The redemption of Moyo

The World Bank’s chief economist for Africa mounts a thoughtful defense of Dambisa Moyo’s controversial new book on aid:

My own take is that the book is right in the small, wrong in the large, and possibly right in the gargantuan.

The small point is that it would be better if Africa received private capital rather than foreign aid to supplement its own resources for investment. Everyone would agree with this in principle.

…The larger point is that the book claims foreign aid is largely wasted, and this is the part that has elicited the most criticism. People have pointed out that aid’s productivity has been increasing over time. But the fact is that Dambisa doesn’t need to claim that foreign aid is wasted in order to make the small point above.

…Nor is it necessary to claim aid is wasted to make the bigger (gargantuan) point in the book: that aid creates incentives so that recipient countries remain dependent on aid and never make the transition to private capital financing. This is not the case in general, but there may be circumstances under which it is.

These are all great points. My sense: Moyo’s book really fails in the detail. I’m also doubtful of the policy recommendations (blithely, benevolent dictators should refuse aid and promote Eurobonds, Chinese investment, and internet microfinance). But I’m grateful to Shanta for great talking points when I discuss Moyo’s book in lecture.

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