Waylaid Dialectic

September 24, 2010

All the Views Fit to Print

Filed under: Aid,Trade — terence @ 8:29 pm
Tags: , , , ,

More Aidwatch watching. Sorry…

Poor old Bill. Such is the life of a sceptic. While Jeffrey Sachs gets actual print column inches he’s reduced to the online edition.

Although having read his column, I’m inclined to think the FT may have been doing its print subscribers a favour.

I mean, the guy’s academic papers are great, and he clearly knows and cares a lot about development, but his polemics are excruciating. The FT missive being a case in point.

The problems:

1. He writes:  “Of the eight goals, only the eighth faintly recognises private investment, through its call for a “non-discriminatory trading system”. Which, although you’d never learn this from Easterly’s column, is because the first seven goals are not about means at all. They are measures of ends. And for what it’s worth teh aid (boo! hiss!) gets the exact same weighting as trade under goal 8 (have a look yourself).

2. He writes: “But current experience and history both speak loudly that the only real engine of growth out of poverty is private business, and there is no evidence that aid fuels such growth.” Except that there is evidence that aid leads to higher rates of economic growth. For example, here and here). It is true that the methodological issues associated with aid growth regressions mean that such evidence isn’t particularly reliable. But it’s evidence nonetheless. And the fact that we have difficulties finding more evidence may be as much a result of the difficulties inherent in cross country growth regressions, as a product of the limitations of aid. Complicated – yes. Uncertain – yes. But definitely not the same as “no evidence”.

3. Throughout the column he implies that almost all the campaigning effort associated with the MDGs has been about aid while there’s been near silence on trade. Once again, this just isn’t true. I mean have a read of Sachs’ book the End of Poverty. Trade is most definitely mentioned. Or have a look at the campaign platforms of MakePovertyHistory (NZ, UK) or the One Campaign. People campaign on trade. They really do.

4. And if you’re going to be pedantic about it, the econometric evidence that reducing remaining trade barriers would lead to sustained increased economic growth (different from static benefits) is, to be generous, about as strong as the evidence for an aid-> growth relationship.

Easterly laments the fact that aid sceptics get so little press. This is a dubious claim but let’s grant it for now. If it’s really so hard for Bill to make his voice heard, why, when he finally gets the chance, does he waste it with platitudes and erroneous claims? Why? I really have no idea.

[Update: More evidence for point 3 – Chris Blattman stumbles across Bono arguing Africa needs trade more than aid. Yes, Bono. Myopically aid focused advocates do. not. exist.]

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2 Comments

  1. 1. True, the MDGs are described as an end, but it’s also extremely common for them to be treated as a ‘means’ on the ground. This means a focus on directly addressing these indicators, rather than focusing on the indirect method of promoting broad-based economic growth and institutions-building – it’s these countries that have been growing that have made the most progress. This isn’t all due to private income: bigger GDPs mean bigger government coffers which means a bigger budget for public services. If aid stopped tomorrow, most of the gains in slow-growing countries would be wiped out.

    2. No one, I repeat, no one should take aid-growth regressions seriously (and no one in academic economics really does, except those that write the papers). For every study cited (including the two you’ve included), there are a dozen papers with different results. Yes, that’s not ‘no evidence’ but evidence that’s unreliable at best and impossible to draw conclusions from at worst is as close to ‘no evidence’ as you can get.

    3. They do campaign on trade, but the effort/return ratio is pretty poor compared to that of the aid lobby.

    Comment by Matt — September 24, 2010 @ 9:06 pm

  2. Hi there Matt,

    1. That may be the case, but it’s not what Easterly’s arguing.
    2. I almost agree. Aid growth regressions are deeply problematic. But the fact of the matter is that the majority of recent regressions find a positive relationship. As well as some within country studies (like Tarp and Hansen in World Development on Mozambique). Sure this isn’t game clinching evidence, but it’s not no evidence either. Moreover, it’s quite possible the main reason we have no evidence (if that’s what we have) is to do with the methodological limitations of the research. Which isn’t to say we know for certain that aid works. But it’s also not the same thing as implied by Easterly, that we can say with confidence aid doesn’t lead to growth.
    3. What can I say – I disagree. Remember the beginning of the century? Remember ‘Rigged Rules and Double Standards’? Remember Stiglitz and Charlton “Fair Trade for all” (or something like that). People really have campaigned on trade.

    Comment by terence — September 25, 2010 @ 9:34 am


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