Sachs vs. Easterly

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After reading The Bottom Billion, I really wanted to get a grasp on the spectrum of perspectives development economists have towards foreign assistance. To this end, I just finished reading two more books on economic development: Jeffrey Sach’s The End of Poverty and William Easterly’s The White Man’s Burden. At 350+ pages per book, both authors pack a lot of information. However, the crux of both authors’ arguments is essentially:

Sachs: Advocates for international development through an approach he calls Clinical Economics. Doctors diagnose patients to improve their wellbeing; Sachs argues international development professionals should similarly conduct a multi-pronged assessment of the conditions of undeveloped countries in order to prescribe and execute a comprehensive plan to promote economic development.

Easterly: Planners, folks who believe economic development can be solved through strategic planning and implementation, are not the solution to economic development. Believes the real solution to economic development comes from searchers – folks from the country in question – who learn through doing, in turn promoting economic development from within.

If simplified even further, Sachs advocates a planned-approach while Easterly believes in the power of a markets-based approach to economic development.

Both Sachs and Collier cite a huge problem if the development community relies on a market-based approach: the economies of the most undeveloped countries often don’t offer goods or services that the rest of the world is interested in trading with. Even if these countries have goods of interest, typically natural resources, a variety of issues, such as those cited by Collier, continues to hinder undeveloped countries from getting a foot hold on the first rung on the economic development ladder.

Both authors provide valid arguments; however, if I’d have to choose a camp, I’d have to side with Easterly. I’m not completely sold on believing that searchers and a market-based approach is the key to international development, but I do believe a more entrepreneurial-from-within approach is needed.

Ironically though, my experiences volunteering with Generation Enterprise has taught me that entrepreneurship already is happening everywhere in the undeveloped and developing worlds. Perhaps hustling or hawking might be a better descriptor, but nonetheless, what’s happing on the ground is entrepreneurship. If hustling is already happening, than it’s clear, at least in my opinion, that a complete market-based approach is likely not the final solution to promoting systemic change and widespread improvements in the economies of the undeveloped world.

Book Review: “The Bottom Billion” by Paul Collier

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In my quest to learn more about how aid has influenced global development, I recently finished reading Paul Collier’s, The Bottom Billion. Collier first looks at the reasons why the world’s poorest, which he calls the bottom billion, have not succeeded in climbing out of extreme poverty: conflict, resources, bad governance, and landlocked with bad neighbors. Collier then looks at the different tools he believes can be leveraged to eradicate extreme poverty: aid; military intervention; laws, statutes, and charters; and trade. Finally, he outlines how these four tools can address the challenges of each poverty trap.

Some points that particularly stuck with me:

  • By design, the international development community has been organized to use aid as the primary tool to combat global poverty.

The power of international trade as a tool towards economic growth (and consequently, away from extreme poverty) has been demonstrated throughout the world. Of course, not all countries have benefited from globalization. The development community needs to change in order to complement and collaborate with the private sector. Structurally, how can this be done?

  • Until a large enough wage gap exists between Developing Asia, it’ll take decades before the poorest countries can begin to compete globally in international trade.

Even if large wage gaps existed in Developing Asia, other aspects such as a lack of economies of agglomeration and poor infrastructure will ensure that it’ll likely take even more years before countries in the bottom billion can be attractive alternatives for manufacturing, or for commerce and trade. Aside from policies and charters, which Collier prescribes, what else can be done NOW to better incorporate these countries into global trade?

On “Stop Kony” Campaign

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Earlier this week, an SD-based non-profit, Invisible Children, released a video highlighting the atrocities caused by Joseph Kony and the Lord’s Resistance Army in northern Uganda. Kudos should definitely go to the IC team for putting together a pretty stellar marketing campaign and raising awareness about the issue. I’m sure that up until watching this video, millions worldwide had never heard about this issue.

Despite IC’s success in this regard, the non-profit has received a ton of criticism. This HuffPo article does a good job at summarizing just some of the issues: poor spending practices, military action support, posing with guns, and neo-colonialism.  The first issue, poor spending practices, is the focus of this post.

The notion of poor spending practices stuck a particular chord with me because it reminded me of how MUCH I think the International Development industry is in dire need of being restructured. Although notions of fundraising and development aren’t as important for development agencies as they are for non-profits, the whole campaign reminded me of the importance of raising money, even when it’s not necessarily the organization’s ultimate bottom line.  Here’s why:

Even at non-profits, “sex sells.”

For the absolute longest, I generally associated this phrase with for-profits. From DECA during high school, to flyers for activities at Penn, to everyday commercials, I learned (quite obviously) that sex sells. So how does this phrase apply to non-profits? Though non-profits aren’t necessarily “selling” a product or service, they do need to market their cause to drive donations in order to carry out their mission.

Perhaps “sex” isn’t the proper term when it comes to marketing at non-profits. Maybe “heart-touching” or “emotion” might be more appropriate. Whatever the word, marketing (re: development and fundraising) is clearly important for most non-profits.

However, that the bulk of IC’s spending isn’t on “direct services,” but on awareness and filmmaking, I think, is a clear example that demonstrates how awareness (and hence, presumably fundraising) may all to often be of more concern for non-profits than to actually conduct “on-the ground” actions that actually drive change. Of course, defining “change” is much harder when the bottom line isn’t as tangible as turning a profit for shareholders.

IC definitely did a great job at raising awareness this past week about their cause, but as a (theoretical) donor, wouldn’t I rather see my donation going to activities that are changing things in Uganda, rather than just raising awareness about the issue? Of course!

Sadly though, I think most non-profit contributors (myself included) pay far more attention and get much more joy in donating after seeing something heart-moving than to take the time to research how donations are being spent. If only there was a way to make it easier for donors to more easily figure this out. At the very least, it’d definitely provide much more transparency concerning the activities for non-profits, let alone raising accountability.

From Race to Class

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Interesting point by Paul Krugman in the Times over the weekend:

“Yet if King could see America now, I believe that he would be disappointed, and feel that his work was nowhere near done. He dreamed of a nation in which his children “will not be judged by the color of their skin but by the content of their character.” But what we actually became is a nation that judges people not by the color of their skin — or at least not as much as in the past — but by the size of their paychecks. And in America, more than in most other wealthy nations, the size of your paycheck is strongly correlated with the size of your father’s paycheck.”

For the most part, I agree with Krugman’s argument. Aside from a couple slurs I experienced at Penn by non-students, I can’t really think of anytime in my life where I felt I was being judged negatively because of my color. Though racism (even reverse-racism) most definitely exists, I don’t doubt the issue of race in America has become increasingly a non-issue. In contrast, I absolutely believe that America is already a society based on class. I liken the shift from race to class as an issue to the saying, “Birds of a feather flock together.” Whereas in the past color defined the feather, today that feather is defined by our education and work.