Monday, November 22, 2004

Visit Gandhi and think about development

LOCATION: Intersection of O and 21st, Gandhi memorial TIME: Take your pick EQUIPMENT: Yourself

There's a monument to Gandhi on the corner of 21st and O near Dupont Circle, although "monument" is a misleading term for this one; unlike most marble grandiosities in this city of power, it's a life-size statue, down close to the ground, with a single inscription: "My life is my message"; it does not call to you from a distance nor demand attention once you're near. There's a few benches, and a little patch of grass under a tree.

I was dating a guy called Dave for a short time; he was the most starry-eyed idealistic person I've ever known, and I thought his personality was weak and watery. He was very agreeable; his wrists were limp and flexible; he was plagued by insecurities (he once asked me mournfully, "Are my hands too small?") When I disagreed with him, he never defended his viewpoint with any force. I judged him ruthlessly and unfairly, with a complete lack of respect for his good intentions which are so rare in this world. He was a milksop, incapable of carrying out his ideals into action, someone who at the first hint of adversity would retreat to a safe haven in a cloud of pot smoke.

We were talking about the Gandhi memorial once, and he mentioned walking home one night at 3am, stopping by the statue, and gazing at it for an hour before going to bed. Told by another friend, this story would have made me smile in approval, but instead I said, "Gosh Dave...you're so sappy sometimes." He looked hurt but he didn't say anything.

A few weeks later I was walking home late at night and I stopped to look at the statue. It was a cloudy rainy night, so the late lights of the city were reflected on the clouds and the water on the street, and there were eerie colours shifting everywhere, and everything was very quiet except for the sound of the wind. And all of a sudden, there was Gandhi. It's a beautifully made statue. Gandhi is in the middle of taking a step, his muscles moving with relaxed exertion, and the sculptor has captured an expression on his face which is simultaneously steely and determined, but also soft, compassionate, and humble. And I stood there gazing at it for an hour. "My life is my message." (Sorry, Dave.)

Washington DC is full of thought-inspiring places; in fact, there's not a square foot in the center of the city that's not spitting distance from a monument to something or someone important, or an institution with world significance, not to mention the museums and sculpture gardens and concerts and community gathering points. (There's a cute scene in the movie "Mr. Smith Goes to Washington" where the idealistic young senator arrives in DC for the first time and is four hours late for a meeting because he began wandering around the monuments and got distracted.)

But I think the Gandhi monument is one of the nicest. Gandhi believed in economic development taken slowly, on a small scale, without the use of advanced Western technology. He advocated using hand-looms, for example. He also believed in protectionism and high import tariffs. Whenever I mention Gandhi to my dad (a former World Bank economist) he points this out. "The man claimed to be so moral," he says, "but he tried to get his people to sit around using hand looms. And he tried to put up trade barriers so that the economy would have been destined to flounder. That directly translates into people not earning as much money and not having as much food. You know what happens when you sit around using hand looms? The country next door does it better and takes all your business away, and then they eat you. You've got to be able to compete in this life."

My father used to work for the World Bank as a development economist, but he quit his job six years ago and moved to the private sector because he became so disillusioned about the prospects for actually putting ideals into action. And all of his colleagues I met seemed similarly bitter.

"Development economics": what does that mean, exactly? The study and practice of "rich" countries "helping" "Third World" / "poor" / "undeveloped" / "underdeveloped" / "developing" / "non-industrialized" / "South" countries "develop." (I place in quotation marks those terms still subject to philosophical/moral debate.) It's a sign of the field's underlying confusion that even the most basic terminology about who is helping who exactly changes as quickly as Madonna's hair.

But I suppose that's understandable; development economics is a young field, and the young are indeed frequently confused, and embarrassingly likely to spend long hours in front of the mirror experimenting with different hairstyles and philosophical paradigms to see if it makes them look fat. While countries have always given gifts to other countries (there's a 1,500-piece pure silver banquet setting from France on display at the Hermitage that was - oh! just such a thoughtful gesture), these gifts have always been directly tied to strategic outcomes, whether it be fostering diplomatic goodwill for the furtherance of alliances or the strengthening of political factions you think are favorable to you, or any of a host of other reasons. But the idea of spending money to help another countries, for purely altruistic reasons, because it's your moral duty, belongs to this century. How do you think Bismarck would have responded if you suggested to him that Germany give some development aid out of the goodness of its heart?

The first country to include a pure altruistic component in with all of the other motivations for giving aid was the United States with the Marshall Plan for reconstructing Europe after World War II. Although there were certainly many other practical economic and diplomatic reasons for the reconstruction program, it was the first time that a country had even paid lip service to the idea that moral duty could be a driver behind aid, and only the most hopeless cynic, I think, would suggest that it was only lip service.

Despite the other practical reasons for the Marshall Plan - it was possible to justify on the pure economic grounds of rehabilitating a useful trading partner - this moral duty concept was shocking in a way I think we don't understand now, in these days where "Kumbaya" has been performed and the UN has issued its "Millenium Development Goals." At the time, public debate focused on the fact that the Marshall Plan was limited, it would certainly stop after a few years, and the US wouldn't have to give altruistic aid again.

And yet like government programs tend to do, somehow foreign assistance survived, and was transmuted into a Cold War tool, and the US set up agencies to give economic and technical assistance to those "Third World" countries that might support it instead of Russia. Many of these programs were eventually consolidated into USAID by JFK, and some survive in the State Department and other places in the US government.

Contrary to popular assumption, aid given for pure development purposes is pretty rare. A recent survey, "US in the World," showed that American citizens estimate that about 10% of the budget is spent on foreign aid. In fact, it's 0.1% of the budget, and most of that sum is not spent on Kumbaya-type goals but on rewards, in various disguises, to strategic allies. (And unfortunately for us Kumbaya types, the report cards for aid effectiveness tend to mix together the results from aid given for pure economic development, and aid given for strategic purposes - adding to the popular belief that development aid is completely wasted. Even the Millenium Challenge Account, President Bush's new lean, mean, pure-aid giving machine, named a strategic ally, Georgia among its 16 new candidates for grants next year, even though it’s less eligible than some other countries that weren’t chosen.)

Nonetheless, although the altruism in top-level motives is muddied at best, although there is continued confusion as to who you’re helping and what you’re trying to help them develop toward, there are an incredible number of talented, idealistic people who are drawn to the field of development - any of whom would probably stop a while if they noticed Gandhi late at night. And, like my dad, many of them end up bitter when they realize that helping someone develop is just not that easy.

I recently read a paper by Dani Rodrik called "Growth Strategies." He opens with a set of quotes from Arnold Harberger. The first quote is from 1985:
"Least-developed countries that have run their economies following the policy tenets of the professionals have on the whole reaped good fruit from the effort; likewise, those that have flown in the face of those tenets have had to pay the price."
The second quote, also by Arnold Harberger, is from 2003:
"When you get right down to business, there aren't too many policies that we can say with certainty deeply and positively affect growth."

That’s the embarrassing spinach between the Western development establishment’s teeth: if you compare countries' economic performance with how faithfully they applied the Washington Consensus, there's not much positive evidence. Graphs of countries’ growth vs their WC faithfulness pretty much look like lovely scattered autumn leaves. It's getting harder and harder to point to China's success and argue that it's due to those few parts of their policies which are actually orthodox, while Latin American countries who faithfully follow the Washington Consensus nonetheless flounder.

Rodrik argues that although we are in agreement about certain principles of society, such as aligning economic incentives for producers, maintaining the rule of law, and upholding property rights, these principles are broad enough that there are a wide range of policy regimes which may work to carry these out - and that these policies are far more flexible than the Washington Consensus would suggest. When you take into account the existing power balance in a society - and the capacity for unrest if you disturb it too quickly - it’s possible that maverick policies are much better.

An example: China’s agricultural reform. Instead of instant deregulation, China has kept some government agriculture quotas, but now allows farmers to sell their surplus at market prices. As long as the quotas are lower than the market outcome (so that transactions are conducted at market prices at the margin), and as long as the quotas are predictable, this system actually achieves full allocative efficiency - yet preserves the existing wealth balance among the different players in society. It’s not an economist’s dream, but nobody’s rioting in the streets, and it’s an improvement.

Unfortunately, this isn’t to say that China’s agricultural solution would work well somewhere else. Every country is so different that the application of high-level ultimate goals like "rule of law" or "property rights" or "efficient incentives" requires a nuanced knowledge of the existing society and balance of power. In fact, the temptation for countries to "copycat" other countries’ institutional structures is often dangerous since it can short-circuit needed societal introspection. (In the same way that when journalists get a good press release, they often don’t bother to do any real reporting.) Of course it’s a huge advantage to be able to take advantage from other countries’ hard-earned lessons (there’s a reason that other European countries industrialized in a fraction of the time that Britain, the forerunner, did) - but some part of it is an art, not a science, figuring out which abstract lessons to crystallize from someone else’s example and how to apply them to your particular circumstance.

When reading development literature it's funny how quickly important ideas and concepts start to seem reminiscent of self-help books talking about personal self-actualization. Transitioning between learning by parroting others and making your own discoveries... The fact that it's often easier to enact institutional change in a period of growth, because people are more optimistic and energetic and in good spirits... Short periods of growth are often easy to attain with surprisingly small policy changes - the data is as full of examples of countries growing fast for five years, as your local gym is full of pudgy people in bright white Nikes on January 6 right after their New Years resolutions.

Yet growth is maddeningly hard to maintain in the long run. The contents of the cookie jar are just so tempting and delicious, and it's just so tempting for a society's leaders not to enact any hard institutional change when they have the chance but instead just ride on their political capital. Sometimes the only thing to do is put a padlock on the fridge, and sometimes all a country can do is peg its currency fervently to the dollar and keep it there, no matter how out of sync the local economy is with America's, because it simply cannot be trusted not to inflate its way out of debt.

It’s a not a new idea. Plato writes in The Republic, "Isn’t it quite necessary for us to agree that the very same forms and dispositions as are in the city are in each of us? ...It would be ridiculous if someone should think that the spiritedness didn’t come into the cities from those private men who are just the ones imputed with having this character, such as those in Thrace, Scythia, and pretty nearly the whole upper region; or the love of learning, which one could most impute to our region, or the love of money, which one could affirm is to be found among the Phoenicians...The just man will not be any different from the just city with respect to the form itself of justice, but will be like it."

How do you introduce the rule of law to a society unfamiliar with it? (How do you build your own disciplined habits?) How do you encourage corrupt leaders (or yourself) to exercise restraint? How do you inspire people to exercise their entrepreneurial spark? How do you build institutions that can be trusted and respected? How do you help people to develop? Will we ever come up with actual prescriptive tools that work - development in a box - or will it always be an infuriating mystery?

There’s a story about the physicist Richard Feynman sitting down to dinner. His charming hostess said, "I’m afraid we can’t talk about physics - nobody knows a thing about it." Feynman replied, "Ah, the only conversational topics are things that nobody knows anything about: weather, psychology, politics, love. The reason we can’t talk about physics is that somebody knows something about it." I’m afraid that the field of development economics is still squarely in the first category.

...But somebody does know something about personal development, though. Yoga is basically the science of how to be happy. Anyone who practices the yamas (non-violence, truthfulness, non-stealing, control of the passions, control of greed) and the niyamas (cleanliness, contentment, disciplined work, self-study, openness to the divine*) with their mind, and the asanas with their body, is going to make their lives better.

Oh, whenever I think about these things, I feel so stupid and so unsure. Maybe there is a secret to life, maybe there are hidden parallels behind everything, maybe all of our conversational topics that we know nothing about are just facets of the same deep mystery. Gandhi has this look on his face like he knows something I don’t. Maybe if I hang out near his statue longer, he'll tell me a secret.

10 Comments:

Anonymous Anonymous said...

Help me Dude, I'm lost.

I was searching for Elvis and somehow ended up in your blog, but you know I'm sure I saw Elvis in the supermarket yesterday.

No honest really, he was right there in front of me, next to the steaks singing "Love me Tender".

He said to me (his lip was only slightly curled) "Boy, you need to get yourself a shiny, new plasmatv to go with that blue suede sofa of yours.

But Elvis said I, In the Ghetto nobody has a plasma tv .

Dude I'm All Shook Up said Elvis. I think I'll have me another cheeseburger then I'm gonna go home and ask Michael Jackson to come round and watch that waaaay cool surfing scene in Apocalypse Now on my new plasma tv .

And then he just walked out of the supermarket singing. . .

"You give me love and consolation,
You give me strength to carry on "

Strange day or what? :-)

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