[Paleopsych] William Easterly: The Utopian Nightmare

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William Easterly: The Utopian Nightmare
http://www.foreignpolicy.com/story/cms.php?story_id=3193&print=1
September/October 2005

This year, economists, politicians, and rock stars in rich countries
have pleaded for debt relief and aid for the worlds poorest countries.
It certainly sounds like the right thing to do. But utopian dreams of
alleviating poverty overlook some hard facts. By promising so much,
rich-world activists prolong the true nightmare of poverty.

The past has prepared all the materials and means in superabundance to
well-feed, clothe, lodge, train, educate, employ, amuse, and govern
the human race in perpetual progressive prosperitywithout war,
conflict, or competition between nations or individuals.

These words were not uttered by a hopeful world leader at the most
recent Group of 8 (G-8) summit, or by Bono at a rock concertbut they
certainly sound familiar. They were written in 1857, when British
reformer Robert Owen called upon rich countries, who could easily
induce all the other governments and people to unite with them in
practical measures for the general good all through futurity. Owen was
laughed out of town as a utopian.

How comforted Owen would be if he were alive in 2005, when some of the
most powerful and influential people seem to believe that utopia is
back. American President George W. Bush has dispatched the U.S.
military to spread democracy throughout the Middle East, G-8 leaders
strive to end poverty and disease sometime soon, the World Bank
promises development as the path to world peace, and the International
Monetary Fund (IMF) is trying to save the environment. In a world
where billions of people still suffer, these are certainly appealing
dreams. But is this surprising new fondness for utopia just harmless,
inspirational rhetoric? Are utopian ambitions the best way to help the
poor-world majority?

Unfortunately, no. In reality, they hurt efforts to help the worlds
poor. What is utopianism? It is promising more than you can deliver.
It is seeing an easy and sudden answer to long-standing, complex
problems. It is trying to solve everything at once through an
administrative apparatus headed by world leaders. It places too much
faith in altruistic cooperation and underestimates self-seeking
behavior and conflict. It is expecting great things from schemes
designed at the top, but doing nothing to solve the bigger problems at
the bottom.

The Year of Living Utopianly

At the dawn of the new millennium, the United Nations realized Robert
Owens dream of bringing together the Potentates of the Earth in what
the global organization called a Millennium Assembly. These potentates
set Millennium Development Goals for 2015, calling for, among other
things, dramatic reductions in poverty, child mortality, illiteracy,
environmental degradation, AIDS, tuberculosis, malaria, unsafe
drinking water, and discrimination against women.

But it is in 2005 that utopia seems to have made its big breakthrough
into mainstream discourse. In March, Columbia University Professor
Jeffrey Sachs, celebrity economist and intellectual leader of the
utopians, published a book called The End of Poverty, in which he
called for a big push of increased foreign aid to meet the Millennium
Development Goals and end the miseries of the poor. Sachs proposes
everything from nitrogen-fixing leguminous trees to replenish soil
fertility to antiretroviral AIDS therapy, cell phones that provide
up-to-date market information to health planners, rainwater
harvesting, and battery-charging stations. His U.N. Millennium Project
proposed a total of 449 interventions.

British Chancellor of the Exchequer Gordon Brown likewise called in
January for a major increase in aid, a Marshall Plan for Africa. Brown
was so confident he knew how to save the worlds poor that he even
called for borrowing against future aid commitments to finance massive
increases in aid today. At the World Economic Forum in January,
British Prime Minister Tony Blair called for a big, big push to meet
the goals for 2015, and his administration issued a fat report on
saving Africa in March. The World Bank and the IMF issued their own
weighty document in April about meeting these goals and endorsing the
call for a big push, and utopians of the world will reconvene at the
U.N. World Summit in September to evaluate progress on the Millennium
Development Goals. The G-8 leaders agreed on a plan in June to cancel
$40 billion worth of poor-country debt to help facilitate the push.
The IMF might even tap its gold reserves to bolster the effort.

The least likely utopian is George W. Bush, who has shown less
interest in vanquishing poverty, but has sought to portray the Iraq
misadventure as a step toward universal democracy and world peace. As
he modestly put it in his Second Inaugural Address in January 2005,
America, in this young century, proclaims liberty throughout all the
world, and to all the inhabitants thereof.

These leaders frequently talk about how easy it is to help the poor.
According to Brown, medicine that would prevent half of all malaria
deaths costs only 12 cents per person. A bed net to prevent a child
from contracting malaria costs only $4. Preventing 5 million child
deaths over the next 10 years would cost just an extra $3 for each new
mother, says Brown.

The emphasis on these easy solutions emerged as worry about terrorist
havens in poor states intersected with the campaigning on the part of
Sachs, Bono, rocker Bob Geldof, and the British Labourites. All these
factions didnt seem to realize aid workers had been trying for years
to end poverty.

All Talk, No Traction

We have already seen the failure of comprehensive utopian packages in
the last two decades: the failure of shock therapy to convert the
former Soviet Union from communism to capitalism and the failure of
IMF/World Bank structural adjustment to transform nations in Africa,
the Middle East, and Latin America into free-market paragons. All of
these regions have suffered from poor economic growth since utopian
efforts began. In the new millennium, apparently unchastened, the IMF
and World Bank are trying something even more ambitioussocial,
political, economic, and environmental transformation of the poorest
nations through Poverty Reduction Strategy Papers. These reports,
which the IMF and World Bank require that governments design in
consultation with the poor, are comprehensive plans to make poverty
vanish in each nation. It is a little unclear how a bureaucratic
document can make often undemocratic governments yield some of their
power to the poor, or how it will be more successful than previous
comprehensive plans that seem modest by comparison.

Indeed, we have seen the failure of what was already a big push of
foreign aid to Africa. After 43 years and $568 billion (in 2003
dollars) in foreign aid to the continent, Africa remains trapped in
economic stagnation. Moreover, after $568 billion, donor officials
apparently still have not gotten around to furnishing those 12-cent
medicines to children to prevent half of all malaria deaths.

With all the political and popular support for such ambitious
programs, why then do comprehensive packages almost always fail to
accomplish much good, much less attain Utopia? They get the political
and economic incentives all wrong. The biggest problem is that the
rich people paying the bills do not share the same goals as the poor
people they are trying to help. The wealthy have weak incentives to
get the right amount of the right thing to those who need it; the poor
are in no position to complain if they dont. A more subtle problem is
that if all of us are collectively responsible for a big world goal,
then no single agency or politician is held accountable if the goal is
not met. Collective responsibility for world goals works about as well
as collective farms in agriculture, and for the same reason.

To make things worse, utopian-driven aid packages have so many
different goals that it weakens the accountability and probability of
meeting any one goal. The conditional aid loans of the IMF and World
Bank (structural adjustment loans) were notorious for their onerous
policy and outcome targets, which often numbered in the hundreds. The
eight Millennium Development Goals actually have 18 target indicators.
The U.N. Millennium Project released a 3,751-page report in January
2005 listing the 449 intermediate steps necessary to meet those 18
final targets. Working for multiple bosses (or goals) doesnt usually
work out so well; the bosses each try to get you to work on their goal
and not the other bosss goal. Such employees get overworked,
overwhelmed, and demoralizednot a bad description of todays
working-level staff at the World Bank and other aid agencies.

Top-down strategies such as those envisioned by President Bush, Prime
Minister Blair, and Bono also suffer from complex information
problems, even when the incentive problems are solved. Planners at the
global top simply dont know what, when, and where to give to poor
people at the global bottom.

That is not to say that it is impossible to meet multiple goals for
multiple customers with multiple agents. The various needs of the rich
are met easily enough by a system of decentralized markets and
democracy, which utilize feedback from the customers and
accountability of the suppliers. Rich, middle-aged men can buy Rogaine
to grow hair on their heads, while women can buy Nair to get rid of
hair on their legs. No Millennium Development Goal on Body Hair was
necessary. The Rogaine and Nair corporations are accountable to their
customers for satisfaction. If the customers dont care for the
product, the corporations go out of business; if the customers do like
the product, corporations have a profit incentive to supply it.
Similarly, men and women in wealthy countries can complain to
democratically accountable bureaucrats and politicians if garbage
collectors do not pick up their discarded Rogaine and Nair bottles.
Private markets also specialize; there is no payoff for them to
produce a comprehensive product that both removes hair from womens
legs and transfers it to mens heads. The irony of the situation is
tragically obvious: The cosmetic needs of the rich are met easily,
while the much more desperate needs of the poor get lost in
centralized, utopian, comprehensive planning.

Poverty Starts at Home

Free markets and democracy are far from an overnight solution to
povertythey require among many other things the bottom-up evolution of
the rules of the game, including contract enforcement and fair
political competition. Nor can democratic capitalism be imposed by
outsiders (as the World Bank, IMF, and U.S. Army should now have
learned). The evolution of markets and democracy took many decades in
rich countries, and it did not happen through big pushes by outsiders,
Millennium Development Goals, or Assemblies of World Leaders. Progress
in wealthy countries arrived through piecemeal steps, gradual reforms,
incremental improvements, and experimental probing, accompanied by
gradually accelerating economic growth, rather than through crash
programs.

The problems of the poor nations have deep institutional roots at
home, where markets dont work well and politicians and civil servants
arent accountable to their citizens. That makes utopian plans even
more starry-eyed, as the big push must ultimately rely on
dysfunctional local institutions. For example, there are many weak
links in the chain that leads from Gordon Browns 12-cent malaria drug
to actual health outcomes in poor countries. According to research by
Deon Filmer, Jeffrey Hammer, and Lant Pritchett at the World Bank,
anywhere from 30 percent to as much as 70 percent of the drugs
destined for rural health clinics in several African countries
disappear before reaching the clinics. According to one survey in
Zimbabwe, pregnant women were reluctant to use public health clinics
to give birth because nurses ridiculed them for not having better baby
clothes, forced them to wash bed linens soon after delivery, and even
hit them to encourage them to push the baby out faster during
delivery. And Africa is not alonenearly all poor countries have
problems of corrupt and often unfriendly civil servants, as todays
rich countries did earlier in their history. Researchers find that
many people in poor countries bypass public health services
altogether, in favor of private doctors or folk remedies.

The poor have neither the income nor political power to hold anyone
accountable for meeting their needsthey are political and economic
orphans. The rich-country public knows little about what is happening
to the poor on the ground in struggling countries. The wealthy
population mainly just wants to know that something is being done
about such a tragic problem as world poverty. The utopian plans
satisfy the something-is-being-done needs of the rich-country public,
even if they dont serve the needs of the poor. Likewise, the Bush
Doctrine soothes the fears of Americans concerned about evil tyrants,
without consulting the poor-country publics on whether they wish to be
conquered or democratized.

The something-is-being-done syndrome also explains the fixation on
money spent on world poverty, rather than how to meet the needs of the
poor. True, doubling the relatively trivial proportion of their income
that rich Westerners give to poor Africans is a worthy enough cause.
But lets not kid ourselves that spending more money on foreign aid
accomplishes anything by itself. Letting total aid money stand for
accomplishment is like the Hollywood producers of Catwoman, recently
voted the worst movie of 2004, bragging about their impressive
accomplishment of spending $100 million on its production.

The Way Out

Certainly not all aid efforts are futile. Instead of setting utopian
goals such as ending world poverty, global leaders should simply
concentrate on finding particular interventions that work. Anecdotal
and some systematic evidence suggests piecemeal approaches to aid can
be successful. Routine childhood immunization combined with measles
vaccination in seven southern African nations cut reported measles
cases from 60,000 in 1996 to 117 in 2000. Another partnership among
aid donors contributed to the near eradication of guinea worm in 20
African and Asian countries where it was endemic. Abhijit Banerjee and
Ruimin He at the Massachusetts Institute of Technology list examples
of successful aid programs that passed rigorous evaluation: subsidies
to families for education and health costs for their children,
remedial teaching, uniforms and textbooks, school vouchers, deworming
drugs and nutritional supplements, vaccination, HIV prevention, indoor
spraying for malaria, bed nets, fertilizer, and clean water.

Of course, finding and maintaining piecemeal approaches that work well
requires improving incentives for aid agencies. Better incentives
might come from placing more emphasis on the independent evaluation of
aid projects. Given the vast sums that are being spent, reliable
evaluations remain surprisingly rare. Better incentives could also
come from devising means to get more feedback from the poor people
that the programs are trying to help, and holding aid agencies
accountable when the feedback is negative. It seems more productive to
focus on such critical problems in foreign aid rather than simply
promising the rich-country public the end of world poverty.

If an aid-financed big push will not generate society-wide
development, are things hopeless for poor countries? Fortunately, poor
countries are making progress on their own, without waiting for the
West to save them. The steady improvement in health and education in
poor countries (except for the AIDS crisis), the market-driven growth
of China and India, the movement toward democracy in Latin America and
Africa (even amid continued disappointing economic growth), not to
mention earlier successes such as Botswana and the East Asian Tiger
economies, offer hope for homegrown and gradual development.

The outpouring of donations for last Decembers tsunami victims shows
that Europeans and Americans have genuine compassion for those in
need. Can the rich-country public call their politicians bluff and
refuse to let them get away with utopian dreams as a substitute for
the hard slogging of delivering benefits to the poor? Will they hold
the aid agencies accountable for getting money to those in need? Will
they figure out new ways to give voice to the voiceless? If they
asked, they would likely find that the poor are unmoved by utopian
dreams. They probably just want those 12-cent medicines.

William Easterly is professor of economics at New York University,
nonresident fellow at the Center for Global Development, and author of
The Elusive Quest for Growth: Economists Adventures and Misadventures
in the Tropics (Cambridge: MIT Press, 2001).