Book-Blogging: Dead Aid – Chapter Four

This is part of my effort to read through a number of development-focused books. Previous chapters of Dead Aid: onetwo, three

Let’s start by pulling out the thesis of the chapter – the idea of the “aid curse”:

“In response to growing poverty, donors give more aid, which continues the downward spiral of poverty. This is the vicious cycle of aid. The cycle that chokes off desperately needed investment, instills a culture of dependency, and facilitates rampant and systematic corruption, all with deleterious consequences for growth. The cycle that, in fact, perpetuates underdevelopment, and guarantees economic failure in the poorest aid-dependent countries.”

That’s a big claim – one that, without extensive evidence, would be a massive overreach, in my opinion. Doubling down, Moyo argues that

“In an aid-dependent environment, the talented… become unprincipled and are drawn from the productive work towards nefarious activities that undermine the country’s growth prospects. Those who remain principled are driven away, either to the private sector or abroad…”

It must be difficult to conduct a study to see whether these claims are true; still, Moyo asserts them without any basis in fact, which is frustrating. At the margin, there’s probably a good deal of truth in those statements – but possibly only at the margin. Without evidence, it’s just an argument made to incite anger and fear.

There are those who argue that a little corruption is OK, even positive – the “grease the wheels” theory – but in general, most are on the same page that corruption is, on net, a bad thing. Related to economic growth, “a one-point improvement in a country’s corruption score was correlated with an increase in productivity of 4 percent of GDP,” among other things.

So we’re all in agreement: corruption is corrosive, and is associated with poorer countries full of destitute villages and sick, hungry people. What to do, then? Moyo would have aid be withheld, arguing that it props up corrupt leaders and that the money doesn’t flow down to the poor, anyway. I’m sympathetic to those concerns, but can’t help but think there’s a better way; aid doesn’t necessarily need to flow through the corrupt government to get to the people. I’m not sure what the right answer is, but I think the wrong answer is to cut aid altogether.

The next claim I found troublesome was

“In a world of aid, there is no need or incentive to trust your neighbor, and no need for your neighbor to trust you. Thus aid erodes the essential fabric of trust that is needed between people in any functioning society”

I don’t really know where to begin with this – in my notes I wrote “What?! How?!” The causal link between aid and lack of trust isn’t mentioned, nor is any supporting evidence for it. Making bold claims is fine if they’re backed up; it’s not if they aren’t. This is just sloppy polemics.

Moyo ends the chapter by discussing some of the very real macroeconomic impacts of foreign aid: inflation, currency strengthening (which makes exports more expensive), and more. These are issues that need to be worried about and worked on, but shouldn’t constrain policymakers. Admittedly, my economics background is too rusty to offer up concrete suggestions.

This was a frustrating chapter to read through; like discussing politics with family, it lacked evidence and relied on increasingly-extreme assertions. I don’t know that I’m better informed than when I started it, which is not a good sign.

Leave a Reply

Your email address will not be published. Required fields are marked *