Magazines: Developing Debate

Lyndon Johnson's Great Society was founded on the notion that experts, given enough time, dollars, and computers, could wipe out poverty through pure brainpower. The sociologist, by calculating the dynamics of the ghetto, could design an urban-renewal plan that would end poverty and hunger. His intellectual cousin, the development economist, after spending a few weeks with the peasants of the Third World, could design a policy that would result in a steadily rising gross national product. (If the denizens of the Third World would use their newfound wealth to purchase American exports—well, that was a bonus.)

Today very few people believe a newly minted Ph.D. can lift a ghetto economy out of poverty simply by coming in and giving marching orders. But the notion that foreign aid can help other countries solve their problems is still a common one. The Job Corps is completely discredited, but the Peace Corps thrives, even though they were created at the same time for roughly the same reasons.

Two arguments discredited the welfare state. Charles Murray showed that welfare programs didn't result in rising incomes among the poor; and Robert Woodson and Cicero Wilson showed that when poor people take matters into their own hands, they do a better job of improving their communities than outsiders who do not understand local manners, habits, and customs.

Neither argument is used in the foreign-aid debate because there is no development economist equivalent to either Murray or Woodson. While Lord Peter Bauer has certainly shown the ill effects of foreign aid, he has never done so in a systematic way; his work is much more theoretical in nature, and his place in history will be closer to F. A. Hayek's than to Murray's. There is no counterpart to Losing Ground for India or Nigeria. And while Hernando de Soto has conclusively shown the ways that regulation in the Third World stifles enterprise and retards growth, very little research has been done on how the poor in Africa or Latin America have been locked into their destitution by the policies of national or transnational governments.

For the most part, the American media have not helped in understanding the development debate. American journalists, as a rule, know little about economics, care very little about other countries, and hate doing stories that require any background reading.

So when the topic is the Third World, a subject that requires spending a good deal of time in foul places, reading dozens of impenetrable reports, and having a thorough understanding of global finance, it is little wonder that affairs of the less developed countries receive very little attention in American newspapers, magazines, and television shows. This coverage will probably shrink further with the end of the Cold War. Who will care about Angola now that communist forces have withdrawn and the waters near its coast no longer constitute a strategic sea lane?

The development debate, in fact, often begins with premises that are not necessarily true. Some writers assume a poor nation can become wealthy by proper planning by a country's economic ministry. Others are still looking for an international agency that will succeed where the World Bank, the United Nations, and the International Monetary Fund have failed and raise the incomes of poor countries without excessive interference by mandarins based in New York, Washington, or Geneva. Still others assume protectionism ensures prosperity while free trade ensures domination of the Third World by the rapacious multinationals.

Even the history of foreign aid is open to question. Consider this argument: The Marshall Plan enabled Western European countries to recover from fascism and withstand communism. Therefore, a Marshall Plan–like scheme for [Russia, Czechoslovakia, or another friendly but beleaguered country] will surely ensure the growth of another democracy.

American Enterprise Institute scholar Nicholas Eberstadt has set himself up as a one-man truth squad devoted to debunking mistaken notions about development. In the November Commentary, he conclusively shows that the Marshall Plan did little good and a great deal of harm.

When the Nazis conquered Europe, they instituted a comprehensive set of central-planning controls to ensure that the economies of the occupied countries fueled the German war machine. But when Marshall Plan economists arrived in ravaged Western Europe, they required countries accepting aid to maintain these fascist controls; in many nations, finance ministers used Marshall Plan aid to "postpone rather than hasten economic adjustments or 'privatizations.'" In Italy, market-oriented economists spent years convincing Marshall Planners that liberalizing the economy was a worthwhile goal.

American aid also failed to improve the ailing economies of Japan, South Korea, and Taiwan. Between 1945 and 1950, America spent about $1.8 billion ($7 billion in today's dollars) aiding Japan, but most of the funds were consumed by "direct handouts or by provision of supplies to make-work industries" and did little to fuel Japanese economic growth. Between 1949 and 1961, the United States gave $1.2 billion to Taiwan and $2 billion to South Korea, but these nations stagnated until aid was cut off, forcing a shift in export-oriented policies that transformed these countries into economic giants.

Eberstadt is not an isolationist or a foe of government; he feels that American military aid made the democracies of Western Europe, Japan, and Korea more credible, thus ensuring a steady flow of business investments. But he argues that American development assistance programs are "more likely to lead a prospective beneficiary toward an Eastern Europe-style economic morass than to help it escape from one toward economic health and self-sufficiency."

But if foreign aid programs are likely to ensure that sick economies are never cured, other strategies may well result in a nation brimming with artificial health and false confidence. Some market-oriented economists, for example, have pointed with pride to the "little dragons" of the Far East—South Korea, Taiwan, Hong Kong, and Singapore—as examples other nations can copy. Certainly these four are countries with steady economic growth. But as Stan Sesser shows in a hard-hitting report on Singapore in the January 13 New Yorker, at least in the Far East, economic freedom is often combined with massive government intervention.

Singapore's government performs many functions well. Civil servants cannot be bought; a postman was once arrested for accepting a bribe of one Singapore dollar (or 62 American cents). Government corporations are not only entrepreneurial but highly profitable; the state-owned Singapore Airlines has never had a crash and made money even during the Gulf War. Singapore has also successfully converted former British military installations into civilian enterprises; an old naval base became a shipyard, and the British air base became an international airport.

But Singapore combines capitalism with a massive amount of state intervention. The government severely restricts dissent. It bans Cosmopolitan, Playboy, satellite-reception dishes (thus blocking most Singaporeans from seeing CNN), and some albums by Eric Clapton, the Rolling Stones, and Elton John (because of drug references); Singapore barred jukeboxes until July 1991. Not flushing a public urinal can result in a fine of up to 1,000 Singapore dollars and publication of one's photograph in the newspaper.

"The tattered remains of Asian communist parties," Sesser reports, "are looking to Singapore as a model of how to maintain tight control over a nation's government and over its people's lives while simultaneously quelling discontent by freeing its economy." Sesser says that Singaporean scholar Russell Heng even contends that his nation's "neo-authoritarian" government "could emerge as the next ideological challenge to democratic capitalism." With friends such as these, one cannot endorse Singapore's style of government without qualification, even if the country's subways make a profit.

But a world made of capitalist democracies and Singapore-style states would be far preferable to the world foreseen by some environmentalists. In the Winter World Policy Journal, David C. Korten of the People-Centered Development Forum argues that the world economy should be controlled neither by global government agencies nor by multinational corporations, but by the "democratically controlled institutions at the global, national, and local level" that would "create a decentralizing frame for economic activities."

In Korten's utopia, capitalism would exist, but primarily as a means for transmitting information from the rich countries to the poor ones. Antitrust agreements would smash or severely restrict most multinational corporations. Those that survived would be forced to abandon patents that Third World governments might find useful. By "relinquishing its monopolistic control of technology," says Korten, the developed world can make "partial restitution" for "the wealth it has already consumed."

While Korten would permit some trade, John Cavanaugh of the Institute for Policy Studies and John Gershman of the Institute for Food and Development Policy argue in the February Progressive that free trade must be stopped, as it reduces wages, weakens unions, damages the environment, and introduces goods into the market that poor people can't buy. "How many people can afford the mangoes, star apples, and kiwi fruit that now add color to Safeway's grocery sections?" ask Cavanaugh and Gershman.

The local Safeway, in the middle of February, sold kiwi fruit for 50 cents and star fruit for 89 cents each—not terribly expensive compared to apples selling for $1.19 a pound. (Perhaps Cavanaugh and Gershman don't do the shopping in their households.) One can only guess how much these fruits would cost if the "new international institutions and norms" these authors want to control all trade were in place.

The problem with the environmental critique of development is that there is no third way between the state and capitalism. For over 40 years, the left has called for democratically controlled government organizations, but such institutions, once created, swiftly ignore the wishes of the people. Korten does not give any examples of existing government organizations that would be role models for his new world order; one suspects that such organizations do not exist—and, given the nature of government, cannot exist.

One should also question the notion that protectionism helps the global economy. When a multinational corporation transfers jobs to the Third World, they are playing not Scrooge but Robin Hood; they take from the rich (well-paid union workers) and give to millions of poor consumers. Certainly multinationals have done more to provide a wide variety of goods to consumers than any national or transnational bureaucracy.

The Third World needs no more handouts; it needs honest work. The best way to provide such work is to eliminate the protectionist barriers that act to increase Third World starvation and price many First World goods beyond the means of the poor.

Contributing Editor Martin Morse Wooster is a writer, editor, and researcher living in Silver Spring, Maryland.