When you want to know how someone in international development views the world, there is no surer way than asking them whether they identify with Jeffrey Sachs and Bill Easterly. On this blog, your correspondent has made his proclivities known on multiple occasions – even once being persecuted from doing so by a former employer and being recognized by Mr. Easterly himself for his martyrdom.
Jeffrey Sachs, the pre-eminent economist, is generally associated with the top-down school of development economics, advocated substantial public investment to improve the broader systems – water, health, sanitation, education, etc. – that contribute to poverty. In contrast, Bill Easterly, the roguish author of The Elusive Quest for Growth and White Man’s Burden, supports bottom-up interventions, preferring to search for solutions that develop organically and take into account local contexts. Most people find themselves on one side or the other, except for the deliberators in the middle, like Abhijit Banerjee and Esther Duflo. If Bill Easterly is 50 Cent, then Jeffrey Sachs is surely Ja Rule.
The flagship of the Sachs camp is the Millenium Villages project, a $150 million, multi-country intervention that exemplifies the concept of “the big push.” The systems that underlie the poverty trap are extraordinarily complex, layered, and multi-faceted. According to the top-down school of thought, it is possible to change the entire system only by changing its key components. The Economist explains the thinking behind the idea:
In development, it seems, you cannot do anything until you can do everything. That is the idea behind the “big push” theory. Outlined by Paul Rosenstein-Rodan in 1943, this says that even the simplest activity requires a network of other activities and that individual firms cannot organise such a large network, so the state or some other giant agency must step in.
The big push came to grief in the 1970s and 1980s as evidence accumulated that, in Africa at least, public investment and foreign aid had produced no perceptible change in productivity, not least because so much of it was stolen. Recently, though, the idea has come back into vogue. The UN talks constantly about its millennium development goals (eight goals, 21 targets). Jeffrey Sachs of Columbia University argues that if public investment and foreign aid are big enough, they will boost household incomes, spurring savings and boosting local investment. They should also “crowd in” external investment by improving infrastructure.
In order to do anything, you have to do everything. Being on the ground, you see the complexities of the system at work. Everything is interrelated and connected in a complex web. Change an input here or there and you can transform the system. But, more often, well-reasoned tweaks to the system have unintended consequences. What is more, it is question whether even the smartest economists can truly comprehend that sheer magnitude of the forces at play. They are, after all, global by nature.
These are the criticisms of Sachs and his “big push” school. Today, randomized controlled trials – the same tests used by the pharmaceutical industry to test the efficacy of new drugs – can actually tell us a lot about whether interventions like the Millenium Villages actually work. And, according to recent studies, it appears that they don’t. Back to the Economist:
Now a Kenyan economist, Bernadette Wanjala of Tilburg University in the Netherlands, has raised further doubts about the project. She interviewed 236 randomly selected households in Sauri who had been offered the benefits and 175 randomly selected ones who had not. In a study with Roldan Muradian of Radboud University, she concluded the first group had raised their agricultural productivity by an impressive 70%. Yet she found that the impact on household income was “insignificant”, and that there had been little extra saving or investment. The villagers had grown more food—and eaten it. They became better nourished, but this did not affect the wider economy.
Better nutrition is important, of course. But the aim of the project is to boost income, investment and economic diversification. It is not clear that these goals are being achieved. For $60 per person per year (which increases the income of the poorest villagers by well over 25%) the project has improved village life only a little more than it would have improved anyway. So far, the project provides little evidence that “big push” development—advancing on all fronts, flags flying—is better than the alternative: gradual, step-by-step changes to remove specific barriers to growth.
The answer, as Easterly puts it, is elusive. But certain interventions – providing an affordable education by lowering operating costs or leveraging social networks to distribute capital – affect the systems that influence poverty in a very real way. And these, to me, are the most exciting interventions of all.
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I am not sure I would be as quick as The Economist to dismiss a 70% increase in agricultural productivity as a failure. (Although I am not surprised that a publication of the Economist’s economically liberal bent is this quick).
Firstly, even if that increase in agricultural productivity is “just allowing people to become better nourished”, I would see that as a success in itself. Fewer healthcare problems and health costs down the road, etc. Maybe Amartya Sen might also have something to say here about agency (cf. Development as Freedom).
And secondly, this is presumably one of the first steps along the road to economic development. Now that agricultural productivity has been increased, maybe the next couple of years can focus on other infrastructure investments to spur development in other areas, and the “economic diversification” that The Economist has decided is the important yardstick of development.
Jonny – thanks for the comment. I agree that 70% is nothing to scoff at, and the idea eating more rather than investing is a negative tradeoff is probably misguided. I do still think the opportunity cost of $150 million spent on MV is great than the gains from the project. In other words, for marginal improvements over the baseline, the money spent on MV could have greater impact in other ways.
One of my biggest problems with the program is that these systems are impossibly complex. They idea of definable steps along a road to economic development is the hardest sell for me.
Here is what Big Sachs has to say about the matter in his “Dear Sir:” to the Economist:
“The gains are on several fronts, including increased agricultural production and farm incomes, and reductions in disease burdens and hunger. The project is now halfway through its ten-year horizon, and we look forward to further gains in the second half as we work towards the MDGs. The second phase of the project emphasises business development through farmer co-operatives.”
What happens after the 10-year horizon? Will those cooperatives last? In my experience, when the money dries up and the driving force holding the cooperative together ceases to exist, the cooperatives go away along with it.
What do you think?
Dude, screw Jeff Sachs. And Ja Rule.