Review: Dead Aid–Why Aid Is Not Working and How There Is a Better Way for Africa

4 Star, Asymmetric, Cyber, Hacking, Odd War, Country/Regional, Diplomacy, Disaster Relief, Humanitarian Assistance, Information Operations, Information Society, Peace, Poverty, & Middle Class, Stabilization & Reconstruction
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Amazon Page

Goldman Sachs Pitch Dressed in Don’s Robes,

July 18, 2009

Dambisa Moyo

I bought this book cognizant of the negative reviews, and I break with them in giving this book four stars instead of one, two, or three stars.

This book is worth reading, and it makes points that I summarize below that are in my view meritorious.

The book loses one star for being Goldman Sachs pitch for emerging markets dressed up in a Don’s robes. I note with interest the 13 July 2009 Rolling Stone article by Matt Taibbi, “The Great American Bubble Machine,” in which both the criminal campaigns of Goldman Sachs, and the lack of integrity at every level of the US Government responsible for market oversight, are made clear. I venture to suggest that the only thing worse than the combination of blind aid and unrestricted leadership corruption might be Goldman Sachs in charge of an African Union IPO.

That having been said, I find the author’s contribution quite worthwhile. In condemning aid–and especially aid blindly given to dictators and known world-class thieves in high places–the author laments the cycle of corruption, disease, poverty, and aid dependency.

As summarized by Niall Ferguson, chronicler to the banking barons (e.g. The Ascent of Money: A Financial History of the World), the author posits four alternatives:

01 International Bonds

02 Chinese and other Foreign Direct Investment (FDI)

03 Free Trade with an emphasis on ending US and other subsidies (but later in the book the author also observes that the Africans themselves are killing each other with import taxation)

04 Financial intermediation inclusive of micro-finance, home plot titles, and efficient trusted remittance (and savings) management.

I met with the CEO of a $200 billion a year asset management company in January 2008, and all he could talk about was Emerging Markets. It is in that context that this book strikes me as a massive pimping of Africa of, by, and for Goldman Sachs.

On a more interesting note, I find the author’s passing and always favorable references to China’s deepening engagement in Africa to be both helpful, and worthy of a separate book. I have been studying China since 1975, am particularly admiring of the manner in which it uses non-governmental capabilities to “wage peace” and achieve its objectives, and have written a short memorandum easily found online, <Chinese Irregular Warfare>. Between their dominance of cyber-war, which includes the ability to incapacitate any US military platform, and their coherent strategy of creating the infrastructure they need to vacuum Africa of its resources, I am totally impressed.

The other negative, one highlighted in another book on Africa, The Trouble with Africa: Why Foreign Aid Isn’t Working is largely ignored in this book: the raw fact that African trade is down by half, or $70 billion a year.

Overall I find in this book a useful summary of the history of aid to Africa from the 1960’s, rooted at first in the proxy wars of the USA and the USSR, then going through phases focused on poverty, development, stabilization, and most recently good governance.

In passing I am delighted to read of Paul Collier (Cf: Living Down the Past: How Europe Can Help Africa Grow (Studies in Trade and Development, 2) and his distinction among three categories of African countries:

01 Resource poor with coastlines, do better than the other two

02 Resource poor and landlocked (with a large part of the total African population locked in here)

03 Resource rich with or without coastlines

It is in connection with the latter that I note no mention of the looting of African natural resources by multinational corporations that have bribed their way into possession with exemption from virtually all export fees.

In summarizing the negative impact of aid, the author states that after 60 years and $1 trillion in aid, there is nothing to show for it. Clearly an over-statement, it is followed by the author’s view that aid feeds corruption, reduces the middle class, undermines social capital, promotes conflict and black markets (William Shawcross says it better, see Deliver Us from Evil: Peacekeepers, Warlords and a World of Endless Conflict), promotes inflation, and reduces the value of exports.

The author spends a few pages negating the impact of tribal and ethno-linguistic diversity (e.g. 1000 tribes across sub-Saharan Africa) but observes that the 1885 Berlin Conference and its partitioning of Africa did not help. I quite agree, and point to the equal insanity of the Treaty of Westphalia, see Philip Allot’s The Health of Nations: Society and Law beyond the State.

I rather like the conclusion, in which the author posits an ideal future in which each African nation (I prefer integrated economic zones myself) reduces its reliance on aid to 5% while substituting 30% trade led by China, 30% Foreign Direct Investment, 25% efficient use of remittances and internal savings now held back; and 10% from the capital markets, i.e. bonds.

The author talks briefly of direct aid (“conditional cash transfers”) to individuals instead of governments, and generally speaks of the Western mistake of aid with no strings, while China is “all business.” Much of the author’s discussion is facile, and the brilliant bibliography is not at all integrated into the work as a whole, but no matter. This book was worth my time and money.

The author’s final paragraph struck me as worth quoting:

“Africa’s development impasse demands a new level of consciousness, a greater degree of innovation, and a generous dose of honesty about what works and what does not as far as development is concerned. And one thing is for sure, depending on aid has not worked. Make the cycle stop.”

Shortly I will read and review:
Africa Unchained: The Blueprint for Africa’s Future
The Challenge for Africa

From the two books so far, I have two conclusions:

1) Africa needs a regional counter-intelligence service against both government corruption and predatory immoral capitalism;  and

2) Africa stands to benefit the most from open information that cannot be sold, stolen, nor distorted. Free cell phones (e.g. the new Nokia ones that energize from ambient energy waves and do not need to be “plugged in” combined with a regional information network that will answer any question in any language or dialect for free, strike me as the solution that will never occur to any government or any capitalist.

In the above vein, see also:
The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Wharton School Publishing Paperbacks)
The Wealth of Networks: How Social Production Transforms Markets and Freedom
Infinite Wealth: A New World of Collaboration and Abundance in the Knowledge Era

All of the books I have published are free online [http://www.oss.net/BOOKS]  as well as for sale here at Amazon, I especially recommend:
COLLECTIVE INTELLIGENCE: Creating a Prosperous World at Peace
THE NEW CRAFT OF INTELLIGENCE: Personal, Public, & Political
THE SMART NATION ACT: Public Intelligence in the Public Interest

 

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