As reported in the Guardian today the UNDP has released this year’s Human Development Report. Things are not getting better everywhere and more should be done. That basic analysis seems unobjectionable. There is one slight problem, however, if this Bill Easterly paper touched on by Owen Barder is to be believed.
What should we actually be doing? Follow the Sachs plan to meet the Millenium Development Goals? The sort of thing that the G8 agreed to? This is based on an analysis of the problem described in the paper thusly:
The
UN Millennium Project and Jeffrey Sachs argue that it is the poverty
trap rather than bad government
that explains poor growth of low income countries and the failure to
make progress towards
the Millennium Development Goals (MDGs). Sachs says “the claim that
Africa’s corruption is
the basic source of the problem {the poverty trap} does not withstand
practical experience or serious
scrutiny.” Likewise
the Millennium Project says “Many
reasonably well governed countries are
too poor to make the investments to climb the first steps of the
ladder.”
The paper closes with the finding:
The
classic narrative — poor countries caught in poverty traps,
out of which they need a Big
Push involving increased aid and investment, leading to a takeoff
in per capita income — has been
very influential in development economics. This was the original
justification for foreign aid.
The narrative became less popular during the market-oriented 80s and
90s (even then the idea of
the “takeoff” remained widely accepted, as it still is), but has
made a big comeback in the new millennium.
Once again it is invoked as a rationale for large foreign aid
programs.
However,
the description of poverty traps, Big Pushes, and takeoffs as a justification
for foreign aid receives scarce support in the actual experiences of
economic development.
The paper instead finds support for democratic institutions and
economic freedom as
determinants of growth that explain the occasions under which poor
countries grow more slowly
than rich countries.
There is no doubt that there is a problem. I also have no doubt that we have a moral duty (quite apart from the fact that helping the poor get rich will make us even richer) to help solve that problem. But when a respected academic in the field (as Bill Easterly is) says that the basic structure of the problem has been misidentified, and that thus our solution is completely wrong, don’t you think we might want to sit down and have a little discussion? Instead of throwing money at it in a way that we know is incorrrect?
(Some useful things to do while having that discussion might be the immediate abolition of all farm support, quotas, export subsidies and import tariffs on all goods including agricultural ones, by the EU and the US [the so called zero zero option], thus allowing the Doha round to proceed.)
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