06 June 2013

Moyo vs Gates: The dangers of simplifying aid

The recent spat between Dambisa Moyo and Bill Gates illustrates the dangers of being "for" or "against" aid.
As I wrote below in April 2009 (my first blog) Moyo's analysis is flawed, but her central point--when are we going to talk about the end of aid--is a good one.

Gates is right when he says aid has done lots of good things, but he needs to acknowledge that it has done bad things too, because it has been designed poorly or it has been misappropriated, or both.
The answer (yawn) is that impact of aid is a reflection of the ownership, care and intent of the people using it.

Here is the post from over 4 years ago.

April 2009 Dambisa Moyo’s book is a readable and provocative call to action, but oversimplifies the issues and ignores the fact that in some contexts aid can be useful – and sometimes even necessary.
Dead Aid by Dambisa Moyo should have been called ‘No End to Aid?’ That is because it does several important things. Firstly it has opened the debate about the need for an African exit strategy from aid. Secondly it has outlined some plausible alternatives to aid. Thirdly it hammers home on aid’s Achilles heel – weak accountability to citizens in recipient countries. Fourth it talks about how difficult it will be for the aid industry to work itself out of business. Will it ever receive a phone call, much like the one the General Motors CEO recently received from President Obama, to say ‘time’s up’? These are all extremely important points and are eloquently made in Moyo’s readable and provocative book.

Unfortunately the book also trashes aid. Aid is ‘malignant’. It is the problem and is not even allowed to be a part of the solution. I suppose titles like ‘aid is never sufficient for development, but is often useful and sometimes even necessary in certain countries at key times, in key sectors, for a limited duration’ would not ‘sell the t-shirts’ (to coin one of Moyo’s phrases).

Too many people will latch onto this book and say aid=bad. I know too many people say aid=good, many because they mistakenly think aid=development. But even Moyo points out that many of the countries that have achieved sustainable growth benefited from aid at critical junctures. We need to be much more nuanced about when aid is good or not. Her cursory examination of the data and her sparse selection of the evidence does not inspire confidence in her assertions. But the need to be more nuanced applies to all of us.

A single set of Dollar and Burnside’s cross-country regressions should never have been used as a launch pad for a massive aid propaganda machine. Neither should a few horror stories launch a counter campaign. Aid has saved millions of lives – both outside and within humanitarian contexts – and there are many documented and credible success stories. But the development community has been too squeamish about documenting aid failures, allowing others to do so – typically in an imbalanced way, drowning out other messages. For example, Time magazine’s review of Dead Aid (which I read before reading Moyo’s book) focuses almost entirely on the ‘aid is bad’ story and relegates Moyo’s important alternatives to aid primarily to ‘microfinance’.

The real contributions of the book relate to the four points outlined above. On the aid exit strategy I agree with Moyo – until we start talking about it, we (and others) won’t begin thinking about it. There is an African proverb at the end of the book which states ‘The best time to plant a tree is 20 years ago. The second best time is now.’ The time to start discussing exit is not in 20 years time, but today. But exit to what? At this point Moyo’s years as a ‘global economist and strategist’ at Goldman Sachs come to the foreground. The book describes several alternatives including: the issuance of bonds in the international capital markets; attracting investment from China and promoting trade with both China and others; and reducing the costs and charges associating with receiving remittances (strangely domestic taxes are not mentioned much). Moyo is rather sanguine about the ease of generating these flows, their predictability and their corrupting influence and is correspondingly disparaging about aid’s performance in these dimensions. At least aid (unlike international credit) looks like it is holding firm in the current crisis – can aid’s stickiness be helpful in some circumstances?

Critically, being market based, these non-aid sources of finance have the advantage of demanding some performance in return. This is difficult for the aid industry. Specifying what is to be returned from aid and when and why is almost impossible for distant and outsider bureaucrats. Moreover, enforcement is time consuming and politically unpopular. Moyo does not dwell much on how to improve aid accountability, preferring to ditch the whole ‘unmitigated disaster’. That is too bad – aid will be around for a while and it needs to be made more accountable. Why not a citizen-led global ‘Aid Transparency Initiative’ inspired by the Extractive Industries Transparency Initiative?

The aid industry is indeed a machine as Moyo describes it and my own organisation, IDS – like most others working on development – is wrapped up in it. So when are we going to join Moyo in envisaging a ‘world without aid’? As the quoted proverb notes, the time is indeed now.

The flux of the global economic turndown of 2008-2010 (I hope) provides an opportunity for aid to demonstrate its virtues in helping many through the crisis. It is also an opportunity for its proponents to demonstrate their lack of self interest and to re-imagine a development where aid has a diminished role. A development where responsibly governed market, diplomatic and defence forces provide the platform for sustainable improvements in wellbeing. It must be seized.


Dorje Mundle said...

Great to see balance and nuance in this post, and your original review of Moyo's book. It's a great shame that Gates resorted to aid-is-good-and-Moyo-promotes-evil rather than taking a more facts-based stance.

Aid can be and often is invaluable, but there are undeniably many deep structural problems.

I've lost count of the number of times I've heard people say they were obliged to spend donor funds in a given quarter/year on pointless activities due to - a.o. - project delays or the need for project adaptations after new insights showed flawed assumptions. But they are punished by donor agencies for not spending, instead of being rewarded for delaying the spend until it can be used to actually drive positive development outcomes.

Let's hope your call for open, balanced debate gets heeded.

Anonymous said...

For all those interested in another thought provoking blog entry, here is one by Edward Carr: http://www.edwardrcarr.com/opentheechochamber/2013/06/02/gates-v-moyo-are-aid-critics-getting-trolled/

Jeneral28 said...

Gates is just becoming another Jeffrey Sachs

Tony German said...

Lawrence, it’s good to have a chance to follow up your very thoughtful blog from 4 years ago – and to link the discussion on the future of aid, to the challenge of resourcing the sort of goals envisaged in the High Level Panels very welcome report.

On what you highlighted as the Achilles heel of aid – accountability - there has been real progress since 2009. A new ‘global standard for aid transparency has been agreed with most of the world’s leading bilateral, multilateral and civil society donors signed up and starting to deliver. Over time this should provide answers to the question ’‘its our money, where’s it gone?) Better data on how aid is spent can also improve the ownership, coordination and therefore the effectiveness with which each $ is spent.

With much better data on aid we can have the discussion you called for on where aid is necessary, where it delivers well and where other resource flows could do better. In September we’ll be producing a report on Investments to End Poverty which will unbundle aid – so we have a more realistic picture on how much of the headline billions is in cash or kind or TC, how much ever gets to a developing country and how much is spent on delivering the kind of aid which we all know can work in bringing benefits to and opening up opportunity for the world’s poorest people.

Yes we need an end to aid dependency – and the sooner the better. The rhetoric of aid agencies working themselves out of a job is not matched by the way we think or work. But whilst we have a billion people denied basic rights and living on less than $1.25 a day, there is clearly a resource gap which aid plays a key part in filling – and is likely to do so until we hopefully achieved the goals envisaged by the HLP. Even then we can be sure there will be crises and that from time to time countries will have difficulty financing the basics for the most vulnerable. So rather than envisaging an end to aid – we think the debate that needs to take place is about how aid should morph into a global pool that backstops every country’s ability to provide basic services and security for all. We currently have a global architecture that offers us (not just traditional ‘developing’ countries) financial support when needed. Aid could become a global insurance (to which very country contributes) against the social impact of downturns and crises which we know will happen, and we know will hit the most vulnerable hardest. To paraphrase the proverb you quoted, the time for this discussion is now, so that as we work to make aid more effective in helping to deliver post 2015 goals on poverty, we do so using an aid architecture fitted to the next 20 years, not that of the last 60.

Tony German, Executive Director, Development Initiatives

Lawrence Haddad said...

Tony, thanks, great comment. Look forward to the September Report from DI