrey. In 2009, Time magazine named her one of the 100 most influential people in the world.

Moyo’s next book, How the West Was Lost: Fifty Years of Economic Folly and the Stark Choices Ahead, will be published in early 2011.

 

Story by Emily Groff

Posted on Tuesday, September 14, 2010

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