William Easterly
Subject: Cutting Foreign Aid
Bio: Professor of Economics at NYU and Author of Violent Saviors: The West’s Conquest of the Rest
Transcript:
Larry Bernstein:
Welcome to What Happens Next. My name is Larry Bernstein. What Happens Next is a podcast which covers economics, politics, and history. Today’s topic is Cutting Foreign Aid.
Our speaker is William Easterly who is a Professor of Economics at NYU and the author of a new book entitled Violent Saviors: The West’s Conquest of the Rest.
I want to hear from Bill about whether foreign aid has been a source for good in the developing world. I also want to understand the role of experts and whether the World Bank’s programs has been successful.
I have been told that the road to hell is paved with good intentions. Let’s find out if this applies to foreign aid as well. Bill, can you please begin with six minutes of opening remarks.
William Easterly:
I was motivated to do this book out of frustration with the modern development world. They had this idea that a leader who is in power during a period of extremely high economic growth is presumed to be a benevolent leader, even when that leader is an autocrat. For example, Meles Zenawi in Ethiopia was everybody’s favorite autocrat when he was in power from the 1990s through his death in 2012. Ethiopia did have high growth during that period. Infant mortality fell. Bill Gates praised Meles Zenawi repeatedly and yet he was shooting demonstrators in the street, putting political prisoners in jails, forcing farmers to relocate at gunpoint from their own fields.
European colonial rule had the idea that they are bringing economic development to the places they were conquering. John Winthrop, the first governor of the Massachusetts Bay Colony in 1629 wrote a sales pitch to potential settlers for the Massachusetts Bay Colony of the development right of conquest. The Indian will learn from us to improve the land they have left. It was not a voluntary trade. Indians were not consulted. Winthrop also advertised that he was going to bring a bunch of soldiers along just in case the Indians did not show enthusiasm for development.
This idea recurred throughout western colonial history. A Belgian King Leopold conquered the Congo in the late 1800s claimed to bring civilization to Congo. Massive increases in rubber exports made possible by enslaving the Congolese. The toxic version is the idea of benevolent slavery that allegedly the slaves were better off under slavery than they had been if they were still in Africa.
It is a radical redefinition of progress. We still are obsessed with using GDP per capita to define progress. This is about ethics rather than science. This is not empirically testing whether material GDP did go up or not. This is saying we are going to redefine progress according to the normative criteria. People get to say for themselves whether they think they are better off or not.
Frederick Douglas said, caring for the slave is no compensation for slavery. It is about having the right to self-determination. When white philanthropists were flooding into the South to help freed slaves, he was like, why are these broken-down professors from the North in charge of this philanthropy and why aren’t Black leaders in charge of our own progress?
Why are economists getting involved in this stuff? This sounds like moral and political. Adam Smith alternative to conquest was commerce. Instead of conquering, you engage in trade. Adam Smith made clear in The Wealth of Nations trade is only trade if there’s mutual consent on both sides. Both of us have agency, neither of us is coerced, neither is pretending to be the savior of the other. Neither side is paternalistic, and we’re better off through trade.
The alternative of slavery was a free labor market. The alternative to the Congo was Congolese voluntarily work to export rubber to the Europeans. Capitalism without consent can be destructive. Capitalism with consent can be enormously beneficial.
Smith was optimistic. He said one day commerce would replace conquest. Adam Smith’s prophecy did come true. Colonialism and slavery ended. Communism mostly ended and it was replaced by commerce. The inhabitants of the world over are getting agency to decide what trades they engage in.
In the 21st century, development is not as bad as benevolent slavery. It’s not as bad as colonialism, it’s not as bad as Leopold in Congo, not as bad as the Soviet five-year plans. But there’s still little attention paid to giving agency to the intended beneficiaries of a development program.
Larry Bernstein:
Bill, you worked for the World Bank. This is a multilateral agency that was created by the US government immediately after the Second World War with the hope of bringing money and know-how to the developing world. And it reflects the idea that we know better. Step aside, we are bringing in college educated experts to solve your problems. Water use, fertility, how to engage in an economic takeoff. Tell us about your background and how you got to questioning the tyranny of experts.
William Easterly:
I worked for the World Bank from 1985 to 2001. I was in the research department, a group of truly knowledgeable people. Everyone in the World Bank had incredibly good intentions about development and achieving relief for poverty. But two things bothered me. The first was that it did not seem to be working. The places where the aid was most intensive was in Africa. Sub-Saharan Africa had been a big development failure and been a tragedy rather than triumph of development. On average through the early 1990s when I started, Africa had had a negative per capita growth since independence.
The places that were most reliant on aid were the ones that did the worst. Of course, there was always a problem of reverse causality about this relationship. The places that did the worst also needed the most aid. So, it was not that easy to tease out the relationship between aid and economic growth. But the efforts to do that failed to find any evidence that aid was causing growth. And certainly, the big propaganda that large aid programs would result in the equivalent of the Marshall Plan launching Europe back into prosperity after World War II. That clearly did not happen in Sub-Saharan Africa. It did not happen in other low-income places around the world like Nicaragua, Bolivia or Cambodia, places that did get a lot of development advice and aid, they were big failures.
Larry Bernstein:
The Cold War started conterminously with the World Bank’s birth and there was a desire to persuade the former colonies into democratic politics, free markets, and open trading platforms and to reject advances from the communists.
William Easterly:
The colonial powers were motivated by their own self-interest, and the western aid is motivated by the desire for the U.S. to win the Cold War. A secondary goal was to eliminate poverty. When someone has the motivation primarily about self-interest, you cannot trust them to act in someone else’s interest.
Larry Bernstein:
If you take it away from governments and look at NGOs, how do you think about the role of NGOs and their experts to solve problems?
William Easterly:
The fundraising model for NGOs is about paternalism because if we know best what people need and how to end their poverty, then we will take money from rich donors, and we will use our expert knowledge to achieve poverty relief for the intended beneficiaries. That is the successful fundraising model. So sadly, even when people have good intentions that fundraising imperative pushes them in the direction of paternalism.
Larry Bernstein:
I am not doubting the good intentions of the experts, but what seems to be opposite to your goals is to get the consent to agree to suggestions. How should we think about good intentions as being insufficient?
William Easterly:
Nobody denies that genuine scientific knowledge useful, but it is undercut by our arrogance that we have all the answers, our lack of interest in hearing from people on the receiving end, the insights that they must how to achieve progress in their own lives. That is the problem.
Larry Bernstein:
America felt threatened by Iraq and Afghanistan and decided that a war could incorporate democracy, rule of law, and aid could kickstart these two countries that would not be a threat to America. These failed miserably from a military, economic, and moral perspective. How do you think about nation building?
William Easterly:
It is just a rehash of what failed Vietnam applied to Afghanistan. It is tremendous hubris that western military intervention plus development experts and aid could result in the emergence of a liberal market-based democratic society. It is crazy that Americans with guns and aid expertise can build a nation. Certainly, it would have been understandable that there would have been a military response to 9/11. But the delusion that you could create liberal democratic, economically free society from scratch, relying primarily on soldiers and experts. That was just a crazy delusion.
Larry Bernstein:
The Peace Corps sends young college kids without experience or relevant knowledge to help people in the developing world. What do you think of this secular missionary project?
William Easterly:
I know a lot of people have been on the Peace Corps and they would be the first to say it is crazy that I, knowing nothing, would show up and be a benefit to people. Going back to the Frederick Douglass critique of random white people coming from the North to help to freed slaves. It is the insulting notion that any random American, even a young American with little knowledge and experience, it’s a huge benefit to non-white, non-American populations. That is what notoriously become called the white savior complex.
In our own day with the teenager going to the third world on a gap year and presume to be a great benefit. It is the same mindset that it is like God’s gift to any non-American population.
Larry Bernstein:
We last met 18 years ago in 2007 when I hosted a book club to discuss your book White Man’s Burden. In that work, you discussed the failures of the World Bank. Despite the best of intentions, the World Bank failed. It wasted money by siphoning off cash to autocrats and doing significant harm to the beneficiaries of aid. At the end of the book club, I asked you if you were put in charge, would you cut the funding to the World Bank materially, keep it the same, or increase it. Do you remember what you said?
William Easterly:
I voted to leave it the same. It astonished you and the audience. I remember that.
Larry Bernstein:
I was flabbergasted. You wrote a book that concluded that the World Bank where you had previously worked for decades was flawed and had no chance for reform. How can you conclude that you want to keep the organization as it is? Why not make a change if an institution is failing to meet its objectives?
William Easterly:
I do not want to be too arrogant to say, I know what the answer is and then you should do something drastic based on my advice alone. Even when I am saying aid is bad and has negative consequences, I still prefer gradual transitions rather than shock therapy.
And why is that? Because a gradual transition gives everyone time to adjust. See whether things are working out well or have any unintended consequences and keeping aid the same was a transition towards aid becoming increasingly irrelevant.
Larry Bernstein:
In what way has foreign aid become less important?
William Easterly:
Voluntary market transactions between the West and the rest exploded a thousand-fold while aid did stay relatively constant. Aid at this point is an insignificant part of the relations between the West and the rest.
Larry Bernstein:
Compare the relative importance to Africa of trade, foreign direct investment, and migrant remittances with foreign aid?
William Easterly:
If you add up in Africa all the market transactions, the foreign direct investment flowing into Africa, the exports from Africa, the remittance from migrants, all of that is nine times larger than aid. Aid is not as important as it used to be. Keeping aid constant did facilitate a transition from aid towards markets, and that was greatly beneficial.
We are giving too much importance to ourselves when we get so obsessed with the aid debate. We must get over ourselves. Aid is not important. Poor people in Africa are not aware of aid. Their lives are determined by what they want to do and what they can earn from local and international markets.
Larry Bernstein:
The West wanted to get rid of infections like malaria, polio, smallpox, so we gave the third world vaccines and mosquito nets to minimize the spread of disease. How do you feel about medical advances and our interaction with the rest?
William Easterly:
Medical philanthropic effort has been the most successful and there are successes to be celebrated. Infant mortality has fallen and a lot of that it had to do with vaccines and antibiotics and simple interventions to rehydrate infants if they are afflicted with diarrhea.
Larry Bernstein:
President Trump recently terminated USAID and there was much gnashing of teeth by the experts that good programs would be stopped.
William Easterly:
I was not a fan of the way that the Trump administration went about it. I hate the idea of shock therapy based on imperfect knowledge and dynamite to destroy successful programs like the health ones.
To transition towards a world with less aid that was a great way to go about it. Aid is now being romanticized as this wonderful thing that was destroyed by the Trump administration, and it certainly doesn’t deserve that reputation either.
Larry Bernstein:
What are you optimistic about?
William Easterly:
The most encouraging thing I see is the assertion by African intellectuals and development economists to oversee their own development.
Larry Bernstein:
There was a Conference in Bandung Indonesia in 1955 where the third world nations participated without the West. This happened at the height of the Cold War at a time when the United States was pushing free markets and encouraging countries to join our military alliance and the Russian Communists had an opposing vision. At the Bandung Conference, what were the developing country participants considering as a third way for industrial policy to achieve takeoff without interference by the West or the Russians.
William Easterly:
There is a mythology about the Bandung Conference. It claimed to be the origin of the term Third World. It is supposed to be a neutral term referring to a world caught between the first world of the West and the second world of the Communist Russians. A view of the third world as inferior and needing our benevolent help from the first world. There was a fierce debate between the market liberal democratic solution and the communist solution. And the Bandung participants were on one side or the other of that debate. The tragedy is the mindset being projected by the West that leads to an anti-liberal response. Violence directed back from the rest towards the West, which is the mantra of Chinese communism back in the days of Mao.
Today in the days of Xi, we are going to threaten Taiwan and with America to achieve our self-determination.
Larry Bernstein:
Since the end of the colonial period, much of Africa has been ruled by authoritarian regimes. There has been a deprivation of liberty and freedom. They have had self-determination that they have consented either directly or indirectly for autocracy.
William Easterly:
Independence from colonial rule does not automatically lead to a liberal alternative. Many countries had dictators after the end of colonial rule. Maybe the progress of liberty is that you progressively eliminate certain categories of tyranny over time. The conquest of colonialism in the name of development that’s been eliminated. And that was progress, but it didn’t automatically lead to the emergence of a liberal alternative. The West showed so little interest in the anti-colonial liberal alternative of markets instead of colonial development that led to a violent reaction.
Larry Bernstein:
Thanks to Bill for speaking on today’s podcast.
If you missed the last podcast, the topic was Should the Allies Have Bombed Auschwitz? Our speaker was Richard Breitman who is an Emeritus Professor History at American University and the author of a new book entitled Calculated Restraint: What Allied Leaders Said About the Holocaust.
Richard discussed whether the allies should have bombed the rail lines to the concentration camps and if Roosevelt and Churchill should have said more to warn the Jews in Europe so that they could have gone into hiding.
I would like to make a plug for next week’s podcast with Roger Moorhouse who will talk about his book Wolfpack: Inside Hitler’s U-Boat War. I want to learn from Roger about the relative importance of convoys, radar, and breaking the Nazis codes were to the allied victory in the Battle of the Atlantic.
We will also be joined by the What Happens Next Culture Critic Darren Schwartz. We plan to discuss World War 2 U-Boat movies including Das Boot and the recent Tom Hanks film Greyhound.
You can find our previous episodes and transcripts on our website
whathappensnextin6minutes.com. Please follow us on Apple Podcasts or Spotify. Thank you for joining us today, goodbye.
Check out our previous episode, Should the Allies Have Bombed Auschwitz?, here.
