Eyes Down for a More Revealing Insight into Economic Development
Friday, December 9, 2011
A group of people had just disrupted a baseball game by running naked across the field. After the disturbance, legendary player Yogi Berra was asked whether they were men or women. He replied: “I don’t know. They had bags over their heads.” That story illustrates what is perhaps the biggest issue in development economics today: the inability of many researchers to look in the right place when searching for answers.
I have just returned from east Africa, where change is stimulating the debate about the future of the continent. Yet, despite the optimism, I came back with some concerns. Important players still appear confused about what development strategies to recommend to low-income countries.
It was painful to sit in some meetings and observe foreign experts trying to assess whether the government had provided enough funding to “priority sectors” (defined very broadly as agriculture, education, health and infrastructure) to justify more external financing. It was equally frustrating to see these well-meaning people attempt to reach definitive conclusions about whether things were going in the right direction by analysing the number of reforms carried out to “improve the business climate”. Watching them search for answers, I could not help but think of Berra’s comment.
Vague notions of reform are meaningless in developing countries. What does a budget increase for the agriculture ministry reveal, exactly? A minister might simply have purchased a few more expensive cars for his staff, or his personal ranch. Why expect any low-income country with limited administrative capacity to simultaneously improve all the many “doing business” indicators every year? It is unrealistic to recommend an overwhelming laundry list of reforms that no government has the capacity to achieve. (By the way, China, Vietnam, and Brazil, which have been among the top-performing countries in the world for the past 20 years, are consistently ranked quite low when it comes to the ease of doing business; Brazil is 126th, Vietnam 98th, and China ranks 91st, behind such star economies as Kazakhstan, Azerbaijan, Belarus and Vanuatu.)
Unfortunately, development economics has not always been a trustworthy source for those policymakers who need a concrete blueprint for action. Decades of paradigm shifts, from grandiose project financing (interventionist policies) in the 60s and 70s, to structural adjustment (laissez-faire) in the 80s and 90s, have led to intellectual confusion and random economic policy.