03 March 2006

Great-Leap vs. Piecemeal Poverty Reduction

A week ago, LaurenceJarvikOnline noted the forthcoming appearance of a new book by former World Bank senior economist William Easterly with the provocative title, White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good (Penguin, 2006): "An informed and excoriating attack on the tragic waste, futility, and hubris of the West's efforts to date to improve the lot of the so-called developing world, with constructive suggestions on how to move forward."
The ironies are many: We preach a gospel of freedom and individual accountability, yet we intrude in the inner workings of other countries through bloated aid bureaucracies like the International Monetary Fund (IMF) and World Bank that are accountable to no one for the effects of their prescriptions. We take credit for the economic success stories of the last fifty years, like South Korea and Taiwan, when in fact we deserve very little. However, we reject all accountability for pouring more than half a trillion dollars into Africa and other regions and trying one "big new idea" after another, to no avail. Most of the places in which we've meddled are in fact no better off or are even worse off than they were before. Could it be that we don't know as much as we think we do about the magic spells that will open the door to the road to wealth?
Jarvik also tracks down Easterly's scathing review last year of The End of Poverty: Economic Possibilities of Our Time, by Jeffrey Sachs (Penguin, 2005):
The climax of The End of Poverty is Sachs's far-reaching plan to end world poverty -- a sort of Great Leap Forward. His characteristically comprehensive approach to eliminating world poverty derives from his conviction that everything depends on everything else -- that, for instance, you cannot cure poverty in Africa without beating AIDS, which requires infrastructure, which requires stable government, and so forth.

Social reformers have found two ways to respond to this complexity; Karl Popper summed them up best a half-century ago as "utopian social engineering" versus "piecemeal democratic reform." Sachs is the intellectual leader of the utopian camp. To end world poverty once and for all, he offers a detailed Big Plan that covers just about everything, in mind-numbing technical jargon, from planting nitrogen-fixing leguminous trees to replenish soil fertility, to antiretroviral therapy for AIDS, to specially programmed cell phones to provide real-time data to health planners, to rainwater harvesting, to battery-charging stations and so on. Sachs proposes that the U.N. secretary general personally run the overall plan, coordinating the actions of thousands of officials in six U.N. agencies, U.N. country teams, the World Bank and the International Monetary Fund. Sachs's Big Plan would launch poor countries out of a "poverty trap" and end world poverty by 2025, as the book's title advertises. The world's rich countries would pay for a large share of the Big Plan -- somehow doing an exact financial "Needs Assessment," seeing how much poor country governments can pay and then having rich donors pay the rest. The donors will fill what he calls the "financing gap" by doubling donor-nation foreign aid in 2006, then nearly doubling it again by 2015.

What's the alternative? The piecemeal reform approach (which his book opposes) would humbly acknowledge that nobody can fully grasp the complexity of the political, social, technological, ecological and economic systems that underlie poverty. It would eschew the arrogance that "we" know exactly how to fix "them." It would shy away from the hubris of what he labels the "breathtaking opportunity" that "we" have to spread democracy, technology, prosperity and perpetual peace to the entire planet. Large-scale crash programs, especially by outsiders, often produce unintended consequences. The simple dreams at the top run afoul of insufficient knowledge of the complex realities at the bottom. The Big Plans are impossible to evaluate scientifically afterward. Nor can you hold any specific agency accountable for their success or failure. Piecemeal reform, by contrast, motivates specific actors to take small steps, one at a time, then tests whether that small step made poor people better off, holds accountable the agency that implemented the small step, and considers the next small step.

What's the evidence on how well the two approaches work? Sachs pays surprisingly little attention to the history of aid approaches and results.... Spending $2.3 trillion (measured in today's dollars) in aid over the past five decades has left the most aid-intensive regions, like Africa, wallowing in continued stagnation; it's fair to say this approach has not been a great success. (By the way, utopian social engineering does not just fail for the left; in Iraq, it's not working too well now for the right either.)

Meanwhile, some piecemeal interventions have brought success. Vaccination campaigns, oral rehydration therapy to prevent diarrhea and other aid-financed health programs have likely contributed to a fall in infant mortality in every region, including Africa. Aid projects have probably helped increase access to primary and secondary education, clean water and sanitation. Perhaps it is also easier to hold aid agencies accountable for results in these tangible areas.

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