Mugged by reality:

  This book is about $2.3 trillion in foreign aid dispensed over the last five decades with few benefits and much harm to show for it. It is written by an author who had been ardently involved in top-down Big Plan efforts. He explains that he was mugged by reality and could no longer ignore the futility of the Big Plan efforts he was engaged in.
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  "The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good," by William Easterly, is a story familiar to FUTURECASTS readers. See, Government Futurecast at Part II, "Government management," and Paul Theroux, "Dark Star Safari," It is about the inevitable failures of  distant top-down "Planners," aid bureaucracies and  governments. Here is a typical explanation of why vast well-meaning aid bureaucracies can't even get 12¢ doses of life-saving medicines to African children who suffer from malaria.

  "So for the twelve-cent medicines, the Planners are distracted by simultaneously doing the other 448 [foreign aid] interventions; they don't have enough local information to know how many children in each locale have malaria and how many doses of medicine are needed at each of the myriad health clinics; they don't have agents motivated to get those doses there; the local health workers are poorly paid and poorly motivated; many different aid agencies are doing many interventions on the health system and on malaria; nobody knows who or what to blame if the twelve-cent medicines are out of stock in the local health clinic and do not reach the dying children; and the local parents don't even have a way of communicating to the Planners whether the medicines have reached them."

  Markets, of course, have no trouble whatsoever with such problems. Markets facilitate the efforts of "Searchers" who respond to the opportunities that they find in front of them so that, as a result of the efforts of a mass of Searchers acting on their own, supplies flow efficiently to satisfy needs and desires. Of course, the poverty stricken in Africa and in other undeveloped third world nations have no funds with which to access market goods. Unfortunately, because there are so few Searchers in the aid bureaucracies, it is mostly the aid bureaucracies themselves and corrupt local officials that benefit from aid funds.
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  Nevertheless, the foreign aid Planners keep coming up with one top-down plan after another for  doing great things with massive foreign aid programs. They denigrate as "heartless" those who doubt their plans, and suffer no consequences when each plan inevitably fails.

  "Poor people die not only because of the world's indifference to their poverty, but also because of ineffective efforts by those who do care. To escape the cycle of tragedy, we have to be tough on the ideas of the Planners, even while we salute their goodwill."

Universal access to clean water was to be achieved in 1990. Universal primary school enrollment was to be achieved in 2000. Nothing has happened - and there were no consequences for the failures of the planning bureaucracy.

The Planners mentality remains as always: "applying a simplistic external answer from the West to complex internal problems in the Rest."

  The United Nations is the quintessential top-down Big Plan agency. With its colossal hubris and total ignorance of local conditions, it has repeatedly set vast noble goals that have wasted decades and tens of billions of dollars with no accountability for failure and no effort to learn from previous mistakes. Universal access to clean water was to be achieved in 1990. Universal primary school enrollment was to be achieved in 2000. Little has happened - and there were no consequences for the failures of the planning bureaucracy. Those goals have just been folded into subsequent sets of additional goals - now set to be realized by 2015 and achieved by the expenditure of twice as much money. (Anyone want to make a bet?)
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  When current plans achieve little, with vast wastage of money and loss of precious time, there will still be no adverse consequences for the "Planners." The Planners mentality remains as always: "applying a simplistic external answer from the West to complex internal problems in the Rest."
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  There has been more than six decades of big foreign aid plans and vast expenditures by big government foreign aid bureaucracies and numerous private charities. If poverty could be dealt with by such top-down big plans and outside interventions, the author asserts, it already would have been eliminated - or at least substantially reduced.
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   This doesn't mean that aid agencies are useless, Easterly carefully emphasizes. If they just recognized their substantial limitations, they could concentrate on the many lesser objectives that they might actually accomplish. Easterly mentions a variety of examples that are within reach. They are not Big Plan cure-alls but useful specific objectives that would actually help needy people - like dispensing cash subsidies to parents who keep children in school. Easterly describes how a local scheme to sell mosquito nets to poor mothers at a subsidized price achieved substantial success in Malawi while the usual top-down approach of just giving them away in Zambia failed.
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  "Utopian social engineering" efforts have a long history of failure, Easterly notes, while individual economic market responses and piecemeal political response to local needs in democratic states continuously achieve substantial advances. The former are devised by top-down "Planners" while the latter are the result of continuous efforts by innumerable "Searchers" constantly seeking better solutions for achieving innumerable individual objectives. Jeffrey Sachs, an economist widely active as a Big Plan advocate,  is viewed as the quintessential top-down Big Planner who is never embarrassed by his participation in a growing list of failures.
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  The particular demands of their constituents for particular solutions to particular problems forces democratic political leaders to be Searchers for particular solutions at home, but outside aid agencies with little concern for the particular concerns of their intended beneficiaries generally opt for grandiose top-down plans. "Democratic politics is about searching for piecemeal solutions." Economic, social and political complexity always thwarts grand utopian social engineering plans.
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Distant top-down Planners receive little feedback and are generally divorced from the consequences of failure.

  Feedback and accountability are two factors that underlie the success of economic markets and democratic politics. Distant top-down Planners receive little feedback and are generally divorced from the consequences of failure. Searchers for particular answers need to be close to their customers. Planners reside in distant, comfortable offices.

  "Lack of feedback is one of the most critical flaws in existing aid. It comes about because of the near-invisibility of efforts and results by aid agencies in distant parts of the world."

  However, feedback must generate appropriate response. Markets impose accountability on suppliers and force appropriate response to feedback. Some measure of accountability is also imposed on government officials and politicians by democratic politics. There is no accountability for foreign aid Planners, and they often fail to seek or respond to feedback.

  "Feedback guides democratic governments toward supplying services that the market cannot supply, and toward providing institutions for the market to work."

  Thus, the author encourages a shift among aid agencies from grand Planners to Searchers who develop and are accountable for particular responses to particular problems.

  "Aid workers now tend to be ineffective generalists; accountability would make them into more effective specialists."

Big Plan advocates:

  There are many working-level people in aid agencies who are in fact Searchers who acknowledge the particular needs of the people they work amongst and sometimes do good work responding to those needs. Unfortunately, it is the distant Planners who direct assistance budgets and "foist on these workers these plans, taking money, time, and energy away from doable actions" that would meet the particular needs that the workers have become aware of. Aid agencies do achieve considerable success when they concentrate on particular needs - like drilling and maintaining local wells or building and maintaining local roads or sewerage systems or distributing food or medicine in particular places where they are needed.
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  The writings of Jeffrey Sachs and the 19th century utopian socialist Robert Owens are compared side by side by Easterly. They both use remarkably similar language in advocating big utopian plans. Such plans are no longer just unfortunate local failures. They are no longer just the tragedies expected in socialist nations. They absorb both financial and human resources in infeasible tasks and divert them from "the feasible tasks that will do some good."
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  The long, generally miserable history of Western efforts to raise "the Rest" out of poverty and misery is sketched by Easterly. Despite some broad success - such as the ending of the slave trade - it is a history of Western conceit, self-serving interventions, and failure. (There is still a considerable slave trade for sexual exploitation.)
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  Now, it is the "development expert" who develops assistance policy where in the past it was the missionary and colonial officer. Development experts always grossly underestimate the cost of their grandiose plans. The Truman administration thought $2 billion would be enough to end world poverty. Walter Rostow in 1960 thought $3 billion would be enough. (This would be about $7 or $8 billion in today's inflated dollars.)
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  A history of past failures running well back into 19th century liberal imperial theory is always conveniently ignored by the assistance community. Often, assistance Plans are diverted by conflict strategy - as during the Cold War, and today during the War on Terror. An alphabet soup of agencies has been developed and tasked with administering assistance programs. The principle beneficiaries of their long efforts have been their own executives and employees. Easterly offers USAID, DFID, AFDB, ADB, UNDP, FAO, ILO, UNICEF as a partial list. Hoards of diplomats and advisors are also involved. Poor country "development" has become an academic field employing a cadre of academics and occupying the attention of their students.
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  Gunnar Myrdal became famous advocating Big Plan assistance programs. Peter Bauer, in the 1950s, presciently predicted the failure of the Big Plan approach and explained why it must fail, but remains little acknowledged.

  "The fallacy is to assume that because I have studied and lived in a society that somehow wound up with prosperity and peace, I know enough to plan for other societies to have prosperity and peace."

  This is today's version of "The White Man's Burden" conceit. It is not universal among assistance agency leadership, Easterly carefully notes, but it is powerful enough to guide policy. This "patronizing mind-set" and approach must be abandoned, he explains.
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  Some poor nations have, of course, succeeded in moving out of the third world status of undeveloped poor nations. They have undertaken the task of helping themselves and have moved into a second world of developing nations - often with astounding success. Hong Kong, S. Korea, Singapore, Taiwan, China, India and others have lifted more people out of poverty than all the Western aid plans combined. They did this "through the efforts of many decentralized agents participating in markets -- the ideal vehicle for feedback and accountability." (italics in original).

  "The main hope for the poor is for them to be their own searchers, borrowing ideas and technology from the West when it suits them to do so."

  Western aid is clearly not the answer for successful development. For Easterly (as for Robert Guest in "The Shackled Continent," see segments on the "Importance of government" and "Foreign aid,") Botswanna is a poster child for successful development. This small landlocked African country has achieved a 6% per capita growth rate since 1960. Per capita aid has been a trivial influence. An effective democracy has been a major influence.

  "Acknowledging that development happens mainly through homegrown efforts would liberate the agencies of the West from utopian goals, freeing up development workers to concentrate on more modest, doable steps to make poor people's lives better."

The "Poverty Trap" myth:

  According to this myth, they need a "big push" from the aid community led by the Big Planners to get them out of their poverty trap. However, reality perversely refuses to conform to this theory. There are too many examples of the poorest nations advancing quite nicely and rapidly out of poverty with little or no foreign assistance. Botswana, Lesotho, China and India have been growing nicely in recent years without significant foreign assistance. Chad and Zaire/Democratic Republic of Congo had no growth or have actually declined despite massive assistance interventions.
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  From 1985 to 2001, growth amongst the poorest nations stopped. However, this was not due to some mythical poverty trap. This was because eleven of the 28 poorest nations grew enough to escape the lowest 20% group. They were replaced by nations that had originally been better off but that had for some reason been declining into poverty, thus filling the lowest 20% group with nations that make no effort to help themselves. The nations now in the lowest 20% group are self-selected to be there.
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  Moreover, studies have found considerable savings even in the poorest countries. "The reasons countries stay poor must lie elsewhere."
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Bad government:

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A "Big Push" aid program won't work if the problem is bad government and widespread corruption.

  However, the corruption ratings from the International Country Risk Guide and a University of Maryland "Polity IV" rating on democracy correlate well with growth rates. The worst performing states on the governance ratings are the slowest growers. A "Big Push" aid program won't work if the problem is bad government and widespread corruption.

  "The recent stagnation of the poorest countries appears to have more to do with awful government than with a poverty trap, contrary to the UN/Sachs hypothesis."

  Indeed, foreign assistance in Africa for the 1990s averaged an astounding 15% of recipient GDP even as growth rates plummeted from almost 2% to negative. This constituted a massive increase in the levels of assistance from the 7% of GDP provided in the 1970s. Easterly rejects the notion that this massive increase in outside interventions caused the decline in growth rates, but at least there has been no evidence that foreign aid can support economic growth.
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Confirmation bias:

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  The recent U.S. assistance policy shift in favor of countries with the best governance was based on a study showing a correlation between the effectiveness of aid and the quality of governance. Easterly repeated that study with additional data now available and found no such correlation. However, aid plans are still proceeding on the assumption that there is such a correlation.

  At least there won't be the embarrassment of no growth. There will be economic growth in reasonably governed states with or without outside assistance, so the Planners can claim victory.

  The success of "short impact aid" designed to have an immediate impact on growth was highlighted by another study. It reasonably excluded humanitarian assistance and "long impact aid" for health and education that was not designed to achieve immediate improvements in economic development. Unfortunately, subsequent examination has found this study faulty, but the aid community nevertheless continues to plan on the basis of this study.
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  The lack of correlation between aid and economic growth is found to apply to multilateral aid as well as to bilateral aid that is generally tied to political considerations. It applies even to aid from Scandinavian countries renowned for the lack of strings attached to their generous aid programs.
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  Moreover, the more assistance received, the less recipient growth has been achieved. The "Big Push" theory, too, thus has no support in the evidence. The figures indicate that when assistance reaches 8% of GDP, it has no impact on growth, and assistance above that level has a "negative" effect on GDP. For twenty seven states that received aid receipts over 8% of GDP, there has been a "negative" impact on GDP from the additional aid.
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  The author explains the mechanics of these studies and some of the particular interventions that have been found either useful or not useful. Focused efforts at eradication of local disease problems, road building, assistance in maintaining sound monetary policies, are among the interventions that often succeed. The current fad in favor of encouraging small and medium sized enterprises works in some industries but not in others.
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Big Plan failures:

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  Privatization and "shock therapy" failed to produce the "enormous" benefits promised by outside economists and other consultants. Top-down imposition of markets failed.

  "Russia received thirteen structural adjustment loans in the 1990s alone. Thousands of percent inflation and a decade of production collapse later, we outside experts had to admit that the market had not created 'enormous scope - - - for increases in average living standards within a few years.' Overnight transformation to a market economy had joined the list of failed utopian schemes."

  In fairness, it must be acknowledged that the Russian economy was in a state of rapid collapse even before imposition of "shock therapy." Seventy years of autocratic socialism had left little that was of actual productive value in its economy. Even without the "shock therapy," the 1990s was going to be a terrible decade for Russia, and without some dramatic shift in favor of markets, the following decades would necessarily also have been terrible.

  Corrupt Soviet business executives remained in control of their economic entities by means of corrupt arrangements with post-Soviet government authorities. The author provides some interesting details.

  "The reforms followed the disastrous sequence of free markets and privatization without first creating the rules that make profit-seeking behavior beneficial to society. Searchers in markets need rules or else they become opportunists who benefit at others' expense."

  Seventy years of socialism had destroyed even human capital. There simply were no longer any people who could remember how a market economy works.

  The privatization auctions were a corrupt farce. A decade and a half later, Russia has yet to fully recover from the catastrophic failure of its initial comprehensive effort at market reform.
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"What we shock therapists didn't realize was that all reforms are partial; it is impossible to do everything at once, and no policymaker has enough information even to know what 'everything' is."

"The responses to failure was to do more of the same. The IMF and World Bank kept on giving out structural adjustment loans for more than two decades, despite their record of failure. Today, they are still doing those loans; they have just changed their names to 'poverty reduction loans.'

  This mirrored the massive failures of Robert McNamara while he was president of the World Bank. The Bank's "structural adjustment loan" program that tied loans to broad-scale market reforms failed to generate working markets and left third world undeveloped nations bankrupt under the weight of the loans. At that time, the author was a believer in those big comprehensive aid plans.

  "What we shock therapists didn't realize was that all reforms are partial; it is impossible to do everything at once, and no policymaker has enough information even to know what 'everything' is. The choice is between large-scale partial reforms -- which shock therapy mislabels as comprehensive reforms -- and small-scale partial reforms. Either [of them] could back fire, but it is much easier to correct the small mistakes than the large mistakes. The 'unintended consequences' problem is greater with a large-scale reform than with a smaller one. The attempted changes at the top are out of touch with the complexity at the bottom." (emphasis in original)

  The poor African nations that received the most structural adjustment loans since 1980 experienced minimal or negative growth rates, often accompanied by double digit inflation. Many ex-communist nations did even worse after 1990. (This last point is similarly unfair, since much of the collapse was of rotten socialist enterprises that had to be eliminated in the first half of the decade.) There is no doubt that the high expectations of the Planners were not realized. However, several of these nations are now enjoying significant growth rates (now that the creative destruction process has eliminated most of those rotten socialist enterprises).
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  Latin America, too, had disappointing results under the structural adjustment loan program, with one especially damaging result being the considerable loss of public support for free markets.

  "The responses to failure was to do more of the same. The IMF and World Bank kept on giving out structural adjustment loans for more than two decades, despite their record of failure. Today, they are still doing those loans; they have just changed their names to 'poverty reduction loans.' This is the fixation-on-a-big-goal characteristic of Planners, despite repeated failures to reach the goal."

  The aid Planners are in the business of dispensing aid and they keep shoveling out ever increasing amounts of it no matter how little they have to show for it. Clearly, the development of effective assistance programs is impossible in the absence of ways to evaluate and publicize the actual results - the actual successes and failures.
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  Economic and financial markets, of course, are good at providing feedback and imposing accountability - as Adam Smith pointed out more than two centuries ago. The author provides a thumbnail sketch of their advantages. Top-down Planners have no way of doing nearly so well, because bottom-up factors are so complex and fail to impose themselves on the Planners. The common thread in all recent economic success stories has been the shift in these nations towards increased involvement in competitive international markets that impose discipline and provide bottom-up guidance for their productive activities.
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 Making markets work:

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Effective capitalist market commerce is based on highly ethical standards of conduct. It is built on trust.

  The corrosive impact of widespread dishonesty on economic development is emphasized by Easterly. Effective capitalist market commerce is based on highly ethical standards of conduct. It is built on trust. Trillions of dollars in commerce flow on the basis of phone calls and computer key strokes with performance enforced by the need to qualify for inclusion in further transactions. In the absence of norms of trustworthy conduct, markets are never more than mere bazaars.
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  Widespread corruption is a major problem in many developing countries - and an even greater problem in undeveloped countries. Trust may be limited to family or friends, or further to clan, village or ethnic group. The inability to trust strangers constrains commerce. Even for large transactions, poor societies lack the institutional infrastructure - reliable courts, credit agencies, financial security arrangements - that support trust.
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  The author outlines some of the vast array of social arrangements that enforce trustworthy business dealings in various nations and regions. Markets must rely on such arrangement until they mature enough so strangers can trust each other in the market.

  "How can top-down Planners make markets work when it requires understanding not just free markets but also the bottom-up search for the social norms, producer and consumer networks, and kin relationships that facilitate exchange? Whether you and I become better off through markets depends now on more than our individual choices. All in a society must develop the informal social ties that make our individual market choices possible. The chances are low that the international jet set will understand us enough to make markets work for us. The quest to help the poor has put far too little effort into learning about their informal social arrangements."

  The need for security for persons and their property is emphasized by Easterly. The rule of law provides this in the West, but a variety of social arrangements of widely varying effectiveness is used in developing and undeveloped nations.

  "Western social scientists don't begin to comprehend fully the complex process of state formation and rule of law in the West, so they shouldn't be too quick to predict how it will work anywhere else."

  Property rights are an essential factor, the author stresses. He refers to Hernando de Soto, "The Mystery of Capital." Without property rights, markets fail and assistance Planners efforts are futile. The issue is more complicated than just legal arrangements. To be effective, property rights must come to be respected by society as well as by the law. The evolution of secure property rights in the U.S. took many decades with sophisticated reform continuing into the 20th century.
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  Western concepts of land titles often don't conform with land use arrangements in third world nations. The Planners never bother to understand and take these arrangements into account. Their efforts to engineer a transition from informal to formal rights is often crude and disruptive. Efforts by Western legal and accounting experts in post-communist Eastern Europe were often inapt and ineffective.

  However, the benefits of property rights are starkly apparent to the naked eye today in many East European states. Compare, "Observations about Czech Republic & Eastern Germany," at segment on "Property rights," with "Observations about China," at segment on "The economy." China, too, is increasingly extending property rights to private citizens.

  There was great confusion and actual reduction in security of property rights as a result of Western legal title reforms in Kenya, for example.

  "Perhaps chastened by these experiences, formal land law in Kenya is now moving back toward recognizing customary rights. The government is allowing the paper titles to lapse. Reformers who want to increase the security of property rights have to search for what works in each locality. A more likely way forward for formal law would be building on the customary law rather than contradicting it."

  However, Big Planners can't be bothered with learning and accommodating local customary law.
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  The English common law is a bottom-up case by case method of development flexible enough to accommodate new circumstances. The Napoleonic Code is a top-down imposition of law that is relatively inflexible. The author asserts the superiority of the common law in accommodating and facilitating commerce.
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  Privatization of banks in Mexico proved to be a colossal fiasco that contributed to the peso crisis in the 1990s because the top-down legal system in Mexico could not accommodate the changes and left the privatized system open to widespread abuse. There have since been additional top-down reforms in Mexico, but they still leave much to be desired. Private credit in Mexico thus remains constrained.

  "So the West cannot design a comprehensive reform for a poor country that creates benevolent laws and good institutions to make markets work. We have seen that the rules that make markets work reflect a complex bottom-up search for social norms, networks and relationships, and formal laws and institutions that have the most payoff. To make matters worse, these norms, networks, and institutions change in response to changed circumstances and their own past history. Political philosophers such as Burke, Popper, and Hayek had the key insight that this social interplay was so complex that a top-down reform that tried to change all the rules at once could make things worse rather than better."

  Systems of informal rules evolved gradually into the systems of formal rules that were introduced in the West to reinforce the informal rules. When a legal system is introduced from outside without consideration or familiarity with local customs, it often disrupts local customary arrangements without providing an effective substitute. This may be one explanation for the disastrous failure of market reforms in Russia and for the disappointing results in Latin America and Africa.

  "Even with severely distorted markets, the participants had formed networks of mutual trades and obligations that made the system function at some level. Trying to change the rules all at once with the rapid introduction of free markets disrupted old ties, while the new formal institutions were still too weak to make free markets work well. Gradual movement to free markets would have given the participants more time to adjust their relationships and trades."

  But progress is in fact being made in Africa and Latin America. Education keeps advancing with each generation. Creature comforts - radios, TV, computers, internet access, cell phones, VCRs and DVDs per capita achieve explosive growth rates. Cell phones have bypassed the smothering inertia of local telecommunications monopolies. Individuals - with their human capital and sweat equity - create a rich ferment of economic improvement even in many third world undeveloped nations. The Chinese miracle began at the bottom in 1978 with piecemeal reform among collective farmers.

  "Piecemeal reformers, foreign and domestic, can try to move toward better systems that are sensitive to local conditions and that unshackle the dynamism of individuals every where. The dynamism of the poor at the bottom has much more potential than plans at the top."

  Outside pressure and encouragement to make progress may be essential to overcome local inertia. For example, outsiders that report on the regulatory barriers to business may encourage third world nations to reduce those barriers - to materially reduce the regulatory steps and time that it takes to initiate businesses and complete business transactions, enforce contracts, register property and complete bankruptcy proceedings, among other things. This is the kind of outside assistance that is far from utopian but that achieves real results.
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Good government:

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  Democratic political systems clearly do not work as well as market economic systems, but they clearly do work. It is no accident that the most broadly prosperous states are almost all multiparty democracies. Local politicians respond to local problems and national politicians to national problems as the electorate focuses attention on them.
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  Easterly provides a couple of examples of the progress that is possible in third world nations with good governance. Botswana here again serves as the prime example.
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  There are, in fact, a few African nations besides Botswana that have recently made some progress towards democracy. Benin, Ghana and Mali since the early 1990s, and Kenya and Nigeria recently and less convincingly are mentioned. However, there has been no progress with corruption - which can be as bad under the new democratic systems as under the previous despotic systems.
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  Democracy is more than just holding elections. Ethnic divisions can undermine democracy. The "tyranny of the majority" is a real threat. The majority may vote to abolish democracy. Voters may be harassed and dissuaded from voting. Protection of minority rights is not high on the agenda of dominant majorities in many poor countries. Demagogic redistributionist impulses are always strong  (even in advanced nations).
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  Pervasive corruption and judicial dishonesty can make economic progress impossible regardless of outside assistance. In some Latin American states, like Bolivia, centuries of exploitation by small white minorities have generated ethnonationalist backlashes that currently undermine political and economic prospects. (See, Chua, "World on Fire." )

  Hopefully, over time, the ethnic majorities in these Latin American states will learn how to run a political and economic system that provides social and physical infrastructure and facilitates their commerce. The previously dominant white and Asian minorities certainly neglected those chores.

  Commodity and other natural resource wealth can undermine democracy by freeing the political elite from dependence on general prosperity for its revenues. For a wide variety of reasons, Easterly points out, democracy can be fragile, difficult to initiate and difficult to sustain.
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The World Bank and IMF  seek recipient government input by funding programs devised by the recipient governments. However, since they will only approve programs that comply with agency plans, the recipient governments  know they have to generate the same types of plans previously imposed on them in order to get aid.

  Democracy is no "magic bullet." It is always messy and gets in the way of aid agency Big Plans. The World Bank and IMF have repeatedly tried to bully legislatures into adoption of measures the legislators oppose. Again, there is the failure of "top-down" Big Plans to deal with the actual complexities that exist on the ground. (Like WW-I generals, the Planners never go to the trouble of examining and understanding the actual battlefield.)
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  This does not begin to cover all the reasons why democracy is difficult and why democracies so often fail. Easterly presents them to make the point that imposing democracy from without is no simple solution. The aid agencies "have had little idea how to fix these problems from the outside." European nations have experienced many failures in their attempts to establish democratic systems that offer good governance for third world nations.

  All the major advanced nations -  England, Germany Japan, and the U.S. - have experienced initial failures with democratic government. France is in its Fifth Republic. Latin American nations have made an art form out of how to fail at democracy.

  Today, the World Bank and IMF assert that they have changed. Instead of telling recipient governments what to do, they seek recipient government input by funding programs devised by the recipient governments. However, since they will only approve programs that comply with agency plans, the recipient governments  know they have to generate the same types of plans previously imposed on them in order to get aid. Today, the World Bank and IMF are in partnership with thuggish and thieving governments to justify expenditures from assistance budgets.
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The "foreign aid curse:"

  Since the poorest nations also happen to be the worst governed, aid agencies like the IMF and World Bank that work with governments wind up giving billions to the most corrupt governments on earth. In 2002, the recipients of about $9 billion in aid were among the 25 most corrupt and the 25 least democratic governments. Despite much recent talk about shifting aid to better managed third world nations, there is no evidence in recent years (through 2002) of such a shift. It is still business as usual.
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  Modern government-to-government aid is all too often like the "natural resource curse." It provides easy resources to corrupt unrepresentative governments that are thereby relieved of dependence on the commerce of their people for their revenues. It thus props up and even reinforces bad governments. This is the "foreign aid curse."

  "High aid revenues going to the national government benefit political insiders, often corrupt insiders, who will vigorously oppose democracy that would lead to more equal distribution of aid. Systemic evidence in a couple of recent studies suggests that aid actually decreases democracy and makes government worse. Steve Knack of the World Bank finds that higher aid worsens bureaucratic quality and leads to violation of the law with more impunity and to more corruption."

  Several studies have similarly found that "high aid caused setbacks to democracy."
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  Easterly notes the failure of a focused World Bank effort to improve social services - health care and primary education - in Pakistan. A decade-long effort was undermined by corruption, an agrarian elite that cared not for the mass of the poor, sharp ethnic divisions, and blatant discrimination.
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Orwellian evaluation of progress:

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  Haiti is a poster child for all that is wrong in third world undeveloped nations. It remains at the bottom of all economic and political ratings after decades of IMF efforts to stabilize the economy. "The IMF giving Haiti credit after credit did nothing to address the centuries-old political roots of macroeconomic instability" and underdevelopment. (Haiti is currently operating under a type of UN protectorate.)
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  Zaire is just as bad - yet the IMF and World Bank kept assistance flowing into Zaire for a quarter of a century - totaling about $20 billion. Assistance kept flowing to Rwanda even as the situation notoriously degenerated - halting only with the actual onset of genocidal violence. A World Bank report issued while the genocide was actually in progress blandly recommended continued assistance.
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  Even today, assistance continues to be extended to some blatantly thuggish and corrupt governments - like Angola and Zaire/Democratic Republic of Congo - in "hubristic" efforts to tempt them towards reform. The international financial institutions extend assistance for "post-conflict reconstruction" through governments run by men who have committed heinous war crimes but shun the peaceful democratic politicians striving for actual reform.
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  Angola received $421 million in 2002 "despite abundant oil revenues" for its 13 million people. Needless to say, most of the assistance and oil revenues disappear into a corrupt system. In World Bank doublespeak, the situation was "catastrophic but improving." It detected "reformists within Government" that "have been achieving incremental improvements in transparency and accountability." It concludes with the typical understatement that "much more needs to be done." However, the World Bank's own corruption rating for Angola remained unchanged from 1996 to 2004.
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  Thus, thuggish, corrupt rulers are coddled and given loans that a poor population will be liable for even though the benefits never reach them. The IMF has recently reduced its assistance involvement with governments in the lowest tenth of the corruption ratings - but not with those in the second lowest tenth.
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  The United Nations is even worse. The Libyan government chairs its Human Rights Commission, and the UN incredibly insists that poor government is not the cause of nationwide poverty. Despite numerous examples of the "oil curse" and the "foreign aid curse," the UN insists that a lack of funds for infrastructure and sufficient salaries is the problem. At least Belarus, Myanmar, N. Korea, and Zimbabwe are considered beyond the pale.
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  The UN recommends that all others qualify for Big Push foreign aid. These include five of the seven evaluated as most corrupt by Transparency International - Azerbaijan, Bangladesh, Chad, Nigeria, and Paraguay - and fifteen governments on the Freedom House list of "not free" countries. Azerbaijan makes both lists. Jeffrey Sachs in "The End of Poverty" acts as an apologist for this massive extension of assistance funds to corrupt officials.
 &
  The U.S. Millennium Challenge Corp. is now trying to screen out the worst governments from U.S. assistance programs. It will be interesting to see how well this works. (Inevitably, as during the Cold War, the strategic considerations of the War on Terror will trump all other considerations for U.S. foreign assistance.)

  "[As these awful examples illustrate,] the official aid agencies simply don't know how to change bad governments into good governments with the apparatus of foreign aid. Bad governments have far deeper roots than anything the West can affect. To make matters worse, the aid agencies need the poor-country government, even a bad government, to fill the role of aid recipient to keep money flowing." (emphasis in original)

  The West can encourage good governance in "the Rest," but it has demonstrated no ability to change bad government into good government. It should denounce bad government, not coddle it, the author insists. Cameroon was getting 41% of its government revenues from foreign aid. The Big Plan would increase that to 55% - thus actively supporting the corrupt Paul Biya regime.
 &

The West should not presume to overthrow bad government, but it should not provide it with financial support; either.

  Official aid agencies should not be dealing with corrupt autocrats. Aid in these circumstances should continue only if it can flow directly to the people whenever practical, the author asserts. Foreign aid should be politically neutral in fact, not just in theory. The West should not presume to overthrow bad government, but it should not provide it with financial support; either.
 &
  Nigerian Pres. Obasanjo won office in a seriously flawed election, the author points out as an example. He repeatedly makes unfulfilled promises of reforms to qualify for aid, and has so misspent both aid and oil wealth that the population remains 60% below the poverty line. As the author points out, this is not the fault of the people. Whenever Nigerians are provided with education and reasonably good governance, they progress in numerous economic and intellectual directions.
 &

Bureaucratic imperatives:

"Politically dysfunctional governments don't do maintenance."

  What it fails to provide is vital infrastructure in poor nations. "Politically dysfunctional governments don't do maintenance." And the aid bureaucracies keep growing, absorbing ever increasing amounts of assistance budgets.
 &
  Billions are spent on roads and buildings and other facilities that are not maintained and quickly go to ruin. Aid policy will simply have to be changed. Aid agencies cannot maintain the fiction that it is enough to build infrastructure and turn it over to the recipient government. Aid agencies are going to have to also maintain what they build if infrastructure funds are not to be wasted by lack of maintenance. This will be a very unpalatable admission, since it will highlight the futility of assisting bad government.
 &

 These bureaucracies are not accountable. Incentives favor Big Plans and the serving of the interests of donor nations and recipient autocrats. There are, in fact, many professionals trying to fulfill assistance objectives, but unlike market and democratic political incentives, the incentives applicable to assistance bureaucracies work against them.
 &
  Somebody actually has to go out to the poor to get feedback on what they need and don't need. "Searchers" have to seek particular solutions for particular problems to make individual small step progress, the author repeatedly explains. Big Planners intent on transforming an entire economic system don't have the time to operate in that way.
 &
  Donor politicians and their voters "love the Big Plans, the promises of easy solutions, the utopian dreams," and the economic benefits for donor nation contractors and suppliers. However, because of complex economic and political variables and a lack of visibility, there is actually no accountability when the results fall far short of the promises. Big Plans necessarily have many objectives, so failure to achieve any particular objective becomes more excusable. To remedy this, the Big Plans must be abandoned and the focus of each aid agency shifted to meeting one objective or one subset of achievable objectives.
 &

  The great number of aid agencies that get involved in the Big Plans is another problem. None are accountable for the results of Big Plan efforts.

  "Operating in the Bolivian mountains are the International Monetary Fund, the World Bank, the Inter-American Development Bank, USAID, the U.S. Drug Enforcement Administration, the UK Department for International Development - - -, just about every other country's aid agency, multiple NGOs, and Bono. None of the agencies is responsible for a particular outcome, and the effects of their individual efforts are unobservable. They jointly affect what happens to economic development in Bolivia. When something goes wrong in Bolivia, such as the economic and political crisis in 1999-2005, after years of effort by these agencies, which one is to blame? We don't know, so no one agency is accountable."

  Which among the universe of participating aid agencies will be blamed for failures to reach the Big Plan UN Millennium Development Goals? As experience with socialism and communism demonstrated, collective responsibility for outcomes doesn't work.
 &

  Agency bureaucracies in democratic nations are usually designed to achieve particular achievable results. Police, fire, education, roads, water - they are not asked to transform everything so there is some accountability and they can work tolerably well. When their tasks become more complex and agency objectives overlap - as in the welfare system - accountability and results are generally more disappointing. Big Plan aid agencies have broad visionary objectives and overlapping responsibilities - and no accountability.
 &
  How can a poor person in Tanzania get a pothole fixed? He can't - so Tanzanian roads - on which billions of aid dollars have been spent - are filled with potholes. In most American towns, some irate phone calls to the mayor's office - and if needed a few seconds attention during a local newscast - gets the job done. Easterly provides two pages filled with the bureaucratic steps needed for Big Plan international aid agency response to a pothole. Improvement could come from having a single assistance program and agency dedicated just to maintaining roads in Tanzania.
 &

Focus:

&

  Focused disease and child malnutrition fighting efforts have proven particularly effective. Life expectancy in third world nations rose from 48 to 68 years in four decades. Infant mortality rates plummeted. Focused water and sanitation initiatives have shown considerable results.  Primary and secondary education and literacy rates soared, especially for girls. World Bank Food for Education keeps Bangladeshi girls in school. Focused programs where progress is easier to measure do better than Big Plan general programs where progress is more difficult to measure.
 &
  Policy efforts can be effective, too, if narrowly focused. How many days does it take to start a new business? How many banks fail? Focus on such specific policy areas can show progress where broad Big Plan efforts to increase economic growth stumble over innumerable obstacles.
 &

Outcomes or inputs?

&

Inputs have become more important that outcomes.

Conferences, meetings, reports and plans absorb vast amounts of assistance funds and bureaucratic time.

The proliferation of assistance lobbying groups and NGOs keeps inserting additional objectives into succeeding Big Plans. This further reduces focus and the likelihood of achieving any particular objectives.

  However, they do report vast volumes of bureaucratic activity. Conferences, meetings, reports and plans absorb vast amounts of assistance funds and bureaucratic time. Easterly provides two pages of meetings, conferences, reports and planning efforts for the World Bank in 1997 and 2001 and for the UN Millennium Project in 2004-2005.
 &
  And failure - repeated and gross - does not reduce ambition. The proliferation of assistance lobbying groups and NGOs keeps inserting additional objectives into succeeding Big Plans. This further reduces focus and the likelihood of achieving any particular objectives.

  "Aid agencies are remarkable for setting goals rather than reaching them."

  Thus, in 1999, the World Bank set forth a monstrosity of a Big Plan with an unfocused check list of 14 general items each with multiple sub-items. "Capacity building" - a variety of legal codes and other "appropriate laws" - accounting and auditing standards - indigenous histories - sewerage - wood and fossil fuel use reduction - distribution of wind-up radios - preservation of historic sites, artifacts and books, and indigenous arts and language - "integrated solutions to rural development." A 2002 Johannesburg summit listed 185 actions "including 'efficient use of cow dung.'" The UN Millennium Project spreads its efforts over 36 general recommendations.
 &
  Numerous objectives are listed as "top priority." "The political incentives to do token amounts of everything are too strong" to actually recognize tradeoffs and set priorities, Easterly points out.
 &

Big Plan aid agencies are increasingly unfocused and tasked with objectives beyond their expertise.

  In economic markets, tradeoffs and prioritization is automatic. Expertise is provided by incentives to specialize. (Even the great conglomerate corporations of a few decades ago were almost all ultimately forced to specialize.) In democratic systems, interest groups focus on agencies specifically designed to address their issues. Yet Big Plan aid agencies are increasingly unfocused and tasked with objectives beyond their expertise.

  "If Western governments and NGOs really want to make poor people's lives better, it will take some political courage to admit that doing everything is a fantasy. The rich-country public has to live with making poor people's lives better in a few concrete ways that aid agencies can actually achieve."

  They will have to maintain as well as build and provide roads, buildings, vehicles and equipment. They will have to maintain and supply the clinics and schools they build. They will have to pay the teachers and buy the text books and supplies. They will even have to concentrate on  maintaining specific government operating agencies if they want such assistance to be effective. Easterly notes that money spent on education has a greater impact, but aid agencies prefer to spend on roads and structures that they can show off before the structures crumble for lack of maintenance.

  Roads, railroads and ports constitute the most important elements of infrastructure for economic development. But Easterly is correct that without maintenance, construction funds are a waste.

Coordination and "tied aid:"

&

  "Tied aid" restricted to purchase of donor products and services, strategic aid to reward friends and allies, and lack of meaningful evaluation of results are additional problems with assistance programs. These and much more shield the Big Planners from accountability for their many failures.
 &
  Some efforts are now being made by the World Bank and IMF to objectively evaluate aid programs and to encourage participation of the intended beneficiaries in the planning of programs. However, the effectiveness of the evaluations remains to be proven, and the local participation efforts are smothered in bureaucratic top-down administrative requirements.

  "The appeal of planning to aid visionaries is so strong that they map out top-down plans at the same time that they emphasize 'local ownership' and emphatically deny that they favor top-down planning."

  Aid agency officials will not give up utopian planning. They will not emphasize piecemeal interventions that might actually do some good. Their prestige depends on the grandeur of their Big Plan efforts.
 &
  The author shows that, for 40 years, they have repeatedly made the same mistakes using the same Big Plan language, requirements and techniques - but nobody bothers to remember past mistakes or learn from them. There is nothing different about the UN Millennium Development Goals and previous efforts other than the vastly greater sums that will be wasted in the current efforts.
 &

International aid agencies:

&

  A whole chapter is provided about the IMF. The author covers operations that have been effective and those that haven't. The IMF has been effective in the short term bail-out of nations experiencing monetary crisis - its specific original mission. However, as the IMF has undertaken bloated objectives to promote long term development, its results have been disappointing.

  "Moreover, things have gotten worse over the past two decades, as the IMF's mission statement has grown more and more bloated, its conditions more and more numerous, and its interventions more and more intrusive. The IMF has no mechanism that holds it accountable to the poor for acting in their long-term interest or improving their welfare. It places excessive confidence in very shaky statistics on the countries' problems it seeks to correct."

  Its grand goals suffer from the same Big Plan weaknesses as those of other aid agencies.

  "Like all Planners, the IMF fits the complex reality of economic systems into a Procrustean bed of numerical targets that have little to do with that complexity. The conditions on its loans often roil internal politics in a way that is much too intrusive. And in the end, it is not even clear that the conditions contribute to repayment of the loans."

  Easterly provides some interesting examples of just how squishy the accounts and economic statistics of third world nations can be. (First world statistics are nothing to brag about either. See, "Economic Statistics and Macro Econometrics: The Figures Lie.") Yet these are the tools that the IMF relies upon for its financial stabilization efforts.
 &

Often. the IMF and World Bank join in extending further credit to pay for previous loans. 

  When austerity measures are required or when nations collapse, it is not the IMF that is the cause, Easterly carefully points out at several places. These were mismanaged - sometimes dysfunctional nations to begin with. They would have suffered or collapsed on their own.
 &
  However, the IMF econometric formulas are no substitute for market mechanisms. Its efforts to calculate at what point national accounts will balance, restore public confidence and monetary stability, have often proven far wide of the mark. (See, Hendry and Ericsson, "Understanding Economic Forecasts.")
 &
  It should thus not be surprising that nations receiving a series of short term IMF structural adjustment loans so often fail to make the needed structural adjustments. Typically, inflation rates remain above 40%, a black market for dollars offers a 40% premium over the official rate, interest rates remain an inflationary 5% or more negative, and/or official exchange rates remain 40% out of line with what is needed to facilitate exports. Nevertheless, the IMF extends one structural adjustment loan after another - regardless of recipient failure to comply with the conditions of the prior loans.
 &
  Often. the IMF and World Bank join in extending further credit to pay for previous loans. Forty four countries were identified as being prolonged users of IMF money between 1971 and 2000. By 2001, half of all IMF short term loans were going to prolonged users.

  "The IMF displays one of the classic symptoms of Planner's disease: in many countries, it keeps doing the same thing over and over again to reach a never-reached objective. The repetition itself shows the failure of previous attempts at 'short-term stabilization.'"

  With the gross inflation of the U.S. money supply and the consequent inflation of raw materials prices at multiple double digit rates during this decade, the world is now awash in rapidly depreciating dollars. Thus, many of these nations are at last able to build substantial financial reserves even with continued bad governance practices. This will all change dramatically - as in the 1980s - when the U.S. is again forced to deal with its own inflation problems.

  The IMF has in fact helped many nations dig their way out of deep financial holes. S. Korea and Thailand in the 1980s and Mexico in the 1990s were clear successes. It all depends on whether recipient governments are actually willing and able to put their financial houses in reasonable order.
 &
  Ultimately, 27 poor nations could not repay their accumulating loans. Those loans had to be partially or totally written off - "forgiven" - for a loss of $54 billion. Argentina defaulted on $81 billion in foreign loans in 2001 - but the IMF kept lending into an obviously impossible financial situation up to the last minute. Lenders later received just 35¢ on the dollar for their loans.
 &
  Undaunted, the IMF is now expanding into long-run lending and adding additional non-financial conditions to its loans. Even environmental requirements are now included in the smothering array of IMF loan conditions.

  "The IMF needs to shed its excessive self-confidence that it knows in detail what is best for the poor, based on an analysis of the whole economy that shares the presumptions of utopian planning. It should go back to its narrow mandate of financial stabilization. The talented professionals at the IMF could plan the simplified role of bailout creditor effectively, making a useful contribution to the well-being of emerging-market countries." (emphasis in original)

  The IMF should abandon to the aid agencies those nations that are so dysfunctional that there is really no hope of repayment - or of actual "structural adjustment."
 &

Health aid:

&

Nobody has bothered to ask the people in the recipient nations how they would prefer the money to be spent. Political and religious agendas in the West take precedence over the actual needs of recipients.

  Now, AIDS treatment programs are draining funds from all other assistance programs - including those for AIDS prevention. Treatment and prevention of many other more deadly diseases is much less expensive and more effective than for AIDS. Many more could be helped with the funds available. However, AIDS has caught the attention of the Big Planners and that's where the money is going. A year's supply of condoms to prevent HIV costs about $14. Treatment, delivery and supervision costs about $1,500.
 &
  The time it took for the assistance community to gear up to combat AIDS is a quintessential example of the unresponsiveness of the Big Planners. Now, many billions are being expended to deal with the problem. The effort is frequently smothered in complex planning procedures - and is so far ineffective.

  "Overall, the World Bank estimates the cost per year for a variety of health interventions [for malaria, maternal and infant death, TB, childhood vaccines, intestinal worm] to range from five to forty dollars, compared with the fifteen-hundred-dollar cost of prolonging the life of an AIDS patient by a year with antiretroviral treatment. The $4.5 billion WHO plans to spend on antiretroviral treatment for one more year of life for three million could grant between seven and sixty years of additional life for five times that many people -- fifteen million."

  Nobody has bothered to ask the people in the recipient nations how they would prefer the money to be spent. Political and religious agendas in the West take precedence over the actual needs of recipients. Thus, vast sums are wasted on ineffective abstinence programs, proselytizing against prostitution, and prohibition of condom distribution. The gay community and other AIDS activists join the religious right in emphasizing treatment when prevention would be far more effective - as proven in Thailand and Senegal.
 &
  Prevention is a permanent cure - the "first-line drugs" offered by the assistance programs may be effective for as little as 14 months before resistance sets in. Moreover, treatment without adequate supervision may encourage the development of resistant HIV strains, "so that treatment will sow the seeds of its own downfall."
 &
  However, these calculations are admittedly all oversimplifications. Because of the dysfunctional health care systems in dysfunctional poor nations, and aid agency insistence on working through corrupt dysfunctional governments, aid funds get lost in corrupt and patronage filled national health bureaucracies. Funds disappear and drugs are sold on the black market. More funds are absorbed by the international aid bureaucracies and their interminable planning and reporting and coordinating cycles. The AIDS campaigners remain intentionally oblivious to how little good donated funds actually achieve.
 &

  The current generation of AIDS victims is lost, the author points out. Treatment is too complex and costly to be effectively administered. By neglecting prevention programs, the AIDS treatment advocates are condemning the next generation and subsequent generations, too.
 &
  Aid agencies want the credit for visible outcomes - like treating those already sick. Prevention is an invisible outcome.

  "The politicians and aid agencies didn't have the courage to confront the uncomfortable question of how to change human sexual behavior. The AIDS failure shows that the bureaucratic healers too often settle for simply handing out pills."

The white man's burden:

&

  Reacting to recent "postmodern" or "liberal imperialism" advocates, (see, Barnett, "The Pentagon's New Map," and Ferguson,  "Colossus") Easterly provides a balanced sketch of some of the horrors, foibles, and actual accomplishments of European colonial rule.

  "However, even with the best of motives, colonial officials suffered from all the same problems that characterize today's White Man's Burden: excessive self-confidence of bureaucrats, coercive top-down planning, desultory knowledge of local conditions, and little feedback from the locals on what worked. Under the theory that  'whites know best,' colonialists forced development schemes on locals rather than respecting their economic choices."

  The numerous failed - sometimes farcical - outcomes of Western colonial planners eerily resemble the Big Planner failures of the last four decades of foreign aid. Plans crumbled as soon as they came in contact with inconvenient realities on the ground that the planners determinedly ignored.
 &
  For example, Easterly cites the failure of a Ford Foundation effort to establish a Western-style law school in India with Western law professors - highly competent legal scholars but unfortunately lacking any knowledge of local legal and customary traditions. Sometime later, an Indian law professor devised an Indian-style law school that has since been emulated in several Indian states. Recognizing his success, the Ford Foundation has helped with large grants. The Western law professors were remote Planners unfamiliar with local legal traditions - the Indian law professor was a local Searcher intimately familiar with local legal traditions.
 &

  The noxious legacy of the colonial period, and the equally noxious legacy of how the colonial powers arbitrarily drew up "national" boundaries and then set indigenous peoples free like scorpions within the bottles delineated by those artificial national boundaries, are covered at some length by Easterly.

  "Look behind a modern-day [conflict] headline and often you will find the machinations of some long-forgotten colonial planner."

  These artificial nations languish at the bottom on measures of economic development, democracy, and health. Easterly describes how colonial plans continue to contribute to conflict in Congo, the Middle East, Pakistan and Sudan. He points out that the peoples in these areas already had ancient animosities and plenty of reasons to hate and slaughter each other, but the colonial planners were oblivious to these problems and made them considerably worse. Easterly concludes:

  "Western intervention in the government of the Rest, whether during colonization or decolonization, has been on the far side of unhelpful. The West should learn from its colonial history when it indulges new-imperialist fantasies. They didn't work before and they won't work now."

Neo imperialism:

  The Big Plans at the beginning of these conflicts have crashed into the realities on the ground - as they always do. (Military plans never survive contact with the enemy.) Imposed by the U.S. with incredible hubris, without local feedback or concern for local conditions, they are quintessential Big Plan farces.

  If these efforts actually succeed in achieving anything, it will be because the American soldiers on the ground - with their traditional resourcefulness and flexibility - and remarkable levels of sensitivity under conditions of extraordinary stress - have devised tactics and strategy to meet the challenges they face. The original plans from Washington were obvious failures - the product of gross incompetence - and should have been discarded long ago.
 &
  At best, success will be Iraqi and Afghani governments that fall well short of Western democratic standards, but that are able to take care of their own internal security needs with U.S. support levels about equivalent to that in S. Korea. Support will probably have to be maintained for at least eighty years from the end of conflict. That clock has not yet even begun to run.

  Security is the first and most vital requirement for economic development, and nothing undermines security like the social disruption of military intervention.
 &
  With a few exceptions - like S. Korea - third world nations where proxy conflicts were fought during the Cold War remain in the bottom quarter of economic freedom, rule of law, corruption and democracy ratings. Yet, all of these nations were recipients of vast flows of Western assistance.
 &
  This is not necessarily the fault of Western intervention, of course. The communist forces were involved, too, and almost all of these nations were already a mess before the proxy conflicts began. However, there aren't many success stories, here, either. Easterly provides details about Nicaragua and Angola - both of which remain a mess more than 15 years after the end of the Cold War and after massive assistance programs.
 &
  Of all the pre-Cold War nation building efforts, only four - Japan, Germany, Grenada and Panama - can be viewed as successful. Easterly notes 12 failed efforts.

  FUTURECASTS, too, frequently reminds its readers that democracy isn't easy, often fails, and nation building efforts have very dubious prospects. Nor will the U.S. electorate long tolerate the open-ended conflicts often involved in such efforts. Ideal concepts of democracy generally fail because, as James Madison so wisely acknowledged, "men are not angels." Any system that does not take this into account fails the test of practicality.

    The experience with Western  assistance interventions since the end of the Cold War are too recent to judge, but suffer from many of the same problems.

  "Like the cold war interventions and like Planners efforts everywhere, the interventionists suffer from ignorance of local conditions. The UN team sent to scout out peacekeeping in the former Yugoslavia in 1991 consisted of 'two men in a jeep,' neither of whom was a Yugoslav expert. The UN Planners in New York could only fit reports from the field in Rwanda into such preconceptions as 'civil war' or 'violent chaos,' arguing against intervention by not processing evidence that Hutu extremists were organizing a campaign of extermination against the Tutsis. In Somalia, by contrast, lurid images of gunmen and famine victims argued for intervention, exaggerating the crisis -- one TV journalist instructed an aid worker to 'pick the children who were severely malnourished' for filming -- and fatally ignoring the complexity of clan politics."

  However, since the end of WW-II, almost every successfully developing nation has been the recipient of extensive outside assistance. Of course, evaluation of the effectiveness of this assistance would require a separate study for each nation.

 Peacekeeping efforts flip flop between trying to work with gangster regimes and warlords or trying to overthrow them. It often involves collective responsibility for policy, leaving nobody accountable for results. Nobody in the peacekeeping policy establishment was held accountable, for example, for the Rwanda genocide.
 &
  A stable peace is twice as likely if one side is permitted to triumph in conflict than if the UN intervenes to try to establish a coalition of recent antagonists. Yet, the World Bank and other Western Big Plan agencies keep insisting on the Western obligation to intervene in local conflicts. There have been success stories, the author acknowledges, but there have been far more failures.
 &

  Germany and Japan are special cases, not easily emulated. Easterly perceptively points out that they were already advanced nations before WW-II, had some albeit unsuccessful experience with democracy and advanced political and civil institutions, and were pulverized into submission during WW-II. (They were also frightened into accommodation with U.S. reform efforts by their need to shelter under U.S. military protection from Cold War communist threats.)
 &
  Post WW-II Marshall Plan successes in these and other advanced war-ravaged nations cannot be replicated in third world nations that lack all experience with modern economic and political institutions and that are encumbered with innumerable obsolete local mores and folkways.
 &
  Successful developing countries (what Clark Reynolds calls the post-Cold War "second world," see Reynolds, "New Regionalism: How Globalization Reorders the Three Worlds of Development") have all successfully used market mechanisms for economic development. However, they have all developed their own unique combination of other political, economic and societal characteristics.
 &
  There are varying degrees and types of democracy or autocracy. The free market capitalism of Hong Kong is different from the guided capitalism of Japan and S. Korea, or the major state enterprises in China or the various competition policies in other successfully developing nations. There are a host of variances of economic effectiveness, but individual characteristics respond to local political and societal conditions.
 &
  No successfully developing second world nation conforms to some outside Big Plan. Each nation's "Searchers" found an amalgam of local solutions to local conditions - admittedly with many stumbles along the way - to arrive at their current relatively successful models. They are not Utopia, but they are success stories.

  There is no question of the importance of market mechanisms in these success stories. However, whether democratic capitalism or autocratic capitalism proves superior will be the - hopefully peaceful - contest of the 21st century.

  Five of these success stories escaped Western colonization, Easterly points out, while all the disasters didn't. Singapore and Hong Kong were successful during and after colonization, but these tiny city-states had unique colonial characteristics as British free market trading station enclaves. Easterly briefly acknowledges the great success of the Asian tiger economies. They were each recipients of some foreign assistance but their success was predominantly homegrown.
 &
  China, on the other hand, was a catastrophic failure prior to WW-II despite significant Western assistance. It descended into even greater depths under autocratic socialism, only to turn itself around on its own terms since 1979.

  China has been the recipient of considerable Japanese assistance and considerable outside technical assistance. However, most outside technical assistance came not as a part of foreign aid, but from the Chinese diaspora and with foreign direct investment.

  Easterly acknowledges that China did receive some minor World Bank assistance.

  "[China] is an unconventional homegrown success, failing to follow any Western blueprint for how to be modern. It combines lack of property rights with free markets, Communist Party dictatorship with feedback on local services, and municipal state enterprises with private ones." (Some property rights are now being granted.)

  India, too, had a long period of disappointing development results under a socialist economic system, and has improved rapidly as it has slowly accepted market reforms. It has received substantial outside assistance both before and after initiation of those reforms, but success has come from homegrown entrepreneurs taking advantage of particular opportunities as the reforms opened up market access. There are similar stories from Turkey.
 &
  Botswana is an example of a successfully developing nation with mineral riches - diamonds.  It left the mineral exploitation in private hands - De Beers - which it taxed at reasonable rates. With good governance, the rest of the economy is expanding exuberantly. Unfortunately, it is now suffering from the AIDS epidemic.
 &
  Botswana benefited from benign neglect during its colonial period (much like North America). It has a homogeneous population, property rights that were originally based on cattle holdings, and local customs of consultative governance.
 &
  Chile is an example of successful free market reform under autocratic government. The market reforms have been maintained by both leftist and rightist governments since it became a stable democracy. Easterly emphasizes the homegrown aspects of this success story. While recognizing the technical assistance of Milton Friedman and his disciples, he de-emphasizes its importance. (In fact, the Pinochet dictatorship had no idea what to do about the economy when it took office, and was greatly influenced by the economic policy advice of the "Chicago boys.")
 &
  However, Easterly is correct that, once guided in the direction of free markets by Western advice and example, those markets facilitated local commerce guided by local entrepreneurs - "Searchers" in Easterly's terminology - seeking to take advantage of particular opportunities as they became aware of them. There was no Western Big Plan. There was no "Big Push." There was no "utopian blueprint."

  "The great bulk of success in the Rest comes from self-reliant, exploratory efforts, and the borrowing of ideas, institutions, and technology from the West when it suits the Rest to do so.
 &
  "Again, the success stories do not give any simple blueprint for imitation. Their main unifying theme is that all of them subjected their development searching to a market test, using a combination of domestic and export markets. Using the market for feedback and accountability seems to be necessary for success. But we have seen - - - that creating free markets is itself difficult, and the success stories certainly don't all fit some pristine laissez-faire ideal."

An end to Big Plan hubris:

&

Outsiders cannot end poverty in third world nations. That must be a homegrown effort through market mechanisms.

  Outsiders cannot end poverty in third world nations. That must be a homegrown effort through market mechanisms.

  "Once the West is willing to aid individuals rather than governments, some conundrums that tie foreign aid up in knots are resolved. Those so unlucky as to have warlords or kleptocrats as leaders will still be eligible for aid. The West can end the pathetic spectacle of the IMF, World Bank, and other aid agencies coddling the warlords and kleptocrats. It can end the paternalism and hypocrisy of conditionality. It can end the inherent contradiction between 'country ownership' and dictating conditions from Washington."

  Aid can achieve obvious objectives, and these are obviously worth achieving. Aid can distribute vaccines, antibiotics, food supplements, improved seeds, fertilizer, school books It can build infrastructure. Advice on management techniques and economic reforms is always useful and may sometimes actually be accepted. But humility is essential. Even this simplified approach will face many difficulties.
 &
  Assistance efforts should be guided by those with knowledge of particular problems who have searched for and found particular solutions. These are domestic Searchers, not Western Big Planners.
 &

  Each aid agency should specialize in performing a small number of tasks in particular nations, Easterly asserts. That way, aid agencies can be held accountable for actually achieving some results. He offers some suggestions for an independent evaluation agency (that are highly unlikely to be adopted). But focus on particular projects will facilitate evaluation.
 &
  Examples of homegrown programs for child health and education that were started small, evaluated positively, and expanded, include cash grants to keep children in school, improve their nutrition and attend health clinics; free breakfasts; donated textbooks; community remedial education tutors. Teacher incentives and the use of flip charts for less literate students were tried and found wanting.
 &
  Other interventions found effective were: "deworming drugs; dietary supplements such as those for iron, vitamin A, and iodine; education in using condoms and treating other sexually transmitted diseases to slow the spread of AIDS; indoor spraying to control malaria; fertilizer subsidies; vaccination; and urban water provisions." Utopia, such interventions don't provide. But they do improve people's lives - sometimes immensely.
 &

  Easterly offers some suggestions for empowering the poor to make their particular needs known to the assistance community. Some might actually work - like posting needs on an internet web page - globalgiving.com. Some of the suggestions reveal Easterly as still a utopian - like his suggestion to just give money away.

  What the author is asking is for official aid agencies to no longer respond to donor political, economic and strategic interests, but instead to respond directly to the needs of the poor. He is asking aid bureaucracies (Paul Theroux calls them "the agents of virtue") to subordinate their ambitions and self interest. Easterly is no longer a utopian Big Planner, but in his own way he remains a utopian. Unfortunately, he who pays the piper will always call the tune.