For nearly sixty years the United States and Western governments have been giving aid to developing nations unilaterally, through international organizations like the International Monetary Fund and the World Bank, and through non-governmental organizations. Economist Jeffery Sachs was all the rage in 2005 with his book The End of Poverty making the case for a “Big Push” to end poverty. While Sachs advocates many micro level experimentations, a central piece of his proposed agenda is massive overhauls of developing nations and government to government loans.
William Easterly’s The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done so Much Ill and so Little Good came out in 2006. It gives what I believe to be a much more realistic picture of the way development works. Easterly is professor of economics at New York University and a senior fellow at the Center for Global Development. He was a senior economist at the World Bank for sixteen years.
Easterly gives three legends (myths) about “Big Push” economic development at the beginning of the book:
- Legend 1: The poorest countries are stuck in a poverty trap from which they cannot emerge without an aid-financed big push.
- Legend 2: Whenever poor countries have lousy growth, it is because of a poverty trap rather than bad government.
- Legend 3: Foreign aid gives a big push to countries to achieve a takeoff into self-sustained growth.
He then reviews the recent literature showing all of these assumptions to be false. Big Push aid has not lifted any nation out of poverty and every nation that has made the transition from widespread poverty to prosperity has done so serendipitously with gradually accelerating growth. Government to government aid can be especially destructive because leaders of developing nations can receive billions of dollars to keep their governments alive without having any accountability to their indigenous business communities or to voters. Contrary to Sachs, bad government and insufficient societal institutions are a central problem. It is like pumping gasoline into a fuel take that is riddled with holes. Markets, and the values and institutions that support them, are insufficient to the task.
As I read this book an analogy came to came mind. A friend of mine who does economic development work in Indonesia once told me of a time when he was working in a remote farming area. There was no electricity and very little access to petroleum for running motors. Farmers still gathered to thrash their grain on a hard floor. He came up with the idea of taking an old bicycle and mounting at as a stationary bike. Instead of a tire on the front, he attached slats of wood with nails protruding from them. One person could sit on the bike and peddle as others laid their grain against the spinning wheel of nails They threshed the grain in a fraction of the time with fewer people. That small advancement freed labor to engage in other productive tasks. This is a prime example of using appropriate technology to incrementally improve people’s lives.
The “Big Push” approach is the equivalent “helping” this rural Indonesian community by giving them a mammoth combine tractor like those used on the Great Plains of the American Midwest. Easterly believes that there are many things that can be done that I would qualify as appropriate technology but most aid is scaled to and tested at the appropriate level.
The key is for development entities to focus on a small handful of tactics they believe have high payoff potential, run pilot projects, and then measure results. A major flaw in many development projects is absence of a feedback loop from the intended recipients of aid. I love one of his chapter titles, “The Rich Have Markets, The Poor Have Bureaucrats.” Market transactions allow buyers to have immediate feedback from those supposedly being served. One novel idea he mentioned was the idea of giving the poor aid vouchers. Services could be purchased from aid agencies with a voucher for things like mosquito nets, vaccines, or clean water. Aid agencies could turn in collected vouchers to a central bank, where aid dollars have been deposited, to be reimbursed accordingly. There could be community vouchers where entire communities could purchase services of their choosing. This would force agencies to compete for the services of those they are supposed to be serving. Easterly is not convinced this would work but would love for it to be tested. The important thing is the incorporated dynamic of feedback.
At the core of Easterly’s analysis is the difference between what he calls Planners and Searchers. He writes:
In foreign aid, Planners announce good intentions but don’t motivate anyone to carry them out; Searchers find things that work and get some reward. Planners raise expectations but take no responsibility for meeting them; Searchers accept responsibility for their actions. Planners determine what to supply; Searchers find out what is in demand. Planners apply global blueprints; Searchers adapt to local conditions. Planners at the top lack knowledge of the bottom; Searchers find out what the reality is at the bottom. Planners never hear whether the planned got what it needed; Searchers find out if the customer is satisfied. Will Gordon Brown be held accountable if the new wave of aid still does not get twelve-cent medicines to children with malaria?
A Planner thinks he already knows the answers; he thinks of poverty as a technical engineering problem that his answers will solve. A searcher admits he doesn’t know the answers in advance; he believes that poverty is a complicated tangle of political, social, historical, institutional, and technological factors. A Searcher hopes to find answers to individual problems only by trial and error experimentation. A Planner believes outsiders know enough to impose solutions. A Searcher believes only insiders have enough to impose solutions. A Searcher believes only insiders have enough edge to find solutions, and that most solutions must be homegrown. (5-6)
Some reviewers have suggested that Easterly oversimplifies issues and opposes aid. I’d say Easterly is a strong advocate for aid but it must be aid that empowers and amplifies the work of Searchers not funds the hubris of Planners. I believe Easterly has a far better take on the realities of economic development than “Big Push” advocates are willing to acknowledge. It took me almost a year but I’m glad I finally got around to reading it. I highly recommend it.