Debt Relief a Moral Hazard

Andrew Mwenda makes a case for turning off the Aid spigot:

“The best thing the West can do is nothing,” he says...“White society is being blackmailed. The white world looks at Africa from a position of guilt,” he told a seminar at IPN, the London think tank. The beneficiaries of aid are governments, politicians, the staff of aid agencies and charities, he says. Head in hands in mock despair, he reels off a list of “charities” that sprang into being when the Global Fund to Fight Aids, Tuberculosis and Malaria began to disburse its millions. “There was Children of Hope, there was Hope for Children, there was Help the Children.”

Aid is the problem, not the solution, he says. Debt relief is a Moral Hazard. What is the incentive for country “A” to continue paying interest on its borrowings if country “B” steals the money, defaults and then gets debt relief.

“Countries that are deserving don’t get aid,” says Mr Mwenda. Aid creates the wrong incentives, he argues. It makes objects of the poor, passive recipients of charity rather than active participants in their own economic betterment. Africans don’t need handouts, they need better institutions, land reform and access to cheap mortgages.