Review of Dead Aid

Dambisa Moyo’s best-selling 2009 book Dead Aid caused a considerable stir upon its release; written by a young African woman, it stood out in a field dominated by ageing, white academics. It stands, along William Easterly’s The Elusive Quest for Growth and The White Man’s Burden, as the central work of foreign aid scepticism.

Moyo’s basic argument is that foreign aid is actually counter-productive precisely because we are so willing to give it: because leaders are virtually guaranteed to receive foreign aid, they do not attempt to use it to benefit their populations. Aid functions as a ‘moral hazard’ for recipient governments, incentivising corruption and civil war – for whoever reaches power will have access to an unending fount of foreign funding. Moyo proposes that we remove the distorting force that is foreign aid, and allow governments to find other sources of finance – most notably by opening their countries to foreign capital markets.

While Dead Aid is interesting insofar as it challenges certain development clichés and received wisdom, it has several major flaws.

  • Concentrating solely on government aid

One factor which makes Dead Aid less relevant than it could be to an organisation like 80,000 Hours is that it concentrates solely on ‘official aid’ (from international organisations and the governments of international organisations to recipient governments); it does not take into account private international philanthropy or humanitarian relief, or the work of most NGOs. As such, it simply has nothing to contribute on what most people can do as individuals to have a significant positive impact in the world.

  • Over-reliance on market-logic in development

But even concerning official aid, Moyo’s book has several weaknesses. For one, its concept of development is strictly economic is a rather narrow sense: her argument is built on the basic correlation between aid and growth, and the fact that whereas aid has increased significantly over the past several decades, growth has remained stagnant. But over the same period she examines, the life expectancy in sub-Saharan Africa has increased by 10 years, or 20% (from 40 to 50). Simply put, Moyo’s conception of development is too centred on economic growth, not on quality of life. Given her background, working for eight years at Goldman Sachs, this should perhaps not be too surprising.

  • Unquestioning, and outmoded, neoliberalism

Whatever the objective merits of the argument of Dead Aid, there is no question that its 2009 release was colossally ill-timed. Moyo would have us replace foreign aid as a source of finance for poorer countries with increased access to global capital markets. But the events of 2008-2009 have brought into question the wisdom of relying on such a volatile a thing as financial markets – though the lesson was there in the repeated developing world financial crises of Russia, (1998) East Asia (1997), Mexico (1994), and the repeated Latin American crises of the 1980s.

What’s more, given the current state of the sovereign debt crisis in Greece and southern Europe more generally, it is extremely unlikely that banks would even be willing to offer loans to impoverished African governments in the first place. So while Moyo does question the conventional wisdom of development, she seems incapable of questioning her deeply ingrained, and increasingly outmoded, neoliberal capitalism.

  • Theoretical vs empirical economics

Finally, its findings aside, there are certain quibbles to be had with Dead Aid‘s methodology – or, more broadly, its whole approach to economics. The book is, at its core, an extraordinarily simple, grand argument. Once she has established that economic growth has stayed constant while foreign aid has increased, Moyo jumps straight to the conclusion that all aid should be cut off. The generalisation she makes is quite unwarranted from the evidence – it is equally possible that, in the absence of foreign aid, that growth would have been significantly diminished. The only evidence she draws to the contrary is abstract neoclassical cliché about market distortions and moral hazards.

But the substance of her generalisation aside, Dead Aid exemplifies a kind of economics that seeks grand, sweeping generalisations in the first place, instead of examining evidence rigorously, from the bottom up, and constructing practical solutions to specific problems. The experimental method championed by Abhijit V. Banerjee and Esther Duflo in their 2011 Poor Economics represents a refreshingly sober, nuanced, and pragmatic alternative to the sort of grand theorising that’s based on a single, simplified correlation.