INR Week 12 INT PROC HU RIGHTS

SAGE Los Angeles, London, New Delhi, Singapore, Washington DC

John Hilary is the executive director of War on Want.

Race & Class Copyright © 2010 Institute of Race Relations, Vol. 52(2): 79–84 10.1177/0306396810377010 http://rac.sagepub.com

Africa: Dead Aid and the return of neoliberalism JOHN HILARY

Abstract: Dambisa Moyo’s 2009 book Dead Aid sought to revive the neoliberal prescriptions for Africa’s development that were promoted by the World Bank and the International Monetary Fund during the 1980s and 1990s. This article argues that implementing such prescriptions would repeat the catastrophic errors of Africa’s two ‘lost decades’ and that the real alternative to aid dependency lies not in the free market but in development that is genuinely accountable to local communities.

Keywords: Dambisa Moyo, International Monetary Fund, neocolonialism, World Bank

One of the more controversial publishing events of 2009 was the appearance of Dambisa Moyo’s book Dead Aid.1 Subtitled ‘Why aid is not working and how there is another way for Africa’, the book rekindled the debate on economic development in the poorest countries of the global South. Moyo herself has been heralded as a prophet for the twenty-first century, being included in Time maga- zine’s hundred most influential people and even breaking into Oprah Winfrey’s top twenty power list. Yet is she right?

Dead Aid raises a number of critical issues which challenge the comfortable orthodoxy of overseas development assistance. The book follows in the foot- steps of Teresa Hayter’s 1971 classic Aid as Imperialism, which exposed the use of aid as a political weapon wielded by donor countries in their own interests. US

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presidents had made no secret of this, as in Nixon’s much quoted admission: ‘Let us remember that the main purpose of aid is not to help other nations but to help ourselves.’ Yet Hayter took the story a stage further by revealing the imma- nent ideological bias of the World Bank and International Monetary Fund (IMF) at a time when those institutions were still promoted as being ‘above’ the politics of the cold war. Hayter’s employer, the London-based Overseas Development Institute, refused to publish her research.2

Moyo recognises the problems of aid dependency. Yet she is unable to situate the issue within the politics of neocolonialism as understood by African writers, such as Yash Tandon in his recent essay Ending Aid Dependence, or the African critics cited in Jonathan Glennie’s The Trouble With Aid.3 Unsurprisingly, there- fore, Moyo’s policy prescriptions fall far short of what is needed to set the peo- ples of Africa on a development path free from western domination and control. For this, Africa would need a radical politics and economics very different from that envisaged in Dead Aid.

Conditionalities and dependency

The most harmful aspect of aid dependency has been donors’ use of conditionali- ties to impose their own political and economic ideologies on recipient countries. Conditions attached to aid in this way have undermined democracy in many countries, preventing governments from introducing development policies appropriate to their national situations. As a result of their reliance on loans and debt relief from bilateral donors and international financial institutions such as the World Bank and IMF over the past thirty years, many African governments have devoted themselves to satisfying the interests of the international donor community without reference to the needs of their own economies and people. Small wonder that they have failed to prosper.4

In response to widespread criticism of the effect of their conditionalities, the World Bank and IMF declared at the start of the millennium that they would be reducing the number of structural conditions in their lending. They also commit- ted themselves to respecting national ownership of development policies by drawing any remaining conditionalities from national development plans instead of imposing them from their own ideological blueprints. Yet the World Bank and IMF have signally failed to honour these commitments. Internal evaluations and external studies alike have found that neither the IMF nor the World Bank has reduced the number of structural conditions as they were supposed to have done, and that both institutions continue to impose economic policy conditions in highly sensitive areas without reference to the will of the peoples concerned.5

As well as undermining democracy, the aid conditionalities imposed by the World Bank and IMF are widely held to have been responsible for the two ‘lost decades’ of the 1980s and 1990s, in which per capita income levels fell dramati- cally in countries across Africa. Aid-dependent countries were required to imple- ment the Washington consensus through free market reforms such as trade

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John Hilary: Africa and Dead Aid 81

liberalisation and privatisation of state-owned enterprises and utilities, despite the acknowledged damage these policies could cause to their economies and, especially, to vulnerable sectors of their populations.

War on Want’s recent report Trading Away Our Jobs details the huge losses in employment and industrial capacity seen across Africa as a result of the trade liberalisations imposed by the World Bank and IMF. Far from stimulating growth and development, three in four of the African countries that underwent such economic restructuring experienced a decline in per capita incomes during the 1980s.6 UN studies of the world’s poorest nations have shown that those countries which opened their economies most during the 1990s experienced significant increases in poverty. Conversely, those countries which managed their economies more closely in line with national circumstances succeeded in reducing poverty levels.7

Even the IMF has now admitted that it made serious mistakes in promoting trade liberalisation in developing countries. An internal evaluation from 2009 concluded that the IMF’s ‘aggressive’ trade conditionality during the 1980s and 1990s ‘went beyond staff’s technical competence’, while the institution’s reliance on neoliberal dogma, without reference to the specific national circumstances of each economy, was ‘an insufficient basis for a constructive trade policy dialogue between country authorities and the IMF’. In the infamous case of the IMF forcing the government of Ghana to overturn a parliamentary decision to raise import tariffs on poultry, the internal evaluation found that IMF staff lacked the necessary background knowledge of the sector and failed to appreciate the true merits of the case.8

In sharp contrast to almost every other commentator, Moyo does not see the imposition of these conditionalities as problematic. In her opinion, the condi- tionalities imposed on African countries by the World Bank and IMF during the 1980s and 1990s ‘made sense’.9 Instead, she locates the problem in the failure of the governments in the recipient countries of Africa to implement the conditions expected of them: ‘the point here is that conditionalities were blatantly ignored’.

This also happens to be the standard defence given by the World Bank and IMF themselves: that if only African nations had been more assiduous in following the blueprints outlined for them by the international financial institutions, they would have seen better results. In addition to its spectacular arrogance, the defence does not square with the facts. Many African countries did indeed undertake the most far-reaching privatisation and free market experiments, which have resulted in their economies now being far more liberalised than others. According to the World Bank’s own trade restrictiveness index, Africa is now more open to agricul- tural trade than any other region in the world, including Europe and North America. More worryingly still, Africa is also more open to manufacturing trade than the countries of South Asia, Latin America and the Middle East. This exposes its domestic industries to the threat of unequal competition from multinational companies seeking new markets in which to operate and risks blocking African countries from climbing the ladder of economic development.10

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Free market fundamentalism

The central problem of Moyo’s book is reflected in her suggestion for how Africa can liberate itself from dependency on foreign aid. Moyo claims that only the free market can offer Africa a sure path to development and enjoins all African leaders to embark on a crash course of neoliberal economics remarkably similar to that proposed by the World Bank and IMF in the 1980s and 1990s.

For example, Moyo recommends that African countries embark on a series of reforms to attract more foreign direct investment as an ‘engine for economic growth’. The usual list of supposed benefits is provided: foreign investment will ‘create more jobs, assist in the transfer of new technology, help stimulate the formation of … capital markets, improve management expertise, and aid indig- enous firms to open up to the international markets’. Yet this wholly fails to register the problems associated with past foreign investment into Africa, both in terms of its negative impacts on local peoples and economies, its ‘crowding out’ of domestic industries and its long-term damage to countries’ overall bal- ance of payments.11 Similarly, Moyo’s uncritical celebration of Chinese invest- ment in Africa fails to examine whether it is contributing to local development or whether it is just another example of African resources being appropriated to meet another country’s needs.

Moyo also promotes the further integration of African economies into the global market through an expansion in foreign trade. Again, her enthusiasm prevents her from recognising the problems facing African countries where loss of industrial capacity has rendered them wholly uncompetitive on international markets. Many of the foremost cheerleaders for export orientation have been forced to reconsider their theories in light of this real world experience. Former World Bank research director Paul Collier has now admitted, in his much-hyped book The Bottom Billion, that Africa will not be able to rely on international markets to trade its way out of poverty: ‘Don’t count on trade to help the bottom billion. Based on present trends, it seems more likely to lock yet more of the bottom- billion countries into the natural resource trap than to save them through export diversification.’12

This admission marks an important corrective to the glib suggestion that poor countries should just trade their way out of poverty. African countries have already tried this route via the ‘outwards turn’ of export orientation in the 1980s and 1990s and they already enjoy unparalleled trading preferences under the USA’s African Growth and Opportunity Act (AGOA) and the EU’s ‘Everything But Arms’ initiative – both of which Moyo covers in her book. Despite these preferences, Africa has seen its already small share of global exports plummet by a further 70 per cent in recent years.13

Finally, Moyo suggests that African states wean themselves off the conces- sional lending of the World Bank and IMF and turn instead to borrowing on international capital markets at rates of interest which are over ten times higher. While she concedes that this will cause significant financial hardship to future generations crushed by unsustainable levels of debt, she holds out the

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consolation that African countries should at least see their credit ratings improve over time as a result.

Voice and representation

As a result of the economic crisis which has rolled across the world over the past two years, few serious commentators now share Moyo’s belief in free market capitalism. The good news is that this may offer Africa a genuine ‘opportunity for change’, according to the latest report on the world’s least developed coun- tries, published by the UN Conference on Trade and Development (UNCTAD). The crisis has at last ‘exposed the myth of self-regulating markets’, notes UNCTAD. Turning away from trade liberalisation, monetarism and other articles of the neoliberal faith, the world’s poorest countries would do better to embrace the concept of the ‘developmental state’, just as the successful economies of East Asia did in their day.14

Moyo’s faith in the free market, despite its evident failings in Africa, raises the broader question of voice and representation. As the book’s foreword and its sup- porters remind us, Moyo is one of the few black African women economists to have captured international attention for her views. As such, we are advised that the programme for change she espouses has a particular claim to authenticity.

The claim is open to question. Moyo was born and raised in Zambia’s capital Lusaka but her faith in neoliberal economics has been formed during periods working at the World Bank, Oxford and Harvard Universities, and then during eight years at the infamous investment bank Goldman Sachs. Her nomination for Time magazine’s list of the hundred most influential people came from none other than Paul Wolfowitz, former World Bank president (until his departure under a cloud of scandal) and one-time joint architect of the US invasion of Iraq. The issue of representation and democratic authenticity is one which engages all of us who work in partnership with civil society groups in Africa and elsewhere. War on Want works with social movements, trade unions, workers’ associations, landless people’s movements, peasant movements and resis- tance groups across the world in an attempt to support genuinely democratic forces for progressive change. We expend considerable time and effort ensur- ing that our contacts are situated within and accountable to the movements they represent. None of these groups are under the illusion that Moyo’s free market fundamen- talism will bring them the change they need. Instead, they hold to a vision of the future which guarantees them freedom not only from aid dependency but also from the dictatorship of capital. Neocolonialism is as present in the politics of the free market as it is in the aid conditionalities of the World Bank and IMF. As David Harvey puts it in The New Imperialism: ‘Free trade and open capital mar- kets have become primary means through which to advantage the monopoly powers based in the advanced capitalist countries that already dominate trade, production, services, and finance within the capitalist world.’15

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Africa was forced to embrace the neoliberal economics of the Washington consensus and suffered two ‘lost decades’ of development as a result. Moyo’s blueprint for Africa would plunge the continent back into the dark days of the 1980s and 1990s, fulfilling George Santayana’s dictum that, ‘Those who can- not remember the past are condemned to repeat it.’ For all Moyo’s celebrity status, Dead Aid should not convince the people of Africa to make the same mistake twice.

References 1 Dambisa Moyo, Dead Aid: Why aid is not working and how there is another way for Africa (London,

Penguin, 2009). 2 It was eventually published as a Pelican paperback: Teresa Hayter, Aid as Imperialism

(Harmondsworth, Penguin, 1971). President J. F. Kennedy was equally candid over the pur- pose of US aid, describing it as ‘a method by which the United States maintains a position of influence and control around the world and sustains a good many countries which would defi- nitely collapse or pass into the Communist bloc’. See also Graham Hancock, Lords of Poverty: the freewheeling lifestyles, power, prestige and corruption of the multibillion dollar aid business (London, Mandarin Books, 1991).

3 Yash Tandon, Ending Aid Dependence (Cape Town, Dakar and Nairobi, Fahamu Books, 2008); Jonathan Glennie, The Trouble With Aid: why less could mean more for Africa (London, Zed Books, 2008).

4 SAPRIN, Structural Adjustment: the policy roots of economic crisis, poverty and inequality (London, Zed Books, 2004); Arun Kundnani, The End of Tolerance: racism in 21st century Britain (London, Pluto Press, 2007); Tandon, Ending Aid Dependence, op. cit.

5 IMF Independent Evaluation Office, Structural Conditionality in IMF-Supported Programs (Washington, DC, International Monetary Fund, 2008); Nuria Molina and Javier Pereira, Critical Conditions: the IMF maintains its grip on low-income countries (Brussels, Eurodad, 2008); Untying the Knots: how the World Bank is failing to deliver real change on conditionality (Brussels, Eurodad, 2007).

6 Graham Hobbs and David Tucker, Trading Away Our Jobs: how free trade threatens employment around the world (London, War on Want, 2009).

7 John Hilary, ‘Trade liberalization, poverty and the WTO: assessing the realities’, in Homi Katrak and Roger Strange, eds, The WTO and Developing Countries (London, Palgrave Macmillan, 2004), pp. 38–62.

8 IMF Independent Evaluation Office, IMF Involvement in International Trade Policy Issues (Washington, DC, International Monetary Fund, 2009); IMF Involvement in Trade Policy Issues in Low-Income Countries: seven case studies (Washington, DC, International Monetary Fund, 2009), section E.

9 Moyo, Dead Aid, op. cit., p. 39. 10 Ha-Joon Chang, Kicking Away the Ladder: development strategy in historical perspective (London,

Anthem Press, 2002). 11 David Woodward, The Next Crisis? Direct and equity investment in developing countries (London,

Zed Books, 2001); Tandon, op. cit. 12 Paul Collier, The Bottom Billion: why the poorest countries are failing and what can be done about it

(Oxford, Oxford University Press, 2008). 13 See also Robert Calderisi, The Trouble With Africa: why foreign aid isn’t working (London, Yale

University Press, 2006). 14 UNCTAD, The State and Development Governance: the least developed countries report 2009 (Geneva

and New York, UNCTAD, 2009). 15 David Harvey, The New Imperialism (Oxford, Oxford University Press, 2003).

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