We asked some of our friends on Twitter to submit questions for Goldman alumna and development-economics star Dambisa Moyo. (Thanks to @wiwibloggs, @sinatraj, @socialentrprnr, @ellmcgirt, and @rebekahco for their submissions.) Moyo declined, by the way, to answer a question about her views on Madonna’s attempt to adopt another Malawian baby. But here’s an edited transcript of the rest of her responses on topics ranging from the bond markets to the problem with Pepfar, the U.S. government’s major but controversial effort to battle AIDS in Africa. (To read the rest of the interview–including her scathing thoughts on celebrities in Africa–click here.)
FC: We have some reader questions for you. The first one ties in with something we were just talking about: credit ratings and the bond markets. You’re very big on the capital markets, but doesn’t it have just as horrible a record over the decades? Is it that much better for development?
Moyo: Absolutely. Look at China. China was worse off than many African countries 30 years ago. They’ve moved, in 20 to 25 years, 300 million people into the middle class.
FC: But has that been because of the capital markets or because of the power of the government?
Moyo: I think the government. I should clarify that there are clearly differences between the free-market system that has pervaded Western society and the ethos of the Chinese model. China has encouraged entrepreneurship, free-ish trade, and the investment into the country. I would consider that as broadly in line with the Western view of a capitalist model, but of course it’s a command model.
My point is that Africa is nowhere near that. It’s aid dependent. Health care, infrastructure, security–it’s all provided by foreigners.
FC: Do you have an example of a country that has done well in the capital markets, where it has been a major component of its development?
Moyo: Ghana. Ghana has done well. It’s been against the wishes of the donor community. I saw a letter from the World Bank saying they shouldn’t go to the capital markets. It said, “It’s cheaper to borrow from us.” It’s cheaper in the financial sense, but the stigma associated with continuing to be a borrower from the World Bank as opposed to having a transparent credit rating where you can price your risk–it’s enormous. Nobody wants to invest in a basketcase. If you say, they’re dependent on aid from the World Bank, most investors will say thanks but no thanks.
FC: How about outside of Africa?
Moyo: Lots of countries in South America and Eastern Europe. Argentina, although it’s defaulted. People do default. Malaysia, Indonesia, South Korea have used the bond markets well.
FC: But if they default, they’re not really better off, are they?
Moyo: It depends on why they default. When investors put money into a country, the expectation is that they’re not going to default. In the book I give the example of Brazil. When you go to investors, you have to articulate a vision for the country: This is a great place to come and invest. You pitch the story and investors buy the story. You talk about your tax base and how you plan to pay them back. Brazil had a coffee frost. It wiped out the tax base. That’s unanticipated, but investors usually factor that in. And so if Brazil turns around and says, “I’m defaulting,” at least you can see the government didn’t run away with the money and put it in a Swiss bank account.
FC: Another reader question: What one or two government policies are the biggest barriers to African economic independence?
Moyo: Dependence on aid. I’d actually call it an obsession with aid. South Africa is already a member of the G20, but they decided to invite three other representatives from Africa to speak on behalf of the continent. The whole thesis is, Give us more aid. They’ve got aid on the mind. It irritates me. We can be sympathetic for bailout aid: Eastern Europe has a balance-of-payments crisis and they’re asking for money. That’s fine. We understand that when the crisis is over they’re going to be going back to a free-market model. That’s not Africa. Africa is asking for an open-ended commitment with no cancellation. The other side of that is a lack of motivation to create an environment that’s conducive to investment.
FC: A question about AIDS funding: It’s been a huge part of U.S. government aid. Has it skewed the priorities of the governments receiving money?
Moyo: Yes. Here, I go back to my original question: What is the role of government? Let me be a little facetious. If government is supposed to provide health care, education, infrastructure, and security, and African governments are not providing these things–UNICEF is providing education, Gates Foundation is providing health care, the Chinese are providing infrastructure, the U.N. is providing security or whatever combination. Very facetiously speaking, shouldn’t we not bother to elect African officials but instead vote for which NGO will provide the best healthcare?
Let’s talk about Pepfar [the U.S. government’s strategy to fund AIDS treatments and prevention]. They’ve increased it to $30 billion for 15 countries. Say every country roughly gets $2 billion. Zambia has 10 million people, so that’s roughly $200 a person. That’s approximately the per-capita income of Zambia—you’re roughly doubling the per capita income. But that has had no meaningful impact on the health sector. $2 billion and you can’t overhaul the system? That seems to me completely absurd. African governments have completely abdicated their responsibility.
Pepfar get authorization from Congress. That money is split amongst four organizations. Then those organizations give the money to another layer. It hasn’t even left the shores of America yet. Then those guys give money to local NGOs–and some of them aren’t even local NGOs. They’re American NGOs registered locally. The dollar amount that hits the individual is 20 cents on the dollar if you’re lucky.
We haven’t even gotten to the philosophical questions: Should we focus on abstinence? Forget that. As a practical thing, does a dollar approved by Congress go to the person on the ground?
FC: Next, mobile-payment schemes. Are they a viable possibility for the unbanked? Do they help?
Moyo: They’re incredibly innovative. They’re working already. Grameen Bank has rolled out a quite aggressive system in Bangladesh. I write about the M-PESA system in Kenya–it’s a good way of getting money to the rural sector. We need innovation–and here’s a good example. I was actually talking to Chris Hughes about this. He said he wanted to do something in Africa. Getting information out, getting ideas out, getting money out–how do we do it? Well, many people have mobile phones. That’s one thing you could use. It circumvents government, and that’s a good way.
FC: What about fair trade and cooperatives? Cadbury’s recently announced they’re going to buy all of their cocoa for Dairy Milk from Ghanaian fair-trade coops.
Moyo: You don’t want to just grow the cocoa. You want to make the chocolate.
FC: So who are the leaders who are helping to make that happen, who are helping to “make the chocolate”?
Moyo: I really admire Kagame. He’s doing something against the grain, but he’s an anomaly. Ellen Sirleaf-Johnson in Liberia is doing it to some degree. But that’s about it. I’m not very sanguine. That’s precisely why I’ve decided not to be a crusader. I’ve said what I have to say.