Boom and Bust
Why It’s Hard to Predict Economic Growth
"Be thine own palace," wrote John Donne, "or the world's thy jail." William Easterly does not invoke this particular metaphor in The White Man's Burden, but this exciting -- and excited -- book is about the imprisonment of the world's poor in the trap of international aid, where "planners" have incarcerated the wretched of the earth. The poor may not have a "palace" to fall back on, battered as they are by grinding privation, massive illiteracy, and the scourge of epidemics. But Easterly -- a former World Bank economist who now teaches at New York University -- nevertheless argues that in the fight against global poverty, "the right plan is to have no plan."
In contrast to the typically well-meaning but allegedly always injurious "planners," the heroes of Easterly's book are those whom he calls "searchers." The division between the planners and the searchers, as seen by Easterly, could not be sharper: "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 whether the customer is satisfied." The radical oversimplification in this overdrawn contrast leads Easterly to a simple summary of his book's thesis in its subtitle -- Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good -- which supplements a title borrowed from Rudyard Kipling's lyrical paean to high-minded imperialism.
As it happens, the empirical picture of the actual effects of international aid (which, incidentally, does not come only from white men, since Japan is a major participant in the effort) is far more complex than Easterly's shotgun summary suggests. Nor is Easterly particularly fair in describing what the leaders whom he identifies as well-intentioned doers of great harm (including British Prime Minister Tony Blair, British Chancellor Gordon Brown, the economist Jeffrey Sachs, and former World Bank President James Wolfensohn) actually propose and sometimes achieve. Nor is he persuasive in his use of isolated quotations to indicate how the world is supposedly being misled by The New York Times, The Economist, and The New Yorker when they argue, as one of their writers, John Cassidy of The New Yorker, put it, that "aid can be effective in any country where it is accompanied by sensible economic policies."
All of this is a great pity, since Easterly's book offers a line of analysis that could serve as the basis for a reasoned critique of the formulaic thinking and policy triumphalism of some of the literature on economic development. The wide-ranging and rich evidence -- both anecdotal and statistical -- that Easterly cites in his sharply presented arguments against grand designs of different kinds deserves serious consideration. In a less extreme form, they could have yielded an illuminating critical perspective on how and why things often do go wrong in the global efforts to help the world's poor.
Unfortunately, Easterly gets swept up by the intoxicating power of purple prose (I could not avoid recollecting Kipling's description of words as "the most powerful drug used by mankind"). He forgoes the opportunity for a much-needed dialogue, opting instead for a rhetorical drubbing of those whom he sees as well-intentioned enemies of the poor.
JUST SO STORIES
Empirical evidence of the ineffectiveness of many grand development and poverty-alleviation schemes is undoubtedly worth discussing clearly and honestly, as Easterly does when he is not too busy looking for an aphorism so crushing that it will leave his targets gasping for breath. And Easterly is also right to note that the failure of many grand schemes results from their disregard for the complexity of institutions and incentive systems and their neglect of individual initiative, which must be societally encouraged rather than bureaucratically stifled. All of this may not yield Easterly's overblown conclusions; in fact, even he acknowledges the success of many international aid efforts, from the dissemination of deworming drugs and the use of oral rehydration therapy for diarrheal diseases to indoor spraying to control malaria and several programs to slow down the spread of AIDS. But all of the failures he does cite should encourage the type of scrutiny that can help translate good intentions into effective results.
The challenge is to respond to the plight of the hopelessly impoverished without neglecting to insist that help come in useful and productive forms.
In fact, Easterly makes exactly that point once the blast of rhetoric is turned down: "The good news about the noisy anti-globalization protesters, the hard-working NGOs, the rock bands and the movie stars, and the rich-country governments' increased interest in the Rest coming after 9/11 is that the constituency for the poor is growing. It's time for the rich-country public to insist that aid money actually reach the poor." Although not coming until after page 200, those sentences provide a better summary of the contribution of The White Man's Burden than do the rather extreme slogans to which Easterly chooses to give pride of place.
Those slogans also give the misleading impression that Easterly is against efforts to help the poor altogether, preferring to leave them to rely on their own devices and their own "search" for ways of making things better through unaided individual efforts. The hardheadedness of his bombardment of "do-gooders" can be read -- wrongly -- as a general skepticism toward the idea that one person can consciously and deliberately do good to another. This is not Easterly's actual position at all. He clearly knows how appalling the lives of the poor of the world are, and his sympathy for them is manifest throughout the book. In Easterly's rejection of plans to aid developing countries, there is nothing of the false ethics that finds frequent expression in the anti-aid attitudes of those who argue, whether explicitly or implicitly, that the affluent have no moral responsibility to help the wretched, because their problems were not caused by the rich. Nor does he show any sympathy for the growing tendency to blame the predicament of the poor on the basic deficiencies and hard-to-reform nature of their own regressive cultures, which supposedly make it quite futile to try to help them. In contrast to those who make this case -- under the apparently benign slogan "culture matters" -- Easterly has faith in the creativity of all.
Furthermore, Easterly's critique is not confined to foreign aid as it is usually defined; it is a critique of all grand plans to save the world hatched in Washington or London or Paris. Market ideologues may love the battering that large-scale state intervention receives through Easterly's hard-hitting prose. But they will be less happy with his carefully spelled-out skepticism of schemes for the immediate replacement of all economic institutions with a pure market system. Easterly is particularly critical of the reasoning behind programs that go by the name of "shock therapy" -- plans to jump-start a market economy by comprehensively dismantling all preexisting institutions. He also criticizes the growing tendency to advocate an exclusive reliance on capitalist property rights, which often end up replacing old societal arrangements that, among other things, play an important part in mitigating problems of "shared commons." Although Easterly recognizes the importance of a market system with good property rights, he looks for its nurtured emergence in a qualified form -- rather than its drastic imposition on bemused recipients by befuddled "planners of markets."
Although a great champion of democracy, Easterly is also deeply critical of the majestic pretensions of a handful of world leaders who think they can impose democracy on other countries they know little about. The continuing debacle in Iraq affirms his general critique of grand plans. Easterly presents a similarly effective critique of the recent spell of imperial nostalgia -- a temptation to save the world by filling the void left by the decline of old empires with the activism of a new American one. Here he comes closest to responding to Kipling's exhortation:
Take up the White Man's burden --
The savage wars of peace --
Fill full the mouth of Famine,
And bid the sickness cease.
Easterly writes, "Harvard historian Niall Ferguson, whose work on every topic but this I greatly admire, says that there is 'such a thing as liberal imperialism and that on balance it was a good thing. ... In many cases of economic "backwardness," a liberal empire can do better than a nation state.'" Easterly's skepticism of the benefits of such "liberal imperialism" is well presented. It could be supplemented by noting that there were big famines in India -- the subject of Kipling's eloquent phrase -- until the very end of the British imperial rule. The last one, the Bengal famine of 1943, killed between two million and three million people four years before Indian independence. Since the end of the Raj and the establishment of a parliamentary democracy, there has not been a single one.
Despite the simplicity of its subtitle, Easterly's book is concerned with a much wider range of problems than just the pros and cons of aid. He is moved by a rich vision of indigenous creativity that can flower in the absence of extraterritorial grand designs. This vision informs and inspires his general approach and leads him to a number of empirical exercises -- which are interesting but not quite unproblematic. To arrive at his negative view of economic aid, Easterly draws on large-scale cross-sectional statistical analysis, as well as on case studies of particular plans and programs. Such intercountry comparisons have become fashionable as a way of isolating solid connections between causes and effects, but they are seriously compromised by the difficulty of comparing diverse experiences: countries can differ significantly in variables other than those that are brought under cross-sectional scrutiny.
Many such studies are also impaired by difficulties in identifying what is causing what. For example, a country's economic distress may induce donors to give it more aid -- which may, in terms of associative statistics, suggest a connection between aid and bad economic performance. But using such a correlation to prove the bad effects of aid turns the causal connection on its head. Easterly tries to avoid such pitfalls, but the statistical associations on which he draws for his comprehensive pessimism about the effects of aid do not offer a definitive causal picture.
In some ways, the more interesting parts of Easterly's analysis lie in his case studies of particular programs. Many of those detailed depictions of donors' failures to foster development are indeed persuasive. And yet, there are very few cases cited in which aid has actually "done so much ill," as Easterly claims. Rather, sometimes it has simply not done much good. (Presumably, Easterly would argue in his defense that the waste of resources is itself scandalous and that the belief that something good is being done can discourage a fresh examination of what is really needed to help the wretched of the earth.) There are also many examples that Easterly considers where aid helped rather than hindered -- which could have led him not to the total dismissal of the importance of aid, but to a more subtle rendering of the overall picture. Such a more nuanced view could yield important insights for policy, including on the need for more emphasis on social institutions and individual incentives. On the basis of his own investigations, Easterly is in an excellent position to systematize such insights. But this does not quite happen here, despite Easterly's occasional suggestions for how to make international aid more effective and less wasteful. Useful hints at balanced evaluation come amid deafening outbursts against the advocates of aid; again and again, unifocal extremism is snatched from the jaws of discriminating judgment.
A similar point can be made about Easterly's insistence that aid-oriented international institutions are doing unmitigated harm (even though, in this case too, Easterly lapses into the occasional interlude of passing approval). The World Bank and the International Monetary Fund do not need me to defend them, but it should be noted that the way Easterly describes them and their work includes a strong element of caricature (rather surprising, given his long experience working for the bank). To be sure, these organizations have often imposed terrible policies on developing countries, and Easterly is right to criticize their sometimes insensitive agendas, overly grand designs, and lack of engagement with the way the wretched themselves see their problems. But these deficiencies call for better economic and political reasoning and a bigger voice for the poor in the governance of these organizations, rather than simple dismissal. Global institutions have important roles to play in the coordination of short- and long-term economic policies across the world. As it happens, coordination is an issue that receives surprisingly little attention in this grandly conceived book. Easterly's rejection of all plans disposes of not only grandiose "gosplans," which will not be missed, but also all efforts to try to do things together without getting into one another's hair.
It is also worth noting that some of the studies on which Easterly draws in making his case for "searchers" were produced by these very institutions. Voices of the Poor was a World Bank project that received direct encouragement from then President James Wolfensohn. The most illuminating study of recent North Korean famines -- which linked starvation to North Korea's authoritarian governance, a theme that should appeal to Easterly -- was written by Andrew Natsios, until recently the head of the U.S. Agency for International Development (USAID). The need to move beyond unilaterally imposed schemes is not nearly as unknown in these institutions as Easterly suggests. Indeed, Natsios' valedictory statement (which included the observation that the U.S. government's treatment of USAID efforts sometimes made the agency feel "almost like an abused child") explicitly identified many of the the problems with which Easterly himself is concerned. Shorn of their dismissive denunciations, Easterly's investigations can be of use in suggesting avenues for reform in those institutions. But there is a difference between curing an affliction and eliminating the afflicted.
Perhaps the weakest link in Easterly's reasoning is his almost complete neglect of the distinctions between different types of economic problems. Easterly is well aware of the efficiency of market delivery when commodities are bought in a market and backed by suitable purchasing power, and he contrasts that with the usual infelicities and inefficiencies in getting aid to those who need it most. But the distinction between the two scenarios lies not only in the different ways of meeting the respective problems, but also in the nature of the problems themselves. There is something deeply misleading in the contrast he draws between them, which seems to have motivated his entire project: "There was no Marshall Plan for Harry Potter, no International Financing Facility for books about underage wizards. It is heartbreaking that global society has evolved a highly efficient way to get entertainment to rich adults and children, while it can't get twelve-cent medicine to dying poor children." The disparity in the results is indeed heartbreaking. But jumping from there to arguing that the solution to the latter problem is along the same lines as the solution to the former reflects a misunderstanding of what makes the latter so much more difficult. (That major issue is clearly more important than the minor point that J. K. Rowling was on welfare support and received a grant from the Scottish Arts Council when writing the first Harry Potter novel.)
In his wholesale praise of "searchers" over "planners," Easterly says, "Planners determine what to supply; Searchers find out what is in demand." This may be just so, but there is a radical difference (of which Easterly is surely aware, judging from what he writes elsewhere in the book) between the enterprise of supplying "what is in demand" -- which is integrally linked to the buyers' ability to pay -- and that of supplying needed goods and services to people whose income and wealth do not allow a need to be converted into a market demand.
None of this, however, negates the importance of Easterly's general praise of searchers. There is much merit in ground-level explorations of what is feasible -- even when addressing problems that are a thousand times more difficult than selling Harry Potter books to buyers who are willing and able to pay for them. Information and initiatives have to come from many sources, including the deprived themselves (this is why studies such as Voices of the Poor are so important), and without constant searching for what the problems are and how they can be addressed, global aid efforts end up being far less effective than they could be. Easterly is absolutely right to praise the visionary efforts of the remarkable Muhammad Yunus of Bangladesh in pioneering the microcredit movement through his Grameen Bank. Easterly could have also enlisted Yunus' fellow activist Fazle Hasan Abed for his own momentous initiative in launching huge cooperative efforts across the country through BRAC (the Bangladesh Rural Advancement Committee). Such powerful departures were based on a clear understanding of why the market had failed to work on its own and of how that could be altered through social efforts to supplement the market; these are not mere extensions of the sale of J. K. Rowlings' fantasy novels.
There is much of merit in Easterly's perceptive vision about initiatives, incentives, and communication. We should be grateful to Easterly for the wealth of material he has presented, thereby enriching the development literature. We may have less reason to celebrate -- or even to accept -- the diagnosis of idiocy and obduracy he gives to those whom he calls "planners." But there is a strong case for judging a book by its best contributions, not its weakest points. My hope is that the "searchers" among the readers of The White Man's Burden will look for the convincing arguments Easterly does provide rather than for those he does not.