My last post, 21 things they never tell you about poverty, was by far my most-read yet, receiving about 10,000 views in two days. Clearly it struck a chord. I wonder whether there’s a widespread feeling that we sort-of think we’re doing things about poverty but that something is missing? Charities constantly harangue us, but poverty persists. The international media focus relentlessly on events in the rich world, encouraging us to think that is the world, but occasionally shows pictures of deprivation — which are portrayed as the exception, and the fault of poor countries themselves, separate from our actions. Certain less well-off parts of the world are synonymous with chaos and underperformance. Nothing happy ever happens there. Could it be that the causes of poverty are deeper than we think, and that, God forbid, the economic system might even be the problem — even for us in the rich world? Periodic hand-outs might not cut it.
What was interesting was to see how the post spread: at first someone in Croatia must have posted it on Facebook, because it became big in the Balkans, then during the American daytime someone put it on Reddit, which sent the most links. Twitter, surprisingly, provided a small proportion of hits. As always most views came from the United States, followed by the UK. Feedback was via Reddit, Facebook, Twitter and email, which is a bit of a shame because it meant that the discussion wasn’t in the same place. Of course for the reasons stated in point 1 most feedback wasn’t from the countries that the post itself discussed (and because it was in English!)
Anyway, enough navel-gazing. What were people’s main responses? Mostly they were very positive, which is encouraging.
One person criticised points 1 and 2 on the grounds that he or she “already knew it all”. Fair enough. Someone else thought i’d made a statement of the obvious, saying that it’s self-evident that more poor people live in Asia than in Africa because Asia is much bigger. But that’s not the narrative we’re taught. I don’t think people have woken up to the progress that’s been made in Africa or the growing differences within and between countries. Everything on telly about Asia is about the rise of China and the Oriental miracle, and how these high-tech superstates are going to run the world. Maybe, but first they have to sort out their glaring and growing problems of inequality.
Surprisingly no-one criticised point 6: “Our main tool for understanding poor countries – mainstream economics – is woefully inadequate and all about the rich world.” That’s a controversial statement, and one which i’d have thought some economist out there would have issues with. But perhaps most people nowadays just regard economists as close to a nasty thing you might step on in the gutter.
A more cogent criticism was that it’s naive of me to write that “the governments of poor countries should be more adventurous, leapfrogging ideologies. Environmental sustainability and a focus on happiness could enable some countries to prioritise the important things in life.” The objection was that in reality the marginalised countries don’t really have the autonomy to be able to pursue their own policy objectives.
But I think that’s an excessively cynical view, put about by those who imagine the world economy is a machine rather than a collection of human interactions. Governments and people all have the potential to influence the direction of the societies within which they live. Other narratives are possible — I cited the example of Gross National Happiness in Bhutan, which really works. I know because i’ve seen the policy in action. One of the incredible achievements of Cuba is to pursue a somewhat different economic system despite the United States embargo. It’d be like the UK being prevented from trade with Europe (something which politicians honestly seem to be considering, but that’s another story).
There was some criticism of the point that the world isn’t overpopulated. Again I suspect that overpopulation has become a standard trope, one which is easy to understand. But the world isn’t full up, and nor do we remotely use resources efficiently. Saying the world is overpopulated is a good way of excusing the rich world its voracious over-consumption and of absolving those 85 billionaires of their inexcusable affluence. Effective distribution is the challenge, not the birth rate. In any case high birth rates are partly a product of poverty. In all rich countries people stop having so many babies after a certain level of income. Lowering infant mortality actually reduces population growth, as this very clear video by Hans Rosling shows.
Someone expressed scepticism about point 16, which is that most countries which successfully reduced poverty didn’t directly try to reduce poverty. Others thought it was one of the better points. It’s based on the experience of the East Asian tigers, where there were no Millennium Development Goals on poverty, environmental sustainability or global partnerships for development. One of the most-ignored aspects of East Asian economic development was the sheer ability of governments to accumulate and mobilise capital and to direct it into productive areas. Health and education were certainly prioritised in some countries, but largely as a means of facilitating improvement of the stock of human capital rather than as ends in themselves. If people were sick or didn’t have good enough skills they wouldn’t be as useful. Poverty reduction in many cases came as a result of the economic boom, without direct policies aiming at reducing deprivation. After all, most Asian countries don’t even have social security. The point wasn’t to suggest that in future all countries that want to reduce poverty should initially ignore the poor, or even that they should be as brutal or utilitarian as the Asian tigers or China. They shouldn’t. But for the international development community to exclusively promote social goals at the expense of economic ends means that countries may not develop the government revenues to be able to spend enough money on education, health and social security themselves, and that development isn’t self-sustaining.
I think number 17, how rich countries behave is often more important than how much they spend on aid, is really important. I could have added the well-known point about US and European agricultural subsidies. Cotton subsidies for US farmers, in the order of billions of dollars, directly put West African producers out of business (and others, such as in Brazil). The European Union spends around 40 billion euros a year on direct subsidies. Agricultural and fisheries subsidies form over 40% of the EU budget. Many years ago Oxfam famously calculated that in effect each European cow receives a handout worth $2.20 a day, over twice the income of the bottom billion of the world’s people.
In the comments underneath the blog Jonathan Said questioned point 18. ”Just give them the f-ing money”. He rightly said that cash transfers aren’t the solution to poverty reduction. I should have been clearer. They play a small role but they’re particularly helpful because they mean that money is channelled straight to the poor without the intermediary of the charity manager or the aid bureaucrat. Aid is, or should be, a form of redistribution. The less it is just a tool of politics or patronage, the better.
There is a misperception that all aid breeds dependency and that countries should be left to develop under their own steam. This is wrong. Some aid can be problematic if it replaces funds that would have come from elsewhere, but lots of aid is the only game in town. It doesn’t ‘crowd-out’ private investment. European governments and charities are getting better at designing aid programmes, and ‘leaving countries to develop under their own steam’ really means abandoning them.
One of the worst books about development i’ve read is Dambisa Moyo’s Dead Aid. Bill Gates recently called it “evil”. Moyo presents a picture where vast oceans of aid are being squandered and stolen. In reality global aid is much smaller than she states (ridiculously, she counts only gross aid to Africa, not net — lenders receive large sums in interest payments on development loans) and aid has had a tremendous effect. Gates points out that it’s immoral to deny children live-saving medicines and vaccines, and that aid has saved hundreds of millions of lives over past decades, not to mention supported economic growth.
Prompted by Bill Gates’s annual letter and the response from the Overseas Development Institute I thought I’d list some of the things that in my experience seem to be less understood about poor countries. (I wanted to list 23 things like Ha-Joon Chang on capitalism but I couldn’t think of another two). I use the word poor on purpose because although the word risks sounding patronising or dismissive, euphemisms like developing and less-developed can be worse. Thoughts are welcome.
1. Poverty is the rule, not the exception. For most people life just isn’t as good as it is for you and I, the comfortable people from a country rich enough to allow us the literacy, time and Internet access to read blogs written by well-meaning left liberals. Poverty-as-rule-not -exception is difficult to bend our minds around because we tend to base our views about the world on direct experience. If people around us seem mostly well-fed and content, then why shouldn’t everybody else be?
Although things are improving, a huge chunk of the world’s population remain poor. Over a fifth of humans, 1.29 billion, are considered extremely poor . In effect the equivalent of every man, woman and child in Europe, the United States and the Middle East scrape by on 75 British pence a day adjusted for the cost of living in each country. About a third of the world lives on less than $2 a day. The poorest half of the world – 3.5 billion people – own only 0.71% of the world’s wealth between them.
A billion people live in chronic hunger. Nearly a third of all children are chronically malnourished, which unless addressed before the age of two often leaves them stunted and mentally impaired. A sixth of the world’s adults can’t read or write and many more have only rudimentary literacy. Sub-Saharan Africa has only two doctors for every 10,000 people, which is partly why on average its inhabitants live to an average age of 56.
Rather than a term like “developing” to describe these people and countries, the travel writer Dervla Murphy’s phrase “majority world” is more accurate.
2. Most countries aren’t well-off. The following graph using World Bank data shows that most countries have a relatively low level of national income per capita. 120 nations earn less per person than the world average. When you reach an income per capita of about US$20,000, about half that of the UK, there’s a big jump. Bermudan national income per person is US$104,590, 455 times that of the Democratic Republic of the Congo.
National income per capita, US$
[NB. Not all country labels fit on the vertical graph.]
3. More poor people live in Asia than in Africa. Everybody seems to be wittering on about the Asian Century these days – and Asian development has been miraculous. But about 69% of Indians live on less than US$2 per day: 850 million people. A third of Chinese, 400 million, remain similarly poor despite the country’s amazing success in reducing poverty. Together those two countries contain more poor people than there are Africans.
4. The distinction between “developed” and “developing” countries is meaningless. What’s Brazil got to do with Liberia? Not much, apart from an Atlantic coast. One is a newly-industrialising behemoth with an average income near the world average. The other is one of the world’s poorest, emerging from war. Yet both are officially considered developing. China, Turkey, Russia, Indonesia, Mexico and India are all big and relatively dynamic even if they also contain a lot of poor people. Millions of people in those countries live just like Europeans, and the emergence of these nations is one of the biggest reasons why poverty will continue to drop in the coming decades. Yet plenty countries also called developing are being left behind. I count 41 supposedly developing nations which in 2012 on some criterion had real incomes that were lower than a decade earlier. They’re probably better described as undeveloping.
5. Lying on the beach in Thailand or Gambia doesn’t tell you much about poverty. We still don’t know as much as we should about poverty and we try to ignore poor people. Most people’s experience of the global poor is the waiter at their table or the pool attendant, the ones lucky enough to have jobs. Only by direct experience and immersion in local circumstances is it possible to have a vague inkling of what it might be like to be genuinely destitute. There’s no obligation on holidaymakers to go wandering around in slums, but anybody who claims knowledge about deprivation should experience or observe it first-hand for themselves, ideally for a long time.
6. Our main tool for understanding poor countries – mainstream economics – is woefully inadequate and all about the rich world. A sample of 76,000 economics journal articles published between 1985 and 2005 shows that more papers were published about the United States than on Europe, Asia, Latin America, the Middle East and Africa combined. Like I said in this blog post, that’s as ridiculous as if biologists researched only flowers, or physicists only outer space. It’s no wonder that the mainstream model of human beings bears no resemblance to most people on the planet. Economists start from the assumption that humans are individualistic, utility-maximising and strictly rational in a narrow sense. Actually many people are communitarian, social, non-calculating, uncertain about the future and often act according to sentiment or whim. Mainstream economics allows no theory of power or politics and can’t see the world economy as a system.
7. The economic statistics on poor countries are awful. Which undermines my first four points. As Morten Jerven says in his book Poor Numbers: How We Are Misled By African Development Statistics And What To Do About It, “the most basic metric of development, GDP, should not be treated as an objective number but rather as a number that is a product of a process in which a range of arbitrary and controversial assumptions are made.” Jerven finds that the discrepancy between different GDP estimates is up to a half in some cases. This supports my experience from working in the least developed countries, where statistics offices are usually underfunded and don’t have the resources to collect data often or well enough.
There’s a kind of false scientism: foreign academic economists spend ages refining complicated econometric models despite the raw material being rubbish. In the absence of good numbers, the only immediate alternative is to live in a country, to use good theory and to rely where necessary on case studies and even anecdote.
8. We need somewhere to make our T-shirts. The global development story is all about how wonderful it would be if we could end poverty. But the current economic system relies on cheapness. Capitalism functions partly via its ability to maintain low wages. Why has global inflation been so low over the past decade or more? Partly, the China effect, whereby the opening up of huge untapped labour markets meant that whole Western industries could outsource their manufacturing and that new local manufacturers could emerge. China’s rural poor keep Foxconn workers on their toes – if you don’t like assembling iPhones at US$18 for a 10-hour day (much higher than it used to be) 1000 people are waiting to take your place.
Nairobi’s Kibera slum-dwellers and rural poor keep wages low by functioning as a reserve army of labour willing to work for peanuts. In Haiti garment manufacturers recently argued that a minimum wage rise to the equivalent of five dollars a day would kill their business. Wikileaks published documents showing that the United States government earlier fought to cap daily pay at three dollars. The country’s only major export industry is clothing destined for the United States.
It’d be worth paying a lot more for our t-shirts if it meant that the people who made them had decent lives. An increase in demand via higher wages would support economic growth. But it’s also naïve to think that western consumers would pay much more for their t-shirts or that businesses would tolerate big wage hikes.
9. Inequality matters at least as much as poverty. A report from Oxfam last month pointed out that 85 people, about as many as would fit on a double-decker bus, own as much wealth as the bottom half of the world’s population.
The Spirit Level by Kate Pickett and Richard Wilkinson shows that equality is good for everyone. Redistribution reduces poverty and makes life better for the rich in the form of less crime, better education and a more cohesive society. Global inequality is getting worse, not better. If we don’t radically reduce inequality the poor will eat us, so aid isn’t an option, and it’s not about the rich world “saving” the poor. It’s essential for everyone.
10. Africa isn’t a country. Although sub-Saharan Africa’s economy is still much smaller than Britain’s, some Africans are fat, go to the supermarket and drive cars. Many are very poor. The rise of the African middle class is one of the most under-reported stories of our times. If people in the UK think about the continent at all they think of the Ethiopian famine of the 1980s. Partly this is the fault of the major news media, which have cut back on foreign coverage so much that all they report on is Big Events – a bomb, a famine, a war. Reporters who occasionally fly in from abroad miss the cumulative series of small happenings that amount to a trend. To show only negative TV stories about Africa smears the whole continent. The Central African Republic isn’t Botswana, which isn’t Namibia. Within countries the divide between urban and rural populations is increasingly stark.
11. Not all poor countries are corrupt. Corruption tends to be more obvious in some poor countries because the police aren’t very good, the rule of law isn’t established and small-scale bribery may have become entrenched, but a country isn’t necessarily poor because the wealth has all been stolen. All sorts of other more important reasons explain poverty, like political instability, bad economic policy, colonial history, an over-reliance on tropical commodities, distance from major markets, being landlocked and poor health and education.
Relatively uncorrupt poor countries I’ve worked in or on include Vanuatu, Fiji, Kiribati, Tuvalu, Samoa, Tonga, the Federated States of Micronesia, Bhutan, Cape Verde and Mauritius. Arguably a good hundred others are less corrupt than when the United States or Britain were industrialising.
In the UK until the early 1800s it was perfectly normal for ministers to ‘borrow’ their departmental funds for personal profit. Until 1870, appointments of high-ranking civil servants in Britain were made on the basis of patronage rather than merit. The British government chief whip was actually called the patronage secretary of the Treasury because distributing patronage was his main job. (h/t M. Ibrahim) This was at a time when Britain became the first superpower.
Arguably the banking industry and its takeover of American and European governments represents a far bigger and more dangerous form of corruption than even the bribery and political theft that blights the likes of Nigeria. In the US and UK lobbying is a multi-billion dollar business which subverts the democratic process. From 2008 onwards , encouraged by lobbyists, the UK government committed to spending a staggering trillion pounds on the bank bailout, which is about ten years’ worth of National Health Service funding. It wasn’t as obvious as baksheesh but it amounted to the same thing only on a vastly larger scale. One academic estimates that by the end of 2012 the UK bailout had cost the taxpayer up to 13% of one year’s economic production.
Corruption doesn’t necessarily cause poverty: that’s like blaming poor countries for their own failures. In some cases quite the reverse can be true. Some people argue that corruption has helped national politicians align their interests with that of their country. Indonesia’s President Suharto understood that if he generated wealth there’d be more to steal, so he installed a team of technocrats whose sole job it was to grow the economy; immoral but effective.
12. Money doesn’t make you happy. Up to about US$75,000 a year it does – and most people aren’t anywhere near that level – but beyond that it doesn’t have any effect, according to Nobel prize-winning psychologist Daniel Kahneman. “The four basic needs: food, housing, clothes and medicine must be cheap and easy for everybody. That’s civilisation”, says Jon Jandai, a farmer from northeast Thailand. I’d add primary, secondary and tertiary education, too.
13. Poor countries can learn from the mistakes of the rich on the environment and life satisfaction. Lower income countries have leapfrogged some technologies. For example many will never install fixed telephone lines because mobile coverage is so good. Vast numbers of people will never touch a PC, doing all their computing on a smartphone or tablet.
The governments of poor countries should be more adventurous, leapfrogging ideologies too. Some proponents of economic growth argue that environmental sustainability and a focus on happiness will handicap poverty reduction. But it could enable some countries to prioritise the important things in life. Endless growth is impossible and undesirable.
Beyond a certain point rich inefficiency is the real problem. Why do developing countries ape the development paths and economic structures of the West? We are wage slaves who perform bullshit jobs so that we can service our mortgages. The advance of the car ruined everyone’s quality of life so that a minority can sit in air-conditioned metal boxes in jams. Clever though-leadership in the majority world could lead the way for the rich. Bhutan’s idea of Gross National Happiness is an example.
14. The world isn’t overpopulated. There’s plenty of food to go round. World agriculture produces 17% more calories per person today than it did 30 years ago despite a 70% population increase, due to rising yields, higher farming intensity and more use of land. The real problems are the system of distribution and energy use. If the rich world didn’t hog all the food and produce it inefficiently there’d be enough for everyone.
15. Governments often do things better than markets. Market fundamentalism is the new global creed, and yet most countries that developed successfully did it initially via heavy government intervention. Markets suffer from serious coordination failure. The global free-flow of capital and trade renders poor countries more vulnerable. As the United Kingdom has proven, natural monopolies like the railways, post office and water and electricity utilities are better off in public ownership. In poorer countries the case for government ownership is even stronger.
16. Most countries that successfully reduced poverty didn’t directly try to reduce poverty. They aimed at economic transformation. A fall in poverty was an indirect result of an increase in productive capacity. Investment rates and capital accumulation were high and aimed at enterprise development and technological improvement, as well as structural change toward developing the non-traditional sectors, including linkages to agriculture and the wider economy.
This sort of obliquity is what John Kay talks about in his book of the same name. If you try to target things directly you often fail.
17. How rich countries behave is often more important than how much they spend on aid. The 2008 global economic crisis, which was caused largely by the financial sector, increased poverty for hundreds of millions of people. The collapse in international trade hurt all countries, developing and industrialised. But while the big and emerging nations might recover, the poorest couldn’t cope. A downturn in exports can be life-and-death. When European orders stopped coming, Kenyan flower farm workers simply sat idle. Foreign investment inflows also dwindled. There is a large group at the global periphery which won’t rebound for a long time — and for many people, it is already too late.
Nicholas Shaxson’s excellent book Treasure Islands suggests that Transparency International’s corruption perceptions index has things the wrong way round: we should rank countries on banking secrecy, not graft. The real economic issue is that rich nations harbour ill-gotten spoils, not that Charles Taylor foists himself on Liberia.
18. Just give them the f-ing money, as Bob Geldof sort-of said. Daily Mail readers seem to think that the world has already given enough aid, but in reality an enormous amount remains to be done, as should be clear from points 1 and 9. More aid should be in the form grants rather than loans. Cash transfers are the best way of delivering some help. For example the British Department for International Development works with Unicef and the Kenyan Government in Korogocho, Nairobi, to improve the lives of orphans and vulnerable children through a cash transfer scheme which gives very poor families 3000 Kenyan shillings (about £25) every two months for help with basic household expenses. It cuts out the middleman and it’s been proven through robust testing to reduce poverty, hunger and inequality.
19. Rich countries don’t spend much on aid. The amount officially spent on each poor person globally is US$20 a year, according to the World Bank. The amount has doubled in the last decade following a dip in the late 1990s. But several opinion polls show that rich country inhabitants think they’re much more generous than they really are. Americans think that their government spends 28% of the budget on aid when it’s really about 1%. Brits are almost as bad. The result of this widespread overestimation of generosity is that many people in rich countries want to cut aid.
20. Aid works: both developmental and humanitarian. It’s not widely known that development aid was instrumental in supporting the growth of Singapore, one of the world’s most remarkable economic success stories. The United Nations Development Programme contributed 744 technical assistants from 1950 onwards and spent US$27 million on development help. In 1960 a visiting UNDP team led by Dutchman Dr Albert Winsemius, who became a trusted adviser to Lee Kuan Yew until the 1980s, wrote a report entitled “A proposed industrialisation programme for the State of Singapore”. This document formed the basis of early development strategy. Other major aid recipients that now receive very little include Botswana, Morocco, Brazil, Mexico, Chile, Costa Rica, Peru, Thailand, Mauritius and Malaysia. Bill Gates reckons that through a combination of aid and spontaneous economic development there won’t be any very poor people left by 2035.
He calculates that 100 million deaths have been avoided since the drop in child mortality since 1980, the start of the “Child Survival Revolution” that made vaccines and oral rehydration therapy much more widespread. Total aid, $500 billion, counts money for vaccines, HIV/AIDS, family planning, and water and sanitation from all donors. That works out at US$5000 per life saved, which he rightly says is quite cheap. Hundreds of millions of people have been immunized against Polio, treated for TB and given anti-retroviral treatment for HIV/AIDS.
21. Charity sometimes isn’t the best way of tackling poverty. Sometimes it is. Just because a service is provided freely or from donations doesn’t mean it is better. Often governments are better-placed to deliver assistance because they have better expertise, economies of scale and political access. Taxation places a similar burden on everyone and makes aid revenues more predictable. Sometimes, though, charities have better access and niche skills. Volunteer organisations often have a long history in certain locations and they can avoid accusations of political interference.
As usual the Daily Mash says it better than the mainstream media. “Independent Scotland will not be allowed to use British oxygen” reads one of today’s headlines, written after George Osborne ruled out a currency union with Scotland.
Because that’s what his announcement amounts to: a childish confrontation based on the politics of the sandpit. If you want to play it your way, you’re not getting our toys.
The Chancellor’s gambit will backfire because most Scots can’t stand Osborne and they won’t like being pushed around. The Spectator says that the fact that the government is playing its ace card now shows how worried it is about the referendum result.
Opinion polls continually show a minority in favour of self-rule because many Scots are either scared or apathetic. But the widespread dislike of Conservatism north of the border might translate into action if people feel they are being pushed around too much. Osborne would probably do better not to antagonise the undecided.
Nicola Sturgeon is right to say that if the Tories rule out a currency union then Scots aren’t obliged to take on their share of British debt. Given that the pound is partly Scottish property, if they’re denied the right to use it why should Scots feel obliged to burden themselves with its associated liabilities ?
She’s also correct that it isn’t the Chancellor’s place to rule out a currency union. Parliament will vote on the issue, and they’re likely to think carefully before cutting ties with England’s biggest export market.
It’s not often I agree with the right-wing Adam Smith Institute, but they’re correct that Scotland should use the pound anyway, even if Osborne says otherwise. Plenty of countries use the US dollar without asking the permission of Washington.
The euro’s a no-no. A Scots pound would cost too much, and investors in Scottish debt would demand higher interest rates in an untested currency. Public spending would have to be lower than in the rest of the UK despite the SNP’s social-spending ambitions.
Until now the independence debate mostly seemed civilised and demure — even at times inconsequential. It’s just turned nasty, and Osborne may live to regret delivering the latest volley.
The following is based on a talk I gave with Devpacific last Thursday in Vanuatu.
In a passage from his famous work The General Theory of Employment, Interest and Money, John Maynard Keynes presented a novel theory of how share prices are determined. Normally economists like to think of stock prices settling at an equilibrium level where supply and demand meet. The cost of shares is a fundamental property based on the present discounted value of a company’s future worth.
But Keynes thought otherwise, likening stock market investment to a newspaper beauty competition in which the winner is the person who predicts the most popular woman in the contest. Players won’t win by saying who they think is the prettiest; if they’re rational they should try to predict others’ probable choices. Other entrants will, if behaving sensibly, do the same thing, basing their submissions on others’ likely entries.
In the same way stock market investors should base their predictions of future price movements not on what they think a company is fundamentally worth but on the likely behaviour of the crowd. Prices are based on investors’ expectations about other investors’ expectations, resulting in a potentially unstable self-referential situation in which shares can rapidly diverge from their current values. Any notion of a fixed, underlying price becomes wobbly.
Keynes lost and gained a fortune in the stock market, and his concept was later adopted by the investor George Soros, who dubbed it “reflexivity”, claiming to have used the approach to make his billions. A reflexive relation is in essence one in which something affects itself (it’s got nothing to do with Chinese medicine). The difference between reflexivity and reflection is that while the latter suggests looking in a mirror and seeing yourself, the former involves an action deployed on an object and that object reacting back, resulting in a changed situation.
In grammar a reflexive pronoun refers back to the subject of the clause in which it is used. Examples are the words myself, himself, yourself, ourselves. The liar’s paradox – “this statement is false” – is another example. If the statement is false, then whoever said it was telling the truth. But if it is true, then it must be false because the speaker said it was. Therefore if it is true it is false, and if it is false it is true. The self-referential (and somewhat head-bending) nature of the statement has even led some to question the absolute validity of classical logic.
What’s all this got to do with development economics, never mind Vanuatu?
Several social scientists have used the idea of reflexivity in their theories of knowledge and society. In my book, Reflexivity and Development Economics, I try to draw out some of the implications of those theories and apply them to Vanuatu and Singapore.
Anthropologists have been among the most enthusiastic proponents of a reflexive approach. Bronislaw Malinowski in his post-war studies of Melanesian society, it is claimed, “lived as a native among the natives for many months together, conversing with them in their own tongue”. But it became clear that while Malinowski believed he had embedded himself in the society he was studying, in fact he was unable to escape his own preconceived beliefs and cultural tendencies – such as the rather dismissive category “native” itself, a word which would nowadays be considered racist.
Clifford Geertz thought that methodology – the study of methods – is reflexivity, as it involves examining your own project. Geertz argued that anthropologists should explicitly discuss their own backgrounds in order to highlight any biases and predispositions.
The French sociologist Pierre Bourdieu accused Geertz of self-fascination and egotism, suggesting that social theorists should examine not only their own backgrounds but the underlying biases and predispositions of the school of thought within which they operate. Bourdieu questioned the entire notion of objectivity.
The term has been used in a range of other areas including the sociology of scientific knowledge. In physics, the Heisenberg principle states that the objects studied in in quantum mechanics are so small that the instruments used to measure those objects may affect them. Similarly in social science human beings are both the examiners and the objects of examination. A social scientist might not be as neutral and objective as it at first appears because she brings all sorts of baggage into an enquiry.
All social science and policy, including development economics, involves a certain self-reference. We are at once the observers and the observed.
One implication is that economics itself might not be quite as neutral and objective as imagined, and it may be necessary to examine the predispositions and background of development economics and economists.
I argue that reflexivity implies four things:
First, an examination of external values and norms. Do economists bring in certain values an norms to a situation? When might these values and norms be harmful? What kinds of outside knowledge are useful?
Second, an assessment of the importance of local context. The empiricist, bottom-up approach of anthropology holds lessons. Anthropologists tend not to be as deductive as economists, preferring instead to ‘get inside’ a social context and describe it rather than using case studies as evidence to prove a wider, universal truth about human behaviour. Economic analysis should take account of values, behaviour and institutions.
Third, a recognition that economic tools, concepts and policies can undermine themselves, even though they were designed for greater control. Given the failure of most economists to predict the global financial crisis in 2008, the discipline might wish to be a bit more modest. Some of the centrally-held truths of the dismal science proved wrong – like the idea that western economies were undergoing a ‘great moderation’ and that private debt wasn’t a problem. If economists aren’t always correct in developed countries then what are the chances that they’ll get things right in the far-flung corners of the world which receive less attention?
Fourth, reflexivity implies that development economics should allow for theory to be revised if it proves inadequate or as circumstances change. Some of the more successful newly industrialised countries, like Singapore, consciously manipulated the economic environment so as to hold on the levers of policy and direct the economy in desired directions. Policymakers changed the development narrative as they saw fit.
In 1997 Vanuatu was subject to a set of economic reforms known as the Comprehensive Reform Programme. The CRP followed a doctrine known as the Washington Consensus, a list of 10 policies which it was argued would lead to rapid economic development. These policies included current and capital-account liberalisation, privatisation, corporatisation and lowering budget deficits and public spending. An identical programme was carried out at the same time in the Federated States of Micronesia, the Republic of the Northern Mariana Islands, Samoa and the Solomon Islands.
The man who coined the term Washington Consensus, John Williamson, said that “the sooner it wins general acceptance and can be removed from mainstream political debate, the better… The proof may not be quite as conclusive as the proof that the earth is not flat, but it is sufficiently well-established as to give sensible people better things to do with their time than to challenge its veracity”.
The problem was, in Vanuatu the economy almost immediately tanked, performing worse than at any time since independence. The government was obliged to match loans from the Asian Development Bank with spending of its own. When it ran out of money it had to rein in spending, with the result that the economy shrank dramatically. It took nearly a decade for growth to recover its pre-CRP levels. Maybe the proof wasn’t quite so conclusive.
GDP growth, 2000-2015
Source: Ministry of Finance and Economic Management 2012
More worryingly privatisation and corporatisation deprived the government of an estimated VT3.5 billion (US$35 million) in revenue according to the UN, and both the stock of debt and interest payments spiralled higher.
Lots of criticisms have been levelled at the Washington Consensus and the CRP, but I think that the failure of both was partly methodological; that they failed to take due account of context. Some of the norms, the standard procedures of economic policy, were useful, like the need to improve the institutions of government and the purported emphasis on social equity (but about which more could have been done). The use of an outsider-driven policy avoided the need for civil servants to take the blame for difficult decisions. Lessons can always be drawn from other countries.
But broadly the programme failed to take account of context, putting into practice an identical programme in five other Pacific island nations. The CRP ignored special features of Vanuatu society like kastom (traditional society), the use of money and land ownership. All land is held on a leasehold basis and deeply connected with kastom.
The programme also failed to acknowledge the possibility that things could go wrong. Certain parts of the programme backfired. The fiscal situation got worse, not better, and such was the hubris of the CRP that it had no back-up plan to deal with this possibility. Trust in outside agencies fell as some government policymakers became disgruntled. One senior civil servant told me that: “The CRP was a complete waste of time. It paid for the salaries of a few consultants and did nothing for the country.”
The programme also failed to allow for the revision of the development narrative. The government found it difficult to change policy direction. Debt was such a burden that policymakers’ hands were tied. Spending cuts limited the capacity of government. Many local people I spoke to suggest that they weren’t properly consulted. As the ADB’s own assessment of the project stated: “Externally imposed reform measures (conditionalities) that have little government ownership are doomed to certain failure”.
The CRP has long gone and there’s little point in over-analysing the past. But the episode holds lessons for both development economics and future interventions in Vanuatu and elsewhere. Thinking about methodology – how methods are selected and applied – is important when practising development economics. Economists are far too reluctant to question their underlying methodology, preferring to think of the discipline as a standardised approach rather than a toolkit or a process of enquiry using ideas from other social sciences like social and political theory. The discipline probably doesn’t carry the same scientific status as the natural sciences, and it should be a lot more modest.
Reflexivity means in part a process of critical self-examination, involving reflection on outside influences as well as the specific peculiarities of a situation. Maybe development economics itself should become more case-study based, empirical and context-orientated instead of so often applying theories based on deductive modelling?
What’s clear from Vanuatu’s story is that national ownership and carefully-considered forms of consultation are vital. Reforms can’t be designed solely from abroad. One size doesn’t fit all.
 Malinowski, B. (1978) Argonauts of the Western Pacific (London: Routledge and Kegan Paul)
 Williamson, J. (1993) ‘Democracy and the ‘Washington Consensus’, World Development 21(8): 1330
 Knapman, B. and C. D. Saldanha (1999) Reforms in the Pacific, An Assessment of the ADB’s Assistance for Reform Programmes in the Pacific (Manila: Asian Development Bank), p.169
What if biologists researched only flowers, or physicists only outer space? It’d be ridiculous.
Something akin to this kind of single-issue madness operates in the economics profession. The Economist reports that economics journals focus almost exclusively on the United States.
A sample of 76,000 papers published between 1985 and 2005 shows that were more papers about the United States than on Europe, Asia, Latin America, the Middle East and Africa combined (as the Economist’s chart shows below). The imbalance is even more marked for the top five economics journals.
Academic economists almost totally ignore the poorest countries. In the 20 years concerned, only four papers were written about Burundi. The American Economic Review, the fulcrum of academic desire, published one paper on India every two years.
Source: The Economist
The Economist explains this one-sidedness partly by saying that loads of data exists on America so it’s easier to crunch the numbers. Poorer countries aren’t so lucky. But that’s like saying oceanographers should ignore the deep ocean because they haven’t been able to explore it yet. In fact the deep sea is considered one of the last frontiers and scientists are doing all they can to understand it better.
The data obsession of economics highlights one of the main problems of the discipline – its positivism gone loopy. The idea that if something can’t be disproved (and hence measured) then it isn’t science is ludicrous. It would mean that we could say very little about love, friendship or social bonds in general, all of which have important implications for economic behaviour but which are nebulous and difficult to capture in numbers.
Just because poor countries aren’t bulging with reams of data it doesn’t mean they’re invisible. This sort of scientism in effect amounts to the wielding of power. ‘We’ as western academics will develop complex techniques which frame the debate because they only ask certain questions – how big should be the public debt to GDP ratio, does government spending crowd out private investment – and then we’ll analyse these issues to death without considering anything that people in poor countries might care about. Economics thus becomes by definition the study of rich countries.
Lots of research techniques and modes of analysis exist on subjective behaviour, and information can be uncovered if you look for it. Anthropologists have long studied subaltern societies using fieldwork complied over years of immersion in the community.
Much blame for the statistics-mania of economics can be pinned on Paul Samuelson, whose notion of operationalism amounted in effect to the economists’ version of positivism. As Bertrand Russell pointed out, the core principle of logical positivism is self-contradictory because it can’t be disproved.
The Economist cites another explanation for economists’ bias toward the States: that the intellectual kudos in solving a problem about the American economy is much higher than understanding a less developed country. But if economists are so career-obsessed that they’ll ignore the rest of the world then they should be pulled down a rung or two. Countries and people should be much more important than the mathematical games played out in the supposedly top journals.
It’d be interesting to know which journals the study covered, because if you look hard enough there is in fact a fair amount of stuff written about poor countries – it’s just outside the big name journals. As Paul Krugman has recently said, some of the best economics is happening on blogs (no, not this one), in working papers and in online journals like that of the World Economics Association.
The biggest problem with the US-centric nature of economics is that the profession has a universal view of human beings as self-interested, utility-maximising, optimising and broadly rational, when such a view of humanity is only one among many. Economists think that if they hone their techniques in the laboratory of America, then they don’t need to look further afield. But America isn’t a laboratory; it’s a small corner of the world, albeit a powerful one, and one where things work in a peculiar way. Humans don’t behave the same everywhere. In none of the 23 countries I’ve worked in does homo economicus exist.
In the broadly subsistence societies of Melanesia, for instance, many people explicitly repudiate the materialistic aspirations of foreigners, having the self-knowledge to realise that televisions don’t make you happy. It would be laughable to describe the inhabitants of Tanna, one of the southernmost islands of Vanuatu, as consequentialist in the economist’s sense, trading off future expected utilities against one another. There, communities are more important than individual “rights”.
In countries like South Sudan and Lesotho, “the state” can’t be conceptualised as the black box that economists think it can. It’s a varied and complex beast, riven with tribal and special interests – as seen lately. It doesn’t behave remotely in the way that it is imagined that the American state does, as a technocratic institution which is supposed to intervene (or not) according to circumstance. Economies themselves are rooted in social structures, all of which vary because of history and culture.
Even in the United States and Europe, the old notion of strict rationality has come increasingly under question as a result of new research by psychologists.
So for economists to focus only on America is as partial as if biology looked only at floriculture, or as if physicists gazed just at the heavens, and omitted the vast and fascinating research space that exists in the rest of the world. We’d be outraged if any other science was so blinkered. Why not with economics?
The Economist concludes that: “the world’s poorest countries would benefit from having more economists poking around. With more published research, it would be easier for those countries to base policies on hard evidence, rather than on politicians’ whims. Economists ought to be bolder in venturing outside their comfort zone.”
I half-agree, in that economists should hugely rebalance their research. But at the same time without a major overhaul of the techniques and methods of economics I’m not sure I want them to poke around more in poor countries because they might make just as much a mess of things as they have in the rich world.
News has emerged of the discovery of mass graves in South Sudan, as the country descends into civil war. I thought i’d say a few things after working there in November.
First, the mainstream media coverage has been awful. When the crisis kicked off 10 days ago it was obvious something nasty was afoot, yet the story didn’t make it to the top of websites for the whole week, meriting only a couple of brief reports on the international sections of the BBC and Guardian. On Thursday I saw a confused-looking Beeb anchor mention the conflict briefly on TV. News websites were too busy grappling with the intricacies of the Nigella Lawson case and crap like “Smartphone smackdown: The best (and worst) devices of 2013″ (The Guardian). Some outside journalists couldn’t enter the country because the borders were temporarily closed, but that should be no reason to ignore the conflict. News outlets could have used newswires and local reports. Radio Tamazuj seems much more informed than its British or American counterparts.
It was only this week that the story hit the top of the news agenda, after the death of an estimated thousand or more and after tens of thousands of people were forced to leave their homes. Twitter has throughout been much more useful than the international press, with informed locals sending messages from the capital, Juba, several informed foreign journalists messaging from home, as well as a few people tweeting from the ten provinces. I emailed several of my contacts, all of whom were OK. As my friend Marco pointed out on Facebook, for the Guardian to trumpet their man as the first foreign reporter to enter the country smacked of the same old paternalism that’s afflicted the continent for centuries. Reuters and local media have been reporting on the crisis since well before the arrival of the foreign press pack.
As so often the causes of the conflict were personalised. Foreign diplomats were reported as saying that President Salva Kiir “wasn’t the man they used to deal with” and that his former vice president Riek Machar, with his PhD from Bradford — as if that matters — appeared more power-hungry than before. The international press has paid hardly any attention to the political institutions (or lack of them) that allowed the current situation to develop, or to the international pressures which might have influenced the schism.
And we wonder why newspapers are in decline.
Second, contrary to what the legion of instant experts soon to hit the airwaves will say, nobody saw this coming. I’m relatively ignorant about the country, having only spent a fortnight there (writing about trade policy), so my view isn’t very important, but not one of the roughly 30-40 people I spoke to in the country mentioned the possibility of armed conflict, still less inter-ethnic violence. I didn’t read any analyses saying that widespread inter-ethnic violence was a risk, although my reading wasn’t exhaustive. Most of the people I spoke to rightly pointed to Khartoum as the source of their fears, rather than Dinka or Nuer. Warnings were issued about ongoing violence in states like Jonglei and at the disputed border with the north, not that the crisis would take the current form.
Retrospectively, of course, it’s always possible to build a story which sees ethnicity and armed conflict long bubbling below the surface. Many senior government staff are former senior army officers who have been given their positions as a reward for decades spent fighting for independence, and to stop them returning to make trouble in the provinces.
The South Sudanese who didn’t fight in the war were reportedly less likely to be promoted afterwards. Before 2005 some worked in Khartoum, where they were confined by to the middle ranks of the civil service. A few people suggested to me that Khartoum deliberately sabotaged the government of the South by promoting weak officers to senior posts just before independence. Put bluntly, many didn’t know what they were doing. After the oil was shut off earlier this year government revenues went into decline, which meant that many government employees went unpaid for several months. Their discontent might have stoked the violence.
Europeans and Americans have a tendency to put too much faith in the peaceful conciliation that comes about through democratic processes, and perhaps a naked power-clash like the one currently being perpetrated by president Kiir was always in the offing, particularly in such a new country and after two civil wars spanning 39 years – together said to be the world’s bloodiest, in which 1.5 million died.
Education and guns matter. A country saturated with AK47s was never likely to remain peaceful forever. Denied the right to attend school only a 27% of people are literate, defined by the UN as the proportion of adults over 15 able to read and write a simple sentence. Globally that’s higher only than the neighbouring Central African Republic. A mere 1.7% of people go to secondary school. It’s not patronising to suggest that some people settled scores by violence, not discussion, and that leaders can readily convince the uneducated that the tribal ‘other’ is to blame for their problems.
Health indicators are little better. Of every thousand live births 105 children never reach their first birthday. In Cuba, a global health exemplar, the comparable figure is six. South Sudanese have a fifty-fifty chance of living below the national poverty line, but their poverty-stricken years are unlikely to last because people die at an average age of 42. I suppose that in a new country the window of opportunity for tackling these horrifying social indicators is relatively short, and when people don’t see their lives improving they will look for scapegoats.
And people’s lives outside the capital weren’t improving quickly. Economic opportunities appeared incredibly limited in many of the provinces. In Malakal, in the northern state of Upper Nile, I asked one interviewee about the main barriers to trade. In other countries the answer is usually technical, like the cost of credit, difficulties with property rights or delays with customs clearance.
“Electricity,” he said, “and roads”. The entire province – which covers an area seven times that of Yorkshire – contains almost no tarmac apart from a couple of short stretches near the oilfields near the border with Sudan. The state has a wealth of resources: oil; gum Arabic (which is used in fizzy drinks and which the South Sudanese have tried in vain to rename Gum Africa); fertile land but no infrastructure or the ability to exploit those resources apart from sending oil via pipeline to Port Sudan for refining elsewhere. The official border at Renk was closed and almost all goods from Sudan are smuggled.
(Incidentally while in Malakal we met the sister of Pagan Amum Okiech, the Secretary General of the Sudan People’s Liberation Movement, who is currently under detention for allegedly plotting the current unrest.)
It probably goes without saying, but infrastructure is very basic. Most roads are rough tracks. We crossed the only bridge out of Juba, a decades-old military affair spanning the White Nile which looked as if it could collapse at any moment. Lorries were backed up to the river’s edge syphoning water from the river for transport round town in tankers. Our taxi driver said that until last year some had been transporting sewage and water in the same tank, and that sometimes you’d be having a shower and “shit would fall on your head”. He seemed to find this incredibly funny. Until two years ago three was apparently no readily-available good drinking water in the town, although now 25 companies bottle water — affordable only for the middle-class, of course.
The Ministry of Transport compound ironically couldn’t be reached except by a very good four-wheel drive. There are almost no small cars in town, and almost every vehicle seems to be a Toyota Landcruiser, probably not paid for out of a senior government salary of about $1000 a month. The only two good paved roads in the capital run mostly between the government offices and aid agencies. The other routes are via terrible muddy tracks which are best avoided. We sat in a jam for ten minutes near a three-way junction. Traffic lights are unknown. Hotels are springing up everywhere, a contrast, I am told, to the pre-independence days when most visitors stayed in tents.
What strikes me as so saddening is that South Sudan will be dismissed by the world as just the latest disastrous African tribal conflict, yet I met a lot of peacable, educated and hard-working people who only wanted their nation to succeed and who were well capable of identifying the real sources of underdevelopment. The explanation is much more complex than just two tribes having at each other. As the traffic jams and new hotels showed, at least in the capital things were booming. Economic growth was so rapid this year that the Economist touted the nation as one of the world’s best-performers. In last week’s print edition it considered South Sudan as a possible “country of the year” but counted it out because of the volatile nature of growth:
Focusing on GDP growth would lead us to opt for South Sudan, which will probably notch up a stonking 30% increase in 2013—more the consequence of a 55% drop the previous year, caused by the closure of its only oil pipeline as a result of its divorce from Sudan, than a reason for optimism about a troubled land.
As an uninformed outsider, if I were to point to one particular cause of the conflict i’d pick out the low level of institutional development. A poor, war-torn country just can’t develop a functional legal system and democracy in two years. Lots of foreigners from rich countries forget that their systems took hundreds of years to develop, often in unspoken, tacit ways. Britain doesn’t even have a written constitution. In any case, writing things on bits of paper is often completely useless. The 2011 South Sudanese constitution is the sort of thing that would give Norwegians wet dreams — and in fact it was drafted with the help of well-meaning European lawyers. It’s full of politically-correct statements about gender equality and human rights, all of which are being resolutely violated.
Civil servants aren’t fully trained, and many are politically appointed or put in place for reasons of expediency rather than because they’re any good at doing their jobs. The state clearly struggled to legitimise itself through monopolising the legitimate use of violence, as students of Max Weber would attest. All of these institutional ingredients need strong long-term international support and funding.
But as the recriminations fly it’s worth remembering that few people, least of all myself, saw the conflict coming, despite the poverty, and despite the poor state of education, health, infrastructure and institutions. It’s probably too soon to start pointing fingers at the UN, or the Chinese, or the Americans, or only one side or other in the political conflict. If the finger-pointers were so wise they’d have said something before the event. What’s obviously crucial in the near term is for the president and Machar to hold public talks aimed at stopping the violence in an effort to stop it getting even further out of hand, and for foreign news agencies to report it properly regardless of Western weariness — and even if it spoils our Christmas dinners.
An excellent paper by Kaushik Basu argues that randomised controlled trials (RCTs) in development economics can’t establish causality:
To be aware of our own minds’ propensities, it is at times useful to take cognizance of the very different beliefs found in other cultures, which those cultures consider perfectly reasonable. The Gurung tribesmen of Nepal spend a lot of time climbing dangerously high trees to gather honey. When the French photographer, Eric Valli, who worked extensively among the Gurung, asked them if they do not ever fall down from their high perch, they replied: “Yes, you fall when your life is over.” (National Geographic, vol. 193, no. 6, June 1998, p.92)
I quite like Basu’s conclusion, which is that whilst RCTs don’t establish causality they may describe a situation well. We should pay attention to them but we should also use our intuition.
What I am arguing is that by bringing … intuition and reason together, we can greatly improve our ability to make policies. Is my intuition consistent with the evidence we have and the other things I already know? Is it consistent with the other intuitive beliefs I hold? Reasoned intuition is intuition that has been subjected to this kind of interrogation.
In this and the next paragraph he more or less describes what I do when I write about trade policy in developing countries:
Empirical studies, no matter how carefully done, cannot in themselves lead us to particular policies. Going from evidence, data, and statistics to policy will invariably entail a leap of imagination.
Another clever argument:
Dollar, Kleineberg and Kraay (2013) have recently shown, using a remarkably comprehensive data set, spanning multiple countries and several decades, that the bulk of poverty reduction that the world has seen in the past was due to overall GDP growth. Intuition then prompts us to propose that we should therefore rely on growth rather than specially designed market interventions to battle poverty. For the untutored, the growth v. poverty debate is an emotive one and this observation quickly gathers support among those who have a predilection to leave it all to the market. Without going into this larger debate here… let me simply point to an obvious mistake that leads us to make this policy conclusion from this robust empirical finding. The fact that 75% of the drop in poverty in the past occurred because of growth in no way shows that growth is more effective in eradicating poverty than say a new conditional cash transfer program. The mistake in making that deduction would be the same as someone studying infections in the 1930s asserting that we should rely on non-penicillin medicines because past data shows that 99% of all cures were because of non-penicillin drugs. This ignores the fact that penicillin was discovered in 1928 and so the lack of evidence of the success of penicillin is not a sign of penicillin not working but of penicillin not existing.
Basu adds on page 20 that the mistake about assuming that growth reduces poverty would be the same as someone pointing out that the private sector creates jobs because past data show that 80% of jobs were created by the private sector. “If this logic were correct, we would also have to accept the logic of an economist in Soviet Russia in 1980 arguing that we have to rely on the state for job creation because past data show that 90% of all jobs were created by the state.”
What human beings know comes from many sources, and to deem only one method valid and all others invalid is to slow the process of knowledge acquisition. The catholicity of methods currently used—from anthropological notes, analysis of large data sets, everyday experience and randomized trials—all have a role to play in this enterprise.