Monday, March 31, 2014

Should we put our faith in development experts or democracy?

The Tyranny of Experts, by William Easterly, is an important book which deserves to be read by anyone with an interest in economic development.  

Easterly argues persuasively that in viewing economic development as a technical problem requiring expert solutions, development economists have strengthened the hands of autocrats and deprived the poor of their rights.  His examination of economic growth experience suggests that leaders matter very little for either good or ill – the influence of leadership is overshadowed by other factors such booms and busts in commodity prices. 

He concludes:
“This is not good news for the experts. If leaders do not drive growth, then the experts advising them do not drive growth either. The experts had promised to deliver high growth in return for giving them and their autocratic pupils more power. There is no evidence that they have delivered. The growth-payoff justification for the Tyranny of Experts has turned out to be spurious”(p326).

In my view, Bill Easterly’s attack on strong political leaders (and their expert advisers) involves too much collateral damage. My reading of history (as well as my own experience in the economic advice industry) suggests to me that strong political leadership is not always at variance with “spontaneous solutions arising from political and economic rights”. Some strong political leaders have been able to use democratic processes to overcome interest groups which have been using their political muscle to restrict freedom. Surely the relevant choice is between freedom and its alternatives. I will return to this point later.

Bill Easterly argues that proponents of the technocratic approach to economic development have failed to establish that it delivers greater development in exchange for sacrifices in individual freedom. He does not argue that such aid always requires sacrifices in freedom. The technocrats who claim rigorous evidence in favour of some forms of development aid (e.g. treated mosquito nets and deworming drugs) can reasonably claim that such assistance expands opportunities available to individuals without in any way restricting their freedom.

Easterly’s point is that by viewing development as a purely technical problem, the technocrats systemically overlook the human rights abuses of the autocrats they help to keep in power. He cites the example of Meles Zenawi, an Ethiopian autocrat who has been praised by Bill Gates and Tony Blair for reductions in child mortality that may not actually have happened. Zenawi used aid funds to blackmail starving peasants into supporting his regime and he forcefully relocated farmers in the Gambella region to model villages so that he could sell their land to foreign investors.

In some other instances there is a more direct link between aid and the abuse of individual rights. For example, the book begins with the story of a World Bank funded forestry project in the Mubende district of Uganda. This aid project involved the forced evacuation of local farmers to enable a British forestry company to take over their land.

Bill Easterly presents evidence that poor people value freedom as an end in itself, but his defence of freedom is not based entirely on those grounds. He argues that freedom promotes individualistic values that favour economic development. By contrast, autocrats promote the interests of the kingdom (or state) above those of the individual and foster collectivist values that are inimical to economic development. That view is consistent with the recent history of rapid economic growth in countries such as China, as well as with the longer history of economic growth in high income countries. Easterly points out that the rapid economic growth in China can be related to the major change toward greater freedom that occurred in China after 1978.

This might be an appropriate point to return to a discussion of the merits of strong leadership. Autocrats sometimes promote freedom. Mancur Olson’s distinction between the incentives faced by roving and stationary bandits (discussed here a few years ago) comes to mind at this point. However, I am more concerned to defend the strong leadership of democrats like Margaret Thatcher than that of autocrats like Deng Xiaoping.

Bill Easterly recognizes that voting is not a sufficient condition for individual rights, but in my view he does not pay sufficient attention to the current problems of democracies, which were discussed here last week. Some democracies have had relatively good records of defending individual rights and ensuring widespread opportunities for individuals to flourish. In recent years, however, weak leadership in quite a few democracies has permitted an explosive growth of public debt which has ended up subjecting citizens to the “tyranny” of experts in the IMF and ECB. 

Democratic political institutions are not always good enough to ensure that political rights produce spontaneous solutions to economic policy problems.

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