16.Todd Moss and Arvind Subramanian, “After the Big Push? Fiscal and Institutional Implications of Large Aid Increases,” mimeograph, Center for Global Development, 2005.
17.Jeffrey D. Sachs, John W. McArthur, Guido Schmidt-Traub, Margaret Kruk, Chandrika Bahadur, Michael Faye, and Gordon McCord, “Ending Africa’s Poverty Trap,” Brookings Papers on Economic Activity, issue 1, 2004, Washington, D.C.
18.See descriptions on the following Nigerian government Web sites: http:// nigerianembassy-argentina.org/nigeria/xsteel.shtml, http://www.nigeria-consulateny.org/News/Aug03/ajaokuta_prod.htm, and http://www.nopa.net/Power_and_Steel/messages/8.shtml.
19.I am indebted to Abijhit Banerjee and Esther Duflo of MIT for the FDA analogy as well as for exposition of the randomized control methodology in general.
20.Stephen C. Smith, Ending Global Poverty: A Guide to What Works, New York: Palgrave MacMillan, 2005, p. 59.
21.Thorsten Beck, Asli Demirgüç-Kunt, and Ross Levine, “Small and Medium Enterprises, Growth, and Poverty: Cross-Country Evidence,” World Bank Working Paper no. 3178, December 2003.22. USAID, “Performance and Accountability Report,” 2003.
CHAPTER 3. YOU CAN’T PLAN A MARKET
1.Edmund Burke, “Reflections on the Revolution in France,” in Isaac Kramnick, ed., The Portable Edmund Burke, Viking Portable Library, New York: Penguin Putnam, 1999, p. 443.
2.Quoted in Peter Murrell, “What Is Shock Therapy? What Did It Do in Poland and Russia?” Post-Soviet Affairs 9, no. 2 (April–June 1993): 111–40.
3.Ibid.
4.Ibid.
5.Quoted in Peter Murrell, “Conservative Political Philosophy and the Strategy of Economic Transition,” East European Politics and Societies 6, no. 1 (Winter 1992): 3–16.
6.Clifford Gaddy and Barry Ickes, Russia’s Virtual Economy, Washington D.C.: Brookings Institution, 2002.
7.Ibid., p. 176.
8.David E. Hoffman, The Oligarchs: Wealth and Power in the New Russia, New York: Public Affairs, 2002, p. 318.
9.http://www.templetonthorp.com/en/news345.
10.UNDP, Russia Human Development Report, 2005.
11.http://www.cdi.org/russia/336-7.cfm
12.William Easterly, “What Did Structural Adjustment Adjust? The Association of Policies and Growth with Repeated IMF and World Bank Adjustment Loans,” Journal of Development Economics 76, no. 1 (2005): 1–22.
13.Mark Twain, The Adventures of Tom Sawyer, chap. 6.
14.Joseph Stiglitz shared this Nobel Prize for his own extensive work on imperfect markets due to lack of information.
15.http://www.dl.ket.org/latin3/mores/techno/fire/.
16.Paul Seabright, Company of Strangers, and Avinash Dixit, Lawlessness and Economics: Alternative Models of Governance, Princeton, N.J.: Princeton University Press, 2004, discuss the evidence on biology and trade.
17.Summarized in Stephen Knack, “Trust, Associational Life and Economic Performance,” April 2000, World Bank.
18.Quoted in Gary Hawes, “Marcos, His Cronies, and the Philippines’ Failure to Develop,” in Ruth McVey, ed., Southeast Asian Capitalists, Ithaca, N.Y., Cornell University Southeast Asia Program, 1992.
19.Marcel Fafchamps, “Networks, Communities, and Markets in Sub-Saharan Africa: Implications for Firm Growth and Investment,” Journal of African Economies 10, AERC supplement 2 (2001): 109–42.
20.Ibid., p. 116.
21.Narayan and Petesch, Voices of the Poor, vol. 1, chap. 4.
22.Fafchamps, “Networks,” p.119.
23.Nathan Rosenberg and L. E. Birdzell, How the West Grew Rich, New York: Basic Books, 1986.
24.Anthony Reid, “Flows and Seepages in the Long-term Chinese Interaction with Southeast Asia,” in Anthony Reid, ed., Sojourners and Settlers: Histories of Southeast Asia and the Chinese, Honolulu: University of Hawaii Press, 1996, p. 50.
25.Avner Greif, “Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders’ Coalition,” American Economic Review 83, no. 3(1993): 525–48.
26.The preceding three paragraphs except for the Greif paragraph were based on James Rauch, “Business and Social Networks in International Trade,” Journal of Economic Literature 39 (December 2001): 1177–203.
27.Fafchamps, “Networks,” p. 122.
28.This is a central point of Douglas North, Institutions, Institutional Change, and Economic Performance, Cambridge, UK: Cambridge University Press, 1990.
29.Narayan and Petesch, Voices of the Poor, vol. 2, chap. 8.
30.Ibid., Vol. 1, p. 187.
31.Ibid., Vol. 3, p. 72.
32.Ibid., p. 71.
33.Martin Booth, The Dragon Syndicates: The Global Phenomenon of the Triads, New York: Carroll and Graf Publishers, 1999, p. 268.
34.Narayan and Petesch, Voices of the Poor, vol. 1, p. 186.
35.Dixit, Lawlessness and Economics, pp. 99–110.
36.Narayan and Petesch, Voices of the Poor, vol. 3, p. 75.
37.Ibid., pp. 401–2.
38.Ibid., vol. 1, p. 202.
39.North, 1990, p. 88.
40.Ibid., p. 129.
41.World Bank, Land Policies for Growth and Poverty Reduction, Policy Research Report, World Bank, Washington, D.C., June 2003, chap. 1.
42.Dixit, Lawlessness and Economics, p. 112.
43.Janine R. Wedel, Collision and Collusion: The Strange Case of Western Aid to Eastern Europe, New York: Palgrave, 2001.
44.Wade Channell, “Lessons Not Learned: Problems with Western Aid for Law Reform in Postcommunist Countries,” Carnegie Endowment for International Peace, Democracy and Rule of Law Project, no. 57, May 2005.
45.Ibid., p. 6.
46.Parker Shipton, “The Kenyan Land Tenure Reform: Misunderstanding in the Public Creation of Private Property,” in R. E. Downs and S. P. Reyna, eds., Land and Society in Contemporary Africa, Hanover, N.H.: University Press of New England, 1988, pp. 91–135.
47.Discussed in Dixit, Lawlessness and Economics, pp. 128–29.
48.Quoted in Duggan, The Art of What Works, p.37.
49.Thorsten Beck and Ross Levine, “Legal Institutions and Financial Development” in Claude Ménard and Mary M. Shirley, eds., Handbook of New Institutional Economics, Norwell, Mass.: Kluwer Academic Publishers, 2005.
50.Figures from Ross Levine, private communication.
51.Stephen Haber, “Mexico’s Experiments with Bank Privatization and Liberalization, 1991–2003,” mimeograph, Stanford University, draft of October 18,2004.
52.See F. A. Hayek, Law, Legislation, and Liberty, vol. 1 ( Rules and Order ), Chicago: University of Chicago Press, 1973, and Robert D. Cooter, “The Rule of State Law and the Rule-of-Law State,” in Annual World Bank Conference on Development Economics, Washington, D.C.: World Bank, 1996.
53.http://www.festivalcinemaafricano.org/eng/index.php?pag=vis_film&id_film=178, http://www.newint.org/issue372/view.htm.
54.“Mobile Phones and Development: Calling an End to Poverty,” The Economist, July 9, 2005.
55.Sharon LaFraniere, “Cellphones Catapult Rural Africa to 21st Century,” New York Times, August 25, 2005, p. A1.
56.John McMillan, Reinventing the Bazaar: A Natural History of Markets, New York: Norton, 2002, pp. 94–95.
57.Manish A. Desai, Sumi Mehta, and Kirk R. Smith, “Indoor Smoke from Solid Fuels: Estimating the Environmental Burden of Disease,” WHO Environmental Burden of Disease Series, no. 4, 2004.
58.This research was sponsored by the World Bank’s 2002 World Development Report, mentioned later as a valuable output of the World Bank.
59.World Bank, Doing Business in 2005: Removing Obstacles to Growth, Washington, D.C.: World Bank, International Finance Corporation, and Oxford University Press, 2005, overview, p. 3.
CHAPTER 4. PLANNERS AND GANGSTERS
1.Federal Research Division, Library of Congress, Bolivia: A Country Study, Washington, D.C.: Library of Congress, December 1989.
2.Herbert S. Klein, Bolivia: The Evolution of a Multi-Ethnic Society, Oxford: Oxford Un
iversity Press, 1992, p. 35.
3.Federal Research Division, Bolivia.
4.Klein, Bolivia, p. 52.
5.Ibid., p. 124.
6.Ibid., p. 152.
7.Ibid., p. 122.
8.Ibid.
9.Ibid., p. 153.
10.Daniel Kaufmann, Massimo Mastruzzi, and Diego Zavatela, “Sustained Macroeconomic Reforms, Tepid Growth: A Governance Puzzle in Bolivia?” in Dani Rodrik, ed., In Search of Prosperity: Analytical Narratives on Economic Growth, Princeton, N.J.: Princeton University Press, 2003, pp. 345–48.
11.Ibid., p. 358.
12.Ibid., p. 364.
13.Report No. 26838-BO, “Report and Recommendation of the President of the International Bank for Reconstruction and Development, International Development Association, International Finance Corporation, and the Multilateral Investment Guarantee Agency to the Executive Directors on a Country Assistance Strategy for the Republic of Bolivia,” January 8, 2004.
14.“Corraling the Gas—and Democracy,” The Economist, June 9, 2005.
15.There is a vast body of literature, with such classics as James Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy, Ann Arbor: University of Michigan Press, 1962; Mancur Olson, The Logic of Collective Action, Cambridge: Harvard University Press, 1965; Anthony Downs, An Economic Theory of Democracy, Boston: Addison-Wesley, 1957.
16.Dani Rodrik, “Institutions for High-Quality Growth: What They Are and How to Acquire Them,” Studies in Comparative International Development (Fall 2000).
17.Philippe Aghion, Alberto Alesina, and Francesco Trebbi, “Endogenous Political Institutions,” Harvard University mimeograph, January 2004.
18.W. Easterly, R. Gatti, S. Kurlat, “Democracy, Development, and Mass Killings,” New York University Development Research Institute Working Paper, 2004.
19.Daron Acemoglu, “The Form of Property Rights: Oligarchic vs. Democratic Societies,” MIT mimeograph, April 2005.
20.Daron Acemoglu and James A. Robinson, Economic Origins of Dictatorship and Democracy, Cambridge, UK: Cambridge University Press, 2006.
21.Ibid., p. 27.
22.William Easterly, “The Middle-Class Consensus and Economic Development,” Journal of Economic Growth 6, no. 4 (December 2001): 317–36.
23.Nathan Jensen and Leonard Wantchekon, “Resource Wealth and Political Regimes in Africa,” Comparative Political Studies, 2005. See also Michael Ross, “Does Oil Hinder Democracy?” World Politics 53 (April 2001): 325–61. Another study confirming this result is Paul Collier and Anke Hoeffler, “Democracy and Resource Rents,” Department of Economics, University of Oxford, April 26, 2005.
24.Daniel Kaufmann, Aart Kraay, and Massimo Mastruzzi, “Governance Matters IV: Governance Indicators for 1996–2004.” World Bank mimeograph, May 2005.
25.This section is based on W. Easterly and R. Levine, “European Settlers, Inequality, and Economic Development,” New York University and Brown University, mimeograph, 2005.
26.Edward L. Glaeser, “The Political Economy of Hatred,” Harvard mimeograph, October 26, 2004, http://post.economics.harvard.edu/faculty/glaeser/papers/Hatred.pdf.
27.W. Easterly and R. Levine, “Africa’s Growth Tragedy: Policies and Ethnic Divisions,” November 1997, Quarterly Journal of Economics 112, no. 4 (November 1997): 1203–250; R. La Porta, F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, The Quality of Government,” Journal of Law, Economics, and Organization 15, no. 1 (Spring 1999); A. Alesina, R. Baqir, and W. Easterly, “Public Goods and Ethnic Divisions,” Quarterly Journal of Economics 114, no. 4 (November 1999): 1243–84; and William Easterly, Jozef Ritzen, and Michael Woolcock, “Social Cohesion, Institutions, and Growth,” mimeograph, New York University and World Bank, 2005.
28.Daron Acemoglu, Simon Johnson, and James A. Robinson, “Institutions as the Fundamental Cause of Long-Run Growth,” in P. Aghion and S. Durlauf, Handbook of Economic Growth, New York: Elsevier, 2005; W. Easterly and R. Levine, “Tropics, Germs, and Crops: The Role of Endowments in Economic Development,” Journal of Monetary Economics 50, no. 1 (January 2003). D. Rodrik, A. Subramanian, and F. Trebbi, “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development,” Journal of Economic Growth 9, no. 2, (June 2004). Note that some of the results by Acemoglu et al. were challenged on the grounds of faulty data in some excellent work by David Albouy at Berkeley. However, studies that do not use this data still find a causal link between good government and income.
29.Narayan and Petesch, Voices of the Poor, vol. 1, p. 181.
30.Ibid., vol. 3, p. 71.
31.Ibid., vol. 2, chap. 8.
32.Ibid., vol. 1, p. 185.
33.Ibid., vol. 2, chap. 8.
34.Ibid., vol. 2, chap. 9.
35.Alberto Alesina and Beatrice Weder, “Do Corrupt Governments Receive Less Foreign Aid?” American Economic Review 92 (September 2002): 1126–37.
36.The regression ran the log of aid per capita on the log of population, log of per capita income, and the Kaufmann-Kraay indicator of corruption, all for the year cited. The sample (including all countries that received positive aid inflows) was kept the same between 1996 and 2002. The source for all data is the World Bank’s World Development indicators.
37.Deon Filmer, Jeffrey Hammer, and Lant Pritchett, “Weak Links in the Chain: A Diagnosis of Health Policy in Poor Countries,” The World Bank Research Observer, vol. 15, no. 2 (August 2000), 199–244. Bureaucracies in rich countries where clients don’t have much voice could be equally oppressive, like Customs or Immigration in the United States. The U.S. government during the Clinton administration tried to make various agencies more client friendly. According to an anecdote by John Nellis, the response of Customs officials to this initiative was “We don’t have clients; we have suspects.”
38.http://www.thp.org/prize/89/masire.htm.
39.Judith Tendler, Good Government in the Tropics, Baltimore, Md.: Johns Hopkins University Press, 1997.
40.Stephen Knack, “Aid Dependence and the Quality of Governance: Cross-Country Empirical Tests,” Southern Economic Journal 68, no. 2 (2004): 310–29.
41.Simeon Djankov, Jose G. Montalvo, and Marta Reynal-Querol, “The Curse of Aid,” World Bank mimeograph, April 2005.
42.Nancy Birdsall, Adeel Malik, and Milan Vaishnav, “Poverty and the Social Sectors: The World Bank in Pakistan 1990–2003,” prepared for the World Bank’s Operations Evaluation Department, September 2004.
43.World Bank Ethiopia report, 2001.
44.OECD, Poor Performers: Basic Approaches for Supporting Development in Difficult Partnerships, Paris: OECD, 2001.
45.World Bank PRSP Sourcebook 2001.
46.Interim Poverty Reduction Strategy Paper, Joint Staff Assessment, Ethiopia, 2001.
47.http://www.state.gov/g/drl/rls/hrrpt/2003/27716.htm.
48.http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/0,, menuPK:258652~pagePK:146732~piPK:146828~theSitePK:258644,00.html.
49.http://lnweb18.worldbank.org/news/pressrelease.nsf/673fa6c5a2d50a67852565 e200692a79/6b834179b3fd616b85256b990077a8a7?OpenDocument.
50.Daniel Patrick Moynihan. Maximum Feasible Misunderstanding: Community Action in the War on Poverty, New York: Free Press, 1969.
51.Ronald Herring, “Making Ethnic Conflict: The Civil War in Sri Lanka,” in Milton Esman and Ronald Herring, eds., Carrots, Sticks and Ethnic Conflict: Rethinking Development Assistance, Ann Arbor: University of Michigan Press, 2001.
52.Sara Grusky, ed., “The IMF and World Bank Backed Poverty Reduction Strategy Papers.” Comments from Southern Civil Society. Globalization Challenge Initiative, May 2000.
53.Scott, Seeing Like a State, p. 94.
54.Robert Fatton, Jr., Haiti’s Predatory Government: The Unending Transition to Democracy, Boulder, Colo.: Lynne Rienner Publishers, 2002, p. 126.
55.World Bank, Country Assistance Strategy for the Republic of Bolivia, January 8, 2004, Report no. 26838-BO, table 10.
&
nbsp; 56.International Development Association additions to IDA Resources: Thirteenth Replenishment, IDA/SecM2002-0488, September 17, 2002, p. 21.
57.www.imf.org/external/np/exr/facts/prgf.html.
58.Nicolas van de Walle, Overcoming Stagnation in Aid-Dependent Countries, Center for Global Development: Washington, D.C., 2005, p. 67.
59.Polity IV database, University of Maryland Political Science Department, www.cidcm.und.edu/inscr/polity.
60.Robert Heinl, Nancy Heinl, and Michael Heinl, Written in Blood: The History of the Haitian People, 1492–1995, Lanham, Md.: University Press of America, 1996, p. 7.
61.David Nicholls, From Dessalines to Duvalier: Race, Colour and National Independence in Haiti, New Brunswick: Rutgers University Press, 1996, p. 19; Heinl, Heinl, and Heinl, Written in Blood, p. 3, gives a higher estimate of the slave population in 1789.
62.Federal Research Division, Library of Congress, Haiti: A Country Study, Washington, D.C.: Library of Congress, December 1989, chap. 6.
63.Stanley Engerman and Kenneth Sokoloff, “Factor Endowments, Institutions, and Differential Paths of Growth Among New World Economics: A View from Economic Historians of the United States,” in Stephen Haber, ed., How Latin America Fell Behind, Stanford, Calif.: Stanford University Press, 1997, p. 55.
64.Heinl, Heinl, and Heinl, Written in Blood, pp. 172, 204.
65.Federal Research Division, Haiti. 66. Nicholls, From Dessalines to Duvalier, pp. 69–72, 77.
67.Heinl, Heinl, and Heinl, Written in Blood, p. 158.
68.Michela Wrong, In the Footsteps of Mr. Kurtz: Living on the Brink of Disaster in Mobutu’s Congo, New York: HarperCollins, 2001, p. 207.
69.World Bank, World Development indicators for 1965–1997, in 2002 dollars.
70.Peter Uvin, Aiding Violence: The Development Enterprise in Rwanda, West Hartford, Conn.: Kumarian Press, 1998, p. 65.
71.Ibid., p. 94.
72.Report No. 12465-RW, “Rwanda Poverty Reduction and Sustainable Growth,” Population and Human Resources Division, South-Central and Indian Ocean Department, Africa Region, May 16, 1994.
73.Ibid., paragraph xvi of executive summary.
74.Tony Hodges, Angola from Afro-Stalinism to Petro-Diamond Capitalism, Bloomington: Indiana University Press, 2001, p. 124.
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