Aid could better utilize one group of agents who do have an incentive to find things that please the customers: private firms. For example, private firms could provide services that reach the poor, function as watchers, provide funding for poor entrepreneurs, and train aid workers to think like Searchers for customer satisfaction.
A little bit of this is happening already, but not in any systematic way that aid agencies take seriously. Surveys, votes, and watchers are not always reliable, but on average they would be a big step forward from the accountability-free zone that aid agencies now enjoy.
Getting Back to Basics
I don’t think these crazy schemes should eliminate official aid agencies. These agencies could work much better if they had more modest agendas and were accountable for those agendas. Again, I emphasize that none of these suggestions is the Big Answer to world poverty, or even on how to fix foreign aid. The only Big Answer is that there is no Big Answer.
The basic principles are much easier to state than to make happen. Agents of assistance have to have incentives to search for what works to help the poor. If you want to aid the poor, then
(1) Have aid agents individually accountable for individual, feasible areas for action that help poor people lift themselves up.
(2) Let those agents search for what works, based on past experience in their area.
(3) Experiment, based on the results of the search.
(4) Evaluate, based on feedback from the intended beneficiaries and scientific testing.
(5) Reward success and penalize failure. Get more money to interventions that are working, and take money away from interventions that are not working. Each aid agent should explore and specialize further in the direction of what they prove good at doing.
(6) Make sure incentives in (5) are strong enough to do more of what works, then repeat step (4). If action fails, make sure incentives in(5) are strong enough to send the agent back to step (1). If the agent keeps failing, get a new one.11
It’s so obvious, I’m embarrassed even to lay it out. But it’s worth laying out only because it is the opposite of the present Western effort to transform the Rest.
Aid won’t make poverty history, which Western aid efforts cannot possibly do. Only the self-reliant efforts of poor people and poor societies themselves can end poverty, borrowing ideas and institutions from the West when it suits them to do so. But aid that concentrates on feasible tasks will alleviate the sufferings of many desperate people in the meantime. Isn’t that enough?
Think of the great potential for good if aid agencies probed and experimented their way toward effective interventions—such as saving the life of a child with malaria, building a road for a poor farmer to get his crops to market and support his family, or getting food and dietary supplements to people who would otherwise be stunted from malnutrition. Think of the positive feedback loop that could get started as success was rewarded with more resources and expanded further. Think of the increased support for foreign aid if rich people knew that an additional dollar of aid was an additional dollar to meet the desperate needs of the poorest people in the world.
What Can You Do?
The Planners have dominated the past generation of efforts of the West to help the Rest. The utopian Planners cannot transform the Rest—at least, not for the better. While the Rest is transforming itself, the Planners’ global social engineering has failed to help the poor, and it will always so fail. The Planners gave us the second tragedy of the world’s poor, that twelve-cent medicines do not reach children dying of malaria, that four-dollar bed nets do not get to the poor to prevent malaria, that three dollars does not get to each new mother to prevent millions of child deaths. Planners made little progress on the first tragedy of the world’s poor, that the poor suffer from many calamities that could be averted.
With this historical record, perhaps sixty years of Planners is enough. Maybe it is now time to give the Searchers a chance. Even though the biggest payoff comes from local Searchers who solve their own problems, Searchers from the rich West can do good, specific things for poor people. Searchers can make progress on the second tragedy, which would then make progress possible on the first tragedy. Let the Searchers try their hands at ways for the medicines, bed nets, and aid money to finally reach the poor.
What can you do? There is a role for everyone (both in the West and in the Rest) who cares about the poor. If you are an activist, you can change your issue from raising more aid money to making sure that the aid money reaches the poor. If you are a researcher or student of development, you can search for ways to improve the aid system, or for piecemeal innovations that make poor people better off, or for ways for homegrown development to happen sooner rather than later. If you are an aid worker, you can forget about the utopian goals and draw upon what you do best to help the poor. Even if you don’t work in the field of helping the poor, you can still, as a citizen, let your voice be heard for the cause of aid delivering the goods to the poor. You citizens don’t have to settle for the grandiose but empty plans to make poverty history. All of you can make known your dissatisfaction with Planners and call for more Searchers.
And could one of you Searchers discover a way to put a firewood-laden Ethiopian preteen girl named Amaretch in school?
ACKNOWLEDGMENTS
I have been lucky to get supremely constructive comments on drafts of the book from some knowledgeable and insightful colleagues. Thanks to Scott Moyers, my tough but fair editor at Penguin, and to production editor Bruce Giffords, to copy editor Jenna Dolan, and to literary agent extraordinaire Andrew Wylie. Thanks to my closest longtime intellectual collaborators, Ross Levine and Lant Pritchett, who don’t necessarily share all the views expressed here but have greatly influenced my research and writing, including reading drafts and giving pointed comments at many different stages of this project.
I am also very grateful to Angus Deaton for a thorough reading of the draft and exceptionally thoughtful comments on it, although again not necessarily sharing its views. And a big thanks to those who generously gave of their time to read some or all of previous drafts and give enormously helpful feedback: Maryam Abolfazli, Emma Aisbett, Alberto Alesina, Nava Ashraf, Donald Boudreaux, Gerald Caprio, Ron Clark, Michael Clemens, Ravina Daphtary, Jess Diamond, Paul Dower, William Duggan, Kareen El Beyrouty, Stanley Engerman, Helen Epstein, Daphne Eviatar, Kurt Hoffman, Patricia Hoon, Roumeen Islam, Charles Kenny, Peter Lindert, Janina Matuszeski, Taye Mengistae, Edward Miguel, Josepa Miguel-Florensa, Frederic Mishkin, Jonathan Morduch, Stewart Parkinson, Elizabeth Potamites, S. Ramachandran, James Rauch, Kenneth Rogoff, Xavier Sala-i-Martin, Julia Schwenkenberg, Richard Sylla, Leonard Wantchekon, Dennis Whittle, Geoffrey Williams, Michael Woolcock, and Treena Wu.
I benefited greatly from discussions with some really smart people on topics covered by this book: Daron Acemoglu, Carol Adelman, Martha Ainsworth, Abhijit Banerjee, Reza Baqir, Robert Barro, William Baumol, Jess Benhabib, Arne Bigsten, Nancy Birdsall, Peter Boettke, Robert Borens, Eduardo Borensztein, Bruce Bueno de Mesquita, Craig Burnside, Charles Calomiris, Stephen Cohen, Susan Collins, Kevin Davis, Allan Drazen, Esther Duflo, Steven Durlauf, Marcel Fafchamps, Niall Ferguson, Raquel Fernandez, Ricardo Ffrench-Davis, Stanley Fischer, Paul Glewwe, April Harding, Ann Harrison, Ricardo Hausmann, Peter Heller, Arye Hillman, Judith Justice, Boyan Jovanovic, Ravi Kanbur, Devesh Kapur, Hiro Kohama, Lawrence Kotlikoff, Michael Kremer, Mari Kuraishi, Ruben Lamdany, Adam Lerrick, Ruth Levine, David Levy, Dyan Machan, Bertin Martens, John McMillan, Allan Meltzer, Janvier Nkurunziza, Yaw Nyarko, José Antonio Ocampo, Mead Over, Sandra Peart, Guillermo Perry, Adam Przeworski, Dilip Ratha, Shamika Ravi, Sergio Rebelo, Ritva Reinikka, Ariell Reshef, Mario Rizzo, David Roodman, Dani Rodrik, Claudia Rosett, Frederic Sautet, Anya Schiffrin, Paul Smoke, T. N. Srinivasan, Joseph Stiglitz, Alan Stockman, Judith Tendler, Frank Upham, Nicolas Van de Walle, Ian Vasquez, Michael Walton, and David Weil.
Another big round of thanks to my students at NYU (and some from Colu
mbia), on whom I have tried out some of these ideas in class. I thank also my other colleagues at New York University and the Center for Global Development. Also, I am grateful to audiences in universities, governments, aid agencies, and think tanks around the world who invited me to give lectures to them on some of these ideas over the last few years, and gave me wonderfully useful feedback in person. Any errors that survived the interaction with all these brilliant people are my responsibility.
NOTES
CHAPTER 1. PLANNERS VERSUS SEARCHERS
1.http://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/04/africa_ethiopian_wood_ collector/html/7.stm.
2.On the trail of the celebrity activist, by CNN’s Richard Quest, Thursday, August 11, 2005, posted: 10:57 A.M. EDT (14:57 GMT).
3.Gordon Brown speech at National Gallery of Scotland, January 6, 2005, “Inter-national Development in 2005: The Challenge and the Opportunity.”
4.http://www.msnbc.msn.com/id/8608578/. This reflection occurred to me based on a similar statement by Paul Seabright in his great book The Company of Strangers: A Natural History of Economic Life, Princeton, N.J.: Princeton University Press, 2004.
5.Shaohua Chen and Martin Ravallion, “How Have the World’s Poorest Fared Since the Early 1980s?” Development Research Group, World Bank Policy Working Paper no. 3341, June 2004, http://www.worldbank.org/research/ povmonitor/MartinPapers/How_have_the_poorest_fared_since_the_early_1980. pdf, p. 17.
6.www.wfp.org.
7.www.unicef.org.
8.http://www.unaids.org/en/resources/epidemiology.asp.
9.http://www.worldbank.org/watsan/.
10.http://www.sil.org/literacy/LitFacts.htm.
11.http://www1.worldbank.org/education/pdf/achieving_efa/chapter2.pdf, p. 42.
12.World Bank, Our Dream: A World Free of Poverty (2000), Washington, D.C.: Oxford University Press and World Bank.
13.UNDP, “Human Development Report on Millenium Development Goals,” 2003, overview.
14.Alan Cowell, “In Davos, Spotlight Turns to Africa,” International Herald Tribune, January 28, 2005, p. 1.
15.United Nations Habitat, “Water and Sanitation in the World’s Cities,” 2003, http://www.earthscan.co.uk/samplechapters/1844070042Intro.htm and http://portal.unesco.org/education/en/ev.php-URL_ID=37612&URL_DO=DO_TOPIC&URL_SECTION=201.html.
16.Speech at Coast Guard Academy commencement, May 21, 2003.
17.Quoted in William Duggan, The Art of What Works: How Success Really Happens, New York: McGraw-Hill, 2003, p. ix.
18.“PSI Malaria Control, the Malawi ITN Delivery Model,” February 2005.
19.Karl Popper, The Poverty of Historicism, London and New York: Routledge, 1957, p. 61. I am indebted to John McMillan of Stanford for calling my attention to this concept of Popper’s. He and Nassim Taleb (who discussed Popper in his nice book Fooled by Randomness) turned me on to reading Popper in general.
20.Quoted in James C. Scott, Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed, New Haven: Yale University Press, 1998, p. 327.
21.Quoted in Herald (Everett, WA), in column by James McCusker, July 5, 2005.
22.Robert Owen, The Life of Robert Owen: A Supplementary Appendix to the First Volume, Volume IA, [1858], Reprints of Economic Classics, New York: Augustus M. Kelley Publishers, 1967, pp. ii, 5.
23.WHO and World Bank, “Dying for Change,” Washington, D.C., 2003, p. 10.
24.Ibid., p. 11.
25.http://www.cdc.gov/ncidod/dpd/parasites/schistosomiasis/factsht_schistosomiasis. htm
26.WHO and World Bank, “Dying for Change,” Washington, D.C.: World Bank, January 2002, p. 21.
27.Deepa Narayan and Patti Petesch, Voices of the Poor: From Many Lands (vol. 3), Washington, D.C.: World Bank and Oxford University Press, 2002, p. 383.
28.Ibid., p. 86.
29.Ibid., p. 63.
30.Quoted in Gilbert Rist, The History of Development: From Western Origins to Global Faith, London: Zed Books, 1997, pp. 38–39.
31.Quoted in Lawrence James, The Rise and Fall of the British Empire, New York: St. Martin’s Griffin, 1994, p. 186.
32.Quoted in Klaus Knorr, British Colonial Theories, 1570–1850, London: Frank Cass, 1968, p. 380.
33.Quoted in William J. Barber, British Economic Thought and India, 1600–1858:A Study in the History of Development Economics, Oxford: Clarendon Press, 1975, p. 138.
34.Niall Ferguson, Empire: The Rise and Demise of the British World Order and the Lessons from Global Power, New York: Basic Books, 2003, p. 236.
35.“To the peoples sitting in darkness,” in Charles Neider, ed., The Complete Essays of Mark Twain, Garden City, N.Y.: Doubleday, 1963.
36.Rist, p. 60.
37.M. J. Bonn, Crumbling of Empire: The Disintegration of World Economy, London: Allen & Unwin, 1938, quoted in Knorr, British Colonial Theories.
38.Gunnar Myrdal, “Development and Underdevelopment,” Cairo, 1956, pp. 63 and 65, quoted in P. T. Bauer, Dissent on Development, Cambridge: Harvard University Press, 1971; rev. ed., 1976, p. 70.
39.See Peter Bauer, Economic Analysis and Policy in Underdeveloped Countries, Durham, N.C.: Duke University Press, 1957; and Bauer, Dissent on Development, Cambridge: Harvard University Press, 1971.
40.Speech by Gordon Brown at a DFID/UNDP seminar, “Words into Action in 2005,” January 26, 2005, Lancaster House, London.
41.Multiplying their respective 2003 growth rates by their 2002 Purchasing Power Parity (PPP) GDP in current U.S. dollars. Source: Global Development Network Growth database.
42.http://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/04/africa_ethiopian_ wood_collector/html/7.stm.
43.This quotation makes up the last line of Peter Bauer’s classic Dissent on Development, 1971.
44.http://www.astdhpphe.org/infect/guinea.html.
45.Demographic and Health Surveys data for 2003, http://www.measuredhs. com/countries/country.cfm?ctry_id=14.
CHAPTER 2. THE LEGEND OF THE BIG PUSH
1.Aart Kraay and Claudio Raddatz, “Poverty Traps, Aid, and Growth,” World Bank mimeograph, January 2005; and Bryan Graham and Jonathan Temple, Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?” mimeograph, Harvard University, 2004.
2.Jeffrey D. Sachs, The End of Poverty: Economic Possibilities for Our Time, New York: Penguin Press, 2005, p. 191.
3.UN Millennium Project Report, “Investing in Development: A Practical Plan to Achieve the Millennium Development Goals,” main report, p. 34.
4.Sachs, End of Poverty, p. 226.
5.UN Millennium Project Report, “Millennium Development Goals Needs Assessment,” January 2005, p. 119.
6.This implicitly assumes that any periods of missing data showed the same democracy on average as those periods for which data were available. This assumption is problematic, so I try two variants on this approach. First, I recognize that most countries in the sample with missing data were under colonial administration, which is not usually considered a very democratic institution. I make the assumption that colonial control equates to the lowest democracy rating in Polity IV, and try the corrected variable as a measure of democracy. Second, I simply omit any country that does not have at least seventy-five Polity IV observations over 1820–2001 (or 1870–2001). All three variants of the data give similar results. This result echoes a previous result by Daron Acemoglu, Simon Johnson, and James Robinson on what they called the “reversal of fortune” between previously rich places like the Caribbean and previously poor places like North America.
7.This discussion draws upon a joint paper I wrote with Ross Levine of Brown University and David Roodman of the Center for Global Development, called New Data, New Doubts: Comment on ‘Aid, Policies, and Growth’ (2000) by Burnside and Dollar,” American Economic Review 94, no. 3 (June 2004): 774–780. I have used a similar exposition in a paper I wrote called “Can Aid Buy Growth?” in the Journal of Economic Perspectives 17, no. 3 (Summer 2003): 23–48.
8.Craig Burnside an
d David Dollar, “Aid, Policies, and Growth,” American Economic Review 90, no. 4 (September 2000): 847–68.
9.Another factor in the administration’s decision was the personal lobbying by the rock star Bono, who seems to be the most influential figure in the aid policy community.
10.For the full text of Bush’s speech of March 14, 2002, see http://www. whitehouse.gov/news/releases/2002/03/20020314-7.html. For the announcement of the Millennium Challenge Corporation on November 26, 2002, see http://www.whitehouse.gov/news/releases/2002/11/20021126-8.html#3. For the quoted passage on the motivation behind this new aid, see http://www. whitehouse.gov/infocus/developingnations/>.
11.http://www.mca.gov/countries_overview.html.
12.Esther Duflo and Michael Kremer, “Use of Randomization in the Evaluation of Development Effectiveness,” mimeograph, Harvard and MIT (2003), discuss publication bias. A classic paper on this problem is J. Bradford DeLong and Kevin Lang, “Are All Economic Hypotheses False?” Journal of Political Economy 100, no. 6 (December 1992): 1257–72.
13.UN Millennium Project Report, “Investing in Development: A Practical Plan to Achieve the Millennium Development Goals,” overview, box 8, p. 41.
14.Commission for Africa, “Our Common Interest: Report of the Commission for Africa,” p. 348; www.commissionforafrica.org/english/report/introduction.html.
15.Raghuram G. Rajan and Arvind Subramanian, “Aid and Growth: What Does the Cross-Country Evidence Really Show?” IMF mimeograph, April 2005.
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