Why Aid Actually Hurts Africa

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Dambisa Moyo’s profound statement is unfortunately not part of conventional wisdom.  While it would seem odd that global aid would hurt economic development in Africa, the problem is that it distorts market incentives.  By flooding communities with free goods and services, the unintended consequence is that local businesses will fail.  So if aid is not helpful, then what are the keys to economic growth?

Moyo’s Financial Times piece offers insight on why self-sufficiency and accessing foreign capital are the keys to growth.  Rather than depend on foreign aid with no strings attached to repayment, she believes that having strong fiscal policies where debt levels are manageable can offer solutions to education, health care, and transportation.  It is essential that debt levels are manageable, so that they can attract foreign capital to  enhance economic development.

Improving overall workforce quality is critical because greater workforce skills will lead to more marketability and higher wages.  By obtaining financing from the international community, national governments can make needed investments to improve their educational systems.

More access to quality health care can boost the productivity rates of each worker.  If they are healthier and stronger, then that will enable them to work longer and faster.  The key is making the right investments in health care facilities without straining resources from other areas of development.

Then there is transportation, such as constructing roads and highways to facilitate more traffic.  If individuals can get to various places quicker and faster, then that will mean more opportunities for commerce and trade.

It is clear that Moyo believes in democracy, but democracy must be designed toward strengthening property rights and improving commerce.  If the people vote for leadership that restricts the private sector and is overly dependent on subsidies from foreign or state sources, then that is not a recipe for raising living standards.


One thought on “Why Aid Actually Hurts Africa

  1. I’m not sure why but this blog is loading very slow for me. Is anyone else having this problem or is it a problem on my end? I’ll check
    back later and see if the problem still exists.

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