August 3, 2014

Review Corner

We have reached another key moment in this book. Today's emphasis on material development --focusing on "what must we do to end global poverty?" while neglecting the unequal rights for blacks and whites and the unequal rights in the West and the Rest--goes back to this moment and other similar moments in the history of the development idea. Development at moments like this accepted the bargain of the autocrat. The autocrats and their expert advisers asked us to give up our concerns about rights in return for a promise by autocrats to alleviate poverty faster than free societies would.
William Easterly's "The White Man's Burden" received a glowing, five star Review Corner a couple weeks ago. To set forward The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor, I will need to bestow a well-deserved Editor's Choice award.

Similar to Taleb's Antifragility and Black Swan, the newer book is a more general case that includes the earlier work. White Man's Burden describes the benefits of Hayekian, bottom up ("searchers" to Easterly) development solutions versus top-down ("planners.") Tyranny of Experts continues the Hayek and adds some Adam Smith to suggest that The West grew prosperous by respecting individual property rights, but that its development plans to lift up The Rest never include rights. Easterly asks about "the debate that never happened," citing prominent experts who respected rights, the many who did not, and why -- without debate or examination -- the authoritarian plans were accepted.

This section of the book (Chapters Three through Five) seeks to understand why and how the illiberal version of development had already defeated the liberal version by January 20, 1949. Our journey will take us from the early years in China to crucial years during and immediately after World War II in West Africa to the final triumph of official development in Colombia in 1948 through 1951.

From my fanboy prose and serial allusions to Hayek and Smith, you'd be forgiven for inferring Easterly as a champion of free markets. He saves plenty of criticism for benevolent autocrats who seek to impose markets. These top down planners of bottom-up solutions can be just as insensitive to rights and to the target people's history. It can be just another "blank slate" solution to recreate a society in the air-conditioned offices of a think-tank. At the same time, ThreeSourcers will find little to disagree with; the elevation of rights over markets does not fall harshly on 3src ears.

The entire work is well crafted, tying different times, places, and plans to a common theme of a blank-slate creation of society, and showing that the different motives of racism, national interest, and misplaced benevolence result in the same, rights-depriving, patronizing, authoritarian control. Development plans use the passive voice exclusively. "Standards will be raised," "production will be coordinated" &c. This allows them to omit the state as controller and enforcer.

[Dr. T.D.] Fong's development plan would appeal to the authoritarian Chiang Kai-shek. "Rationalization" of an industry sounds apolitical. Choosing conscious direction over spontaneous solutions does not say who is doing the conscious directing. Yet in practice, there was only one possibility --the national state-- which would need a lot of power to achieve comprehensive economic control. This sounded like a great approach to an aspiring autocrat like Chiang.
Fong in his new position again highlighted the "need for centralized, coordinated economic planning and control." His models for development in the late 1930s were "Germany and Soviet Russia," which "have attempted industrialization in a new manner which China . . . may simulate with profit." At the time, Fong could not have fully anticipated the awful realities we now know characterized his two models.
Gunnar Myrdal in 1955 cited a 1953 ECAFE Survey written by Fong in support of Myrdal's position that "the state will almost inevitably have to take the initiative." Fong had won the argument for authoritarian development on China. He never commented on how Mao's even more extreme authoritarianism had exiled Fong from his home country.

Got to break some eggs to make Egg Foo Yung, I suppose...
Authoritarian nationalism contributed to two world wars, which left it discredited in the rich countries. Yet authoritarian nationalism got a new lease on life from development in the poor countries. The rich countries' emphasis on the nation as the sole object of development efforts, born out of their own foreign policy needs as discussed in Part Two, coincided with national authorities' efforts to make national identity trump all other identities.

If White Man's Burden is a great intro to Hayek (and it is), Tyranny of Experts is as good an introduction to Adam Smith, the invisible hand, and the advantages of specialization
Suppose Roger Federer was too busy assembling his own iPad to play tennis, Beyoncé was too busy playing tennis for her own family to sing and dance, while Steve Jobs was too busy singing and dancing for his friends to make iPads. I think we are all grateful these three could instead specialize in their best area, what is usually called their "comparative advantage."

Easterly describes the invisible hand as a huge network of problem solvers which all free people can access. The founder of Hyundai was born on a small Korean farm with poor soil and poor irrigation. He found problem solvers who grew food for his family and he solved others' problems by using his exceptional mechanical skills to repair their automobiles.
Suppose I walked out of a building into a pouring rain and realized I had no umbrella, I then asked a stranger to give me his umbrella, which he quickly agreed to give me. Could this really happen? Surely the stranger would likely not agree: he is more likely to be surprised and offended at my bizarre behavior. Yet this did happen to me in downtown New York, and a stranger did give me his umbrella. The only additional details necessary to make it comprehensible is that I gave the stranger $5, and he was a street merchant. The market enlists a vast array of strangers in solving our individual problems.
Let's see how often these basic principles of economics are neglected in development today, starting with the idea beloved by Bill Gates, Jim Yong Kim, and the United Nations Millennium Development Goals: setting goals and then finding evidence-based ways to reach them.

Economics, Development and History. Yet, Easterly always returns to the foundation of rights. Deidre McClosky -- call your office:
But the population story is of no help in explaining why the Western edge of Eurasia would pull ahead beginning in the late eighteenth century and leave the Eastern edge far behind. Why did the West invent the steam engine and railroad, and not the East? We need something else. That something else is already on the table: the Western idea of the individual that emerged from the Enlightenment. That miraculous year 1776 is again the key symbol: Jefferson declares all men equal, Adam Smith declares all men free to choose, and James Watt installs his first steam engine. There are two key mechanisms by which the new Western idea of the individual helped innovation: the challenge to authority and the private return to innovation.

There is a virally popular video on Facebook these days which shows an African cocoa farmer tasting chocolate for the first time. This brings to mind a superb story of African farmers' discovering value and comparative advantage in growing cocoa -- not because of, but in spite of top-down autocracy.
Even after local farmers had introduced cocoa into the Gold Coast (Ghana), the British almost succeeded in killing it. The colonial government had an incentive to make the Gold Coast pay off for the colonizers. They thought cocoa should be grown on "modern" plantations on a large scale. They could not believe that primitive local farmers had already found the most efficient farm size. After six different attempts at plantations failed, with large losses for the colonial budget, colonial officials finally gave up. What the Akwapim knew, and the British did not, was that small holders could mix cocoa with food crops, making small plots preferable.

Another great device of the book is its historic look at Greene Street. A single block in what is now the SoHo section of Manhattan is traced from colonial times to the present. Farmland to sweatshops to bordello row to factories to skid row to art district to gentrified urban lofts. All the changes are Hayekian -- it miraculously escapes Robert Moses Development Aid -- I mean Urban renewal -- which would have precluded its modern successes.
Urban planning in the United States marked the last manifestation of the most enthusiastic New Dealers' wish to see experts plan the US economy. It also exemplified faith in technocrats who were appointed public officials, like Robert Moses in New York, with few checks on their power. The US Housing Act of 1949 endorsing "slum clearance" would give a technocrat like Moses the power to tear down whole neighborhoods and replace them with public housing. But the technocrat Moses would face some fierce democrats on Greene Street.

The 1946 plan recommended all of what is now SoHo for "clearance and redevelopment." In a phrase that sounds familiar from development, the plan said "the depreciation is so widespread that improvement cannot take place except by concerted action." The planners suggested coercion, using eminent domain "to prevent obstruction through holdouts."

But the lovingly documented changes on Greene and the economic and cultural forces which drove them are fascinating. I'd call it the best real-world example of spontaneous order. [Spoiler Alert:] The factories that escaped Moses' bulldozers were perfect for the art studios of Pollock, Warhol and contemporaries who needed to create and display exceptionally large paintings and sculptures. A loft the size of le condo d"amour on Greene Street sells for ~$2.5 million today.
The problem with technocrats is not only that they make the wrong predictions. Their even bigger problem is their confidence in their own predictions. In a seemingly unrelated event in 1947, the artist Jackson Pollock painted Cathedral. It was one of the first works in what would be a successful New York-based art movement called Abstract Expressionism. For the Greene Street block, what was important about Pollock's painting was not its content but its measurements: six feet by three feet. Large canvasses of this kind were common in the new movement, and both the artists and galleries had trouble displaying them in Manhattan's cramped spaces.

I weep to not share additional quotes (I might dribble them out this week as QOTDs) but we must all get to other things. This is a magnificent book. I happily bequeath five stars and an Editor's Choice Award upon it. Run, do not walk to Amazon to buy it.

Review Corner Posted by John Kranz at August 3, 2014 10:32 AM

The Ivory Coast coca story is an interesting one.

Posted by: T. Greer at August 3, 2014 5:32 PM | What do you think? [1]