31 August 2009

Dambiso Moyo is right. Stop Aid to Africa. But not why you think.

This argument is going to be a little bit half-baked, but then as Simon says, "One of the wonderful things about a blog, is that you can write down thoughts which may or may not be interesting but without claiming to have done in-depth research or have in-depth knowledge – you are just 'putting it out there'."

I should also credit Abhijeet for most of these ideas.

Aid to Africa should stop.

Not because it is detrimental to growth, as Dambiso Moyo argues. But because it is SO DAMN EXPENSIVE. Southern Sudan is an extreme case. It is more expensive than most places in Africa. But it is not qualitatively different to the rest of Africa. The reasons it is expensive to operate in are essentially the same across the continent; low population densities, people dispersed across large distances, along with insecurity and political barriers to trade and migration, all making transactions costs huge.

Operating in Asia is cheaper because people are closer together.

What this means is that your money goes much further in Asia, as any backpacker can tell you. This also includes your aid money.

India's national school-feeding programme, which now reaches over 150 million kids, costs 2 cents per day per child. For their school-meal programme (operating in over 80 countries, including in both Africa, Asia and Latin America) WFP want $25 cents per day per child.

Some more back-of-an-envelope calculations (based on figures from BSF South Sudan and India's national primary school programme) reveals similar cost ratios for school construction in India and Southern Sudan, basically at least 10:1.

Now if what we care about is poor PEOPLE and not COUNTRIES, then how can we justify spending money on poor Africans, if it means choosing 1 poor African ahead of 10 poor Asians. On what ethical grounds is that fair?

This is not to say forget about Africa, just that Aid as our means of assistance is ridiculously cost-ineffective. So let's look at some other ways we can help, such as:

Trade - As Paul Collier has called for - lets have EU-US wide preferential market access for Africa, guaranteed for 15 years. (And maybe lose the subsidies? Please? No? Ok fine just the market access then.)

Migration - Come on, let's ease up just a little huh? It's good for us too I promise. Make it temporary or something.

Technology - Lets get serious about funding technology for Africa. That includes IT and tropical disease research.

Security - Yeah OK this one is a bit more controversial, but I'm broadly with Collier.

And then there's investment and the environment, which I know next to nothing about, but I'm sure there's plenty we can do.

Bottom-line - there is LOTS we can do to help in Africa without giving a penny of aid for service delivery.

And I'm not even saying stop aid, just send it where you get bang-for-your-buck.

Thoughts anyone?


Matt said...

This is essentially the same argument made by Collier & Dollar (2002), except without the dodgy econometrics. Basically, if we cared to most about reducing poverty, we'd send all our money to India and China.

Ryan said...

I am a little confused with the argument. Using the expense argument I imagine you would say (and you do say) that aid should be shifted to where you get the most bang for your buck. Perhaps funding technology over food is one instance of this. There are probably many more. But from that point it doesn't follow that "Aid to Africa should stop."

I can see a case being perhaps made in terms of political capital instead of dollars. Maybe aid should end and limited political energy in some rich countries should be shifted from focusing on aid to focusing on security. I am very skeptical of that argument, but from that you could end up saying that aid to Africa should stop. Without a "more bang for your political buck" argument I don't see how you can start with inefficient allocation and arrive at ending all aid.

Does that make sense?

--->After rereading your argument I see that it could work if you argued that every most efficient allocation of aid only existed outside of Africa, and that aid should be allocated purely on the basis of some kind of maximization calculation and not on the basis of need. Is that fair?

Lee said...

Yeah like I said, it's a little bit half-baked, but thanks for the comments.

@Matt - This argument is slightly different to Collier-Dollar which says that aid is only effective with a good policy environment. I'm talking purely about the costs of buying materials in different settings.

@Ryan - I'm being a bit misleading saying all aid should end. It's just attention-grabbing like Dambisa Moyo. I've also confused the issue by making the leap to other forms of assistance such as security.

The main point I'm trying to make is that, focusing only on basic service delivery, should we spend that money where basic services are very cheap and we can help more poor people? (i.e. move that budget from Africa to Asia?). By funding schools and health clinics in Southern Sudan are we valuing poor children in Southern Sudan 10x more than poor children in Asia?

The other forms of assistance are a bit of a panicked afterthought, that we couldn't just sit and do nothing in Africa. But much of what we can do (trade and migration policies) are basically free.

Anonymous said...

How about another possibility: aid to South Sudan is really expensive because it's being done by the most expensive aid-implementors... why is the U.N. there anyway? Why not outsource all the aid to far lower cost providers like NGOs? The very small organization I run in my spare time, FAVL, establishes small village libraries for a small fraction of the cost of other aid projects. But that's cause we don't take vacations in Lamu!!!! ;-)

Lee said...

The data that spurred all this was actually from entirely NGO implemented projects (BSF South Sudan).

Plus I'll wager you could establish village libraries much more cheaply in India than Burkina Faso!

Finally I think I'm pretty cheap, despite the extravagant holidays to Lamu. But then I'm comparing myself to people who work for a certain Union of Nations which allegedly gives its a staff a R&R allowance roughly equivalent to the salary of an undersecretary.

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