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Posts Tagged ‘development economics’

The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor

Posted by nliakos on December 18, 2017

by William Easterly (Basic Books 2013)

This is a book about development economics, the branch of economics that deals with guiding poor countries out of poverty, and about how its practitioners have consistently trampled (or allowed autocratic leaders to trample) on the political and economic rights of the people in those countries, while throwing money and “expertise” at those same autocrats and dictators. Not only that, but these “technocrats” and the governments and organizations (such as the World Bank and the United Nations) that sponsor them have not led a single country out of poverty and into the elite club to which belong the world’s “developed” nations.

In Part One, “The Debate That Never Happened”, Easterly begins with a comparison of economists Friederich Hayek and Gunnar Myrdal, who shared the Nobel Prize for Economics in 1974. Myrdal espoused the version of development economics that still exists today and which Easterly criticizes here, while Hayek held the opposite views, setting them out in his book The Road to Serfdom (1944). Hayek was never given the opportunity to argue for his point of view; instead, he was ignored by the development economics community and then forgotten. You have probably never heard of him. I hadn’t. Not an accident!

Hayek and Myrdal disagreed about three basic things, around which Easterly has organized his book:

  1. The Blank Slate vs. Learning from History
  2. The Well-Being of Nations vs. the Well-Being of Individuals
  3. Conscious Design of National Economies vs. Spontaneous Solutions to Economic Problems

In Part Two, “Why the Debate Never Happened: The Real History of the Development Idea”, Easterly uses China, Africa, and Colombia to illustrate how the concept of helping nations to “develop” economically got its start during an era of empires, colonialism, exploitation, and unmitigated racism. Development was conceived as a way to continue the status quo, to benefit the imperialists. Even though the “Western” nations’ economic power had come about in an unplanned way, these nations’ “experts” prescribed “technical” solutions and scientifically planned economies for the poor nations, and they were happy to support the authoritarian rulers who promised to work with them, and to overlook the unpleasant fact that these rulers caused more suffering than they alleviated. Development economics presumes the leadership of a “benevolent autocrat” who institutes “technocratic solutions” to improve the conditions of the people, but in truth, once given absolute power, autocrats were never and are still not benevolent. In China, Sun Yat-Sen and Chiang Kai-Shek alienated the population they claimed to lead. In Africa, Great Britain wanted to justify its own exploitative empire; Kwame Nkrumah was the first home-grown autocrat to lead a former colony (Ghana) there. In Colombia, where the first survey mission of the young World Bank was begun in 1948, Laureano Gomez presided over an 8-year reign of terror known as La Violencia without losing World Bank support.

In Part Three, “The Blank Slate Versus Learning from History”, Easterly writes of the importance of understanding a country’s culture and history when trying to end poverty. He compares “collectivist values” (trust only members of your own group; it’s okay to cheat outsiders; hierarchical; the state’s role is to force the individual to behave) with “individual values” (written laws and contracts make it easier to trust people outside of your group; equal rights under the law; free cities and states). Easterly disposes of the benevolent autocrat idea, saying “Neither Europeans nor non-Europeans can be trusted with unconstrained power against the rights of individuals.”  Ethiopian dictator Meles Zenawi, the geographically unlucky Aja people of West Africa, how under-development was the logical outcome of slavery in Colombia, and the success of the people of one block on Greene Street in the free city of New York are the extended examples Easterly uses to bolster his claim that countries with the rule of law and economic and political freedom outperform economically countries under totalitarian or authoritarian rule.

In Part Four, “Nations Versus Individuals”, Easterly examines the role of migration in the world. He ponders the question of why we think it is okay for people in rich countries to go wherever they have the best chance to earn and live well, while at the same time accusing the citizens of poor countries of selling out their countries if they migrate to find better opportunities. He shows how migration can actually alleviate poverty (such as in the case of Haiti), and how migrants contribute to global development because of the increase in their earning power. The examples he uses are interesting: the Mourides, a group of Senegalese small-businesspeople who help each other to flourish in many different parts of the world through an astute use of micro-finance and mutual support, and the Fujianese, who form the majority of “overseas Chinese” who have been the drivers of the economic powerhouses of countries like Malaysia and Singapore. These success stories are disregarded by development economists, who have no way to look at (or advise) economic life that crosses national boundaries.

Easterly uses Chapter 10, “How Much Do Nations Matter?”, to explain that the way we measure growth through Gross Domestic Product (GDP) is extremely unreliable (which reminded me of GDP: A Brief but Affectionate History, which said essentially the same thing), so we shouldn’t take it so seriously: “We assume national growth performance is measured with precision–a precision that does not exist and that is sometimes based on numbers that do not exist.” He states that no one can prove that anything the experts recommend has ever caused economic growth or lifted a nation out of poverty (except perhaps temporarily), but that the one thing that is a good predictor of growth is geography: what region a nation is part of seems to matter a lot, and economies rise and fall together with others in their region (e.g., the “Asian Tigers'” boom and the “Lost Decade” of Latin America).

The last part, “Conscious Design Versus Spontaneous Solutions,” begins with a defense of Adam Smith’s ideas. Smith is thought by many today to have espoused the idea of pure laissez-faire in economics–a totally free marketplace in which companies can do whatever they wish to succeed. In fact, says Easterly, Smith deplored greedy business owners and decried monopolies; his concept of a free market was a way to protect consumers against unscrupulous merchants. When individual consumers choose freely, they naturally choose to buy from the best and most efficient producers, and/or for the best price. Easterly writes, “Freedom to choose is a powerful engine in rewarding the world’s best problem-solvers in each area, while getting rid of the inept problem-solvers.” Not knowing much about economics, I don’t know if Easterly is correct in his assessment of Adam Smith, but his argument makes sense.

Chapter 12, “Technology: How to Succeed Without Knowing How” considers how new technologies (both invention and imitation of new inventions) drive growth. Different from a good, which can be consumed by one consumer, an invention or idea can be exploited by many (“nonrival” in economists’ terms). It can fuel economic growth, population, and standard of living in a “bottom-up” way. We can see that wherever there are more people, we also find more technological innovation. Isolated groups of people, like the indigenous peoples of the Americas, still carried or dragged their burdens when all of Eurasia had wheeled vehicles. But innovation requires the right of an individual to think for herself, or to question authority. Then, for a new idea to spread, people need to be free to move to different places, taking their technology (or their ideas) with them (technological transfer, or diffusion).  New technologies cannot be predicted; they always surprise us. Examples include cars and cell phones. To succeed without knowing how, people help to solve each other’s problems, but for this to happen, knowledge must be decentralized.

In Chapter 13, “Leaders: How We Are Seduced by Benevolent Autocrats”, Easterly examines the human tendency to attribute effects to a single person, even when there is no evidence for this attribution. He considers autocrats such as Lee Kuan Yew of Singapore and the last several autocratic leaders of South Korea, who presided over stunning economic growth, and concludes that the growth occurred despite, not because of, these leaders. Korea is an economic powerhouse not because it was ruled by dictators; “The idea that autocracy was necessary for progress in Korea was contradicted by its own later experience,” after the advent of democracy. Sustained economic growth requires lucky circumstances in addition to skills and technologies. People look for heroes of economic development because we have a psychological bias toward individual power, but the data do not back this up. Easterly writes, “The data show little evidence that leaders matter for growth rates.” And if this is true, there is no justification for supporting autocratic leaders in the name of economic development.

In this book, William Easterly makes a powerful case for political and economic freedoms for everyone around the globe. Is anyone listening?

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