Can more money solve poverty?

Image Courtesy - Franco Folini on Flickr Image Courtesy - Franco Folini on Flickr

Bill Gates wrote in his latest annual letter about the value of aid to developing countries. Bill Easterly, an economist who has done a lot to bust the myth of the value of aid writes in the FT about the challenge of attributing a lot of progress to aid. He is basically asking the question, whether more money will solve poverty in developing countries?”

Yet the progress that Mr Gates celebrates began long before this club appointed itself troubleshooter of the world’s problems, and before the advent of organised foreign aid. Consider the case of public health. In the rich countries of today, life expectancy has been rising and infant mortality falling at least since 1900. Poor countries began seeing similar advances shortly after the second world war. While there is still great global inequality on health outcomes, sickness is declining in almost all countries, regardless of how they are governed and how much foreign aid they receive.

This revolution is a story of many actors rather than conspicuous heroes, as Angus Deaton explains in his superb book The Great Escape. The germ theory of disease led to more effective efforts to clear up the water supply, and spurred the invention of drugs such as penicillin. Improvements in transport spread knowledge, medicine and equipment more quickly. Educated parents practised better hygiene and knew how to get medicines for their sick children. Money was only a small part of the story. Ghana at the turn of the millennium was a far poorer country than the US at the beginning of the second world war. Yet it had reduced its infant mortality rate to a similar level.

The contribution made by philanthropists and politicians should not be overplayed. Yet, if aid is a feeble instrument of economic progress, it is nonetheless a powerful tool of self-aggrandisement for the western elite. We” are important because we are the rich people giving aid, the political leaders of the poor countries that receive it and the experts who broker the exchange.

Easterly suggests that in the developing world more money, in this case; aid, is not the the answer. I think what Bill Gates is doing is quite important and worthwhile but that is not the total solution in my view.

[pullquote]I see the same challenge for Indigenous people in Australia. There are many policies announced, much money thrown at this problem however, the outcomes are nowhere to be seen.[/pullquote]The government in this case is more focused on dollar amounts, services and welfare payments. I do not see the leaders in this field think like that, I do not see that the indigenous people actually want that too. The solution is not that.

So, what is the solution?

What does freedom look like? Image Courtesy - Kalyan Chakravarthy on Flickr

Easterly writes about freedom and individual rights as the answer in his new book, The Tyranny of Experts.


He gives the example of a block in New York as an example of freedom and development in this Fast Company article.

The block is Greene Street between Prince and Houston Streets, on the west side of Manhattan, not too far from NYU. Easterly notes that the street started as a residence for wealthy New Yorkers fleeing a yellow fever outbreak in 1782. But the street slowly declined, becoming known for its brothels. Later still, it became an industrial center and then–during New York’s decline in the 1970s, artists moved in to those abandoned industrial spaces. Now the cachet that those artists brought has taken the block full circle: It’s some of the most expensive real estate in the city, and home to an Apple Store.

The story of that block shows how much development really is a spontaneous order full of surprises, and cannot be intelligently designed’ by a ruler or a philanthropist,” Easterly explained.


So why is freedom important?

In his 2013 annual letterBill Gates praised the government of Ethiopia for what it had accomplished in the fall in child mortality,” Easterly said. That’s a real intelligent design’ kind of view: that child mortality is under the control of this conscious designer that happens to be the ruler of Ethiopia and if it falls it’s because he wanted it to fall and he should be celebrated. And that winds up celebrating an authoritarian oppressor who puts peaceful bloggers in jail and violates human rights.”

Respect for human rights, Easterly argues, is what fuels spontaneous order and complex, adaptive, problem-solving systems in the messy, unpredictable, but wildly successful process that he calls free development,” the process that he uses Greene Street in SoHo to illustrate.


A small clip from the launch of the book.

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