Our Word is Our Weapon

Two recent reports on Africa paint an apparently contradictory picture. Firstly, the OECD’s African Economic Outlook says that “recent economic prospects for Africa are looking more favourable than they have for a number of years”, with growth highest in eight years and projected to carry on that way in the short term. But on the other hand you’ve got the findings from the Afrobarometer survey, which interviewed tens of thousands of people from 14 African countries in 2005 and found that perceptions of poverty were no lower and more people than ever cited the lack of food security as their top concern:

In sum, the incidence of poverty in the African countries surveyed is more likely to be increasing than decreasing. People report that reliable supplies of cash income, food, and clean water are increasingly hard to secure.

What’s going on? Well, the OECD report does note that much of the growth is due to relatively high prices for metals and oil, which some African countries are fairly rich in (but not all, and oil importers in particular are going to find it increasingly difficult if prices stay high), rather than any particularly strong growth in agriculture. The people reporting having to go without food (a shocking 56% in 2005, up slightly from 2000) are probably not the same ones that work in the extractive industries, so this growth may be quite narrowly based. The OECD also speculate about the emergence of a two-speed Africa divided between those countries that export oil and those that import it, but the differences within countries are even greater.

In fairness, you could argue this is nothing new, and that those dependent on subsistence agriculture have always been much worse off. But there’s reason to believe their situation could get even worse in future:

• The severest impact of global warming is likely to be in sub-Saharan Africa, leading to an extra 50 - 90 million hectares of arid land by 2080 (in contrast, “industrialized countries on average stand to make gains in production potential as a result of climate change”, so no doubt we’ll get more idiots from those same industrialized countries telling us it isn’t a problem).
• AIDS is going to continue to take a terrible toll on the agricultural sector in particular.
• Lastly, recent research suggests that three-quarters of Africa’s soil is now severely depleted of nutrients - farming by the ever-growing population is “sucking the goodness out of the soil without putting anything back”.

All in all, I suspect ‘Africa’s food crisis‘ isn’t going to go away any time soon, and that will ultimately negate any increased earnings from higher prices for metals. Just about every reasonably sized poor country that has significantly reduced poverty has done it off the back of a major increase in agricultural productivity, and the same is going to have to happen in Africa.

Land reform in Africa is one of those tremendously important but dauntingly involved and complex subjects I really don’t know enough about to comment on, so I’ll just pass on a link to some interesting new work from the International Food Policy Research Institute, which they summarise as follows:

Land is one of the most important assets for millions of poor people in Africa. Equally critical are their rights to this land, which provide social and economic security and an incentive to use natural resources in a sustainable manner.

More than 30 percent of the land in Africa is jointly held by members of a group or community, making common property rights as important as individual rights. In many developing countries, giving individuals title to land has worked well. In Africa, however, titling has led to a weakening of land rights, especially for women and pastoralists, because so much of the land is held in common.

Land rights based solely on individualized ownership fail to acknowledge and respond to property arrangements found in many African communities, such as flexible boundaries based on customary law-the social rules of a community. These customary rights are often adapted to the local ecology and social system, so imposing exclusive ownership can cause disruption. For example, when land is divided as private property, people may lose access to water sources for their families or livestock.

IFPRI research has found that formal land titling does not guarantee more security than customary laws, and may even be a source of insecurity for impoverished households with limited access to government land registration. The poor in Africa rely heavily on common resources, such as forests and pastures, which are best secured by strengthening common property rights, not individual titles.

While customary laws can provide poor households with greater access to land and security, they too are in need of reform. In many African countries, women are prevented from owning and inheriting land because their property rights are often tied to their social relations with men. For example, some customary land registration systems require women to receive authorization from their husbands to independently acquire a land title. This is especially problematic for women who are unmarried, widowed, or divorced, and can limit women’s ability to grow food for their families. Strengthening women’s rights will require working with both state and customary laws.

There is no “one size fits all” solution to improving land rights in Africa. Recognizing the important role of common property and customary law in Africa’s development is vital. If ignored, future land reform policies will not succeed in improving the lives of the poor.

A while ago, I looked at state and private aid given in the wake of the Asian tsunami and concluded that in this case at least, the countries that gave more in state aid were also those where private citizens were generally the most generous, contrary to what the anti-aid brigade would like us to think.

Of course, that was just one quite extreme case, so does the same relationship hold when we look at all overseas aid, state and private? David Roodman and Scott Standley of the Center for Global Development went through the data and came up with this:

some argue that private assistance substitutes for foreign aid (Adelman 2003). Instead of relying on the government to allocate aid abroad, citizens make private decisions about the destination and use of their foreign assistance dollars. To examine this question, we plot the relationship between public net transfers per capita and average private giving per capita across our 21 DAC countries (Figure 12).

The data does not suggest that private charity serves as a substitute for public foreign aid. Indeed, private giving and public giving have a strong positive relationship. In a simple regression on log private giving per capita, the coefficient on log public net transfers per capita is 1.06 with a t-score of 3.33, which is significant at the 5% level.

Last week Harvard University hosted a conference on ‘Equality and the New Global Order’, with an great collection of speakers on some interesting topics. Jon Mandle has an excellent write-up at Crooked Timber and you can download many of the papers here.

One of the good things about William Easterly’s new book, which I’m reading at the moment, is that he often asks the right questions. The bad thing is that sometimes he seems to be deliberately avoiding the real answers.

Here’s an example - malaria. With hundreds of millions of people getting sick from it every year and a million dying annually in Sub-Saharan Africa alone, not to mention the economic costs, it exacts a horrifying toll, all the more so because it is preventable and treatable.

Easterly opens The White Man’s Burden with the following:

United Kingdom Chancellor of the Exchequer Gordon Brown is eloquent about one of the two tragedies of the world’s poor. In January 2005, he gave a compassionate speech [link] about the tragedy of extreme poverty afflicting billions of people, with millions of children dying from easily preventable diseases … He offered hope by pointing out how easy it is to do good. Medicine that would prevent half of all malaria deaths costs only twelve cents a dose. A bed net to prevent a child from getting malaria costs only four dollars …

Gordon Brown was silent about the other tragedy of the world’s poor. This is the tragedy in which the West spent $2.3 trillion on foreign aid over the last five decades and still had not managed to get twelve-cent medicines to children to prevent half of all malaria deaths. The West spent $2.3 trillion and still had not managed to get four-dollar bed nets to poor families …

Like I said, I think Easterly is asking the right questions here, but what’s his answer? Well, he doesn’t go into much detail, but appears to suggest that despite spending untold fortunes on trying to wipe out malaria, hapless ‘Planners’ simply failed to do the job because they lack the ‘incentives’ enjoyed by ‘Searchers’.

So just how much have Planners blown on their grandiose and overblown battle against malaria? Curiously, Easterly is completely silent on the subject, but is happy to let his readers conclude that it must be a sizable chunk of that $2.3 trillion. Which is strange, because the startling fact is that until just a few years ago the total amount of international aid dedicated to malaria control was in the range of $100 million annually. Think that sounds like a lot? Try sharing it out between prevention and treating the 300 - 500 million cases a year. Try comparing it to the estimated costs of a serious global malaria control campaign of $1.5 to $2.5 billion a year. In the last few years, funding for malaria control has increased signficantly and should go yet higher, though even then there is likely to still be an underspend compared to the real need.

So I think Easterly’s wrong to dismiss those in the aid community who have tried to fight malaria, because they were never really given a fighting chance. Only now is anything like enough funding coming through, and it is getting results - in Eritrea, for example, aid-funded bed-net distribution and indoor spraying has resulted in a huge 84% drop in malaria morbidity.

The real scandal that Easterly - and anyone else who cares about this issue, I think - should be angry about is not that vast fortunes were wasted on misguided Planner-led anti-malaria efforts, but that aid donors - our governments - seem to have attached such little importance to fighting malaria for so long.

In all the acrimony of the Easterly - Sachs debate, it’s important not to lose sight of what both Owen and Jonathan correctly identify as important common ground between the two on the need for more accountability and measurability in the distribution and spending of aid.

What’s more, I wonder whether if it wasn’t Sachs spearheading the Millennium Villages Project, Easterly would be a good deal more well-disposed to it. After all, while the funding and technology come from outside, it’s community-based, uses tools and techniques arrived out over years of experiment and evaluation, it’s the communities in the villages themselves who identify what needs to be done and carry out the work, all to be followed by no end of evaluation and ‘participatory appraisal’.

Actually, maybe Easterly wouldn’t like it so much, because it shows how unhelpful his ‘Planners vs Searchers’ dichotomy is. The people in the MVP villages who identify what needs to be done are surely Searchers, as are the scientists who have discovered the fertilisers, tools and so on that will have the most impact. But the MVP approach involves the simultaneous application of a wide range of ‘interventions’, because each one feeds off and spills over into others - for example, increased harvests due to more fertilisers means local kids get free meals at school, which means better attendance. Doing all this piecemeal wouldn’t have the same effect, but the co-ordinated, that is to say Planned, approach seems (if early indications are anything to go by) to be paying off, according to The Economist:

Progress is most advanced in Sauri, the first Millennium village. There, committees of elders (and some not so elderly) have taken responsibility for almost every innovation, proving themselves to be competent and resourceful. According to Glenn Denning, of the Millennium Project’s Nairobi office, the incidence of malaria in Sauri has dropped by at least 50% since the distribution of free bed nets. Food yield has more than doubled and villagers say that everyone can now find at least a little to eat. A school feeding programme, whereby farmers give a portion of their harvest to the village schools, has had a dramatic effect. Children stay in school longer and, with a bowl of maize and beans in their belly, are able to concentrate. Since school feeding began, Sauri has risen from 108th to 2nd in district exam results, out of 253 schools.

But Owen is also quite correct to say that the fundamental issue is whether any successes in these initial villages can be ’scaled up’ to help the millions of people in dire poverty in Africa. He’s very sceptical, perhaps rightly so, but I wonder whether this is an area where Sachs will succeed by taking a leaf out of Easterly’s book. Obviously the various illustrious scientists who are working in the first few villages are not expected to cover the thousands that are eventually hoped to carry the project forward, so the transfer of knowledge and technique involved will have to happen through local people. Mightn’t there be a role for market-type incentives here? If the first villages earned some income for every person they trained who went on to set up a succesful ‘Millennium Village’ elsewhere, and those second generation villages earned an income for every further MVP starter-upper they in turn trained, and if these ‘trainees’ were paid by the villages according to the success or otherwise of their work, there could be powerful incentives at individual and community levels to make sure scaling up worked. And even more amazingly, maybe we could finally get Easterly and Sachs to agree on something.

I had no idea that the debate on aid between William Easterly and three discussants I posted on recently subsequently went on and on and on. One of the frustrations of trying to follow academic ‘conversations’ through the established journals is that they tend not to get beyond a first response, partly because of the long time lags involved, so fair play to Cato Unbound for giving these guys space to argue themselves hoarse in just a couple of weeks.

As I said before, I found Steve Radelet’s critique of Easterly’s arguments on aid convincing. By contrast, Easterly replies to him with a pretty shabby display of straw-manism. Radelet responds himself, but I thought I’d go through Easterly’s points one by one.

The most spirited part of the debate is provided by Dr. Radelet. I hardly need to argue with Dr. Radelet, as he spends most of the time arguing with himself. Aid amounts to virtually nothing, yet accomplishes miracles of raising growth and saving lives.

Radelet didn’t say anything about miracles. He said aid boosts growth significantly, but not hugely, and has saved millions of lives through improved health.

Aid is doing just fine, but needs to be drastically reformed anyway.

No. Aid has done surprisngly well, considering donors handle it so badly and much was deliberately wasted. Some fairly straightforward reforms (like these) should make it work even better.

Aid should not go to middle income countries, except he celebrates middle income “aid success stories” like Korea and Botswana.

They only became middle-income countries after years of high aid and high growth.

We should judge on the basis of econometric evidence on average results, except for when he can selectively use data points to support his case.

As well as providing strong statistical evidence, Radelet points out the most notable examples that disprove Easterly’s own sweeping generalisations, so maybe he should try to be a bit more nuanced in his own remarks.

Facts should be used instead of rhetoric, except when he feels the need for ad hominem attacks.

Diddums! Radelet just exposes the sloppiness of Easterly’s argument - hardly an ad hominem assault.

We should suppress the debate on aid for the sake of the cause, except for presenting his side of the debate.

He doesn’t say that.

I should not use unpublished studies, except for Radelet’s own unpublished study.

What unpublished study is that? Radelet’s study is public and well-known.

Scientific methods should be used to judge aid’s effects on growth, except for searching across every possible statistical specification until you get the “right” result (which promptly falls apart when other researchers try to replicate it.)

Researchers have not tried to replicate those results, so they have not ‘fallen apart’. For example, Rajan and Subramanian explicitly say “we have not replicated [Radelet et al’s] results using their specification and covariates”.

Aid does have positive effects on growth, yet aid donors have mysteriously overlooked this positive potential and allowed Africa to stagnate for decades.

It’s not that mysterious when you think about it - donor countries are stingy, and the evidence showing the positive impact of aid has only started to emerge in the last decade or so.

Aid does have positive effects on growth, except in Radelet’s own “diminishing returns” study in which the most aid-intensive countries have a zero or even negative effect of additional aid on growth.

Nonsense, which Easterly repeats in his book, where he claims that the Radelet study finds aid having a negative impact above 8% of GDP. This is appears to be a wilful misinterpretation, and Radelet and his co-authors explain why here:

Are there limits on how much early impact aid typical recipients can absorb? The answer appears to be yes, but the maximum growth rate occurs on average when early impact aid represents 8–9 percent of GDP, more than three times the typical amount. As a rule of thumb, since early impact aid is slightly more than half of total aid on average, this implies that the maximum growth rate occurs when total aid reaches around 16–18 percent of GDP in the typical country. This does not mean that in any particular country, aid flows greater than this amount are necessarily a bad idea. Instead, this represents the typical pattern over the last 30 years—some countries can absorb more, and others less. Moreover, we find that absorptive capacity depends to some extent on the quality of institutions and general health of the population. In countries with stronger institutions and higher life expectancy, the impact of early impact aid is stronger throughout, and more aid can be absorbed before reaching the maximum growth rate.

In summary, not a particularly impressive defence.

As long as they’re unable to get a comments system up and working for more than a day at a time, I suppose I’ll have to keep recording my comments on the Globalisation Institute’s blog posts here. One thing that caught my eye recently was this remark of Alex Singleton’s:

Africa, after all, has received six Marshall Plans of foreign aid and its economy has stagnated

A fine example of Easterly’s Fallacy. In fact, the best available evidence says that the African countries that struggled through the last 25 years or so would have done even worse without the aid they received. After all, it’s not like everything else was going swimmingly in Africa at the time - or has Alex forgotten about the debt crisis, the collapse in commodity prices, the AIDS epidemic and the odd genocidal conflict or two?

If he wants to be taken seriously on development issues, Alex really needs to stop complaining about left-wing NGOs stealing all his limelight and start reading stuff like this quick dismantling of Easterly’s arguments on aid and this handly list of aid fallacies.

It’s funny, but in almost the same breath that that they have been using to denounce (with what seems to be increasing urgency and even desperation) John Kenneth Galbraith as irrelevant AND a threat to the western civilization AND a commie-lover, the blogosphere’s free-marketeers can’t help but remind me how right he was about many things (though certainly not all) and how relevant he remains.

Take the twin anti-May Day rants unleashed by the Adam Smith Institute and Tim Worstall. First Madsen Pirie informs us without qualification that is only “the wealth-generating power of capitalism” that has improved workers’ lots, presumably as opposed to all that nasty freedom-stifling stuff like paid holidays, maternity leave, workplace safety regulation, pensions, anti-discrimination laws and so forth.

At least Tim Worstall is a little more honest, if only by accident: after lengthily explaining how only markets can be given any credit for “the enrichment of that very working class over recent centuries”, he can’t help but add a rather important proviso:

Free markets make us all richer all the time. Note, please, that “free” in there. We do indeed have to be vigilant about encroachments upon that free part. The creation of monopolies over the supply of an item, whether it be labour, capital, land, goods, whatever, need to be guarded against.

Right, so only free markets enrich everyone. So, that wouldn’t include a market characterised by monopsony in motion, asymmetrical information and high search costs, then? The labour market, in other words?

The funny thing is, Tim has basically explained exactly why labour unions were and are needed, and why they have achieved so much. Because the labour market is so far from being free that it gives bosses the power to bully, rip off and exploit workers. The rational response to such concentrations of power is for workers to band together to get what’s coming to them. Which is just what happened.

Now, what’s this got to do with JK Galbraith? Well, unions are a very good example of a reformist institution that moves us further away from a ‘free’ market but, crucially, also makes actual Marxist / communist / socialist revolution that much more unlikely by improving the lives of workers ‘within’ the system. And this is a process that Galbraith describes very well in his “History of Economics“:

The Marxian system itself had obvious points of vulnerability, and these were to prove serious and decisive. There was, first of all, the threat posed to it by reform, the possibility that the hardships of capitalism would be so mitigated that they would no longer arouse the revolutionary anger of the workers … In an extraordinarily logical response to Marx, the later development of the welfare state, the support for mass education, the abolition of child labour and the Keynesian attack on the capitalist crisis would all address the points of capitalist vulnerability he identified. All of these steps against Marx, it might be added, would in their time be accorded a measure of condemnation as being themselves Marxist.

Quite. Nothing wins support for revolution like genuinely unfettered capitalism. Instead of loudly denouncing Galbraith and his reformist ilk, the free-marketeers should really be grateful for being saved from a fate even worse than social democracy.

“Increasingly in recent times we have come first to identify the remedy that is most agreeable, most convenient, most in accord with major pecuniary or political interest, the one that reflects our available faculty for action; then we move from the remedy so available or desired back to a cause to which that remedy is relevant.”

Sometimes John Kenneth Galbraith’s writing reminds me more of Joseph Heller than anyone else. He was the closest thing to a satirist economics had (something it badly needed, and still does). I like to think one of his main legacies, like Jane Jacobs who went the same way only a few days ago, will be to have demonstrated the importance of mischief in any form of social science.

Already various spots in the blogosphere feature attempts to ensure Galbraith is remembered only as an embarassing fan of the Soviet economic system, the point being to discredit the New Deal and indeed every other kind of government intervention in the economy. Exhibit A seems to be the following isolated quote from a 1984 article in the New Yorker: “Partly, the Russian system succeeds because, in contrast to the Western industrial economies, it makes full use of its manpower.”

Without seeing the rest of the article, I can’t tell whether Galbraith really overstated the achievements of the Russian system. But he could have been forgiven for doing so, since at that point average incomes had grown significantly faster since WWII in the USSR than they had in the US, albeit from a lower level (see Angus Maddison’s data here). One of the few strengths of an otherwise bad system was this output growth, and one of the others was full employment. The decline in health and morale associated with the rise of unemployment in the former Soviet states after the collapse of the system suggests having a job, even a bad or boring one, is very important for general well-being. A similar point was made by Amartya Sen here, ironically in the kind of critique of the French social model that you would expect free-marketeers to support.