The Development Matrix: Wake Up

Two World Bank economists scientifically prove that first-world countries pay more than third-world countries:

Ask most people to name the most effective means of raising incomes of people in poor countries, and what would they say?

Microfinance? Perhaps not after the recent experimental assessments.

Deworming? It increased primary school participation and improved health, but in the short-term at least seems unlikely to raise household income.

Conditional cash transfers? This might be a popular answer, with evidence from a number of countries that they have increased household expenditure , schooling, and health outcomes. But even though Governments devote significant resources to such programs, the absolute annual increases in household income and expenditure are still at most US$20-40 per capita for participating households.

I bet that facilitating international migration is not very high up the list of interventions people think of. But it should be. In a new working paper, John Gibson and I evaluate the development impacts of New Zealand’s new seasonal worker program, the RSE. The figure below compares the per-capita income gain we estimate to those from microfinance, CCTs, and from my previous research giving grants of $100-200 to microenterprises. It is simply no contest!

Really?  The finding here is that seasonal migrant workers who move to developed countries make much more money than they could were they to participate in economic development projects?  The fact that this is even worth the ink it is printed on seems crazy to me.  I thought that this was a fairly established fact.  Why else would migrant laborers from Mexico risk their lives to come work shitty jobs and live in the shadows in Arizona?  Why else would Filipinos suffer abuses as housemaids for Saudi Arabian elites?  Why do Nicaraguans move to Costa Rica, or Somalis to Kenya? Why else would anyone want to live as an oppressed minority in a country that disrespects and distrusts them?  The answer is quite obvious: MONEY.

The concept of seasonal migrant workers is nothing new.  A whopping 10% of the GDP of the Philippines comes from international remittances.  But this graph has the development community buzzing.  Here is the last line of the article:

Such programs are likely to be particularly important in thinking about development strategies for small island nations, in which the scope for large scale industrial development is very limited. There certainly seems scope for thinking about how to apply such programs to more countries..

This just about sums up everything that frustrates me about development and actually leads me to consider as true the popular conspiracy theory that the World Bank and IMF’s only function is to keep poor countries poor in order to ensure access to cheap raw materials and provide a market for surplus food production in the United States and Europe.  What frustrates me is not that this seems “discovery” hardly seems revolutionary, or even particularly interesting, but that the reason there are not more seasonal migrant workers from small island nations is rooted in geopolitics.  The World Bank knows this.  If this is a good method of economic development, why don’t we organize sit-down with Jan Brewer, the Tea Party and (believe it or not) the for-profit prison lobby (!) and see if we can’t work out a seasonal migrant worker program for the Mexicans who would love nothing more than to do the jobs that we Americans are completely unwilling to do.  $50 million later, I will look forward to reading the evaluation paper about how the “adverse political climate” led to the inability for the program to meet its target goals.

People in development talk about a “silver bullet” in poverty alleviation, usually in reference to the next biggest thing (microfinance, conditional cash transfers, de-worming, etc.).  I used to buy into the logic that a “silver bullet” exists, but we just haven’t found one yet.  But the reality is much more sordid and depressing than that.  Here a few “silver bullets” that would make a difference:

  1. Eliminate agriculture subsidies
  2. Reduce barriers to immigration
  3. Stop giving aid to dictators

The reality that no one in development seems to consider is that “development” isn’t really about “development.”  It is just one of the three D’s of foreign policy, the other two being defense and diplomacy.  According to realpolitik political theory, states act in their own interest:

Realpolitik (see also Political realism; from Germanreal “realistic”, “practical” or “actual”; and Politik “politics”) refers to politics or diplomacy based primarily on power and on practical and material factors and considerations, rather than ideological notions or moralistic or ethical premises. In this respect, it shares aspects of its philosophical approach with those of realism and pragmatism. The term realpolitik is sometimes used pejoratively to imply politics that are coercive, amoral, or Machiavellian. Realpolitik is a theory of politics that focuses on considerations of power, not ideals, morals, or principles.

In the documentary The Corporation, two filmmakers consider the modern corporation as a human being and perform a psychological analysis.  The diagnosis?  Sociopath.  Nation-states are largely the same, I think, always acting in their own self-interest.  Real development isn’t motivated by a need to serve the poor and disenfranchised.  It is not meant to right the wrongs of the past.  If it were, governments in the West would’ve revamped their absolutely devastating food “aid” policies, which flood African markets with cheap, subsidized maize, corn, rice, and whatever else, making any domestic agriculture industry entirely uncompetitive.  But the reality is that the agriculture lobby in the United States (and the shipping lobby, for that matter) carries an incredible amount of clout in Congress, and the Cold War required the relaxation of standards in conducting proxy wars with Russia.  So, the policy stays.  And meanwhile, the development community keeps scouring for the next “silver bullet,” playing either deaf or dumb to the cold and cruel realities of the realpolitik world in which we live.

I went down to Georgetown in Washington D.C. to visit a friend a few months ago.  We were walking through campus on a cold afternoon, when we passed a girl handing out leaflets about the election in Myanmar (Burma) and inviting people to hear someone from the Burma Campaign speak that night.  I told her how interested I’d become in Burma after visiting the country in April.   “You shouldn’t have done that,” she said.  The Burma Campaign is one of the chief proponents of the travel boycott, which is based on the assumption that tourism provides money to the government and legitimizes their use of forced labor to build the airports.  In response, I gave her a short lecture on the components of the economy of Burma – namely, precious stones, oil, natural gas, timber – and how little of it trickles down to the masses, while all of money I spent on red curry and rice on the street went to someone who needs it.  Now, thanks to Wikileaks, we know that, while more than 100,000 died in Cyclone Nargis and the government refused to allow outside aid to help, the government was considering buying Manchester United for one billion dollars at the behest of his grandson.  That money didn’t come from me.  It came from oil contracts with the French petroleum giant, Total Oil, and mining contracts with Taiyuan Iron and Steel, a Chinese manufacturer, and natural gas contracts with the Daewoo Group, a Korean conglomerate.  Here is what one released diplomatic cable has to say about the French in Burma:

Like Washington’s policy to Burma, the EU sanctions currently in place against the junta block European investment but do not force the withdrawal of companies there before sanctions were implemented. Thus Total and Chevron have been able to stay, despite reports of widespread human rights abuses related to Yadana.

Moreover, the French government has steadfastly refused to order it to leave Burma. Its comment that Paris was “unprepared” to join the US sanctions programme was set amongst praise for other actions it has taken on Burma, notably in the UN Security Council.

But what lies behind the mixed bag of French policy to Burma goes beyond purely economic reasons, says Matthew Smith, head of ERI’s Burma programme.

“The main reason why Total has not pulled out is mostly to maintain a French presence in a geopolitically valuable part of the world,” he said, adding however that there are concerns that if Total pulled out, the space would be taken by a Burmese or regional company with a worse human rights record.

Five billion dollars, much of which goes to the military junta.  Meanwhile, the Burma campaign boycotts tourism.  Time to go upstairs, kids.  The adults need to talk.  I’m writing about it because I care, and I care because I visited the country and talked to the people.  Meanwhile, the Burma Campaign and other proponents of the travel boycott act like ostriches, too stubbornly idealistic and uncompromising in their principles to acknowledge and accept reality.

I am still idealistic, and believe that even small and marginal improvements in people’s lives is important.  But I’ve got my eyes open, and I recognize that, even if the rice industry in Ghana were to operate perfectly – that farmers had fertilizer and seeds, that domestic rice strains suddenly became incredibly popular – imported rice, which is subjected to a whopping 37% in tariffs, will still be cheaper because of agriculture subsidies in the home country.  C’est la vie.

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