Tue 11 Jan 2011
A piece on the Guardian‘s Poverty Matters Blog today sets up one of the oddest, and most pointless, dichotomies I’ve seen in a discussion of development. To summarize, the post by Rick Rowden argues that a focus on aid effectiveness and poverty reduction
perpetuates a bloated aid industry that doles out millions of dollars each year to legions of contractors and NGOs to carry out projects in dozens of poor countries.
What it does not do, apparently, is work toward any definition of development
In recent decades, earlier notions of development economics have been replaced with meeting the MDGs. But poverty reduction is not development. We seem to have suffered collective amnesia about the history of development, which used to be widely understood as industrialisation – in which poor countries undergo a transformative process out of primary agriculture and extractive industries into manufacturing and services industries with higher value-added over time.
First, this is an absurdly reductionist definition of development. If Rowden wants to talk down to his readers about the history of development, he’d do well to note that his particular take fell out of currency in the late 1960s because IT DIDN’T WORK. There is a reason modernization/big push theories fell out of favor (unless you are Jeff Sachs, and then you are forever reviving the corpse of the big push at the community level via the MVP. Then again, Sachs doesn’t seem to read development history, either). In short, the borrowing required for industrial ramp-ups almost never paid off with enough revenue to pay off the loans. To understand why this happened is to understand the country-specific interplay of three key factors. First, there were (and still are) structural issues in world trade that locked much of the developing world out of key markets. Second, these policies failed because markets were dominated by large corporate entities operating with very small margins because of their huge economies of scale, basically undercutting any new competitors on price because they had the advantage of a huge head start provided by colonialism. Third, massive corruption within countries drained the productive capital out of these loans, dooming the projects there were meant to fund. Countries had to address either two or three of these factors, in varying ratios, at different times. Modernization theories pushing industrialization had little to offer in addressing them. This is why we eventually saw the rise of an attention to institutions and governance in development – not just at the level of the state, but also in markets and broader trade arenas. It is also why so many countries in the Global South found themselves saddled with crushing debt at the end of the last century – many of those debts were the original loans and continued accumulation of interest tied to these failed policies.
The other issue is that industrialization requires resources (to make products) and consumption (to sell them). At a time when our demand on the natural environment is already beginning to overshoot its capacity to serve our needs, asking countries to take on even more unsustainable activities is an absurdity that will end in failure. There is nothing sustainable in this pathway – and if you look at the post, you will see that the entire argument is framed in an unlimited world, where the only constraint on development is growth:
If countries are unable to use the industrial policies they will need to transform their domestic industries, diversify their economies and build up their own tax bases over time, how will they ever get off the foreign aid bandwagon? Here the “poverty reduction” discourse is misleading; it neglects to ask how countries are supposed develop without industrialising.
Well, that isn’t totally true unless you take a very, very narrow reading of the poverty reduction discourse. A lot of us are working in this space to imagine alternatives. Indeed, there are community level projects that, while not elevating people to the standards of living seen in the Global North, have created sustainable, substantive changes in the quality of residents’ lives. The examples are out there if people want to look.
Beyond all of this, though, is the larger issue – Rowden clearly has no idea what he is talking about when it comes to development when he dichotomizes poverty reduction and development. Even if we saw economic growth as the be-all, end-all of development, there is a lot of work out there arguing that endemic poverty is a huge drag on economic growth and therefore has to be addressed as part of a growth package (see the OECD Observer here). So even in a fairly reductionist view of development, you need poverty reduction . . . and I don’t know anyone who believes that growth adequately addresses poverty. Not even at USAID. Really.
So poverty reduction and development are not an either/or proposition, from any reasonable perspective on development. Rowden’s piece would have been interesting . . . in 1960. I have no idea what the point was in publishing it today.