5 Reasons Aid is more Harmful than Helpful

Inspired by Dambisa Moyo’s book “Dead Aid”

When I first started getting interested in Africa, I stumbled upon Dambisa Moyo’s book Dead Aid. It was one of those rare books that totally changed my view of how the world works - and how it should work. 

Aid, as Moyo defines it, encompasses both grants and loans given on a non-emergency basis. Grants are basically a gift of money, and loans given to developing countries’ governments are almost always renegotiated at a lower rate or partially forgiven, meaning that the leaders who receive these loans treat them like free money as well. Emergency aid, such as supplies given after a natural disaster, is not included in this argument.

Aid, Dambisa Moyo argues, is not only not helping African nations develop, it is actively hindering their potential. Here are some reasons she believes this to be true. 

1. Aid encourages corruption.

Foreign aid is easily to redirect, and is unfortunately difficult to track. The very presence of aid gives corrupt leaders something to steal - if the aid weren’t there, corruption would not pay (at least not as well). 

2. Aid reduces social capital.

I’ll have to quote here, because Moyo just says it so eloquently: “By thwarting accountability mechanisms... and removing pressures to reform inefficient policies and institutions, aid guarantees that in the most aid-dependent regimes social capital remains weak and the countries themselves poor. In a world of aid, there is no need or incentive to trust your neighbour, and no need for your neighbour to trust you.”

3. Aid can be inflationary.

This one is pretty straightforward - injecting foreign cash into the country makes everything more expensive for everyone. 

4. Aid stifles local businesses. 

Moyo gives the example of a mosquito net maker in Africa. His net-making capacity is low, but he employs several people. If a multinational enterprise were to enter and give away mosquito nets, he would go out of business. In the short term, far more people are protected from malaria, but in the long term, this well-meaning action has not only prevented gainful employment, it has created a dependency on free, foreign nets because there is no one local to make them any more. 

5. Aid creates dependency.

Because aid has been such a constant source of income for African governments, they believe it will always be there. This discourages them from seeking other, more independent and sustainable solutions for local economies, and destroys any sense of urgency they might have. 

Overall, I find Moyo’s arguments to be very convincing and I definitely recommend that you read her book for more details about why aid is harmful and to find out the solutions she proposes!