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April 05, 2005

Jeffrey Sachs on Aid.

Now I know I’m going to get stick from Jim and Owen about this but Jeffrey Sach’s piece in the Guardian today does support at least part of my contentions on development. Yes, he does call for more aid, and at the same time points to things that could be done without aid, things that would benefit places merely by trivial changes in the rules that would allow markets, capitalists if you wish, to contribute to the solutions.

Africa's third distinctive challenge is the lack of basic transport, power, and communications infrastructure. Africa's farm families need all-weather roads to get fertiliser into the villages and crops out to the market. Africa's villages need trucks to rush a dying child or mother in complicated labour to a district hospital. Africa's small businesses need mobile phones to get the latest market quote. The necessary investments are clear, and not particularly complex.

I highlighted recently an Economist report about mobile phones and the connection (sorry) with growth. It was quite clear that having competing suppliers of services increased penetration into the market of such services. Not a very surprising result really. So those who would advocate development should, in theory, be advocating competetive telecoms markets.

At the heart of my disagreement with those who propose, insist upon, aid to help develop Africa is that I think they are not sufficiently rigorous in their thinking. It isn’t all about throwing money in, although there are times and places when that most certainly helps. Sometimes it really is about those awful neo-liberal (or as I prefer to call it, economically rational) things like markets and the rules, the institutional structure necessary for them to operate.

We have Sachs above, telling us that mobile phones, a telecommunications infrastructure, will improve things. OK, what do we think is the best way to get to this, a better infrastructure? The empircial evidence would appear to be that Governments should issue multiple licences. Doesn’t cost a penny but does contribute to development.

When those who advocate, campaign for, development also campaign for these simple rule changes, like the property rights arguments put forward by Hernando de Soto, like the market creating solutions to ecosystem (Commons) problems proposed by last week’s Millennium Ecosystem Assessment, like power stations being better built and operated by private companies, like Nicholas Negroponte’s observations on internet access bening crippled by State Telecoms monopolies on land lines, like the idea that water services can be best supplied by (regulated) private sector companies, well, when we see these being advocated, these no cost additions to development, then I’m entirely happy to listen to, often agree with, those further programs that we should pay for.

In short, we know that there are problems we can solve via institutional changes. There are others that will require investment. I’ll listen to the latter if you’ll listen to the former.

April 5, 2005 in Make Poverty History | Permalink


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"It isn’t all about throwing money in"

Where have I said that it was *all* about throwing money in? My line has been that we need progress in aid *and* trade *and* lots of other areas if we're going to get faster and wider development. If anyone's being dogmatically narrow about this it's you, with your "we all know that it's trade *not* aid that's important" line ... You want people to stop trading in false oppositions, try doing it yourself.

I'm all in favour of poor people using markets to get ahead, but I'm also in favour of trying to fix market failures when they occur. To take mobile phones as an example, I'm glad that they're taking off in Africa, but I'm worried that it's happening almost entirely in urban areas, partly because the WTO rules that have helped open up African telecomms markets also seem to outlaw state subsidies to ensure wider coverage. I also don't think we should waste aid on trying to bribe governments to liberalise their markets, because that's not what it's for and we'll probably end up giving aid to relatively well-off countries who would have liberalised anyway.

"like the idea that water services can be best supplied by (regulated) private sector companies"

Well, actually it's not quite clear that they are, as I pointed out in a previous post on my blog. The evidence for private sector participation in mobile phone services is much better than that for water services.

"In short, we know that there are problems we can solve via institutional changes. There are others that will require investment. I’ll listen to the latter if you’ll listen to the former."

I'm already listening to the former, and basing my judgements on what the evidence shows.

Posted by: Jim | Apr 6, 2005 8:54:14 AM