Our Word is Our Weapon

I had to giggle when I saw this on Samizdata. Who’s that castigating others for avoiding “using data or facts” and demanding “empirical evidence”? Why, it’s our old friend Alex Singleton of the Globalization Institute, who relies on shoddy, re-hashed Cato Institute work to argue that overseas aid is bad for growth and completely ignores the overwhelming evidence pointing out the exact opposite!

Weird.

While it’s been good to see more and more swivel-eyed ideologues come round to the idea that aid to poor countries can be a good thing, I can’t help but think that some of them only like it as long as it can be used as a bribe for privatisation and free trade. That certainly seems to be the attitude of Scott Burgess, writing here at the Adam Smith Institute in an edited version of an earlier post at his own blog.

In the earlier post, Scott links to an Independent article describing Mozambique as an aid success story, but is sceptical. “It seems“, he muses, “that aid levels for Mozambique are in line [at around 15% of GDP] with those of its less successful neighbors“.

This is misleading. While aid has dropped as a percentage of GDP now, it was massively higher in the 1990s, when the economy was growing even faster. As the Africa Commission report says, “Mozambique grew at an astonishing 12 per cent in the 1990s, while aid accounted for about 50 per cent of national income”.

That is an exceptional level of aid funding, so maybe Mozambique is an aid success story after all. And it wouldn’t be the only one. As I’ve said before, Botswana and South Korea both received enormous amounts of aid as they were posting very high growth, Ghana’s limited success seems to be heavily reliant on aid, and indeed the best available evidence tells us that Africa would be even worse off than it is if it hadn’t received so much aid.

But that story wouldn’t get you onto the Adam Smith Institute blog. Scott wants us to believe that it is Mozambique’s enthusiastic privatisation programme that is “the most important driver in this rare African success story“.

Well, Mozambique certainly did privatise a lot of its formerly state-owned enterprises. But as a former socialist economy, it probably had a lot more to privatise than most African countries. And it’s not clear at all that privatisation was the main driver behind Mozambiquan growth. In a recent analysis of the country’s prospects, the OECD says:

Although in the 1990s Mozambique carried out one of Africa’s farthest-reaching privatisation programmes, results have been mixed and the expected additional contribution to investment, domestic product and employment creation have not materialised.

Which is not to say that privatisation in Mozambique has generally been a bad thing. It just hasn’t been that great. And this illustrates one of the many problems with the argument that we should use aid and debt relief to bribe poor countries into privatising or opening up their markets to us. The problem is that while we think (or pretend to think) these are bound to improve their lot, the evidence just doesn’t back that up.

Another problem is that linking aid to privatisation distorts the incentives for both giving aid and privatising. If we allocate aid to the countries with the juiciest privatisation opportunities, we’re not spending it where it will be most effective. That’s a waste of aid. And if a poor country privatises a state-owned body because some donor will bung them a billion for it, they’re unlikely to be doing it for the right reasons - for example, they’re less likely to manage the sale properly and be prepared to regulate the privatised entity.

Thirdly, it’s quite possible that we’ll end up spending our aid money bribing poor countries to privatise when they would have done it anyway. It seems that Mozambique mostly privatised of its own accord. If they had thought they would get huge sums in aid in return, they might have had second thoughts about this and hung around for the best price. It’s not hard to imagine this actually slowing down the reform process.

In a post for the Globalization Institute, Christian Sandstrom claims that everybody wins when a US company outsources part of its business to a developing country. What, even the US workers who lose their jobs? Apparently so. The proof?

It is often claimed that outsourcing leads to increased unemployment within the country. But the facts point to the opposite. Despite huge worries about outsourcing in the last three or four years, U.S. unemployment is currently 5.0%, which is the lowest rate since September 2001.

Now, this is obviously an incredibly weak argument, as Sandstrom would know if he had read the report that he next uses to bolster the case for off-shoring. It’s an analysis by the consultants McKinsey which I discussed back in 2003, and it explicitly contradicts Sandstrom’s point. As I said then, the McKinsey report bases its calculations of the effect on labour of off-shoring on data collected in the US on trade-related job losses which show that only 69% of workers losing jobs to imports are re-employed. Leaving 31% who aren’t. Of those who do find new jobs, a majority seem to do so at lower wages.

So obviously some people lose out. Who wins? Well, the developing country that takes up the outsourced work, of course. But most of the benefit goes towards the profits of US corporations. It’s a classic example of the uneven distribution of the gains from an economic shock. Now, if these gains were redistributed so that those who don’t find new jobs were fully compensated for their loss, that really would be a win-win-win situation. But they’re not, so it isn’t.

EURODAD, based in Brussels, can be relied upon to produce excellent analysis of development and debt issues, and their new briefing on the G8’s announcement of increased aid flows is very well worth a look. Shockingly, the announced increase may not be all it’s cracked up to be. Here’s the summary:

Aid Volume - As predicted and greatly welcomed, the communiqué includes a pledge by G8 countries and other donors to increase aid by US$48 billion by 2010. However, the money is in no way guaranteed, with Germany and Italy, for example, citing budget problems as potentially getting in the way of them reaching the targeted increase. The United States Congress has also not passed President Bush’s ODA increases and it is yet to be seen whether they will. It will also be a long time coming (spread over a five year period) and, could be raised through borrowing against future aid budgets, rather than new contributions. Finally, reading between the lines, it would appear that the business of counting debt relief as overseas development assistance will continue. Worryingly, for example, Russia’s financial contribution to raising aid appears to be entirely accounted for in terms of debt write-offs (Annex II).

Conditionality – There is no clear information on what conditions countries will have to meet in order to receive any potential new aid flows, though the issue of good governance is flagged up numerous times in the report indicating its importance. This is probably because most of the aid will be disbursed independently by differing countries and as such will be subject to different degrees and types of conditions. Worryingly, the US has cited the Millennium Challenge Account (MCA) as a key vehicle for disbursing new aid. However, the MCA has notoriously tough conditions, making it likely that many countries will not benefit from future funds.

Much has been made by civil society groups of paragraph 31, which progressively calls for developing countries to have the right to decide their own economic policies, something which civil society organizations have been campaigning for, for a long time. Yet with no elaboration on what this actually would mean in practice, it lacks enforceability and is open to wide interpretation. Civil society should push for more detailed policy measures here to ensure that space for developing countries to create their own economic policies exists, like calling for a cessation of economic policy conditionality and in turn ensuring bilateral donor aid to not tied to the IMF’s Poverty Reduction and Growth Facility (PRGF) conditions.

Aid Effectiveness – The communiqué makes a direct call for donors to be held to account for full implementation of the Paris Declaration on aid effectiveness, highlighting the need for greater untying of aid, more aid predictability and greater use of program based approaches. However, firstly, a lot of the new money is likely to be channelled through ‘vertical’ or ‘global funds’ and questions have been raised as to the compatibility of these funds to enhancing ownership and moving towards greater budget support. Secondly, like the Paris Declaration, the communiqué dismally fails to articulate what monitoring mechanisms should be put in place to ensure donors are held to account on aid effectiveness. Eurodad, along with other NGOs have been campaigning for strengthening international level monitoring mechanisms and NGOs should continue to campaign on this issue calling for an international forum where donors and creditors are equally represented.

Sector Priorities - Finally, the communiqué goes into some depth around the need to enhance good governance, growth, trade capacity, infrastructure, health, education, water and private sector development in Africa referring to a number of existing or new initiatives that should be supported. The communiqué should be commended on governance for drawing upon African initiatives. However, what the communiqué fails to do is indicate which of these issues is a priority and in need of immediate attention.

Conclusions - The G8 communiqué goes along way to addressing the need for more and better aid. But, CSOs need to press for more detailed and improved pledges and timetables in the run up to the Millennium Summit in September. And, perhaps even more importantly, over the next few years, CSOs need to continue to hold governments to account for their commitments, especially when the issue is far from the public eye and media headlines. In the end whether the G8 Summit in 2005 will make a big difference to reducing world poverty is yet to be seen. The test will be whether G8 countries live up to their commitments.

One of the many unfortunate consequences of last Thursday’s bombings was that a particularly significant bit of analysis on our healthcare system got very little coverage at all. The independent Nuffield Trust carried out a hugely detailed investigation into trends in the UK (by constituent country and sometimes region, showing quite sharp disparities in some cases), and their conclusion is pretty encouraging:

Patients have benefited from the sustained increase in National Health Service spending but the money appears to have bought better results in England than in Scotland or Wales, an independent assessment of the service has concluded.

“Improvement in a range of quality measures across the NHS has been considerable,” says a Nuffield Trust report by Sheila Leatherman, a US public health specialist, and Kim Sutherland, senior researcher at the Judge Institute at Cambridge University.

Progress is certainly uneven and in some areas the UK is still behind the pack, but the overall improvement is undeniable, and it’s interesting how in many areas the UK is doing better than the other Anglo-Saxon countries used as comparisons. So the next time someone tells you that the extra investment hasn’t improved results in the NHS, gently remind them that they’re talking bollocks.

[Update: Since James Bartholomew is one of those who seems to be constantly describing the NHS as being in some kind apocalyptic downward spiral, I wandered over to his site to see if he had mentioned the Nuffield Trust report. What a shock, the answer’s no. Equally unsurprisingly, he seemed very taken with the seriously flawed analysis of aid and growth produced by Tomi Ovaska and re-hashed by the Globalization Institute]

Dean Baker’s weekly Economic Reporting Review is well worth your time. He concentrates on stories from a few major US papers, but the insights are usually applicable elsewhere, and it’s good to be reminded of the angles journalists don’t like to cover and the questions they don’t like to ask. Here’s an extract from this week’s:

Climate Plan Splits U.S. and Europe
Juliet Eilperin
Washington Post, July 2, 2005, Page A4

On Eve of Summit Talks, Leaders and Protestors Prepare
Alan Cowell
New York Times, July 5, 2005, Page A1

These articles report on preparations for the G-8 summit that is scheduled to take place in Scotland this week. Both articles refer to President’s Bush’s opposition to the Kyoto agreement to restrict greenhouse gas emissions.

The Times article provides an interesting contrast when it reports President Bush’s comments concerning the need to pursue the war on terrorism. It later quotes him as saying that taking steps to curb greenhouse gas emissions, along the lines proposed in the Kyoto agreement “would have wrecked our economy.”

It is worth noting that, according to standard economic models, the damage to the U.S. economy as a result of the Iraq War is comparable to the losses that would result from the Kyoto agreement. While the potential economic costs of the Kyoto agreement have been given considerable attention in the media, the economic costs attributable to the war have rarely been mentioned in the media.

Those of you in or within travelling distance of London could do worse than sign this pledge: “I will at the earliest opportunity, assemble in London in a public demonstration of respect to the victims of the July 7 atrocity, defiance of the murderers who carried it out and solidarity with the people of London but only if 2,500 other people will too.�

[Cross-posted at The Sharpener]

It’s too early to say, but I’ll say it anyway. I hope and I believe that the attacks on London yesterday will be remembered not for how much they changed Londoners and the world but for how much they didn’t.

Firstly, where 9/11 changed everything, we have already changed, in large part because of 9/11. We’ve seen this coming, and we’ve had the arguments over war and terrorism. Secondly, I don’t think this will give Blair a mandate to turn around and bomb someone else like Bush did - for one thing there’s nobody identifiable to bomb, and even if Blair wanted to it’s unlikely he could muster the trust and support required.

So far - and I haven’t read the papers or spoken to a lot of people about this - the general mood does not seem to be one of vengefulness per se, but of anger and sadness. I think Ken Livingstone may have swiftly and decisively set the tone with his remarks yesterday. It may be that as the shock wears off, some people turn to violence against Muslims or anyone else they identify as culpable by association. Maybe, but this is London, and I’d be surprised if it’s more than a few.

After 9/11, the Bush government was able to enact various curtailments and in some cases serious abuses of civil liberties. In our case, you could argue that Blair is already doing his best to follow suit. Maybe one effect will be to increase support for ID cards, but I hope most people realise that they would probably have had zero effect in this case.

I suppose what I’m saying with this chin-stroking think-piece is that I hope to see very few chin-stroking think-pieces about the attacks, because they’ll be unnecessary and irrelevant. We have not “lost our innocence” or anything like that, but we have lost a lot of Londoners, and a lot more are injured or distressed. Let’s remember the dead and live for those left behind.

(PS, I know it might sound like I’m trying to have the first and last word, but I’m really not. Better analysts will have better analysis, so comments are as welcome as always.)

Ken Livingstone sums it up very well:

“This was not a terrorist attack against the mighty and the powerful; it is not aimed at presidents or prime ministers; it was aimed at ordinary working class Londoners, black and white, Muslim and Christians, Hindu and Jew, young and old, indiscriminate attempt at slaughter irrespective of any considerations, of age, of class, of religion, whatever, that isn’t an ideology, it isn’t even a perverted faith, it’s just indiscriminate attempt at mass murder, and we know what the objective is, they seek to divide London. They seek to turn Londoners against each other and Londoners will not be divided by this cowardly attack,” said Mr Livingston.

He then had a message for the terrorists who had organised the explosions.

“I wish to speak through you directly, to those who came to London to claim lives, nothing you do, how many of us you kill will stop that flight to our cities where freedom is strong and where people can live in harmony with one another; whatever you do, how many you kill, you will fail”.

Tim and Nosemonkey have done amazing work covering this morning’s events.

Movable Type is beginning to drive me insane. I have about 7,500 spam comments on my database, and every time I try to delete some it gets rid of genuine comments too. So if you’ve commented in the last couple of days, then sorry but it’s probably vanished into the ether - however, feel free to comment again.

The Globalization Institute have a report out called More Aid, Less Growth (I was going to say “a new report” there, but actually it’s not new, it’s a re-hash of this old article for the Cato Institute’s journal). It claims to show that “for every 1% increase in aid received by a developing country, there is a 3.65% drop in real GDP growth per person”. But in fact it is so seriously flawed that it tells us nothing at all. Here’s how.

Firstly, the report author Tomi Ovaska includes as “aid” humanitarian assistance that is usually by its nature negatively correlated with growth, as it is mostly given to countries who have suffered some serious disaster. Mixing this up with non-emergency aid will automatically reduce the strength of any positive correlation between aid and growth, as conclusively demonstrated here.

That paper (”Counting chickens when they hatch”, by the Center for Global Development), also highlights the second flaw in Ovaska’s analysis. He breaks up his data-set into five periods of four to five years each, and tries to measure the effect of aid in a particular period on growth in that period. But if aid has any positive effect on growth that begins or simply lasts beyond four or five years (for example by improving child educational levels or the quality of political and administrative institutions), the short periods used by Ovaska will not pick it up and may even return a negative correlation. The CGD paper again overcame this problem by analysing only the effects of aid that we would expect to have a short-term impact, “including budget and balance of payments support, investments in infrastructure, and aid for productive sectors such as agriculture and industry.” When they make these two adjustments, they find a strong and significant positive effect of aid on growth. Ovaska makes neither adjustment, so it’s hardly surprising that he finds no such correlation.

The problems don’t stop there though. The equations Ovaska uses to measure the effect of aid on growth control for the level of government consumption, investment, education and life expectancy in a country. But each of these are channels through which aid impacts on growth - by financing government spending, investment, education and health services. So by factoring out the effect of aid on growth through these channels, Ovaska massively reduces any chance of finding a positive effect of aid on growth*.

Taken together, these problems render Ovaska’s analysis pretty much meaningless (a bit like that recent IMF analysis, as Owen Barder pointed out). And yet I predict that the Globalization Institute and various other right-wing think-tanks (and media) will continue to talk it up like it’s the gospel truth. Already it has inspired at least one slavering fool to denounce the ’socialist’ Make Poverty History campaign on the grounds that it will “cause more poverty and more deaths than would otherwise have occurred”. Creeps like Will Stephens seem to have no interest in whether what they say is actually true - the point is to bash lefties wherever and whenever possible. I still like to think that the Globalization Institute has better motives, but in promoting this seriously flawed report and deliberately ignoring the robust and overwhelming evidence to the contrary they are spreading misinformation, simple as that.

Which brings me on to a related point. Globalization Insititute head honcho Alex Singleton here tries to answer a criticism of the report I made on the Samizdata site, but without attribution or link. Now, the GI has never been good at providing enough links to enable people to make up their own minds (and they would certainly never link to this post or any other on this site), but I wonder if it’s also partly because if he had linked to my comment people would have noticed my adjacent remark that “a recent summary of the evidence found overwhelming support for the argument that aid is good for growth”, which referred to this study by Mark McGillivray (discussed in my previous post). Here’s another prediction - the Globlization Institute will never acknowledge the existence of the McGillivray paper- if they do I’ll happily donate �50 to their whip-round (as long as I get the promised invite to the “launch party later this month on the rooftop bar at the fashionable London venue, Soho House”).

Incidentally, Alex goes on to say that

The report’s author, Dr Tomi Ovaska of the University of Regina in Canada, tells us that while many studies in the past thirty years have found aid fostering economic growth, this has often had to do more than anything else with poor quality data, misspecified models, and/or a small data set where a just few countries (China and the Asian Tigers) drive the results. If one looks at the latest studies using more advanced statistical techniques and better data, the unanimity is fast eroding.

This is pretty much exactly backwards. Firstly, Ovaska’s sample is actually smaller than the CGD paper I’ve already mentioned, so that’s another grounds on which, by his own admission, we should consider it less robust. Secondly, it is not the case that research is increasingly sceptical about the merits of aid. In fact, the opposite is happening - McGillivray says that “the clear, unambiguous finding of practically all empirical studies conducted over the last seven or eight years”, that “Aid now appears to work in the sense that per capita economic growth would have been lower in its absence”, is “a remarkable turnaround in the literature on aid effectiveness, which for decades provided rather inconclusive, often contradictory findings”.

*A more trivial point, but perhaps an illuminating one, is that Ovaska gets the basic aid terminology wrong. He talks about using a measure of aid called “Efficient Development Aid”, but in fact the proper term is “Effective Development Aid”.

Allister Heath’s tirade against Make Poverty History isn’t just self-satisfied and patronising - some of it is also flat-out untrue. Heath approvingly describes

a growing chorus of Western analysts who argue that there is no robust statistical or economic evidence that aid boosts growth.

Are these Western analysts correct? It’s not a hard question to answer, since someone has already done the hard work of collecting and comparing all the robust statistical and economic evidence on the subject for us. That someone is Mark McGillivray of the WIDER Institute in Finland and an acknowledged expert in the field. McGillivray’s overview of the evidence is available here.

Directly contrary to what Heath and his “chorus of Western analysts” would have us believed, McGillivray finds not just that there is some evidence that aid boosts growth, but that there is “overwhelming evidence that aid increases growth and other poverty-relevant variables”. He even goes on to list around two dozen studies (the oldest from 1998) that specifically “suggest that aid works in countries irrespective of the quality of policy regime”.

So it’s not just a few isolated studies here and there that contradict Heath and his analysts (who mostly seem to work for right-wing think-tanks like the Cato Institute or our pals the Globalization Institute, of whom more later). They are contradicted by the overwhelming weight of expert opinion. Thus, when Heath says “there is no robust statistical or economic evidence that aid boosts growth”, he shows himself to be either grossly incompetent or a flat-out liar. And by giving him over a page to spread his shit across, The Business makes itself look very stupid indeed.

There was some coverage in today’s press and this evening’s Newsnight of two IMF papers which supposedly undermine the case being made for the positive effect of aid on growth and development. The two papers, each by Raghuram Rajan and Arvind Subramanian, are available here and here. They’re both fairly long and technical, but fortunately Owen Barder has done the heavy lifting and reports back here. Basically he seems to say that the second paper overstates the dangers of exchange rate appreciation due to aid, and that the first is simply a dog’s dinner:

the study which claims to contradict the substantial body of evidence that aid makes a significant contribution to economic growth in developing countries is seriously flawed at a technical level … Correctly specified, the model in fact produces the same correlation between aid and growth that countless other studies have found

Displaying his trademark grasp of statistics, Tim calls me an extremist because he can think of five people who can disagree with me on the issue of free trade and development. Since one of them is himself (someone who thought that Sweden was a free trade success and that poor countries didn’t really liberalise their trade policy in the 1980s and 1990s) and another is Alex Singleton (who thinks Hong Kong shows how a typical developing country should approach trade), I think even that is a bit much, and it certainly rather undermines Tim’s claim that the argument is “between those who know their economics and those who don�t.”. But the other three are Paul Krugman, Brad de Long and Owen Barder, so I suppose I should answer the charge.

That charge is basically that I am the only one nutty enough not to believe that free trade is always unambiguously good for growth, development, poverty reduction, etc. That, in Owen’s words, free trade “can only be good”.

I’ll start from a basic propostion, which is that as far as I can see only the most rabidly market-fundamentalist believe that nobody is ever disadvantaged by trade liberalisation. In the standard terminology, there are winners and there are losers. Unless someone wants to explain to me how losing your job is always in and of itself a good thing, I think we should all be able to agree on this one.

In this way, trade liberalisation is not always (or even mostly, or even ever, probably) a ‘Pareto improvement’, in which at least one person is made better off and nobody is made worse off. Instead, it can at best only be, as Dr Kwanda says, a ‘Kaldor-Hick improvement’, in which some people are made worse off, but others are made so much better off that they can compensate the losers leaving everyone still coming out ahead.

So unless enough compensation takes place that the ‘losers’ do not actually lose, then trade liberalisation can be bad for some people even if we assume for the moment that it is good in the aggregate*. This may not be such an issue if the loser lives in a rich country with a good safety net, a diverse economy, and relatively low unemployment, and thus a good prospect of finding another job and not too much discomfort until they do so (although the evidence suggests that even in America those who lose their jobs to imports don’t all get new jobs, and those who do find work generally do so at lower wages). However, if the loser lives in a very poor country with little or no social safety net, an undiversified economy and relatively high unemployment (and unemployment is generally higher in poor countries), losing out through trade liberalisation can be very serious indeed.

So the standard theory, applied to poor people in poor countries, predicts that trade liberalisation could increase poverty if the winners do not adequately compensate the losers. Is such compensation likely?

I think not, at least not on the scale and with enough targeting required to really reach those disadvantaged by the change. As I’ve already said, social safety nets (unemployment benefits, training, free or low-cost healthcare) tends to be patchy at best in poor countries, so the mechanism we in rich countries use to compensate the losers within our borders cannot be assumed to apply there.

But since the winners from changes to international trade policy will most likely be foreigners, most adequate compensation would presumably have to come from them. I just don’t think that’s going to happen on the scale required, since there is no agreed method for determining the effects of trade policy changes on incomes in the real world, and no mechanism by which compensation can be extracted from the winners and transferred to the losers.

It comes down to power: the point of being a winner is that you don’t have to do what the losers say - otherwise, what would be the point of winning? International winners don’t have to pay compensation, so they won’t. This becomes even more obvious when you realise that it’s not countries who trade, but firms. Much as, say, the German government might want to compensate the Indian government for a supposed loss through trade liberalisation, if they did so they would be spending taxpayers’ money when all the gains accrued not (at least directly) to tax-payers but to a firm.

Don’t get me wrong - if I thought that there really would be serious compensation for the losers from international trade liberalisation, I’d be a lot less cautious about it. But the signs are not encouraging. Recently, UNCTAD suggested a ‘Trade Marshall Plan‘ for the Least Developed Countries, including a proposal for an ‘aid for trade’ fund of $15bn over three years in large part to help these countries meet the costs of adjusting to trade liberalisation. So far, the proposal seems to have been met with a deafening silence.

There are other reasons to suspect that trade liberalisation can not only be good. For example, there’s the potential loss of a significant chunk of revenue from tariffs, which poor countries will have to try and pick up with increased taxation elsewhere. The evidence shows that poor countries usually don’t manage this, with serious implications for funding public services. Even if they do manage to increase taxes elsewhere, I’d be interested to know whether those in favour of free trade really think that it is always better to tax, say, the income of a farm worker than, say, the luxury imported purchases of a highly-paid executive or government official.

Then there are the conceptual flaws in the models that the World Bank, IMF and others use to predict gains from trade liberalisation, which tend to be greeted with no little fanfare from the usual suspects. There are many problems with these models, not least the fact that they tend to assume full utilisation of resources (i.e. no unemployment), tend not to measure adjustment costs, and tend simply to compare two notional equilibrium positions with no account taken of whether or not a real-world economy would have any difficulty actually moving between them (if either of them could actually exist in the real world, that is).

So to sum up, I think there are standard and even obvious reasons why we should not be complacent about the effect of trade liberalisation on poor countries and poor people. To speculate for a minute, maybe the fact that they live in rich countries where it is simply not as much of a problem has something to do with the relatively uncritical attitude of Mssrs Krugman, De Long and Barder. It’s interesting that Tim seems to think that economists living in America represent the entire profession, when in fact scepticism about free trade is far more prevalent among economists from the ‘South’.

*In fact, Tim implicitly concedes that trade liberalisation can be bad for a country in the aggregate when he argues that agricultural subsidies can have an overall harmful effect and that “in highly rural societies (which most of them are, it�s one of the reasons they�re poor) I wouldn�t be surprised if the bad outweighed the good”. Since the cause of the harm is cheap imports I wonder why he doesn’t believe that trade liberalisation could have the same effect.

I’ve added a small correction and another amendment to this post on the International Policy Network’s report on aid.

Having read a lot of Branko Milanovic’s work on world inequality and recently seen him present some of it here in London, I highly recommend getting hold of a copy of his new book “World’s Apart: Measuring International and Global Inequality”. Here’s a description and here’s a PDF of the first few pages.