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Monday, July 02, 2007

William Easterly: The Ideology of Development

William Easterly with his usual perspective, free markets are good, Jeff Sachs is bad (Thomas Friedman too, but who cares so I cut that part), i.e. he argues that "Developmentalism is a dangerous and deadly failure." Here's a shortened version -- the longer essay has the full flavor of his remarks:

The Ideology of Development, by William Easterly, Foreign Policy: A dark ideological specter is haunting the world. It is almost as deadly as the tired ideologies of the last century — communism, fascism, and socialism — that failed so miserably. It feeds some of the most dangerous trends of our time, including religious fundamentalism. It is the half-century-old ideology of Developmentalism. And it is thriving.

Like all ideologies, Development promises a comprehensive final answer to all of society’s problems, from poverty and illiteracy to violence and despotic rulers. It shares the common ideological characteristic of suggesting there is only one correct answer, and it tolerates little dissent. It deduces this unique answer for everyone from a general theory that purports to apply to everyone, everywhere. ... Development even has its own intelligentsia, made up of experts at the International Monetary Fund (IMF), World Bank, and United Nations.

The power of Developmentalism is disheartening, because the failure of all the previous ideologies might have laid the groundwork for the opposite of ideology—the freedom of individuals and societies to choose their destinies. Yet, since the fall of communism, the West has managed to snatch defeat from the jaws of victory, and with disastrous results. Development ideology is sparking a dangerous counterreaction. The “one correct answer” came to mean “free markets,” and, for the poor world, it was defined as doing whatever the IMF and the World Bank tell you to do. But the reaction in Africa, Central Asia, Latin America, the Middle East, and Russia has been to fight against free markets. So, one of the best economic ideas of our time, the genius of free markets, was presented in one of the worst possible ways, with unelected outsiders imposing rigid doctrines on the xenophobic unwilling.

The backlash has been so severe that other failed ideologies are gaining new adherents throughout these regions. ... This blowback against “globalization from above” has spread to every corner of the Earth. It now threatens to kill sensible, moderate steps toward the freer movement of goods, ideas, capital, and people.

Development's Politiburo

The ideology of Development is not only about having experts design your free market for you; it is about having the experts design a comprehensive, technical plan to solve all the problems of the poor. These experts see poverty as a purely technological problem, to be solved by engineering and the natural sciences, ignoring messy social sciences such as economics, politics, and sociology.

Sachs, Columbia University’s celebrity economist, is one of its main proprietors. He is now recycling his theories of overnight shock therapy, which failed so miserably in Russia, into promises of overnight global poverty reduction. “Africa’s problems,” he has said, “are … solvable with practical and proven technologies.” His own plan features hundreds of expert interventions to solve every last problem of the poor—from green manure, breast-feeding education, and bicycles to solar-energy systems, school uniforms for aids orphans, and windmills. Not to mention such critical interventions as “counseling and information services for men to address their reproductive health needs.” All this will be done, Sachs says, by “a united and effective United Nations country team, which coordinates in one place the work of the U.N. specialized agencies, the IMF, and the World Bank.” ...

Unfortunately, Development ideology has a dismal record of helping any country actually develop. ...

What explains the appeal of development ideology despite its dismal track record? Ideologies usually arise in response to tragic situations in which people are hungry for clear and comprehensive solutions. The inequality of the Industrial Revolution bred Marxism, and the backwardness of Russia its Leninist offshoot. Germany’s defeat and demoralization in World War I birthed Nazism. Economic hardship accompanied by threats to identity led to both Christian and Islamic fundamentalism. Similarly, development ideology appeals to those who want a definitive, complete answer to the tragedy of world poverty and inequality. It answers the question, “What is to be done?” to borrow the title of Lenin’s 1902 tract. It stresses collective social outcomes that must be remedied by collective, top-down action by the intelligentsia, the revolutionary vanguard, the development expert. As Sachs explains, “I have … gradually come to understand through my scientific research and on the ground advisory work the awesome power in our generation’s hands to end the massive suffering of the extreme poor … although introductory economics textbooks preach individualism and decentralized markets, our safety and prosperity depend at least as much on collective decisions.”

Freeing the Poor

Few realize that Americans in 1776 had the same income level as the average African today. Yet, like all the present-day developed nations, the United States was lucky enough to escape poverty before there were Developmentalists. ... George Washington did not have to deal with aid partners, getting structurally adjusted by them, or preparing poverty-reduction strategy papers for them. Abraham Lincoln did not celebrate a government of the donors, by the donors, and for the donors. Today’s developed nations were free to experiment with their own pragmatic paths toward more government accountability and freer markets. Individualism and decentralized markets were good enough to give rise to penicillin, air conditioning, high-yield corn, and the automobile—not to mention better living standards, lower mortality, and the iPod.

The opposite of ideology is freedom, the ability of societies to be unchained from foreign control. The only “answer” to poverty reduction is freedom from being told the answer. Free societies and individuals are not guaranteed to succeed. They will make bad choices. But at least they bear the cost of those mistakes, and learn from them. That stands in stark contrast to accountability-free Developmentalism. This process of learning from mistakes is what produced the repositories of common sense that make up mainstream economics. The opposite of Development ideology is not anything goes, but the pragmatic use of time-tested economic ideas—the benefits of specialization, comparative advantage, gains from trade, market-clearing prices, trade-offs, budget constraints—by individuals, firms, governments, and societies as they find their own success.

History proves just how much good can come from individuals who both bear the costs and reap the benefits of their own choices when they are free to make them. ... Those who best understood the lessons of the 20th century were not the ideologues asking, “What is to be done?” They were those asking, “How can people be more free to find their own solutions?”

The ideology of Development should be packed up in crates and sent off to the Museum of Dead Ideologies, just down the hall from Communism, Socialism, and Fascism. It’s time to recognize that the attempt to impose a rigid development ideology on the world’s poor has failed miserably. Fortunately, many poor societies are forging their own path toward greater freedom and prosperity anyway. That is how true revolutions happen. [via Newmark's Door.]

Update: Dani Rodrik comments on the article.

    Posted by on Monday, July 2, 2007 at 12:12 AM in Economics, Policy | Permalink  TrackBack (0)  Comments (48)


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