Wednesday, June 21, 2006

Be a searcher

I haven't read the book yet, but Michael Duffy's excellent review of The White Man's Burden seems to suggest that both he, and the book's author William Easterley, share the sentiments that I do on the fruitlessness of aid rather than the development of markets in helping the developing world. From Duffy in the Sydney Morning Herald:

PERHAPS the most important question of our time is why the West's efforts to help the world's poorest people have been so disappointing and even counterproductive. In the past 50 years, we have spent $US2.3 trillion on foreign aid, to disturbingly little effect. An important new book suggests this has had a lot to do with the arrogance of the "big push" approach favoured by many development economists and organisations such as the World Bank and the United Nations.

William Easterly is a professor of economics at New York University. He used to be a believer: for 16 years he was a research economist at the World Bank and worked extensively in Africa, Latin America and Russia. What changed his attitude was the growing amount of research showing the failures of aid, described in his book The White Man's Burden (Penguin in the US, not published in Australia).

Easterly says the $US2.3 trillion hasn't achieved what it should have. This is because much of it has been given as part of a never-ending series of internationally planned and co-ordinated "big plans". He believes the alternative would be to encourage more market-oriented activities among the poor themselves.

Those, such as Bono, Bob Geldof and the economist Jeffrey Sachs, who still advocate the traditional approach he calls Planners, while those looking for a bottom-up alternative are Searchers. According to Easterly: "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 at the top lack knowledge of the bottom; Searchers find out what the reality is at the bottom."


John Lee said...

I think he needs some evidence before accusing people like Geldof and Sachs of creating expectations without solutions.

The opening of markets in itself may generate wealth but it won't eliminate poverty. Markets need to be backed up by clear property rights and an independent judiciary, or they just funnel wealth to those holding political power. That's what's happened in China, where after almost three decades of market reform 1% of households control 60% of national wealth, while the private sector accounts for barely 30% of the economy. Most of the country is effectively locked out of growth by the political system.

We don't want this process repeated in smaller Third World countries, which lack China's clout to attract foreign capital and dictate the terms of its investment. Especially since it's unaccountable and non-transparent political systems that have swallowed up all that aid over the past thirty years.

Daniel said...

I think that it is simplistic to dismiss the likes of Geldof with a label like 'Planners'. I note that one of the stated objectives of the whole Live8 lobby is trade liberalisation. See my own comments on this from some few months back: