Thought-Provoking and Misleading

Bill Easterly has written a very thought-provoking book. And a very misleading book it is too. Why it is thought-provoking should be obvious. Why it is highly misleading I hope to explain.

There are at least three areas where the book misleads.

First, in stressing the amount that was spent on aid, Easterly mentions a figure of $2.3 trillion over the last fifty years. That figure, even if it is nowhere explicitly stated (one needs to verify it by reading a graph on page 183), does seem to represent bilateral aid, as defined by OECD, given by the rich world to the Third World governments. However, most of the book discusses World Bank and even IMF lending that can hardly be called aid—the concessional element in these loans being generally small (with the exception of World Bank IDA funds). So, is it aid or loans (which have to be repaid) that have been unsuccessful? The political implications are quite different. If it is aid that was stolen, the Western tax-payers can be legitimately angry since their money was misused. But if it is lending that failed, they do not have a particular reason to complain since these loans, being government-guaranteed, have to be repaid, and are being repaid. The joke is on poor countries. There is no White Man’s Burden.

To that potpourri of numbers, composed of aid, quasi-grants and almost commercial loans with strings that can hardly be called “aid” corresponds a potpourri of motivations. Some of “aid” is given for hard-nosed political and strategic reasons, to make friends and to stave-off Communists yesterday or Islamists today; some is given to employ domestic industries and turn out goods that are purchased by the South and which the South might not need at all; some is given to employ domestic bureaucrats who write useless “policy reports” for poor countries. And finally again only a tiny fraction of it is given with the objective of poverty alleviation in the Third World. So, if $2.3 trillion of “aid” did not manage to buy $4-worth mosquito nets it is hardly surprising. For the vast bulk of “aid” was never intended for those nets, but was led by entirely different motives and objectives.

Easterly does a slight of hand by describing this potpourri of money as “aid” and then, accepting at face value the claims of politicians, by ascribing the purely altruistic motivation to it. This is something that Easterly knows not to be true from his own empirical work where he has carefully documented (when studying World Bank lending) how “aid” responds to political objectives of the “donors.” But in this book, he has chosen to ignore it and to pretend to believe the self-serving pronouncement of politicians and aid-business lobbyists.

Easterly is thus perpetuating the myth that “aid” is motivated by Western benevolence only which in turn fuels the dissatisfaction with “aid” and allows him (and others) to shift the entire blame on corrupt governments in the Third World. Now, exposing what the true objectives and the composition of “aid” are is not impugning Western motives. They are perfectly understandable and normal. Even at a purely individual level, we never give anything to others with a sole objective of increasing their welfare. In our giving, we are also led by our own objectives: to make friends, improve people’s opinion of ourselves, do as the preachers enjoin us to, influence the way of life of others etc. But while we may claim that we are being led by humanitarian motives only, researchers should be able to see thorough the hypocrisy.

Second, Easterly stacks the deck by creating a false dichotomy between successful “searchers” for solutions and inept and corrupt bureaucrats who impose (wrong) solutions. This dichotomy is a “no-brainer.” The advantage of the first (searcher) is already contained in the premise. The point is to see whether there is anything that governments can do to make life easier for the “searchers”. Easterly seems to believe that there is nothing. But this cannot be true. “Searchers” also need governments to protect their property and life, to educate their children, to vaccinate them against diseases, to build roads on which they travel, to catch the thieves etc. There is no necessary conflict between the two. There is actually complementarity between “searchers” and governments.

Third, Easterly derides as grandiose and unrealistic the Millennium Development Goals and Jeffrey Sachs’ call to double “aid”. But, at the same time, he proposes a no less grandiose bureaucracy that would oversee the lending institutions and decide whether they are fulfilling the goals of poverty alleviation or not. But what are the tasks “whose outcome depends almost entirely on what the agency [the World Bank] does” and for which it should therefore be accountable? For the World Bank, caught between the Scylla of the interests of its large shareholders and the Charybdis of the objectives of recipient governments, it is impossible to define a single objective for which it can be held fully responsible. So, Easterly’s proposal is no less utopian that those he criticizes.

Finally (and it is not a misleading but ethically troubling part), in singling out for praise the work of evaluators of different anti-poverty programs (like PROGRESA) and in floating the idea of a committee of “wise men” who would oversee the World Bank, Easterly puts forward an extremely technocratic view of the world where a group of well-fed and smart rich men are supposed to find out, using fancy econometric tools, what is best for the huddled masses. He thus ends up at the opposite end of what he starts by advocating. Moreover, Easterly seems unaware of the deeply troubling moral implications of experimentation such as done under PROGRESA. If we treat poor people simply as objects, as guinea pigs whose behavior we shall observe to decide what works and what does not, then why not do more experimentation and random trials? Why not randomly distribute cookies in schools and see if children fight for them or not? Or why stop there: why not give random unemployment benefits? These troubling ethical aspects of treating randomization and poor people as the ultimate “other” are not given a thought in Easterly’s book.

It is somewhat ironic, I think, that Bill Easterly, who has spent a large part of his life working on issues of growth, poverty and inequality in poor countries and whose knowledge and intellectual capacity is second to none, has written a book that, despite his protestation to the contrary, will be used to set back the agenda of poverty alleviation and provides an argument for those who have long argued that the best policy is to do nothing and ignore the poor world. Let them eat cake!

Also from this issue

Lead Essay

  • It is a tragedy that billions suffer from extreme poverty. The second tragedy of the world’s poor, William Easterly maintains in this month’s lead essay, is that trillions spent on foreign aid have done so little to help. Aid efforts so rarely succeed because they so often lack feedback and accountability. The way forward, Easterly argues, is “truly independent scientific evaluation of specific aid efforts … continuous evaluation of particular interventions from which agencies can learn.”

Response Essays

  • In his spirited reply to this month’s lead essay the World Bank’s Branko Milanovic claims that William Easterly’s argument is misleading. Easterly, Milanovic argues, is not clear about the definition of “aid,” and he both underestimates how much governments can do to help the poor and overestimates the likely effectiveness of his proposed new “grandiose bureaucracy” to assess aid effectiveness. Easterly, Milanovic writes, “provides an argument for those who have long argued that the best policy is to do nothing and ignore the poor world.”

  • In his reply essay, Deepak Lal, the James S. Coleman Professor of International Development Studies at UCLA, argues that like almost all aid efforts, Easterly’s proposed evaluation initiative is likely to fail. “Short of direct or indirect imperialism,” Lal argues, “there seems to be little hope of overcoming the domestic political obstacles to the efficient utilization of foreign aid.” Easterly’s proposal is just more fodder for the “Lords of Poverty,” the middle class professionals who derive a good living from the international business of alleviating world poverty.

  • The Center for Global Development’s Steve Radelet argues against Easterly that, in fact, “aid amounts have been modest” and that the evidence shows that aid is often effective. Without successful health interventions, “millions of these people would be dead,” Radelet writes. Furthermore, he argues, aid does promote economic growth. “Here is the dirty little secret: most of the published research over the past decade has shown a modest positive relationship between aid and growth.”