William Easterly: Africa's Poverty Trap

William Easterly has spent much of his career applying economic analysis to very poor countries:

Africa's Poverty Trap, by William R. Easterly, Commentary, WSJ: There is a sad law I have noticed in my economics career: the poorer the country, the poorer the economic analysis applied to it. Sub-Saharan Africa, which this month marks the 50th anniversary of its first nation to gain independence, Ghana, bears this out.

There has been progress in many areas over the last 50 years -- ... yet the same poor economics on sale to Ghana in 1957 are still there today. Economists involved in Africa then and now undervalued free markets, instead coming up with one of the worst ideas ever: state direction by the states least able to direct.

African governments are not the only ones that are bad, but they have ranked low for decades on most international comparisons of corruption, state failure, red tape, lawlessness and dictatorship. Nor is recognizing such bad government "racist"... Instead, corrupt and mismanaged governments ... reflect the unhappy way in which colonizers artificially created most nations, often combining antagonistic ethnicities. Anyway, the results of statist economics by bad states was a near-zero rise in GDP per capita for Ghana, and the same for the average African nation, over the last 50 years.

Why was state intervention considered crucial in 1957? Africa was thought to be in a "poverty trap," since the poor could not save enough to finance investment necessary to growth. Free markets could not get you out of poverty. The response was state-led, aid-financed investment. Alas, these ideas had already failed the laugh test... The U.S. in 1776 was at the same level as Africa today, yet it escaped the poverty trap. The same was also true for the history of Western Europe, Australia, Japan, New Zealand and Latin America. All of these escapes from poverty happened without a state-led, aid-financed "Big Push."

In the ensuing 50 years, there have been plenty more examples of poor countries which grew rapidly without much aid -- China and India (who each receive around half a percent of income in foreign aid) being the most famous recent examples. Meanwhile, aid amounted to 14% of total income year in and year out in the average African country since independence.

Despite these reality checks, blockbuster reports over the last two years by the U.N. Millennium Project (led by Jeffrey Sachs), Mr. Sachs again in his book "The End of Poverty," the U.N. Development Program (UNDP), the Tony Blair Commission for Africa, and the U.N. Conference on Trade and Development (Unctad) have all reached what the UNDP called "a consensus on development": Today Africa needs another Big Push. Do they really think nobody is paying attention?

Africa's poverty trap is well covered in the media, since it features such economists as Angelina Jolie, Madonna, Bono and Brad Pitt. But even Bill Gates ... expressed indifference to Africa's stagnant GDP, since "you can't eat GDP." Mr. Gates apparently missed the economics class that listed the components of GDP, such as food.

The World Bank and the International Monetary Fund have good economists who have criticized state intervention. Under the pressure of anti-market activists, alas, they have soft-pedaled these views lately in favor of ... U.N.-led Millennium Development Goals...

The cowed IMF and the World Bank never mention the words "free market" in thousands of pages devoted to ending poverty. ... World Bank economists are so scared of offending anyone on Africa that they recite tautologies. The press release describing the findings of the 2006 World Bank report "Challenges of African Growth" announces: the "single most important reason" for Africa's "lagging position in eradicating poverty" ... is "Africa's slow and erratic growth." The next World Bank report may reveal that half a dozen beers has been identified as the single most important reason for a six-pack.

Today Unctad (in its 2006 "Big Push" report) still offers to make possible government "infant-industry policies" for "small, fragmented economies" by setting up a regional market, presumably so Burkina Faso and Niger can help absorb the potential output of the Togolese automobile industry.

Unctad lacks everything but chutzpah: All aid to Africa, it said, should be moved into a new U.N. Development Fund for Africa, to which Unctad helpfully offered its "in-house experience"... Unctad will thus permit the economics of Africa to at last "escape from ideological biases," so we can finally understand "why economic activity should not be left entirely to market forces."

The free market is no overnight panacea; it is just the gradual engine that ends poverty. African entrepreneurs have shown what they are capable of. They have, for example, launched the world's fastest growing cell phone industry to replace the moribund state landlines. What a tragedy, therefore, that aid agencies have foisted the poorest economics in the world on the poorest people in the world for 50 years. The hopeful sign is that many independent Africans themselves are increasingly learning the economics of how to get rich, rather than of how to stay poor.

With that attitude you almost want him to be wrong. There seems to be little love lost between Sachs and Easterly. Right or not, Sachs is clearly well-intentioned.

A couple of comments, or questions rather about his examples in support of the free market approach to development. He says "In the ensuing 50 years, there have been plenty more examples of poor countries which grew rapidly without much aid -- China and India ... being the most famous recent examples." Are these examples of free markets at work once government stepped aside, or are they cases where the state has provided substantial direction as the big push to get the ball rolling? Should we wonder why he doesn't mention countries where the strict free-market approach has failed and paved the way for populist alternatives?

Nobody knows for sure what the secret is to escaping poverty, and the answer may lie somewhere between the strict free-market and the heavy-handed state intervention approaches. But whatever the answer, given what we know presently, the case for a strict free-market approach is not as clear as Easterly implies.

Comments

[calmo]

William (the wit) Easterly exercises some (1/2) of that here:The next World Bank report may reveal that half a dozen beers has been identified as the single most important reason for a six-pack. and to what effect?

And what would Mr Easterly's report reveal?
This nugget which is no more than the bark of an ideologue?
The free market is no overnight panacea; it is just the gradual engine that ends poverty. or perhaps this one, demonstrating his second hand Africa Experience? Africa's poverty trap is well covered in the media, since it features such economists (especially compared to W. Easterly) as Angelina Jolie, Madonna, Bono and Brad Pitt. But even Bill Gates ... expressed indifference to Africa's stagnant GDP, since "you can't eat GDP." Mr. Gates apparently missed the economics class that listed the components of GDP, such as food. (But did Easterly take any classes on Africa, is what we want desperately to know at this point.)To this effect:
This is not about Africa, nor even about "free market" ideology. It's an illustration of a windbag looking for an audience. Even Easterly cannot stand how thin his soup is and prefers to humor his fellow half wit WSJ audience.

[anne]

Imagine such rubbish being printed on the Wall Street Journal editorial page; I am shocked, shocked. William Esterly knows nothing of African histories or African cultures, has only disdain for African peoples and those who wish to assist them, and does all that is possible to turn Americans away from assistance to Africa. Yuch.

[anne]

Thank you, Calmo. Notice how increasingly despicable Easterly's attacks on Africans and those who care for and symbolize care for Africans have become.

"Africa's poverty trap is well covered in the media, since it features such economists as Angelina Jolie, Madonna, Bono and Brad Pitt. But even Bill Gates ... expressed indifference to Africa's stagnant GDP, since 'you can't eat GDP.'"

This rubbish from a person who would destroy all that others are building in Africa; a person who has discovered lunatic phantoms of China and India (duh) which would otherwise be only sneered at.

[Sarel]

Maybe Mr Easterly should come visit Africa to really understand how it works, rather than sit 8000km away thinking he knows how it works. At the other famours "economists" he sites have visited some parts of Africa previously. Africa is the most diverse continent on earth and generalising it to a single entity / unit is the gravest mistake anyone can make. Each economic problem is unique and requires a unique solution, not a "one size fits all" solution that the IMF and World Bank so often preaches. It would be like saying all medical problems could be fixed by just simply giving the patient painkillers.

There is too little information / theories in economics on how to transform / translate individual wealth into community wealth and national wealth. That way we build inclusive economies from the ground up, and not the top-down approach propagated by outside agents.

[Martin]

Mark,

Of course the picture is never as clear as ideologues of whatever hue make out - in medio stat virtus - but there is a grain of truth in Easterly's arguments.

India and China are most certainly not models of the free market - Indian citizenship is reserved for those of Indian origin; India ruthlessly protects its steel industry while demanding the right to buy other nations' steelmakers; the gap between India's rich and poor is widening, particularly in relation to healthcare; China demands that Western access to its labour pool (the only thing it has going for it) be bought with the transfer of IP rights to Chinese subsidiaries, etc.

However whatever growth both have achieved could not have occurred without significant changes in policy.

What would in all likelihood be better for Africa would be Ricardian free trade, rather than the disgusting managerial diktats of the vile WTO (where the WTO stands is shown up by the fact that its first chairman, the Irishman Peter Sutherland, hopped out of that nice wee job right into the chairmanships of British Petroleum and Goldman Sachs International; he's now also a financial adviser to the Pope - as some Irish say, God bless all here).

If Ghana were able to trade freely with, say, the UK, or France, or the USA on mutually acceptable terms and along Ricardian lines, and Nnot be lulled by the false promise of prosperity offered by the policy, not a process, of the global labour arbitrage called 'globalisation', then it is not at all beyond the bounds of possibility to expect that African living standards would rise; and the common desire to protect those living standards would in turn raise the standards of African government.

What they should not do is go for the easy way out of 'inward investment', giving corpororate welfare to Dell/Procter & Gamble/Whoever to open a factory only for the dog & pony show to move on to the next great cheap labour pool when the tax breaks run out. This model of economic development does not work. In the 1980's and 1990's it was tested to destruction here in Scotland.

The same pattern is now duplicating itself in Ireland.

Of course, as Africans' living standards improve they might want to do stuff like burn fossil fuels - and when we get to that stage one would see just how much the Liberal Left really cares about African poverty, or whether they're more interested in seeing no mangrove swamp left behind.

[San]

Martin

What is Indian origin!? You can be mongolian and of Indian origin. That said, India is certainly no model of freemarket, however the successful parts of the Indian economy is.

[Martin]

San,

"The Constitution of India does not allow holding Indian citizenship and citizenship of a foreign country simultaneously. Based on the recommendation of the High Level committee on Indian Diaspora, the Government of India decided to grant Overseas Citizenship of India (OCI) commonly known as ‘Dual Citizenship’. Persons of Indian Origin (PIOs) of certain category, as has been specified in the Brochure on overseas citizenship of India who migrated from India and acquired citizenship of a foreign country other than Pakistan and Bangladesh, are eligible for grant of OCI as long as their home countries allow dual citizenship in some form or the other under their local laws."

http://www.indianembassy.org/newsite/oci.asp

"Article 5. At the commencement of this Constitution every person who has his domicile in the territory of India; and –
a) who was born in the territory of India; or
(b) either of whose parents was born in the territory of India; or
(c) who has been ordinarily resident in the territory of India for not less than five years immediately preceding such commencement, shall be a citizen of India."

Okie dokie, where are the numbers on citizenship grants to foreigners?

"Article 8. Notwithstanding anything in article 5, any person who or either of whose parents or any of whose grand-parents was born in India as defined in the Government of India Act, 1935 (as originally enacted), and who is ordinarily residing in any country outside India as so defined shall be deemed to be a citizen of India if he has been registered as a citizen of India by the diplomatic or consular representative of India in the country where he is for the time being residing on an application made by him therfor to such diplomatic or consular representative, where before or after the commencement of this Constitution, in the form and manner prescribed by the Government of the Dominion of India or the Government of India." -

Extracts from the Consitution of India -

http://mha.nic.in/citizenship/const_india.htm

"The government of India has granted citizenship to one-hundred-and-forty-nine Pakistani settlers in the western Indian state of Rajasthan after almost fifteen years of petitioning.

The leader of a settlers' organisation , Hindu Singh Sodha, told the BBC they were part of a group of four-thousand people who have been residing in the border districts of Jaisalmer, Barmer, Bikaner and Ganganagar without the Indian citizenship status since their migration from the southern Pakistani province of Sindh following the 1965 Indo-Pakistan war.

Mr Sodha described the government's decision as a positive sign. An estimated fifty-thousand people from Pakistan crossed over into Rajasthan soon after the end of the 1971 Indo-Pakistan war.

Most of them were immediately awarded citizenship in keeping with a clause of the Shimla Agreement of 1972. "

From BBC News, June 8 2000 -

http://news.bbc.co.uk/1/hi/world/south_asia/783293.stm

"Citizenship of India by naturalisation can be acquired by a foreigner who has resided in India for twelve years. The applicant must have lived a total of 11 years in India in a period of 14 years, and must have spent in India the past 12 months preceding the application."

http://en.wikipedia.org/wiki/Indian_nationality_law#Citizenship_by_Naturalisation

Again, it would be interesting to see the numbers. It hardly seems that India has migrant friendly laws.

"Any person born in India on or after 26 January 1950 but prior to the commencement of the 1986 Act on 1 July 1987 was a citizen of India by birth. A person born in India on or after 1 July 1987 was a citizen of India if either parent was a citizen of India at the time of the birth. Those born in India on or after 3 December 2004 are considered citizens of India only if both of their parents are citizens of India or if one parent is a citizen of India and the other is not an illegal migrant at the time of their birth."

http://en.wikipedia.org/wiki/Indian_nationality_law#Citizenship_by_Birth

What, no birthright citizenship?

How backward...

[Lafayette]

Sarel: "Africa is the most diverse continent on earth and generalising it to a single entity / unit is the gravest mistake anyone can make."

That's what YOU think.

Africa has GREAT commonality and despite its large cultural diversity, poverty is always the common note.

And, I will give you another one. African leadership that did NOTHING for its people whilst skimming the money and putting it from whence it came, Europe.

Africa's problem is the same it was under colonial rule. The influence of tribalism in national affairs and the inability of tribal leaders to put aside their "winner takes all" strategy to sit together and govern with a common cause.

Africa's lack of growth is justified by its inept leadership. Just look at South Africa, the exception to the rule - and Zimbabwe, the personification of the rule. Both had similar economic parameters before both became independent. South Africa is flourishing and Zimbabwe is a living hell.

It all depends upon the leadership.

[Isabel]

"India and China are most certainly not models of the free market - Indian citizenship is reserved for those of Indian origin"

Some free market champions, like the USA, do even better and extend that requirement to airlines.

And why should jus sanguinis be more backward than jus soli?
http://en.wikipedia.org/wiki/Jus_soli

[Martin]

"Some countries are restricting lex soli by requiring that at least one of the child's parents be a national of the state in question at the child's birth, or a legal permanent resident of the territory of the state in question at the child's birth, or that the child be a foundling found on the territory of the state in question. The primary reason for imposing this requirement is to limit or prevent people from travelling to a country with the specific intent of gaining citizenship for a child. The 27th amendment to the constitution of the Republic of Ireland was passed by referendum in 2004 for this purpose."

http://en.wikipedia.org/wiki/Jus_soli#Blurred_lines_between_jus_soli_and_jus_sanguinis

O dear. Another lot not quite with the program.

How backward...

Soory, Isabel, when one country is demanding migration concessions from countries where citizenship is easy to obtain (like the UK), while holding on to its own like gold dust, that's backward -

"There are close cultural and economic ties between the The United Kingdom and India. However, the two Countries are at odds over immigration. The Indian Finance Minister, Palaniappan Chidambaram, has warned that Britain would be the "loser" if immigration laws are not relaxed to make it easier for Indians to work in the UK.

Since 5 December 2006 it has become more difficult for many overseas workers to obtain the coveted HSMP visa in the UK. This is a sore point between the two nations at a time when both are looking at forging closer economic ties. However, it should be noted that there is no quota on the number of skilled professionals allowed into the UK under the HSMP or work permit scheme.

Recent comments during a trip to India from Gordon Brown, UK's Chancellor of the Exchequer, about raising caps on foreign investment, were considered a bit absurd by some business commentators because his government had just made sweeping changes to the Highly Skilled Migrant Programme (HSMP), affecting several thousand Indians. Indians are the largest national group affected by the changes.

"Many knowledge workers could go abroad for three months, six months or a year and add to our exports, but they are constrained by a very restrictive visa regime and local tax laws," said Mr. Chidambaram.

"If a qualified professional from India is denied entry and that place is taken by a less qualified person from, say, Eastern Europe, surely the UK is the loser?"

Mr. Chidambaram's comment seems directed at various European Union policies to favor professionals from within the EU. One of the main aims of the EU is to make it possible for an EU citizen to work freely in any EU Country. Most EU Citizens have been able to benefit from the free movement provisions for many years.

A very similar line of reasoning is regularly put forth regarding the H-1B visa in the United States. Both the U.S. and the UK, along with all the most advanced western nations such as Canada, Australia and New Zealand, are aggressively competing for the most educated and skilled migrant workers from around the globe, regardless of country of origin. However, compared to employers in the other Countries, it is quite difficult for US employers to obtain a visa to employ skilled professionals in the US.

Mr. Chidambaram, 61, was educated at Harvard Business School and represents himself as a strong supporter of free trade."

http://www.ukimmigration.com/news/2007_01_30/uk/india_unhappy_about_immigration_policy.htm

[Lafayette]

Martin: "Both the U.S. and the UK, along with all the most advanced western nations such as Canada, Australia and New Zealand, are aggressively competing for the most educated and skilled migrant workers from around the globe"

The rightist candidate for the French presidency has had the audacity to suggest that immigration and something he calls "national identity" should be under the supervision of a national ministry. Wow.

He further suggested that immigration should be selected and not endured. Wow, again.

His concern is not for "educated immigrants", but the kind in the boats coming from north and east Africa. The best way to stop these immigrants is to give them a reason to stay home, that is, a job. This is unlikely to happen anytime in the foreseen future, given the population growth of Africa.

Indians want jobs in the UK, Africans want jobs in France, Romanians want jobs anywhere they can get one and the Polish plumber is detested in France (by French plumbers, obviously). So, what to do?

Nobody has the foggiest notion. There is no way in hell we are going to stop the hordes of economic immigrants. There are a few ways to diminish it, however. The first is to recruit those immigrants that are necessary in the country of origin. The second one is to prosecute those who hire illegal immigrants (and, typically, work them at slave wages).

The third one is the that which we don't have a handle on. World economic growth that keeps these people in their place of origin. Immigrants interviewed have all said the same thing - they are economic immigrants looking for a job. Some are even migrants, meaning they come and go between Europe and Africa, depending upon the season. Many go home in winter, when Europe gets too cold.

I can't buy Sachs' simplistic state-to-state aid. Been there, done that, doesn't work. But, I can support the concept of institutionalizing micro-credits to get the money where it is needed most.

Finally, it is important that the Doha round conclude with a lowering of American/European agricultural subventions. When that stops, exports will not arrive in Africa at a price that not even the local farmers can compete with.

Africa, parts of which has very fertile soil, has been begging for this for decades. K-street, of course, is not listening ....

[Isabel]

You are mixing up work permits or visas and citizenship, aren't you?

[Isabel]

Totally irrelevant for the main discussion, but here is an interesting article about different traditions on access to citizenship (I wouldn't call anything backward or forward, it is, as usual, a question of national interests):

http://canada.metropolis.net/events/metropolis_presents/EU_speakers/weil2_e.htm

[Lafayette]

Martin: "western nations ... are aggressively competing for the most educated and skilled migrant workers from around the globe"

And, some are investing in the countries of immigrant origin. A very large center is going up in Casablanca (Morocco) that will be state of the art, housing Moroccan IT specialists. Yes, this is dislocation of French IT jobs.

But, the demand is so great at the moment, that it should not harm local employment prospects. In fact, in transitioning from the Industrial Age to the Information Age, we should remember that the youths of Africa, who are educated, are a rich source of competence.

Immigrants immigrate to find a better life, not because they are exhilarated by the challenge of uprooting themselves from house and home.

[bakho]

1. Lack of infrastructure. 2. Knowledge deficit. 3. Distribution of resources. 4. Lack of comparative advantage. 5. Lack of resources.

These are the primary barriers to economic growth in most areas including many countries in Africa. There are multiple reasons for the lack of improvement in 1-4. Improvements require appropriate technology and distribution of resources in a way that promotes growth.

The US industrialized because government found ways to provvide the resources to build canals, railroads, communications, roads, etc. None of this was done by the private sector alone. Our infrastructure was and is now and probably always will be provided or subsidized by government.

[Lafayette]

Isabel : "You are mixing up work permits or visas and citizenship, aren't you?"

Given the subject title of the thread, I think not.

Poverty provokes immigration, which leads to citizenship (not always, but often).

[anne]

Yes; the comments of Africa's generalized needs are sensible but, yes, Africa is vastly diverse and history and culture make differences everywhere for optimism and pessimism. Remember, Ghana was first to shed colonial rule and that only in 1957 and there is much to be shed still.

[anne]

http://www.nytimes.com/2005/12/27/international/africa/27ghana.html?ex=1293339600&en=2dbae1fae37dfea6&ei=5090&partner=rssuserland&emc=rss

December 27, 2005

Ghana's Uneasy Embrace of Slavery's Diaspora
By LYDIA POLGREEN

CAPE COAST, Ghana - For centuries, Africans walked through the infamous "door of no return" at Cape Coast castle directly into slave ships, never to set foot in their homelands again. These days, the portal of this massive fort so central to one of history's greatest crimes has a new name, hung on a sign leading back in from the roaring Atlantic Ocean: "The door of return."

Ghana, through whose ports millions of Africans passed on their way to plantations in the United States, Latin America and the Caribbean, wants its descendants to come back.

Taking Israel as its model, Ghana hopes to persuade the descendants of enslaved Africans to think of Africa as their homeland - to visit, invest, send their children to be educated and even retire here.

"We want Africans everywhere, no matter where they live or how they got there, to see Ghana as their gateway home," J. Otanka Obetsebi-Lamptey, the tourism minister, said on a recent day. "We hope we can help bring the African family back together again."

In many ways it is a quixotic goal. Ghana is doing well by West African standards - with steady economic growth, a stable, democratic government and broad support from the West, making it a favored place for wealthy countries to give aid.

But it remains a very poor, struggling country where a third of the population lives on less than a dollar a day, life expectancy tops out at 59 and basic services like electricity and water are sometimes scarce.

Nevertheless, thousands of African-Americans already live here at least part of the year, said Valerie Papaya Mann, president of the African American Association of Ghana.

To encourage still more to come, or at least visit, Ghana plans to offer a special lifetime visa for members of the diaspora and will relax citizenship requirements so that descendants of slaves can receive Ghanaian passports. The government is also starting an advertising campaign to persuade Ghanaians to treat African-Americans more like long-lost relatives than as rich tourists. That is harder than it sounds.

Many African-Americans who visit Africa are unsettled to find that Africans treat them - even refer to them - the same way as white tourists. The term "obruni," or "white foreigner," is applied regardless of skin color.

To African-Americans who come here seeking their roots, the term is a sign of the chasm between Africans and African-Americans. Though they share a legacy, they experience it entirely differently....

[anne]

http://www.nytimes.com/2007/03/18/magazine/18WWLNlede.t.html?ex=1331870400&en=f0dad9f67ff50a72&ei=5090&partner=rssuserland&emc=rss

March 18, 2007

A Slow Emancipation
By KWAME ANTHONY APPIAH

Once, when I was a child in Kumasi, Ghana, I asked my father, in a room full of people, if one of the women there was really my aunt. She lived in one of the family houses, and I'd always called her auntie. In memory, I see her lowering her eyes as my father brushed the question aside, angrily. Later, when we were alone, he told me that one must never inquire after people's ancestry in public. There are many Ashanti proverbs about this. One says simply, Too much revealing of origins spoils a town. And here's why my father changed the subject: my "auntie" was, as everyone else in the room would have known, the descendant of a family slave.

My father was trying to avoid embarrassing her, although I don't think he regarded her ancestry as an embarrassment himself. Unlike her ancestors, she could not be sold; she could not be separated against her will from her children; she was free to work wherever she could. Yet in the eyes of the community — and in her own eyes — she was of lower status than the rest of us. If she could not find a husband to provide for her (and a prosperous husband was unlikely to marry a woman of her status), the safest place for her was with the family to which her ancestors had belonged. So she stayed.

Beginning around 1700, Kumasi was the capital of the Ashanti empire as it rose and fell. At some point in my education, I was taught that the empire had been the center of a great trading system, with roads radiating from Kumasi in every direction, connecting us with the Atlantic trading system along the coast and with the trans-Saharan trade to the north. Gold, everyone knew, was one of the commodities we exported: the empire of Ashanti covered most of what was once called the Gold Coast.

What I don't remember hearing much about was the role of the slave trade in the growth of Ashanti. More than a million slaves were sent to the Americas through the British, Danish and Dutch forts along the Gold Coast, mostly in the course of the 18th century. Next Sunday marks the 200th anniversary of the British Parliament's vote to ban the empire's North Atlantic slave trade. Following that vote, the Ashanti had to rethink the whole basis of their economy. But while the export of slaves had helped Ashanti consolidate power, it was arguably the importation of slaves from farther east — sold to the Gold Coast states by the Portuguese, starting in the 15th century — that made the empire possible in the first place. The rise of settled states in West Africa, as in much of the New World, seems often to have depended on the rise of plantation agriculture, and plantation agriculture depended on involuntary labor. Just as in the New World, moreover, the legacy of slavery has proved curiously durable. Indeed, to understand the nature of that legacy here, it helps to look at the experience of slavery on the African side of the middle passage.

When I was growing up, people used to visit us regularly from a village called Nyaduom, in the forest to the south of Kumasi. The village had belonged, I was told, to my father's family, and he inherited responsibility for it when he became the head of the family. He had the right to appoint chiefs and queen mothers for the village, and had some vague dominion over its land. A couple of hundred years ago, it turns out, an ancestor of my father's, an illustrious Ashanti general named Akroma-Ampim, had, with the permission of the king, settled the area with war captives and set up a plantation. In the slaving empire of Ashanti, as the Ghanaian historian Akosua Perbi tells us, there were different designations for different kinds of forced laborers — war captives (who could, if they were lucky, be redeemed by the payment of ransom), people held as security for their families' debts, people bought at the slave markets elsewhere and family servants with a status akin to feudal serfs — and each had a distinct status. Not all slaves were created equal. Still, to use our generalizing term, the inhabitants of Nyaduom had been slaves for generations.

And these days? ...

[robertdfeinman]

I don't know how familiar those criticizing Easterly are with his background, but you can't judge him from an op-ed. I suggest reading both his books to get a true picture of what his complaints about international aid and intervention by the IMF and World Bank are.

He has much more direct experience then people here seem to realize. Certainly his analysis of the effect of corruption on economic progress is worth considering.

Whether his proposed solutions will work or not is another question. Several countries which have had rapid economic development such as South Korea and Singapore were distinctly non-democratic during much of their growth period, but both (and now China) were still friendly to entrepreneurship. They also had protectionist policies in place which allowed local industries to grow, this has not been as true in much of Africa.

Sachs is a bit of a utopian and it is does no harm to challenge his opinions. A vigorous debate is the best way to get people to refine their positions.

[ken melvin]

Trickle down economics; what could be more Orwellian? The middle class Peter Pans somehow come first in economic development? Lord, lord, lord, what hast thou wrought? So we too become 3rd world.

[Morgan]

"Nobody knows for sure what the secret is to [nations] escaping poverty..."

I disagree - we all know the secret. It's the knowledge of how to make a profit, combined with the skills and resources to act on that knowledge, the desire to make a profit, and, crucially, the ability to keep a profit. All at the individual level. Writ millions of times over.

All of those elements are necessary, and unless the last link is there, no aid or ideology makes a shred of difference. You will never escape poverty if you can't keep your property. And in much of Africa, you can't keep anything the guys with guns want to have.

says...

talk about caught in a poverty trap

what about bill here's brain

i'd have to say

he's in his very own poverty trap

a two bit free market meme sump
to be
more exact then "fair"

-----------------

too too long
a world bank staffer

now perched
at that rookery
the nyu economics shop

a very local hanger indeed
for a second rate
flying circus
in the pay of wall street

nope
willy's
just another market crow

for ever cawing
"free free free "

[calmo]

2 whole books?!!! If he had only made a reference to those tomes instead of Bono!
He has much more direct experience then people here seem to realize. Little did we realize that he was working along side those Peace Corps workers in Niger. He was just contaminated by the format --the WSJ just made him sound like a desperate half wit in order to entertain their readership...a readership that has poverty and Africa at the very top of their priority list.
I'm sorry robert, but if he feels the need to take down Sachs, he better dress a little better than this...rather naked embarrassment.

Speaking of the Lord, ken, I do think it is close to pay day and your call shall not go unheeded.

If ever there was an occasion for a Marxist to offer his/her view of the economic development of Africa, spanking that "free market" view till it shines in the dark, this is it, no?

[paine]

morgan

"we all know the secret. It's the knowledge of how to make a profit, combined with the skills and resources to act on that knowledge, the desire to make a profit, and, crucially, the ability to keep a profit."

you're time must be money to you

why waste it here

selling pork to us hebrews

i doubt it keeps your profit rate sharp

[Lafayette]

Morgan : "and, crucially, the ability to keep a profit. All at the individual level. Writ millions of times over."

Simplistic in its simplicity, that above. You are living in a rule-based economy.

Most African nations aspire to practices of developed economies. We should help them towards developing in that direction.

But, when the rules are made by a handful of individuals, who have the guns, then your remark is totally irrelevant.

When they are ready to adopt a state of law, both observed and enforced, then we should be prepared to help them. But, not before. It's a waste of time and effort.

Why is there not more FDI going into Africa? Because, it is now a crime to "buy contracts" for anyone in America or Europe. It is not a crime in China, which is why the Chinese are all over Africa seeking mineral rights.

NB: The head of Total, one of the Seven Sisters of Oildom, is being dragged before a judge presently for having purchased a drilling contract in Iran.

[paine]

martin
are you a catholic??

says...

laff
"When they are ready to adopt a state of law, both observed and enforced, then we should be prepared to help them. But, not before. It's a waste of time and effort"

after a line like that you must put a .....sniff

[david]

Paine is the joint, here and everywhere.

Only thing I have to add is that Easterly peddles the very most crap history. It's a real problem, when your free-crowing depends on your historical understanding.

[anne]

Sorry, I filed this important article on the promise of Rwanda on the thread for Jeffrey Sachs. The reader will gain a sense of the importance of looking closely at Africa and avoiding generalization. My criticism of William Easterly amounts to criticsm of a stereotyper, when stereotyping simply will not do culturally:

http://www.nybooks.com/articles/19996

March 29, 2007

Big Gamble in Rwanda
By Stephen Kinzer - New York Review of Books

[robertdfeinman]

Calmo:
I take your glib remarks as a sign that you haven't read any of Easterly works.

Why do you wish to advertise your ignorance?

[San]

Martin

Interesting, India might not be friendly towards immigration, however millions enter the country early, mainly from Bangladesh, but also China. I actually haven't got a clue if the Tibetans that enter India (Dalai Lama being one of them) can get Indian citizenship, but they do howvere freely live in the country.

[San]

"India ruthlessly protects its steel industry while demanding the right to buy other nations' steelmakers"

Mittal lives in Amestrdam and London, his connection to the Indian government is none.

[Morgan]

Lafyette:

"But, when the rules are made by a handful of individuals, who have the guns, then your remark is totally irrelevant."

If so, then yours would appear to be irrelevant also, because our points are the same. Aid in various forms might address most of the links of the chain, but it can't lift people out of poverty if whatever they manage to accumulate goes to the guys with guns.

[Lafayette]

anon: "after a line like that you must put a .....sniff"

There is a rule that one should never negotiate with terrorists. There should be a similar rule regarding African leaders.

America ruined Africa in the Cold War effort to purchase African leaders to the West's side. Why ever should we continue that folly? It has become inbred.

If Africa is in its currently worrisome state, the developed countries are to blame to a great extent. When Africans understand that democracy and the rule of law must prevail to have FDI, then they will adopt democracy and the rule of law.

Companies, to invest, must be convinced that their investments are not open to confiscation by the whimsy of a government that wants a kick-back under the table. They don't want nephews/uncles (of politicians) on the local management hiring themselves incompetent family members.

You have to live this experience to understand how difficult it is to do business in some parts of Africa. If business cannot incite durable growth through investment, not all the books/articles authored by Sachs will have the slightest impact.

[owen p]

laff

"America ruined Africa in the Cold War effort to purchase African leaders to the West's side"

true true .... ever so true

that was the real "big push"

[anon]

see hernando de soto

[calmo]

robert, who would you say is more glib: Easterly hereAfrica's poverty trap is well covered in the media, since it features such economists as Angelina Jolie, Madonna, Bono and Brad Pitt. But even Bill Gates ... expressed indifference to Africa's stagnant GDP, since "you can't eat GDP." Mr. Gates apparently missed the economics class that listed the components of GDP, such as food.
or calmo here:2 whole books?!!! If he had only made a reference to those tomes instead of Bono!And reconsidering, I may have been infected by the illustrious Easterly and this tone, which I find repellent...not like his able critic Sen here:
http://www.foreignaffairs.org/20060301fareviewessay85214/amartya-sen/the-man-without-a-plan.html
Still, waiting for that voice that sees this issue from an ideological perspective that is not compromised by a history of vested interests.

[paine]

calmo

"Still, waiting for that voice that sees this issue from an ideological perspective that is not compromised by a history of vested interests"

"....that heart of gold"

speaking of gold
what happen to ghana's gold mines ???

[robertdfeinman]

Calmo:
You are entitled not to like Easterly's "wit", but you still haven't read his books, have you?

If you do you will find he is very critical of establishment solutions and was a thorn in the side of the World Bank when he worked there.

If he has a consistent theme it is that internal development (bottom up or grass roots or whatever you wish to call it) is much more successful than top down, external aid which usually benefits the donors more than the recipients.

In a perverse way donors get get brownie points for how much they give away (this includes the program managers at the funding agencies) rather than for how well the programs turn out.

Furthermore externally designed projects are more susceptible to graft and mismanagement. The frequent use of debt forgiveness just rewards those who squandered the funds in the past by wiping the slate clean and starting the cycle again.

He provides plenty of documentation in his books so, snide remarks aside, he has a basis for his opinions. What are yours?

[a]

"If he has a consistent theme it is that internal development (bottom up or grass roots or whatever you wish to call it) is much more successful than top down, external aid which usually benefits the donors more than the recipients."

but, it is unfair to conclude that the history of mismanagement of world bank and imf is a good indictment of "top-down" aids. The failur of the past aids has more to do with the way the aids were designed for: for helping the rich countries themselves rather than for helping the poor countries.

[DRR]

I too, think Easterly is getting short shift here, as would anyone who's read "The White Man's Burden" on the sorry state of developmental economics. The contents of which "criticizing the record of the IMF & World Bank, critical of top-down, one size fit's all economic solutions, and large swathes of the 'Washington Consensus'."

My guess is much of the consternation stems from his use of the word "free market" and general insinuation that market oriented economies really are good things. Words & assertions that are like kryptonite to the many retrogressives & economic reactionaries who frequent here, with knee-jerk reactions at the concept of market economics. How odd, that Jeffrey Sachs, the chief architect of "Shock Therapy" in Russia, and all the violent disaster that went with it is considered the right & honest soul, while commenters worth listening to like Easterly are scorned, largely for telling the truth about market capitalism to those who'd rather not hear it.

[calmo]

Robert, I used the text provided, not encouraged by segments therein such as this disturbing analogy,The U.S. in 1776 was at the same level as Africa today, yet it escaped the poverty trap. to peruse The White Man's Burden or his more recent book. Either Easterly thinks that American Indians escaped the poverty trap or more likely he doesn't see them in this analogy. Hopefully he sees the Africans and not merely a failure of colonial administration in Africa, which is the impact of that disingenuous analogy.
With that why would I bother to read his serious opus about poverty in Africa and how aid was misspent? I'd rather curl up with my Braudel and learn some history. I may be missing out on an important authority on the role and malpractice of the World Bank in Africa, but if this piece is representative, I doubt whether I could read it. If I managed to get past all the analogies, I doubt whether I'd get anything more than a business administrator's critique and all the depth of that ideological bias that goes with that.
As I say, the political economics seem far more important than whether aid was given directly to states or businesses within those states.

[robertdfeinman]

Calmo:

My last comment on this topic - the sign of a close-minded ideologue is the unwillingness to even consider information that might shake one's preconceptions.

Your unwillingness to examine issues in depth makes your comments of lesser interest to the rest of us. I've had lots of experiences debating with those full of certainty and the take away is that it always is a waste of time. People who know it all don't contribute anything original.

The goal of debate is not to convince others (although that might be satisfying) but to try to discover the best information which then will lead to the best policy ideas.

[calmo]

Would you say this is "close-minded", Robert:My last comment on this topic - the sign of a close-minded ideologue is the unwillingness to even consider information that might shake one's preconceptions.and that my present effort to continue this argument is just more unwillingness to consider Easterly as more than a WSJ entertainer?
I sense that my "close-minded ideology" is a tad left of yours recognizing capitalist imperialism as an important lens to view the economic disaster that Africa has been since the arrival of the Europeans. But such a broad historical view is construed as too "ideological" and too "unwilling" to stick to bureaucrat's suggestions of a more efficient distribution of World Bank funds.
Would you say this was a great contribution:I've had lots of experiences debating with those full of certainty and the take away is that it always is a waste of time. People who know it all don't contribute anything original.or a statement from someone who dares not even cite one of the Easterly recommendations (to be found elsewhere apparently) for a better outcome in Africa?
Would you say these statements are heavy on that very "certainty" and "know it all" and light on "anything original"?
Finally, this The goal of debate is not to convince others (although that might be satisfying) but to try to discover the best information which then will lead to the best policy ideas.tells me you may be confusing this forum as a debate rather than a discussion and possibly a debate about policy formation/implementation rather than an exploration of our role (not just the World Bank's) in the economic affairs of Africa.

[robertdfeinman]

Calmo:
How can I have a discussion about Easterly when you refuse to read his books?

If I were to cite something from his book what good would it do since you won't follow up?

As to my own political viewpoint (which I thought I was mostly keeping out of this discussion) if you want to explore it I have a web site with lots of my essays on various aspects of policy. Here's the link:
Policy not Politics

I think you will find that I'm pretty far to the left myself. I don't express an opinion on what to do about African development since I'm not an expert, but I do take issue with Utopians of any stripe whether they are Sachs, Stiglitz or Rand. I'm in favor of ideas which have a chance of making a difference.

[Lafayette]

DDR: "How odd, that Jeffrey Sachs, the chief architect of "Shock Therapy" in Russia, and all the violent disaster that went with it is considered the right & honest soul, while commenters worth listening to like Easterly are scorned, largely for telling the truth about market capitalism to those who'd rather not hear it."

A bit melodramatic, this.

I doubt this above characterization of attitudes towards either is held by most. I for one do not believe either wholly. Having worked in Africa, I have my own first-hand opinion and it jibes with neither and is generalized because, from the point of view of conducting business, it is fairly common throughout Africa - although conditional.

Easterly and Sachs have different points of view. Both are worth telling, neither are the absolute truth.

The truth, be there one, is somewhere in between. It is variable and contextual. Enough of this academic tussle over how many angels can dance on the head of a pin.

[anne]

http://www.nybooks.com/articles/19374

October 5, 2006

Aid: Can It Work?
By Nicholas D. Kristof - New York Review of Books

The conundrum facing the rich countries is that everywhere in the developing world, and particularly in Africa, you see children dying for want of pennies, while it's equally obvious that aid often doesn't work very well.

Travel through the third world, and you may see clinics with signs proudly proclaiming that they were built by such-and-such an agency—but no other sign of life. It's easy to build a clinic, but harder to ensure that doctors and nurses actually report for work in the days that follow—and when the doctor stops showing up, so do patients. Go on to the market, and there you may see the clinic's stock of medicines for sale (marked "donated by" so-and-so, "not for sale").

Continue on your way, and you may encounter bridges built with foreign aid over streams—but the construction led to erosion on both banks. So the ends of the bridge are a couple of feet higher than the ground, and vehicles can't use it. Travelers continue to ford the stream in the dry season, and nobody goes across in the rainy season....

[Extensive and worthwhile....]

[gaddeswarup]

I am a non-economist trying to folow these learned arguments. It is difficult in the middle of a discussion to go out, find books and read them. It would be good if people who are convinced by the merit of some books could give a quick synopses of the arguments or to some accessible articles summarizing the arguments. The same Easterly has another paper:
http://www.nyu.edu/fas/institute/dri/DRIWP/DRIWP26.pdf
suggesting that the wealth of nations might have been determined by 1000BC. Geoffrey Clark thinks (A farwell to alms) that this is due to productivity differences. Some look at this in terms of genetic differences. For non-specialists, it is difficult to read all these books and compare. Perhaps, some of the learned commentators can give shorter and accessible references.

[radek]

"4. Lack of comparative advantage. 5. Lack of resources.

These are the primary barriers to economic growth in most areas including many countries in Africa."

4. --> A country cannot lack comparative advantage, unless it has exactly the same technology (scaled up or down) as another country. Generally, you ALWAYS have comparative advantage in something. That's what makes it "comparative".

5. --> Africa has plenty of resources. If anything, they're actually part of the problem, to the extent that people actually talk about a "resource curse". Japan has essentially no resources and does well despite.

And most of this Easterly bashing here is just wallowing in one's own ignorance like a pig in mud.

[anne]

No; William Easterly even when properly criticizing a particular aid program never seems able to understand how often aid has a significance before development and that significance is saving lives, saving actual lives.

[radek]

Welp, here we have some commentary:

http://zambian-economist.blogspot.com/

and here is that blogger's comment over at Mankiw's blog:

On Easterly, I think one must read the White Man's Burden to get a full sense of what he is saying. The people who criticise him are usually ignorant of his work or closely aligned to big international organisations. As a Zambian, I see Easterly very much as friend of Africa!!

Now please put that Shroud of Self Rightousness back in the drawer. It's the wrong occasion.

[anne]

So that I am completely clear, from the title of William Easterly's book, through the ironic Wall Street Journal editorial page love affair with Easterly ideas, the ideas are thoroughly offensive. But that was the point, to be thoroughly offensive to belittle aid efforts through Africa. Phooey.

[anne]

When there are next complaints about aid to Zambia, tell us, please, how an absence of aid will keep AIDS sufferers alive. Somehow the question is never asked let alone answered by the Wall Street Journal editorial page African whiz.

[anne]

2001 - 2002

10,649,000 total population of Zambia.
4,740,000 population of adults 15 to 49.

1,000,000 adults HIV/AIDS positive.
21.5% adult rate of infection.
59.0% of infected adults are women 15 to 49.
16.78 - 25.18% range of women 15 to 24 infected.
150,000 children 0 to 14.

120,000 AIDS deaths in 2001.
570,000 AIDS orphans cumulatively to 2002.

[My data development.]

[anne]

Southern Africa is increasingly providing free public school education for children and teenagers. When Kenya recently began free elementary public schooling, immediately William Easterly complained of whatever might be an over-taxing of resources. Enough nonsense.

Aid allows for children being educated, where children could not before afford schooling. Aid allows for orphans to be cared for in the midst of an epidemic. Aid allows for people to live, where before there was death. The point is to make aid work, and to foster development by a host of means. Enough nonsense, showing not even the sluightest sense that Doctors Without Borders might even be saving lives in Zambia. Enough.

[anne]

Understand the needs even in so promising a country as Botswana:

1,554,000 total population of Botswana.
762,000 population of adults 15 to 49.

300,000 adults HIV/AIDS positive.
38.8% adult rate of infection.
56.7% of infected adults are women 15 to 49.
22.99 - 44.98% range of women 15 to 24 infected.
28,000 children 0 to 14.

26,000 AIDS deaths in 2001.
69,000 AIDS orphans cumulatively to 2002.

[radek]

Anne, you are so missing the point.

[anne]

Radek, the subject is important so let me approach freshly by showing me an alternative take on William Easterly. Suppose I do not understand, what then?

This morning, I was asked to breakfast by a Mason who wanted to explain a childrens hospital campaign. I have by chance known a number of families who have relied on the Shriners for child care, and could not be more impressed by what I know. However, there was a critical article about hospital funding by Shriners recently. I never mentioned the article, for I understand this aid attempt will be well attended while inevitable problems are gradually addressed.

There are problems in business development, there are problems in government planning, there are problems in public-private assistance. Work on the problems, rather than generally dismissing a development avenue.

[anne]

http://www.nytimes.com/2006/03/19/books/review/19postrel.html?ex=1300424400&en=bff8547840668e88&ei=5090&partner=rssuserland&emc=rss

March 19, 2006

The Poverty Puzzle
By VIRGINIA POSTREL

MALARIA infects 300 million to 500 million people a year, causing severe pain and debilitation. A million of those taken ill die, mostly infants and young children. Of the deaths, which amount to a child every 30 seconds, more than 80 percent occur in the poor countries of Africa. Insecticide-treated mosquito nets, which cost $5 or less, could prevent most infections. A mere $2.50 in medicine can treat the deadliest form of the disease, the World Health Organization reports.

So why don't we just buy the nets and medicines? If we cared as much about the poor as Bono does, couldn't the rich countries wipe out malaria and also eliminate the world's worst poverty?

It's not that simple, William Easterly argues in "The White Man's Burden." Take those mosquito nets. When aid agencies hand them out in poor countries, he writes, "nets are often diverted to the black market . . . or wind up being used as fishing nets or wedding veils." Free nets don't get to the people who need them.

But in rural Malawi, clinics serving new mothers sell insecticide-treated bed nets for 50 cents each. The nets come from a program developed by local Malawians working for Population Services International, a Washington-based nonprofit organization. In Malawi's cities, the group sells nets for $5 each, using the profits to subsidize sales in the countryside.

The program, Easterly reports, has "increased the nationwide average of children under 5 sleeping under nets from 8 percent in 2000 to 55 percent in 2004. . . . A follow-up survey found nearly universal use of the nets by those who paid for them." By contrast, when a Zambian program handed out free nets, "70 percent of the recipients didn't use" them. Charging for nets may sound hardhearted, but prices provide vital information about commitment.

The world's poor need more focused, trial-and-error programs like the Malawian net distribution and fewer ambitious plans to cure poverty, Easterly argues. There are two tragedies of the world's poor. The first is the one we hear about: that so many people suffer so much for lack of inexpensive remedies.

The second, he says, "is the tragedy in which the West spent $2.3 trillion on foreign aid over the last five decades and still had not managed to get 12-cent medicines to children to prevent half of all malaria deaths. The West spent $2.3 trillion and still had not managed to get $4 bed nets to poor families. The West spent $2.3 trillion and still had not managed to get $3 to each new mother to prevent five million child deaths." The West is not stingy. It is ineffective.

A professor at New York University and a senior fellow at the Center for Global Development, Easterly spent most of his career as an economist at the World Bank. He had to leave that job after publishing his iconoclastic 2001 book, "The Elusive Quest for Growth," which skillfully combined a history of economists' growth theories with a devastating empirical analysis of the failure of international efforts to spur third world development. The book's theme was "incentives matter."

In "The White Man's Burden," Easterly turns from incentives to the subtler problems of knowledge. If we truly want to help the poor, rather than just congratulate ourselves for generosity, he argues, we rich Westerners have to give up our grand ambitions. Piecemeal problem-solving has the best chance of success.

He contrasts the traditional "Planner" approach of most aid projects with the "Searcher" approach that works so well in the markets and democracies of the West. Searchers treat problem-solving as an incremental discovery process, relying on competition and feedback to figure out what works....

[anne]

http://www.nybooks.com/articles/19374

October 5, 2006

Aid: Can It Work?
By Nicholas D. Kristof - New York Review of Books

[Compare, then, Virginia Postrel's review to Nicholas Kristof's, which I excerpted above. What have I missed in my criticism? I am never arguing for lack of local sensitivity and experimentation is designing aid programs, but good grief, decide whether there is to be free public schooling and if so then how locally to make it effective....]

[jay]

Dr. Muhammad Yunus and The Grameen Bank, Nobel Peace Price 2006.
(http://en.wikipedia.org/wiki/Muhammad_Yunus)
(http://en.wikipedia.org/wiki/Nobel_Peace_Prize)

Often defined as a social "entrepreneur" was awarded the Laureate

"for advancing economic and social opportunities for the poor, especially women, through their pioneering microcredit work"

If you add that the growth in both in India and China have been exponentially increasing since their opening to world economy, then I'm sure you can find it easier to answer the covered questions about their current developing state. I would not venture to call them developed economies because either of them still have a substantial lag in their standard of living as measure by their per capita GDP when compared to countries in Latin America. Still both of these economies have shown a direct relationship between the level of economic growth with the level of openness to the "free market".

quod erat demonstrandum

[gaddeswarup]

I am not sure whether somebody referred to this during the discussion.Here is a link to a lecture by Easterley and discussions after the lecture:
http://www.cgdev.org/content/article/detail/6926/

[anne]

Bono was Knighted today; William Easterly wasn't even mentioned. Hey, I like the band a whole lot more as well.

[dlwanga]

I am an African, and I support William Easterly. I don't consider him as dehumanizing us, instead the Bonos, the Blair Commissions, the Jeffrey Sachs, the Brad pitts, Clooneys, Jolies, and all those are the ones dehumanizing us. plus all of you who claim to be "helping us Africans". My questions, where are you getting this money to help us when your economies are all crumbling, when you owe trillions in debt to China and around the world, when plenty of you are filing bankruptcy, are jobless, homeless, foodless and the list goes on?

We in Africa own the land on which we live and grow our food. Those who lack food are mostly the landless in urban areas or in civil/political conflict. In Uganda my country, even refugees are allocated land in settlement where they grow their own food. Raise your hand if you grow the food you eat in your country (in the West)? or own the food you eat? or the house you live in with no mortgage to pay? or can survive if you lost your job and source of income?

We can, and that is majority of Africa's population. Even those who buy their food, if push came to shovel, they would return to the land and till.

And for y'all abusing and accusing William Easterly or belittling or demeaning Africa, let me remind you that William Easterly has been in Africa longer than Jeffrey Sachs, Bono, Angelina J, Clooney et al...OR even those empty-tined inhumanitarian agencies