Last issue, I reported on Dr. Dambisa Moyo’s talk on her book Dead Aid in which she argues that the billions of government-to-government aid to Africa is not only an inefficient mess, but is also hurting African countries. She reasons that aid harms development directly by causing foreign dependence and inflation, and indirectly through corruption, mismanagement of resources, lack of foreign investments, inadequate healthcare and civil unrest. Moyo believes that greatly reducing and eventually eliminating aid will reduce the dependency of African governments on first-world countries and allow them to pursue investments and encourage entrepreneurs and microfinance on their own. The West’s low expectations for the potential of African economic success has kept these nations on a seemingly never-ending stream of aid.
Moyo received her MA from Harvard and her PhD at Oxford. She has worked on hedge funds and macroeconomics for eight years at Goldman Sachs. Hailing from Zambia, she has seen first-hand the effects of the band-aid of aid. Others such as New York University economist William Easterly also agree with Moyo, yet her argument is still up and coming. For years, more aid has been the only way to go. Surprisingly, the man who has backed billions of dollars in Western aid to Africa is none other than Moyo’s former mentor and lecturer: Jeffrey Sachs.
Who is Jeffrey Sachs? Raised in Detroit, Sachs received his BA, MA, and PhD all from Harvard, and was appointed the special advisor to Secretary-General Kofi Annan on the 8 Millennium Development Goals (MDGs) and from 2002 to 2006 he was the director of the UN Millennium Project. Sachs currently also serves as special advisor to the current UN Secretary-General Ban Ki-moon. He’s been named as one of Time Magazine’s “100 Most Influential People in the World” twice, once in 2004 and again in 2005.
Despite Sachs’ impressive education, he still believes that the only way to end extreme poverty, (defined by living below a $1 a day, as 70 percent of the billion people in Africa are) is through donations in the form of billions of dollars from Western governments. He wants to raise worldwide aid from $65 billion a year in 2002 to $195 billion in the 2015. In his New York Times bestseller The End of Poverty, he cites India and China as examples of aid success stories; in the span of two decades (70’s and 80’s), 300 million people in China alone were lifted out of extreme poverty. However he fails to realize that China received little economic aid packages from national governments when it was making the shift from a communist economic framework to capitalist. A major internal land reform was the primary force that lifted thousands of Chinese peasants from the communes into the middle class. Africa instead has received billions of dollars in external aid, yet since 1970 the continent has actually grown poorer. While the rest of the world, for the most part, has grown richer, the GDPs for African nations continue to lag behind.
In a 2009 article in the Huffington Post, Moyo responded to one of Sach’s Huffington Post articles continuing the ongoing dialogue regarding foreign aid. According to Moyo, when Sachs was her lecturer at Harvard he made the statement: “the path to long-term development would only be achieved through private sector involvement and free market solutions.” Nonetheless, Sachs still pushes foreign aid. William Easterly, in his book review of The End of Poverty in the Washington Post and his subsequent book White Man’s Burden, argued that nations stuck in a “poverty trap” can escape without the massive scaling up of government-to-government aid. He offered statistical evidence that many emerging markets in Asia, i.e. China, Singapore and South Korea, have gained momentum without the help of billions of dollars of aid. There is an inherent bigotry in Sach’s approach to ‘helpless Africans.’ Moyo feels that “Mr. Sachs’s development approach was made for countries such as Russia, Poland and Bolivia, whereas the aid- dependency approach, with no accompanying job creation, was reserved for Africa.” Instead of allowing elected officials to represent Africa nations, seven of which have said they don’t need a continuous flow of aid, Sachs and his celebrity friends Bono and Angelina Jolie dictate what Africa needs during UN and G8 conferences.
On the weekend of April 17th, the Dartmouth Great Issues Scholars and yours truly went to YaleUniversity for the 7th Annual Unite for Sight Conference on Global Health and Innovation. Conference sessions were held in a host of different fields, such as: the non-profit sector, philanthropy, medicine, public service, microfinance, human right advocacy, and health policy. There were a number of keynote speakers, including Sachs himself. The Great Issues Scholars had already had lunch with Moyo, heard her talk, and obtained signed copies of her book. That weekend we heard the argument from the other side—Jeff Sachs.
Sachs began his talk by pointing out that it has been a decade since “We the Peoples,” the creation of the Millennium Development Goals: eight commitments against global issues like poverty, treatable disease, discrimination against women, and illiteracy. In 2000, Secretary-General Annan and Sachs challenged the world to achieve these goals by 2015. With only five years left, is the world any closer to ending problems like poverty and hunger? Sachs felt that advances made in technology such as cell phones, the improvement of primary health delivery, new HIV/AIDS medicines, and new finance and business models were helping the whole world work toward achieving the MDGs. Sachs also believed that if the richest one billion in the world each gave $30 year, in one year $30 billion could be put towards the MDGs. Ten cents on each $100 could go to funding health services for the third world.
Sachs remains dedicated to aid because he feels that since African governments have so little to budget, spending on one sector means not having enough to allocate to another sector like, say, healthcare. Because of this, supposedly an African government lacks the ability to improve their entire nation. He sees no window for microfinance and he wishes to quadruple world aid and pad the World Fund. According to Sachs, the UN should also open another global fund and pump troubled economies, such as that of the US, for more money that will be ineffectively used and will contribute to the conditions that necessitate aid in the first place. Sachs says donor countries don’t give enough, and although he makes a good point that the US spends too much on military funding, he wants to press world leaders into passively dumping aid on Africa instead of actively seeking investments in Africa.
For the final question in the Q&A period after the talk, I asked Sachs about his thoughts on Moyo’s position and those of other intellectuals who say aid isn’t working. Sachs became quite spirited, to say the least, and lashed out at Moyo, referring to her as “that Goldman Sachs employee.” One Great Issue Scholar remarked afterward “I thought he was going to jump off the stage and throttle you.” Sachs defense of aid was constituted almost entirely by what Moyo calls the “emotional argument for aid”; his position was mainly ‘Children are dying!’ Indeed, Sachs did mention how he has been to Africa and has seen children suffering and dying but he offered no economic or logical argument for why aid would work just as well as or better than microfinance or investments in the private sector. He offered no rebuttal to the poor track record of aid and offered no end date for aid. He did not even address Moyo’s most powerful argument: that bucket loads of aid may actually be contributing to the continued destitution of the African continent. In a nutshell, Sachs said there are horrible problems in Africa, so don’t criticize aid; just send more money.
The Unite for Sight Conference was, for the most part, a pro-aid community, and Sachs answer was met by applause. Yet it was obvious that introducing the opposing argument was troubling not only Sachs but to the audience. After Sachs left the podium, his wife Sonia Ehrlich-Sachs, MD came up to talk on the Millennium Villages’ progress on the MDGs in Africa. Dr. Sachs wasn’t as charismatic as her husband and her presentation relied more on its power point instead of effective speaking. Those who questioned her wanted to know if the facts and figures she had up on the screen translated into actual lasting improvement on the ground or in the nation’s government. One questioner wanted to know if this was enough evidence to justify that aid was working, especially for “the other side of the debate.”
Now this isn’t meant to villainize Jeff Sachs. Sachs’s privileged position does not prevent him from taking a deep-seated interest in those in need. However, I think his benevolent character prevents him from seeing that there are other, better ways to help Africa. Moyo doesn’t want the West to ignore the needs of Africa, but she feels that continuing to catch all the fish for Africa will keep it in continuous poverty and is not a sustainable economic course for the West, and the US in particular. As Daniel Quinn describes in his book Ishmael, feeding a group of starving people will only allow them to thrive enough to raise the next generation, and unless these children are taught to feed themselves, they will have no choice but to demand even more.
We cannot hold the Continent’s hand forever and then blindly hope that African governments will suddenly become less corrupt and the common people will magically become entrepreneurs and hedge fund managers. And there are signs that others in the aid community think so too. Although Unite for Sight was pro-aid, it appeared from this conference that the not-for-profit sector is in a transitional stage. More and more people want to empower Africa through investments, loans and business models.
The first keynote speaker of the conference, Jacqueline Novogratz, founder and CEO of the Acumen Fund, gave a presentation entitled “Patient Capital for an Impatient World.” The Acumen Fund supports entrepreneurs in Kenya and other parts of eastern Africa who start projects to alleviate poverty. One entrepreneur started a housing project in the slums of Nairobi, offering small, clean houses with indoor plumbing to people living in tin shanties. Most importantly, these houses are not handouts—they aren’t free, but are offered at reduced loans that once paid off are used to build more houses. Novogratz notes that the fact that houses are not free is key because it gives people a sense of dignity rather than shame at being the recipient of hand-outs.
Innovation in aiding Africa doesn’t stop there. Scott Hilstrom, Co-founder and CEO of the HealthStore Foundation helps create local franchises to dispense much needed medicines as an alternative to the many companies selling counterfeit medicine. HealthStore’s franchises not only have local Africans as business owners and mangers, but also provide the needed oversight to prevent the dispensing of fake pills. Ted London, PhD from the Ross School of Business at the University of Michigan, believes in empowering the people and hidden assets at “The Base of Pyramid” (BoP) through nurturing innovators and encouraging social enterprise balanced with traditional enterprise. The new business model for developing economies involves a development community, a private sector and most importantly, interdependence.
Andrew Wok is the CEO of Root Cause, which according to its website is a research and consulting firm dedicated to “mobilizing the non-profit, public and business sectors work together in a new social impact market.” Wok argues that after trillions of dollars have been poured into poor communities, there has not been a corresponding amount of social progress in return. He wants to create a social impact market that nurtures relationships between non-profits, embraces citizens on the ground as public innovators, and engages Western governments as well as local government. Billy Shore of Share Our Strength, a national organization committed to fighting hunger in the US, spoke on achieving global health through small community wealth. The culture of the non-profits must be recast to capture untapped wealth and aspiring entrepreneurs. How the aid community works right now is “good, but not good enough” he says. Shari Barenbach, President and CEO of the Calvert Foundation, also believes in investment at the “base of the pyramid” instead of handouts. Her foundation works to maximize the flow of capital to developing nations through mainstream investments. Allen Hammond, co-founder and chairman of Healthpoint Services sees the need for hybrid profit/non-profit models. In poverty stricken communities, the poor either pay exorbitant amounts for simple things like sanitary napkins from crooked merchants or they receive free medicine, food and other goods and services from the NGOs. However, due to shame, pride or social stigma, they will avoid the NGOs and will continue to pay exorbitant amounts or go without. It is not immoral to charge a small fee for medicine or clean water if a poor community will buy those goods.
Kevin Starr MD, affiliated with the Mulago Foundation for tactical philanthropy, pushed for an overhaul of the entire way the non-for profit sector does business. Instead of focusing on sad anecdotes to attract donors, NGOs need to start thinking like a capitalist business. He offers the microfinance non-profit Kiva as a good example of a successful NGO that is run well and helps poor communities through loans. Moyo is an avid supporter of Kiva.
The bureaucracies of NGOs right now are for the most part flabby and ineffective. They must start thinking about results in impact rather than profits, and the scalability of their projects and efforts. You can’t have an NGO delivering aid but only 25% of its aid recipients actually climbing out of poverty. A successful intervention in a poor community must be replicable, scalable, and engaging to the local and later national government. Most importantly, the efforts of an NGO must have a staying power so that when the NGO eventually leaves, the community will not revert back to poverty. Aid is like war; there has to be a way to get out once the intervention is over. As the eloquent Dr. Starr put it, “What happens when the donor dollar is gone?”
The face of the aid community is changing, and fortunately Sachs was the only person I heard at the Unite for Sight Conference advocating for billions more in aid. Sachs has done great work drawing attention to global hunger and poverty with the Millennium Villages and the Millennium Development Goals, but he’s stuck in the old way of helping the poor, through free handouts. Although handouts in the billions may alleviate a problem temporarily, they offer no lasting change and do not strike at the root of sustained extreme poverty: lack of investments, capital or participation in global bond markets. Moyo, Starr, Wok, Hammond, Easterly and others are the faces of a new era for aid that will hopefully bring about the end of the current aid situation. “I think Moyo and Sachs desire the same things,” commented Amy Newcomb, director of the Great Issues Scholars program, “but they’re going about it differently.” While Sachs’s vision sees no end in sight for poverty in Africa, Moyo offers a way to systematically revamp Africa’s economy. Sachs would do well to end his long rivalry with Moyo and join in efforts to move Africa beyond aid.
