July 20, 2014

Review Corner

A rare early dissenter was the Hungarian-British economist Peter Bauer, who four decades ago presciently predicted the failure of planning "development" through foreign aid. The fallacy is to assume that because I have studied and lived in a society that somehow wound up with prosperity and peace, I know enough to plan for other societies to have prosperity and peace. As my friend April once said, this is like thinking the racehorses can be put in charge of building the racetracks.
William Easterly won a well-deserved Hayek Book Award from the Manhattan Institute for The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good. The title and excerpt above set the book up pretty well. We're constantly told "twelve cents' malaria vaccine can save a child's life;" Easterly has the temerity to point out that -- after $2.4 Trillion of foreign aid -- they still have not provided that 0.12 dose. There clearly going to need Three Trillion!

The other giveaway to the book's content is the Hayek Prize. It's all planners and plans and ten year development strategies. Again, Bullwinkle? That trick never works. Seriously, none of the wealthy countries got that way because of a development plan; they got there through individual rights, incremental improvement, and Hayekian spontaneous order. All of these are impeded by the benevolence of the Gates Foundation, Oxfam, Save the Children, UK's DFID, USAID, and the UN.

The title of course alludes to Kipling. And the subtext of this book is that all the aid workers and donors (and Live 8 viewers) are aghast to share a species with the likes of Kipling and Macaulay with their patronizing and blatantly racist Colonialism.

Cameroonian lawyer and journalist Jean-Claude Shanda Tonme protested in a July 2005 New York Times Op-Ed column about the Live 8 concert organizers that "they still believe us to be like children that they must save," with "their willingness to propose solutions on our behalf."

The common and oft-repeated theme from Kipling's buddies in India in the 1890's to The Rockefeller Foundation in China in the 1930's to The Gates Foundation in Africa in the '00's is "The Blank Slate." What's a few hundred or thousand years of history, local culture and tribal influence? We're going to teach these coolies what works. And yet, time after time it does not.

The author is not a right winger or radical libertarian, though he accepts the superiority of Hayek's bottom-up versus experts' top-down solutions. But like James Tooley's The Beautiful Tree [Review Corner] he starts out as an idealist young man out to save the world. In Easterly's case it is multi-generational.

The bungalow has only one bedroom; the rest of us make do with sofas or chairs pushed together. We are skittish after sighting a few insects and even bats in the bungalow. We go to sleep anyway, to the rhythms of drums in nearby villages and surf on the nearby coast. My father is a biology professor at the University College of Cape Coast, Ghana, part of the American program to lend knowledge to the development of Africa. We are a family of five from Bowling Green, Ohio. We are white people and we have come to save you. I am twelve years old.

Nor has he abandoned hope for aid or helping -- just the methods generally employed and the mistakes frequently made.
The quest for helping the poor gets more complex the more you study it, but please donít give up! There is hope once you give up the Plannerís ambition of universally imposing a free market from the top down. I point out in this chapter some of the universal problems with markets for poor countries, but the solutions are as varied as the countries and their complex histories.

When I was shopping for this book in the Kindle Store, I was not certain whether this one or his new "Tyranny of Experts" was the Hayek Prize winner. I got the sample for both and both looked good. After finishing this, I immediately bought "Tyranny of Experts" and am halfway through it. It develops similar themes and is also quite good. Forgive me if I conflate points and anecdotes between the two. Both whack the top down aid agencies pretty severely. Both criticize bad governments in the target countries and the ill-effects of aid to prop them up and fund them.
It may be true that poor-country governments are bad, and it may be just as true that Western attempts to change them have been fruitless. Continuing my subliminal quest for the most politically unappealing truths, this chapter considers what to do if both statements are true.
The Achilles' heel is that any government that is powerful enough to protect citizens against predators is also powerful enough to be a predator itself. There is an old Latin saying that goes, "Quis custodiet ipsos custodes?"--which translates freely as "Why would you trust a government official any more than you would a shoplifting serial killer?"
Today's system of foreign aid coddles (and probably worsens) bad governments. The long-standing dictator in Cameroon, Paul Biya, gets 41 percent of his government revenue from foreign aid. Under current proposals to sharply increase aid to Africa, that figure would increase to 55 percent.84

And yet, like Colorado Schools the solution is always more money.

His newer book better develops the similarity with "Nation Building." I can't laugh at the follies of Bono and Bill and Melinda without accepting that much of the Neoconservative agenda I supported last decade was built on the same faulty premise -- there wasn't a lot of Hayek in the Afghan and Iraqi rebuilding efforts.

If it were not for the U.S. Army trying to promote economic development, it would seem presumptuous for me as an economist to comment on military interventions. Yet even without recent rhetoric, military intervention is too perfect an example of what this book argues you should not do--have the West operate on other societies with virtually no feedback or accountability.

IMF and USAID money to bad guys was a weapon and blunt foreign policy instrument through The Cold War and now the War on Terror.
In one of the most bizarre episodes of the cold war, the Reagan administration sponsored an organization called Democratic International, which brought together the Contras in Nicaragua, UNITA in Angola, the Islamic mujahedin in Afghanistan, and anti-government rebels in Cambodia.36
Reagan said of the Democratic International in 1988: "there is something in our spirit and history that makes us say these are our own battles and that those who resist are our brothers and sisters." Savimbi was to democracy what Paris Hilton is to chastity.

Whether the invader is the US Army or the Bill and Melinda Gates Foundation, the occupied are pawns. Easterly returns to the theme of "Searchers" who solve a specific problem in an entrepreneurial manner, versus the "Planners" who come in with a blank slate and ideas to remake the whole society.
The sad part is the poor have had so little power to hold agencies accountable that the aid agencies have not had enough incentive to find out what works and what the poor actually want. The most important suggestion is to search for small improvements, then brutally scrutinize and test whether the poor got what they wanted and were better off, and then repeat the process.

Five stars. Like my excursion, I am hard pressed to recommend one book over the other. They are both very good. [UPDATE: Buy The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor But be warned: you may want to go back and read this one....]

Review Corner Posted by John Kranz at July 20, 2014 9:46 AM
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