On Development

Economic development is a topic about which I know very little, and on that account I’m in good company. Answers in this field have proven to be incredibly elusive, although as far as I can tell some of the right questions have been asked lately. Still, so far it seems as if the best work in development has been to point out flaws with the prevailing wisdom.

Dumping money into government coffers in poor countries is not necessarily as stupid as it sounds; assuming the powers spending the money have better ideas about government and governance than the powers receiving the money, there could conceivably be change in the right direction. However, in practice, this has been a disaster. Corrupt regimes have been propped up with very little development to show for it. Remember, if the world’s most powerful military can’t keep local leaders in line when it is occupying their countries due to both knowledge and incentive problems, how in the world could anybody do the same from afar? Perhaps if these countries had better leaders in the first place they could spend the money better, but if a society produces better government leaders on its own, it’s a lot less likely to be poor.

The geographical and cultural variety of poor countries is another confounding problem. Poverty, in fact, is the natural condition of mankind; at some point in history, everybody was poor. The various cultures/societies/nations/countries that have escaped it have done so in a variety of ways, and there’s clearly not a silver bullet that the rest can use. Many are cursed by geography, many are cursed by colonial legacies, and many are cursed by something more difficult to define. There are so many factors that influence development it may take generations before they are sorted and addressed properly.

One of the major themes, in my mind, is public choice problems in developed countries. (I am not breaking new ground here, it has been addressed often.) Countries with a comparative advantage in agriculture are frequently barred from economic interactions with large developed markets because of trade barriers imposed by developed countries, and subsidized producers in developed countries operate in a distorted market in which the optimal suppliers of food products may be in poor countries, may not receive these subsidies, and may be unable to compete. For all of the rhetoric about wanting to help the less fortunate, this is a glaring exception. Unfortunately, the agricultural lobbies in the USA and the EU are vastly better organized than farmers in poor countries and have far more clout with political decision makers. This is a great example of how unfree markets harm people who are worse off to benefit people who are better off. The antipathy to markets of many of the decision makers—based on ideology or financial interests or both—makes solutions to this problem extraordinarily hard to realize.

Immigration is another big issue. We aren’t as concerned with whether nations or regions prosper; that would be nice, of course, but we’re talking about people. The looming failure of welfare state policies may open up the political possibilities for allowing more immigration, letting people prosper and operating as a channel for financial resources and ideas to flow back to their home countries.

Fortunately, better minds than mine have started taking this field very seriously and perhaps will see some successes in the near future.

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Author: rfmcelroyiii

Student and instructor of economics.

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