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Jewish World Review May 9, 2002 /27 Iyar, 5762

Amity Shlaes

Amity Shlaes
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Aid, development and guilt in our times of terror | Sometimes a death can seem particularly untimely, cruel in its arrival at a certain hour. That is the case with the passing of Peter Bauer, the world's great development economist. Lord Bauer's death last week would have been mourned at any time but it is especially sad because this happens to be a moment when the world needs him and his ideas.

The moment at issue is what might be called the post-September 11 moment. Since that terrible day, most western nations and the elites that tend to govern them have argued that it is now time "to do something" to boost development in poor countries. Thus there are calls to give more money to meet global targets for education and health - a Bush administration update of the "Millennium Goals" - and so on.

Much of this concern is posited on the population explosion in the poorest of the world's places and a new commitment, from left and right, somehow to make it the west's task to extricate the world's poorest from their poverty. The new impulse is expressed in a faith in central planning that would have seemed outdated even 12 months ago: the idea that it is through the World Bank, the United Nations Development Agency or other such multilateral vehicles that we can best achieve global prosperity.

This new campaign is partly a pragmatic one: we have learnt, as Harvard's Jeffrey Sachs puts it, that "when bad things happen in poor and remote places they can come back to bite us". But there is an emotional dynamic at work as well: it is in our mushy western nature to want to assume blame and responsibility when disaster happens, even when it happens to us. We also tend to believe that only action on our part can prevent future such disasters.

Here, Bauer would have said that we were wrong. From a perch at the London School of Economics, and even before, he made it his work to study the development campaigns that resulted from the aid impulse. Indeed, he argued that just because we feel we ought to "aid" the weakest into political and economic stability does not mean that aid is truly the best method for achieving that goal. Other factors - letting governments find their own way from corruption, keeping clear of their efforts to establish the rule of law, respecting their property rights - may be more important for progress. By handing aid to corrupt regimes, we perpetuate trouble rather than alleviate it.

Bauer's studies began with a "guilt" far older than anything felt post-September 11: the guilt of empires, and with Britain especially, their experience in the colonies. But the conclusions he drew, in his studies of the decolonising world, also apply to our unfolding post-September 11 programmes. Consider, for a start, the new concern over population - the idea that fertility engenders despair and therefore extremism.

Bauer denied that population growth per se was a problem; he called it "invented". In Population Growth: Disaster or Blessing, he wrote: "Economic achievement and progress depend on people's conduct, not their numbers." India, with a population density of 750 people per square mile, did better than Zaire, with 40 people per square mile, he noted. Japan disproved the argument that population was a problem. To argue back that poor countries "couldn't handle" the density that wealthy ones could was simple and destructive cultural condescension.

The poverty of poor places, was, Bauer argued, likewise treated in too general and sentimental terms and therefore constantly misunderstood. As early as 1948, for example, in his landmark study The Rubber Industry, Bauer noted that east Asia was a much more varied place than the west assumed: that Chinese workers in Malaya happened to be more productive than Tamil ones; that the informal sector in rubber cultivation was far more productive than acknowledged. Regulation from abroad that supported monopoly also hurt the smaller capitalist enterprises (Malaya's rubber "smallholdings") that existed in former colonies.

Later he expanded his thesis to show how aid damaged, as well. "Economic achievement," he wrote, depends primarily "on people's abilities and attitudes and also on their [domestic] social and political institutions".

Aid, Bauer argued, can be particularly dangerous. It tends to constitute "preferential treatment of the incompetent, the improvident, or the dishonest". Rather than diminishing local inequities, therefore, aid tends to reinforce them. Indeed, the whole campaign for equity is wrong. Instead, we should accept differences and trade with poorer nations in the confidence that trade will best aid them.

But it was on the guilty feeling of the west (now visible in its new iteration) that Bauer was at his most articulate. He recalled that: "Far from the west having caused the poverty in the Third World, contact with the west has been the principal agent of material progress there." (The rich west did not take rubber from Malaya; it introduced its cultivation.) Long before Nike became a powerful brand, Bauer in effect foresaw and rebutted the arguments of those who claim Nike must not sell shoes made in sweatshops.

The modern development experts who are pushing for aid are not so unsophisticated that they do not have a reply to Bauer's arguments. They argue that modern aid will be different, tied to results (the Bush administration's Monterrey programme) and so on.

Still, Bauer's opus stands as a reminder that aid, no matter the conditions, is at heart a subsidy and thus damaging. Just before Bauer's death, Cato, the free-market think-tank, awarded him its Milton Friedman prize. It is a personal tragedy that he did not live to see the award day - but a larger one that he will not be around to help shape our new vision of progress.

JWR contributor Amity Shlaes is a columnist for Financial Times . Her latest book is The Greedy Hand: How Taxes Drive Americans Crazy and What to Do About It. Send your comments by clicking here.


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© 2001, Financial Times