Just a very quick thought today. After reading Charles Kenny’s Getting Better and skimming Owen Barder’s “Can Aid Work?“, I’m wondering if anyone else can hear the faint rumblings of something very important – here we have two people, hardly from the fringes of development thought, noting variously that 1) aid does not seem well-correlated with economic growth, and therefore a clear causal relationship is pretty hard to determine and 2) despite this, and in several cases in the absence of major economic growth, things seem to be getting better in a number of places (this second point is mostly Charles). In other words, are we seeing arguments against a focus on economic growth in development shift from the margins to the center of development thinking?
Those of us more on the qualitative social theory fringes of the field have long been arguing that the worship of growth did not make much sense, given what we were seeing on the ground. Further, the emergence of the anthropocene (the recent era of human dominated environmental events) as a direct outcome of more than a century of concerted efforts to spur ever-faster economic growth, calls into question the wisdom of a continued myopic focus on growth without a serious consideration of its costs and potential material limits. So if indeed we are seeing the beginnings of a shift in policy circles, I am thrilled. Nothing will change tomorrow, but I think these interventions might be important touchstones for future efforts to create some sort of development economics of finitude . . .
I think that both would still argue that growth is important, just that aid isn’t the means of generating growth. Ultimately for countries to pay for their own hospitals and universities they have to grow economically.
Further – Kenny’s arguments that falling prices for key goods were the savior is actually one about growth – productivity growth that just isn’t measured very well in national accounts.
The killer argument for me is that in a world without economic growth, life is a zero-sum game – my advancement can only come at a cost to you. And good luck convincing all 7+ billion of us that we don’t need to improve our lives any more.
Lee:
These are great points – I am not totally sure I agree with your first point about needing growth for public services – states can choose how to allocate their productive funds, and how to gather revenue to facilitate the programs and projects they prioritize. In a lot of places there is unproductive investment that could be retasked. But I suppose you and I could have a long exchange about that – indeed, let me know when you next come through DC, and we will meet!
Your point about falling prices being about growth is interesting – but is increased efficiency the same as growth? Certainly, in a finite world increased efficiency would allow for the production of more stuff, so it would facilitate access to larger amounts of stuff that people need in their day-to-day lives (and wider access to that stuff), but is this the same thing as growth?
Your last point is a huge one – I agree completely. This, in the end, is the core challenge of sustainable development. If the Millennium Ecosystem Assessment was right (among any number of other assessments), we are running down our natural resource base fairly quickly. The apocalypse is not here yet, and is probably somewhat further off than many think (we could utilize ocean resources much more comprehensively and effectively than we do right now, for example), but sooner or later the Earth does impose limits on us. That, of course, is the inter-generational ethics issue inherent to sustainable development. However, given the unevenness of growth, the uneven distribution of resources on the planet, and remarkably uneven access to markets around the world (all of these are of course hugely intertwined), even today sustainable development imposes intra-generational ethics. We in the Global North are living way past sustainable levels . . . so the only real path to sustainability is the continued immiseration of lots of people, at least until we come up with clean, nearly free energy. Improvements in efficiency do happen, but not so quickly as to ameliorate this problem . . . at least not for a very long time.
I have not ever thought nor seen that “aid creates growth” idea. All of the aid projects I have ever seen or been involved with have been to create public goods. Public goods do not create growth. Capitalism creates growth.
So I have this simplistic model. Capitalism, where it’s working, creates growth. Aid cannot help it. It’s either there, or not there. Where it’s operating, in addition to growth, it creates inequality. This inequality is morally offensive to many, and politically and economically destabilising. Therefore the function of the State is to tax growth, and spend in either an equitable, or pro-poor way. The aim of this is out and out transfer of benefit from the capitalist growth engine to the those that miss out.
In the developing world, this State function is weak. Taxation is weak, service delivery is weak, administration is weak. The State may be captured. What aid then does is to undertake either directly (NGOs, some bilateral projects) or indirectly (multilats, other bilateral projects) the function of the State. In so doing it is effecting transfers from the taxpayers of the rich world to the poor of the developing world. And in so doing it (quite expressly, in many cases) serves to ameliorate the political instability and moral opprobrium of extreme poverty.
But the State does not and cannot create a growth economy. (China may provide a counter-example: but again, my model is simplistic.) It can, however, shut down capitalism. Eritrea, where I spent last week, is a good example of State that shut down capitalism.
So theorists should stop looking for signs that aid promotes economic growth, unless they are also looking in the United States for signs that Medicare promotes economic growth. Aid is nothing special. It’s just the governments of some countries assisting the governments of other countries to do what governments do.
Well, the aid/development begets growth argument has been core to development thought since the immediate post WW II era. Then again, I think that we are perhaps working at different scales – you at the project level, and me at the meta-level. Rostow’s stages of growth (late 1950s) was a roadmap of aid for growth. Modernization theory (60s-70s) was a more nuanced approach to the same idea. Etc., etc., but this is not to say that particular projects undertaken under either the “big push” or modernization approaches were themselves about growth – they may well have been to generate public goods, as many projects today aim to do – but when you bundle those projects together at the agency/funder level, you find that they are expected to add up to something, and at least part of that something is growth. Hey, USAID currently argues that one of its goals is to foster broad-based economic growth!
Incidentally, your Medicare example works here – basically, one could argue that a well-funded public health system in the US would foster growth by freeing small businesses (and larger businesses) from a particular direct cost (or at least lowering that cost), the savings from which could be reinvested, etc. Roads are public goods – and any infrastructural development coming from USAID is done, at least in part, as a component of a much larger growth agenda. I argue in my book that development became globalization a while ago (insofar as development becomes a means of furthering economic globalization by linking ever more people into global markets), but what I did not add was that this linkage is justified by the idea that growth is the only pathway to robust development gains that will stand the test of time . . .