William Easterly spent many years working for the World Bank, and his personal experiences and observations enliven and enlighten the text of The White Man’s Burden at many points. He spent considerable time in Africa; his experiences there provide abundant evidence to support his position.
A startling diagram shows that, beginning in 1970, foreign aid to African countries escalated from about 5 percent of gross domestic product (GDP) to more than 15 percent in the mid-1990’s. Growth of per capita real income, which was averaging about 2 percent in the 1970’s, tumbled into negative figures by the mid-1980’s. The World Bank presented 2004 per capita income data for forty-two African countries. Of these, fifteen had annual per capita incomes under one thousand dollars, and these included the ten countries with the lowest incomes worldwide. Twelve African countries were among those countries receiving the most “structural adjustment” loans from international agencies from 1980 to 1999. Seven experienced declining per capita incomes, and only two recorded significant income growth. Easterly’s treatment invites comparison with Robert Calderisi’s The Trouble with Africa (2006), which is somewhat less pessimistic about reforming the aid programs.
Easterly cites several reasons why these types of foreign aid have been ineffective, either for stimulating growth or relieving poverty. Most of the impetus for aid comes from high-income countries, and the donors have had a preference for grandiose plans. The programs must work through host-country governments, many of which are incompetent at best and often brutal and corrupt: “So we had the world’s twenty-five most undemocratic government rulers . . . get a sum of $9 billion in foreign aid in 2002. Similarly, the world’s twenty-five most corrupt countries got $9.4 billion of foreign aid in 2002.” Aid has focused on construction projects such as highways but has included no support for maintenance and repairs to keep them in good shape.
Poor economic theory has been a major contributor to aid failure. For many years, aid programs accepted such false notions as belief that the poorest countries are stuck in a poverty trap from which they cannot emerge without an aid-financed “big push.” Materialist theories of economic growth assumed that a large quantity of capital expenditure would readily translate into output growth.
Easterly contrasts “planners” and “searchers.” Planners are remote from the people they are ostensibly trying to help and often lack accountability. They get paid whether or not their programs really work. Prototype searchers are free-market entrepreneurs who know they must match their offerings with the desires of their customers and make effective use of available resources. Searchers benefit personally when their activities are successful. Planners generate voluminous documents and meetings; their plans abound in grandiose and diverse objectives. Searchers focus on very limited objectives, such as promoting treatments for intestinal worms, training teenage paramedics, promoting microcredit, encouraging use of mosquito nets, paying parents to keep their children in school, introducing stoves that reduce indoor smoke, and persuading people to wash their hands with antibacterial soap.
Easterly is obviously a fan of private enterprise and free markets, but he insists that “you can’t plan a market.” This lesson was learned the hard way in the decommunization of Russia and the other former communist areas. Planners, backed by abundant loans, tried to navigate their clients through such pro-free-market reforms as privatization of former state enterprises, developing stock markets and other financial facilities, and attending to property rights and the legal system. Former Communist officials, however, were often in positions to hijack these measures in ways that lined their pockets but impoverished the economyand, in the process, discredited free markets.
Planners attached to international lending agencies generated extensive revision in legal codes in Eastern Europe with little feedback from the locals. Actual practice was either disrupted or managed to ignore the changes. Easterly concludes that “the West cannot design a comprehensive reform for a poor country that creates benevolent laws and good institutions to make markets work.” It took many centuries for the West to develop the institutions that now enable market economy to work so...
(The entire section is 1845 words.)