Economist Dambisa Moyo suggests four alternative sources of funding for African economies: 1) follow Asian emerging markets 2) encourage large-scale, direct investment in infrastructure 3) press for genuine free trade of agriculture products 4) support financial intermediation. I believe these are all viable options for bolstering African economies- especially 2) and 3). With improved infrastructure, both internal and external, commerce blossoms. Such increased rate and efficiency of trade can only help the economy of a developing nation. Additionally, if the United States were to remove subsidies on agriculture protecting American farmers, African economies that often significantly depend on agricultural goods will be more competitive and prosperous.
Moyo describes the history of African aid as being a product of the enthusiasm of the Marshall Plan’s success. She explains, “…it became a widely accepted view that investment capital was critical for economic growth” (Moyo, 13). Additionally, the global polarity between democracy/capitalism and communism that ensued during the wake of the Cold War also sparked aid-action. With nations in Africa becoming independent, both the USA and the USSR funneled financial capital into countries to persuade and support their own agendas.
- As explained by the World Health Organization, the Washington Consensus is a set of ten policies that the United States government and international financial institutions, such as the World Bank and IMF, believed to be base-level policy reforms necessary for increasing economic growth. It includes fiscal discipline, public expenditure priorities, tax reform,
financial liberation, exchange rates, trade liberalization, increasing foreign direct investment, privatization, deregulation, securing intellectual property rights, and reducing the role of the state. There has been much criticism of this neo-liberal model. With privatization, for example, companies may ignore social objectives and monopolize the sector, which could lead to outrageous price increases for commodities and services. Additionally, some critics say that free trade actually is not always in the interest of developing economies.
- Dambisa Moyo’s website was a great resource in learning about her education and training, experiences, and qualifications. The numerous topics noted as her “Expertise and Interests”
were impressive! Also, readily being able to easily access the information on her publications, any events she’s hosting and/or participating in, and any videos of her talks and speeches made it a perfect source to explore her work. TEDBlog had a wonderfully insightful Q & A Session with economist George Ayittey on Moyo’s work. It was interesting to hear another African-born economist’s take on Moyo’s Dead Aid: Why Aid is Not Working and How There is Another Way for Africa.
- “My voice cannot compete with an electric guitar.” –a critic of the aid model. This person felt
as if celebrity activism for the rise of assistance was overshadowing the voices of its opposition. When mentioning why there is little to show for the United States’ $300 billion in aid to Africa since 1970, Rwanda’s President Paul Kagame points toward the post-Second World War geopolitical and strategic rivalries of the USA and USSR. As was previously mentioned, these powers strove to assert their interests in emerging independent African nations. What happened, Kagame asserts, is that “much of this aid was spent on creating and sustaining client regimes…with minimal regard to developmental outcomes on our continent” (Moyo, 27). These opinions definitely intrigued me as they stress the allegedly selfish origins of monetary aid. I had never before considered this aspect of aid’s history.
- While discussing why aid is not working in Africa, Moyo proclaims that geographical, historical, cultural, tribal and institutional causes play a role, but they fail to capture the entire picture. In considering geographical endowment, Moyo explains that land abundance and natural resources aplenty do not guarantee economic success. For example, oil- and mineral-rich countries Nigeria, Angola, Cameroon, and the Democratic Republic of Congo dissipated much of their natural wealth through bad investments, thus their economic standing was bleak. A second example she gives smashes the assertion that tribal conflict as a reason for aid’s ineffectiveness: many countries with disparate groups have coexisted peacefully, such as Botswana, Ghana, and Zambia. Ethnic diversity is not an excuse for failed aid. Geographical, historical, cultural, tribal and institutional issues, Moyo says, may in varying degrees in different countries contribute to aid’s unproductivity, but not one factor should condemn Africa to permanent failure.
- Chapter 6: A Capital Solution suggests exactly that: a capital solution. One of these is bonds.
She explains, “…the point of issuing these bonds to international investors was to help finance their development programmes, including infrastructure, education and healthcare. Monies raised by bonds could, however, also be used to fund governments’ day-to-day (current) expenditures such as on the military, civil service and trade imbalances” (Moyo, 77). She explains that this form of capital lends credibility to the country seeking funds, which will inevitably encourage a larger range of high-quality private investment. It seems as though Zimbabwe is utilizing this form of revenue to fund priority projects such as the Zimbabwe Power Company, TelOne, hydroelectric power plants, Air Zimbabwe, etc.
- Jeffery Sachs’ argues that the poverty trap, “perpetuated by disease, physical isolation, climate stress, environmental degradation, and by extreme poverty itself,” is an awful circumstance that prevents nations from even stepping foot on the development ladder (Sachs, 19). Thus, he
speaks of “The Big Five” development interventions: agricultural inputs; investments in basic health; investments in education; power, transport, and communications services; and safe drinking water and sanitation (Sachs, 233-234). Moyo’s discussion of “The Silent Killer of Growth” (corruption) shoots a hole in Sachs’ proposal. If the governments receiving the funds are unable to justly and effectively allocate the aid, no progress can be made on Sachs’ propositions. Thus, at the heart of Moyo’s argument for overcoming the poverty trap is for developing nations to create their own wealth. Additionally, Moyo discusses the advantages of China’s involvement in Africa. “…in recent years, China broadened its investment horizons…and people are benefitting from the trickle-down effect of its resource investments- employment, housing and better standards of living…there are now roads where there were no roads, and jobs where there were no jobs” (Moyo, 110). With these improvements comes the climb out of extreme poverty.