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Archive for the ‘Development’ Category

Sadanand Dhume

Reassessing Manmohan Singh

By Sadanand Dhume

January 13, 2012, 10:20 am

Most world leaders, or at any rate the well-known ones, have an international reputation that can be summarized in a single sentence. Scruffy madman in search of a bomb: Mahmoud Ahmadinejad. Mediterranean media magnate with a glad eye: Silvio Berlusconi. Former general turned Southeast Asian democrat: Indonesia’s Susilo Bambang Yudhoyono.

Ever since taking office in 2004, India’s Prime Minister Manmohan Singh has been the beneficiary of this intellectual shorthand. Most people outside India know him simply as the Oxford-educated economist who, as finance minister, helped unshackle the economy by launching economic reforms.

It may be time to revisit that assessment, I argue in my most recent column for the Wall Street Journal.

Singh earned his reputation in the early 1990s, when he piloted India’s way out of a foreign exchange crisis and set the course for two decades of impressive growth. But those achievements notwithstanding, his record as prime minister has been underwhelming.

In India and abroad, a new consensus about the prime minister is forming. The Economist bemoans the country’s policy paralysis. Former Chief Economic Advisor Shankar Acharya accuses the government of carrying out virtually no significant economic reforms since coming to power. Prominent economic commentator Niranjan Rajadhyaksha warns that GDP growth next year may fall to a ten-year low.

For Singh, long beloved of Indian and foreign journalists alike, this reassessment must come as a shock. But there’s only one way to reverse it—to go back to the bold policies of the early 1990s that earned him his reputation in the first place.

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Categories:  Development, Foreign and Defense, South Asia   |   Tags:

Roger Bate

PEPFAR and World AIDS Day

By Roger Bate

December 1, 2011, 9:43 am

Today is World AIDS Day and President George W. Bush writes in the WSJ about the progress made against the disease around the world. He appeals for continued HIV funding through the plan (PEPFAR) his administration established eight years ago. While PEPFAR has been a huge success, new infections continue to rise; what was seen as generous assistance a few years ago has now morphed into something else. The largesse of the American people, which is still praised around the world, is now seen as a right by those receiving treatment and by international aid actors always clamoring for money. Since there is no cure, are U.S. taxpayers on the hook for billions of dollars of treatment funding every year from now? Cutting funding to PEPFAR may not be warranted right now even in these straightened financial times, but at some stage we should demand that the countries with the infected take up the cost for treating them.

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Categories:  Africa, Development, Foreign and Defense, Global Health, Health Policy   |   Tags: , , , ,

Roger Bate

Millenium Village a total bust

By Roger Bate

November 29, 2011, 10:51 am

The first independent evaluation of the United Nations Millennium Village project, which aimed to increase incomes of targeted Kenyans by subsidizing agricultural development, has just been published.

To those of us who have seen the Villages or read about the practices at the Villages, it comes as no surprise that there is no increase in income. For while there is an increase in agricultural returns to affected households due to the massively subsidized projects supported by taxpayers, these same households have had to be less innovative in other areas of income generation. No doubt the UN and Columbia University’s Jeff Sachs, who champion the project, will spin their own reasons why this new report is flawed, but for the rest of us it is just another failed aid project.

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Categories:  Africa, Development, Foreign and Defense   |   Tags: , , , , , ,

Kenneth P. Green

Save the Planet! No, Really!

By Kenneth P. Green

September 22, 2011, 12:05 pm

An environmental group called 350.org is promoting an event this Saturday called “Moving Planet,” which is marketed as a day to help save the planet by lobbying the government to institute controls on greenhouse gas emissions.

Well, words and rallies are cheap: deeds are expensive.

If people are serious about saving the world, they should put their money where their mouth is. Don’t wait until Saturday, then spend a genteel day with your friends waving pithy signs on manicured lawns. Go online, right now, and buy some things from poor countries that are trying to improve the lives of their people through trade. Send this note to your friends, and get them to do the same thing.

The most effective way you can use your labor to save the planet is by enriching people in poor countries, whose development—while desperately needed—is causing the most environmental harm.

It’s cheap and easy to throw a rally and lobby the government to confiscate other people’s money to enact your preferred policy agenda. It’s a feel-good thing, and gives you a sense of moral superiority. You can spend the day with your kids, and make a party of it.

It’s also a massive cop-out. If you want to save the planet, take out your credit card and engage in trade: that’s what generates the wealth that allows environmental protection, at home and abroad. Oh, and tell a friend.

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Categories:  Development, Energy and Environment, Society and Culture   |   Tags: ,

Bridget Johnson

Top Foreign Affairs Dem: Revamp Foreign Aid, Save It from ‘Mindless Slashing’

By Bridget Johnson

September 8, 2011, 11:27 am

(Peter Holden)

The top Democrat on the House Foreign Affairs Committee introduced a revamp of the half-century-old Foreign Assistance Act today at AEI. His plan is based on a compromise by which Congress gives the administration more flexibility while receiving more information and accountability from the White House in return, he said.

Representative Howard Berman (D-California), ranking member of the House Foreign Affairs Committee, unveiled the Global Partnership Act of 2011 in discussion draft form rather than as a numbered bill, hoping to stoke bipartisan consensus to streamline overseas operations and replace the Foreign Assistance Act of 1961.

“Only legislation can make enduring changes to the underlying system,” he said. “Our focus needs to turn to the long-term overall impact.”

This includes the full spectrum of foreign aid—development, democracy promotion, arms transfers and nuclear nonproliferation—but doesn’t include spending levels.

“That, in my view, would be a recipe for disaster,” Berman said.

The congressman said the bill focuses on reorganizing foreign assistance with efficiency and “mutually beneficial goals” in mind. For example, what can be gleaned from Internet research instead of a diplomat at a desk penning a report, and how much can be saved by that approach?

Noting some of the crises unfolding worldwide, Berman acknowledged the challenge of growing calls for spending cuts in Washington. “Some seem to think that foreign assistance is a luxury we can no longer afford,” he said, calling out an “increasing destructive assault on foreign assistance programs” as Congress eyes “mindlessly slashing programs.”

“Aid is not a gift,” he said. “The United States provides foreign assistance because it serves our interests.”

That includes supporting our economy by helping nations develop to the point where they can afford to purchase U.S. products, Berman said.

The congressman said he and his staff have been working on the bill for three years. While not being fiscally or region-oriented, he said the bill would better enable the United States to “seize windows of opportunity like the Arab Spring.”

The act also creates a new emergency humanitarian assistance fund and bans on countries that fund terrorism or engage in gross human rights violations. Berman acknowledged that the discussion over that aspect will be controversial, and said he hoped to postpone that debate while building consensus on the broader principles of reform.

“I can’t make it a bipartisan process unless you folks help me make it a bipartisan process,” Berman told the crowd.

It “will no doubt be an arduous process,” he added.

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Apoorva Shah

India Is an Aid Donor. Surprised? You Shouldn’t Be.

By Apoorva Shah

August 17, 2011, 9:04 am

The Indian government recently announced plans to set up a central foreign aid agency in the form of USAID or the UK’s DFID. Likely called the Indian Agency for Partnership in Development, it will manage over $11 billion in aid transfers to countries like Burma and Bangladesh over the next five to seven years.

It may seem strange that a country with more people in poverty than all of Sub-Saharan Africa now has an official apparatus to disburse development aid to other poor countries. Shouldn’t this money be used to fix social problems at home?

But that’s not the point of this agency. In fact, the announcement helps to prove something that the so-called “development community” still doesn’t understand: aid isn’t and has never really been about development.

Aid is a political and diplomatic tool, something that India wants to use to project more influence toward its poorer South Asian neighbors as well as other countries in Africa and Asia. This annoys the development experts in multi-national organizations and NGOs, who with the best of intentions, believe that aid money can catalyze actual development.

In a recent editorial, the Economist adopts this mentality, questioning India’s decision and noting that its money may be poured into “grand projects which fail—and encourage bad government.” It’s a fair point in that the money may indeed be used to fund big projects that eventually fail. And that these projects may encourage corruption and graft in the recipient countries. But that’s aid. It’s not a natural path to creating prosperity or any of the conditions needed for development, no matter how hard we try.

This also means that the parameters we use for judging the effectiveness of US foreign aid should be selected as carefully. It’s easy to dismiss aid when we try to look for non-existent development results. But perhaps there are more intangible political benefits?

It will be interesting to see where India takes its new agency in terms of its own charm offensive. Particularly intriguing will be how it competes with China’s now well-documented charm offensive across Asia and Africa. But if you’re looking forward to news of Indian aid programs bringing poor Nepalese and Sri Lankans out of poverty, don’t hold your breath.

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Claude Barfield

As Predicted, a European IMF Director Complicates Crucial Decisions

By Claude Barfield

July 29, 2011, 3:39 pm

In a blog post in early June, I argued that, despite her accomplishments and personal ability, the choice of Christine Lagarde to head the IMF would complicate and undercut IMF decision making when it came to crucial and difficult decisions regarding the unfolding debt crisis across the European continent. In a later New York Times op-ed, Harvard’s Kenneth Rogoff echoed this warning when he agreed with Lagarde’s rival for the position, Mexico’s Agustin Carstens, that a “European is going to be hugely conflicted in managing the central challenge facing the IMF today.”

Evidence of the dimensions of that conflict has quickly emerged as Lagarde struggles to find her footing and chart a future course for the IMF in the continuing Greek saga. Last week’s second Greek financial package, a complex stitch-up with details that remain unclear, clearly presumes a continuing role for the IMF. And it is the unexplained nature and extent of that role that has quickly proved the validity of concerns about Lagarde’s dilemmas.

In interviews with Alan Beattie of the Financial Times, emerging market IMF directors have expressed “alarm at the risks” for the IMF and strong opposition to the IMF committing large new sums to the Greek bailout. More important for this post, they suggested that Lagarde’s decisions here would be a direct test of a potential European bias. Paolo Batista, who represents Brazil and eight other countries on the IMF board, told the FT that the crisis would present an “ideal opportunity to dispel suspicions of a bias toward European bondholders.” In similar fashion, Arvind Virmani, the Indian executive director, stated baldly that the IMF already had been too generous to European  borrowers. And he argued: “History suggests that if this were happening to a poor country or developing country, the rich countries would have voted against (the loan).”

A number of observers have suggested that if the new arrangement is to work, the IMF will be called upon to increase its lending—even though the funds committed to date are by far the largest commitment ever by the IMF, relative to the size of a borrower’s IMF shareholding. Still (though doubted in these quarters) there may be compelling reasons for the IMF to up the ante for Greece; but if this and other decisions become a test of a “bias” toward European stakeholders, Lagarde’s leadership role, and by extension the IMF’s, will be badly compromised. In defeat, Carstens, it seems, was prophetic.

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Categories:  Development, Economic Policy, Europe and Russia   |   Tags:

Nicaragua and Venezuela’s Well-Oiled Relationship

By Margaret McCarthy

June 30, 2011, 1:54 pm

Venezuela’s Hugo Chavez might be joining Fidel Castro as an ailing anti-American, pro-Iran strongman who ‘dies’ in the media every so often.

Or he might actually die.

AEI’s Roger Noriega examines the possible fallout in Venezuela, arguing that “now is the time when an attentive public is open to messages about recovering the Venezuela’s democratic republic.”

There will be consequences for America as well, which the Obama administration has been strangely silent about, but there will undoubtedly be implications for other countries in the region, which will echo in the rest of the world.

Take Nicaragua. It was 25 years ago this week that the International Court of Justice handed down a 12-3 decision condemning U.S. intervention in Nicaraguan affairs. Not surprisingly, the international community is largely silent on Chavez’s ongoing intervention in Nicaragua.

But it is precisely this type of intervention which will be thrust into the limelight with Chavez’s end.

In the most egregious case, Venezuela gives huge amounts of money through an opaque arrangement of private and public entities. ALBANISA, a private company in Nicaragua which is not required to disclose its books, receives oil revenues from the Venezuelan PDVSA’s sales to Nicaragua’s PETRONIC, a company over which the Ortega administration has oversight power. A portion of the revenues are kept in ALBANISA—estimated to have had total funds of about $125 million in 2009—and is widely considered to be used to prop up the Ortega regime. This has led to political controversy in recent years. Last year the IMF took issue with this lack of transparency ever so briefly, temporarily refusing to disburse the remainder of funds for a Poverty Reduction and Growth Facility project in Nicaragua. But the controversy, predictably, slipped quickly out of the international limelight.

The fragility of a Nicaraguan regime heavily dependent upon these Venezuelan “funds,” in turn dependent upon the strong friendship between the two heads of state, becomes all the more apparent with the absence of  Chavez, the senior partner. Though the funds are meant to support mutually beneficial regimes (for the leaders at least), the Nicaraguan population and the Ortega regime have both become heavily dependent upon this money, which likely makes up a significant portion of the national budget. The implications of this arrangement are profound, and are becoming increasingly precarious. Its cessation would significantly reduce the standard of living and economic security in Nicaragua, while its continuance results in the derogation of explicit political rights. This will be further aggravated by the impending November 2011 Nicaraguan presidential election, in which President Ortega is only able to participate through a series of corrupt Supreme Court rulings and presidential decrees.

The perfect storm of political unrest in Nicaragua coupled with a debilitating illness of the Venezuelan president could easily disrupt the status quo. This would open the door for other countries—namely the United States and European states—to resume the aid and soft power influence in Nicaragua that has steadily declined with Chavez’s increased role over the last decade. But this cannot happen if those countries which stand to fill the post-Chavez void are not paying attention.

Of course, it is entirely possible that a transition from Chavez’s regime to the next will occur without a hiccup. But while the United States and the international community at large have seemed content to let Chavez’s Venezuela act like a petulant child for the last decade, it should take this opportunity to consider the international ramifications of his potential fall from power.

Margaret McCarthy is a public affairs assistant at AEI.

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State Department Circumvents Congress on $100 Million UN Upgrade

By Trey Hicks

February 10, 2011, 3:31 pm

George Russell at Fox News recently reported on the State Department’s decision to let the United Nations keep $100 million in overpaid U.S. contributions to use for “security enhancements” rather than return it to the U.S. taxpayer:

“In this case the United Nations notified the State Department that it intended to use [TEF funds] for security enhancement,” said U.S. Under Secretary of State for Management Patrick Kennedy. “Since the money was already in their hands, the U.S. had no objection to the use in the upgrade.”

My questions for Congress: How does it feel to be circumvented by unelected bureaucrats in the appropriation of tax dollars? I mean, who needs deliberative committees or pesky legislation when you are trying to “get things done”?

Image by Javier Carbajal.

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Sadanand Dhume

India’s Foreign Direct Investment Heads South

By Sadanand Dhume

February 10, 2011, 10:01 am

In my column in today’s Wall Street Journal Asia, I argue that we may be seeing the first signs of foreign investors losing interest in India. Total foreign direct investment in the country declined by 32 percent last year to $24 billion. Over the same period, China’s already robust FDI inflows rose by 6 percent to cross $100 billion.

Needless to say, one grim statistic does not alter an otherwise positive story driven by world-class companies, an ambitious middle class, and a young population. Last month, car sales crossed 184,000, the best month ever in Asia’s third-largest automobile market; and $24 billion annually is still a lot more FDI than India was attracting as recently as five years ago.

Nonetheless, foreign investors voting against India compared to other Asian countries is a warning sign that New Delhi needs to take seriously. For more than four decades, until the advent of economic reforms in 1991, India was Asia’s economic laggard. It can hardly afford to slow down just when it has begun to catch up.

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Sadanand Dhume

How Real Is India’s Rise?

By Sadanand Dhume

January 31, 2011, 3:06 pm

This winter’s must-read nonfiction book in New Delhi, Mumbai, and Bangalore is India: A Portrait by British historian and writer Patrick French. Its upbeat portrayal of a nation that has shrugged off torpor to become the world’s second-fastest growing major economy has attracted a raft of reviews that neatly illustrate a divide among India-watchers on which way the country is headed.

First, the naysayers. Pankaj Mishra, a regular contributor to the New York Review of Books and the Guardian, excoriates French in Outlook magazine. He accuses French of conducting an “armchair exercise,” and parroting “the rosy Western view of India.” Mishra bemoans “the worldwide corporate hunt for new sources of profit” that has made India fashionable, and points out that the country still houses several hundred million poor people. He accuses French of being influenced by “the right-wing Friedmans” (Milton and Thomas).

In the Guardian, the Booker Prize-winning novelist Aravind Adiga, author of The White Tiger, compares French’s efforts unfavorably with other well-known India books: He accuses French of lacking the depth of V.S. Naipaul’s classic A Million Mutinies Now, and the timeliness of Financial Times correspondent Ed Luce’s In Spite of the Gods. But Adiga’s real problem appears to be French’s obvious affection for the country he writes about, and his agreement with the optimistic view that, on balance, things are better in India today than at any time since independence in 1947. Given the scale of the challenges India still faces, Adiga finds this irresponsible: “For the greatest danger to the nation’s future is no longer poverty or Pakistan, but overconfidence.”

Salil Tripathi in the Independent agrees broadly with French’s optimistic yet sober take on India’s progress: “Two things are clear: large numbers of people have been lifted out of extreme poverty, and around one quarter of the population have so far gained very little.”

In the Wall Street Journal, I share this view. As I see it, a few quibbles aside, French has written as accurate an account of India’s uneven rise as any:

Mr. French doggedly explores India’s underbelly: Maoism, the Kashmir insurgency, bonded labor, police malfeasance, hereditary politics, and rampant corruption. But, unlike many Indian intellectuals, he doesn’t lose sight of the bigger picture: a democratic polity, a rapidly growing economy, and an essentially tolerant society. Optimism about India may be exaggerated, but it’s far from unwarranted.

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Roger Bate

Sweden, Germany Suspend Grants to Global Fund

By Roger Bate

January 27, 2011, 10:47 am

pills1Sweden had already suspended payment of grants to the Global Fund and now Germany has done so too.

These suspensions, which are likely to be temporary, are warranted, and a thorough investigation of the use of the funds should be made. I’ve been calling for an investigation of what happens to donated malaria drugs, and I suspect problems will arise in other areas too.

But the real story is this: If the Global Fund operated like every other multilateral aid agency, we wouldn’t have the information about fraud and other bad behavior that is leading to these funding suspensions. The Fund is admirably open about some of its failings. It will be a bitter irony if the Fund loses significant support only for those funds to be redirected to opaque organizations, particularly many UN organizations (UNDP, UNEP, GEF, etc.), which are institutionally corrupt.

Image by Sarah Korf.

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Roger Bate

The Global Fund Responds to Criticism

By Roger Bate

January 27, 2011, 10:41 am

The executive director and the inspector general of the Global Fund have responded to my recent article in Foreign Policy (their response is at the end of my piece here). For some technical reasons, my reply has not been posted to FP yet (maybe it’s the snow). But I wanted to make it available immediately to answer some of their assertions.

My article was relatively short and couldn’t address all of the nuance of my concerns about the Global Fund. More detail on the research I’ve done can be found here and also here.

As to contact with the Global Fund, which the authors appear to be unaware of, I spent about an hour on a call with a Global Fund investigator in early December discussing the theft of medicines. And my colleagues and research assistants have contacted the Fund on several occasions over the past year to gather information.

The fact that most of the actors that the Fund works with are competent and honest does not mean they can be complacent about the remainder—a few rotten apples can destroy entire systems, or rather develop alternative dangerous networks.

But the Fund’s executive director, Michel Kazatchkine, and inspector general, John Parsons, are correct in other regards—they are more transparent than any other multilateral agency, and I commend them for it—and in the above documents and most of the articles I write, I point this out. It is a travesty that UN Development Program hides its data from the Fund.

But the fact that other agencies are worse than the Global Fund doesn’t mean we can be complacent when drugs go missing, and I fear that the Fund cannot oversee drug delivery particularly well.

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Sadanand Dhume

Obama and Chindia

By Sadanand Dhume

January 26, 2011, 3:51 pm

Reading between the lines of President Obama’s State of the Union address last night provides a glimpse into how the president views one of Asia’s most interesting rivalries: China vs. India.

The president mentioned China four times in his speech; India got called out three times. In two of these references, the Asian giants were mentioned in the same breath, first as economic competitors, and later, in a manner of speaking, as economic partners.

The competitiveness stems from the two countries’ legendary legions of geeks and nerds:

Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with greater emphasis on math and science. They’re investing in research and new technologies.

Economic cooperation appears to hinge on finding a home for U.S. exports:

Recently, we signed agreements with India and China that will support more than 250,000 jobs in the United States.

Obama’s remaining two mentions of China highlighted competitiveness rather than cooperation. The president pointed out that China had recently become “home to the world’s largest private solar research facility, and the world’s fastest computer,” and that it is “building faster trains and newer airports.”

By contrast, the remaining nod to India signaled cooperation by piggybacking on the president’s successful visit to the country in November. (Though his claim of having “built new partnerships with nations like India” would come as a surprise to those who give the George W. Bush administration much of the credit for placing U.S.-India relations in a higher orbit.)

All in all, though, this parsing of tea leaves conforms to reality. With its rapidly modernizing economy and authoritarian government, China is mainly a competitor to the United States. As an English-speaking democracy, India—though often difficult to work with in practice—remains a natural partner.

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Categories:  Asia Pacific, Development, Economic Policy, Foreign and Defense, South Asia   |   Tags:

Does the World Need $100 Trillion More in Credit?

By Rohan Poojara

January 26, 2011, 12:42 pm

The Annual Meeting of the World Economic Forum (WEF), which brings together hundreds of business, political, and social leaders from around the world, began today in Davos, Switzerland. The Davos agendas in the last couple of years have been dominated by the causes and costs of the Great Recession. However, the theme for this year’s meeting, Shared Norms for the New Reality, suggests that the focus will shift to discussing the economic and political partnerships necessary to transform the prevailing (modest) recovery into a more inclusive and sustainable global growth model.

An indicator of the expected dialogue was the release of the “More Credit with Fewer Crises: Responsibly Meeting the World’s Growing Demand for Credit” report last week by WEF and McKinsey & Company. WEF undertook the study leading to this report in response to some of the common concerns raised by attendees of the Davos 2010 meeting, which included striking a balance between economic growth and excessive leverage as well as identifying the under- and over-served areas of the credit market. The stage has now been set for an animated debate among participants with the report’s finding that the world needs to double its existing credit levels by 2020, an increase of more than $100 trillion, to sustain the economic recovery and enable the developing world to achieve its growth potential.

For their study, WEF and McKinsey developed a detailed model using historical leverage levels and forecasted potential debt demand to 2020 across 79 countries, representing 99 percent of world credit volume. They used an estimate of credit stock tracking GDP growth (flat global leverage) until 2020. This includes modest deleveraging in developed markets that is offset by credit growth in developing markets. However, it will be interesting to see if the base-case assumption of flat global leverage holds true given the findings of Carmen and Vincent Reinhart, who examined 15 recent financial crises in their paper “After the Fall.” The Reinharts show that the median decline in credit/GDP ratio in countries affected by a crisis is 38 percent over a ten-year period following the crisis. Detractors of the WEF-McKinsey report will probably welcome this reduction in leverage, even if it is at the cost of forgone growth opportunities, as a necessary reduction in the debt/equity ratio. The WEF-McKinsey team, on the other hand, would argue that global deleveraging will result in insufficient access to debt financing to various parties, from American homebuyers to Chinese consumers and Indian microfinance firms, that are essential for global growth.

Rohan Poojara is a research assistant at AEI.

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Roger Bate

Corruption at the Global Fund Shows Need for Term Limits

By Roger Bate

January 24, 2011, 9:54 am

The Washington Post runs an interesting story about corruption at the Global Fund, the body established to disperse commodities, mainly drugs to combat HIV, tuberculosis, and malaria. With so many of its grants subject to a form of mismanagement, theft, or fraud, there will be calls to shut the Global Fund down. I certainly wouldn’t go that far, for what the Post story alludes to but doesn’t really spell out is that the Global Fund is more transparent than any other multilateral aid body. And its interventions do save lives, thousands of them. Of course it must improve practices, but as far as I can tell in the decade-plus I’ve been analyzing programs of the Fund and other agencies, it is far less corrupt than the United Nations Development Program or the World Bank, but since these latter groups are not at all transparent they get a free pass.

What the Global Fund story should make people realize is that we need term limits on global agencies. Over time multilateral agencies in general, and UN agencies in particular, simply become too good at hiding their perfidy.

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Sadanand Dhume

How to Talk about Gujarat

By Sadanand Dhume

January 20, 2011, 11:30 am

narendramodiIt’s hard to think of a place in India that presents a deeper moral conundrum than the Western state of Gujarat. Nine years ago, Hindus went on a rampage after a Muslim mob burned alive 58 Hindu pilgrims on a train. More than 1,000 people died in the violence, three-fourths of them Muslim.

Many Indians view the breakdown of law and order as unconscionable, and blame the state’s chief minister, Narendra Modi, for it. For Modi’s numerous critics, at worst he abetted the violence by asking the police to stand down. At best he’s guilty of gross negligence. Modi claims he is innocent, that the riots took place despite his efforts to quell them. A team appointed by the Supreme Court of India is investigating the charges, and in the meantime Modi is barred from traveling to the United States.

The conundrum arises because, the events of 2002 notwithstanding, Gujarat is also widely regarded as India’s best-run state. Here’s how the Wall Street Journal described it in a story last week from the sidelines of an economic summit:

Under the direction of Chief Minister Narendra Modi, Gujarat has tackled several problems that often frustrate both foreign and domestic businesses here. Investors characterize Gujarat’s civil service as a disciplined force that approves land purchases and environmental permits quickly. The state invests heavily in modern road and power infrastructure. It has set up a Web portal that lets foreign investors track their government requests and complain about delays.

In my Wall Street Journal column this week, I address what I see as the heart of the conundrum. “To be sure, this larger national conversation, at its heart about morality in public life, will not disappear any time soon … But it ought not to obscure another, equally important, question: What can the rest of India learn from Gujarat’s economic success?”

In short, I believe that the larger debate about Modi is healthy and should continue. If he’s found guilty of playing a role in the riots, he should be jailed. And, as I argued last year, under no circumstances should a person tainted by such serious charges ever become prime minister of India. But at the same time, India can’t afford to ignore the economic lessons of Modi’s Gujarat. It’s time for the rest of the country to emulate the best aspects of the state: business-friendly governance, a small-government philosophy, and serious anti-corruption efforts.

Image by the World Economic Forum.

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Michael Auslin

Culture, Success, and Economics

By Michael Auslin

April 23, 2010, 10:52 am

David Landes has an excerpted piece in the Wilson Quarterly on the “Enterprise of Nations.” Dismissing the claim that globalization is something new, uniquely Western, or nefarious, Landes rather pointedly notes that modernization and success in economic endeavors rests ultimately on a cultural base. Yes, some regions are poorly endowed with natural resources, but history shows far more often that resistance, poor management, and greed are more accurate indicators of the potential for social and economic success or failure. Japan, for all its current malaise, is an excellent example of a country bereft of minerals, arable land, energy resources, etc. that surmounted its shortcomings.

Landes’s piece in many ways supports the arguments made by Francis Fukuyama in his book Trust: The Social Virtues and the Creation of Prosperity. Wealth transfer, domestic or foreign, has failed wherever it has been implemented if the underlying social and economic freedoms are neither enhanced nor taken advantage of. Thus, the Marshall Plan comprised but a small part of the success of European nations in recovering after World War II, while in other parts of the world, billions of dollars over decades have made no mark, leaving ordinary people immiserated and powerless.

Too bad our leaders are ignorant of history and economics, and never learn the adage about pouring good money after bad. But why should they? It’s not their money.

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Mark J. Perry

The Power of the Market: Entrepreneurs in Haiti’s Tent Cities

By Mark J. Perry

April 1, 2010, 9:38 am

800px-tent_city_in_port-au-prince_2010-01-21It’s been almost three months since the devastating earthquake in Haiti, and a couple of recent videos highlight the important role being played there by entrepreneurs, who are starting businesses in the tent cities to provide needed services to their local communities.

In this video, National Public Radio’s “Planet Money” program reports on the Haitian “entrepreneurs who are kick-starting the local economy.” In February, a Reuters video highlighted how “tent cities in Haiti have become something of an incubator for entrepreneurs.”

The fact that small businesses are flourishing in Haiti’s tent cities after a natural disaster clearly illustrates the entrepreneurial spirit of the Haitian people and the economic concept of “spontaneous order”—the spontaneous emergence of order out of seeming chaos. And it’s also important to note that all of the entrepreneurial activity in Haiti is happening in an environment almost entirely free of government licensing, regulation, or central planning. It’s a great example of the “invisible hand” of the market at work in Haiti’s tent cities.

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Jay Richards

Why Is the UN So Corrupt?

By Jay Richards

March 11, 2010, 11:37 am

800px-flag-of-the-united-nationsAdmittedly, my evidence is anecdotal. For the last couple of months, I’ve seen dozens of private emails describing the monumental efforts by private charitable organizations such as Catholic Social Services and Food for the Poor, and by the U.S. military, in delivering emergency humanitarian aid in Haiti. Catholic Social Services and the U.S. military are entirely different institutions, and yet they both seem well-suited to dispense humanitarian aid—though for obviously different reasons.

There’s something to be said for economies of scale, infrastructure, and military might when it comes to humanitarian aid. But there’s also something to be said for local knowledge, religious conviction, and on-the-ground experience.

But not all humanitarian aid programs work so well. In fact, the world’s largest one doesn’t work so well. The New York Times reports that according to the United Nations’ own study, its World Food Program is having a terrible time in Somalia:

As much as half the food aid sent to Somalia is diverted from needy people to a web of corrupt contractors, radical Islamist militants and local United Nations staff members, according to a new Security Council report.

I’m pretty sure that’s not the goal of the program. I have no desire to disparage hardworking UN aid workers in dangerous parts of the world; but at some point, stories like this ought to make us ask what it is about the UN that causes its programs to work so poorly. Is there something about the UN institutionally—which distinguishes it from the successful efforts by national militaries and private religious charities—that too often subverts its stated mission?

The United States often gets badgered for not funding the UN adequately; but perhaps our money would be more effectively spent elsewhere.

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Jay Richards

Haitian Missionaries Mingled ‘Good Intentions With Ill-advised Plans’

By Jay Richards

February 11, 2010, 9:34 am

Perhaps no mistake is more common for religious people involved in good works than to believe what I’ve called the “piety myth.” This is focusing on the goodness of your intentions rather than on the consequence of your actions. This is an especially pernicious myth in economics and charitable work, where the outcomes are so often counterintuitive.

I have hesitated to comment on the sad case of the ten American missionaries being held by Haitian authorities on child trafficking charges, since the details were somewhat muddled in initial reports. But I’m now inclined to agree with Jim Tonkowich that the incident is yet another casualty of the piety myth.

The sad reality is that Haiti’s destitution, which drew the well-meaning if poor-planning Americans to Haiti from the United States, also leaves Haitians vulnerable to all manner of sex and child trafficking. So they’re understandably sensitive on the matter. Clearly, it was unwise to ignore that reality.

But it’s also obvious to everyone that such were not the intentions of the missionaries. Tonkowich’s assessment seems right:

First, their story leaves “the impression of sloppy do-goodism” as Jedd Medefind put it. Assuming the impression reflects the truth, we should pray that the Haitian authorities drop the charges against the Americans and release them from prison where they sit today. Focusing on the very real trafficking problems that plague their country would be a far better use the Haitian legal system.

Second, wisdom is a primary means of God’s leading. Compassion for the needy and the desire to help are strong emotions that we ought to encourage. God uses them to lead us and strengthen us in his service. But strong emotions can run away from us and cause us to act foolishly. Compassion, desire, and zeal must be tempered by wisdom. Proverbs 19:2 says, “It is not good to have zeal without knowledge, nor to be hasty and miss the way.”

Third, I am in awe of people who drop whatever else they’re doing and rush across the world to jump in and help those in need. The Bible enjoins us repeatedly to take care of widows and orphans—the people who have no one to turn to for help and protection. The ten New Life Children’s Refuge missionaries may have had zeal without wisdom, but as I sit comfortably in my study I can’t help but remember that it was not the excessively zealous whom Jesus called repeatedly to repentance, but icy cold Pharisees who knew, but did nothing.

What the world needs is such zeal wedded to wisdom.

Tonkowich, incidentally, is the former president of the Institute for Religion and Democracy, and now writes full time on issues related to faith, economics, and politics. I always read his pieces, which are consistently insightful, balanced, and wise. He has a new website that consolidates his published writings. Check it out here.

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Jay Richards

Haiti, Pat Robertson, and that Story about a Pact with the Devil

By Jay Richards

January 15, 2010, 5:43 am

800px-vuduThe images and stories coming out of Haiti are gut-wrenching and hard to endure. My family has a special connection to this poor, small Caribbean country. My in-laws were missionaries there, my wife lived there until she was in the fifth grade, and my brother-in-law returned there with the military during the U.S. mission under President Clinton. We’re seeing despairing emails from relief workers in Haiti. At the moment, probably the best response for Americans is to pray and donate to nonprofit organizations set up to offer immediate relief (we decided to go with Food for the Poor).

Of course the blogosphere and twittersphere are abuzz with an off-the-cuff comment by Pat Robertson on CBN. After the news broke of the Haitian earthquake, Robertson went on the air asking for donations for relief and made these comments:

Something happened a long time ago in Haiti and people might not want to talk about it. They were under the heel of the French. Napoleon the Third and whatever. And they got together and swore a pact to the devil. They said, “We will serve you if you get us free from the prince.” True story. And so the devil said, “OK, it’s a deal.” They kicked the French out, the Haitians revolted and got themselves free. But ever since, they have been cursed by one thing after the other, desperately poor.

Robertson, of course, has a history of saying odd, poorly timed things that are easy to parody, such as blaming 9-11 and Katrina on America’s sins. And howls of indignation always follow. For this latest offense, Don Imus said Robertson should be “put to sleep”—that is, executed.

So many people love to hate Pat Robertson; so I figured I’d look into it.

Having watched the video several times, it’s clear that Robertson was not blaming the victims of the earthquake, saying that God brought on the earthquake to punish Haitians, or claiming to know the mind of God. Again, he made these comments in the course of appealing to listeners for help for Haitians.

So what was he saying? Well, first, he was expressing a belief that geographical locations can suffer from spiritual forces, including forces of darkness, brought on in part by the actions of leaders. This is a common belief especially among charismatic Christians, but it’s suggested in the Old Testament, and quite explicitly described in the book of Daniel. Normally, though, it’s applied to things humans do to each other. With earthquakes, we’re talking about what philosophers and theologians call “natural evil.”

Second, he was recounting, in urban legend form, a story that lots of people have heard about the founding of Haiti. And whether you believe any of the issues related to spiritual causality mentioned above, there’s still the question of history: Did the early Haitian revolutionaries make a pact with the devil?

Surprisingly few pundits, so busy shooting at an easy target, seemed to be curious about the historical provenance of the story. But Mathew Yglesias did a little digging, and came up with this:

But was there a pact with the devil? I would also note that the Haitian Revolution began in 1791, years before Napoleon took over France as Consul. Napoleon III didn’t come to power until 1848. So clearly Robertson is confused on the basic history. But I believe that Robertson is referring to the Bois Caïman Ceremony that in Haitian national mythology initiated the revolution. This was a Vodou ceremony and the following text is normally attributed to its leader, Boukman:

The god who created the earth; who created the sun that gives us light. The god who holds up the ocean; who makes the thunder roar. Our God who has ears to hear. You who are hidden in the clouds; who watch us from where you are. You see all that the white has made us suffer. The white man’s god asks him to commit crimes. But the god within us wants to do good. Our god, who is so good, so just, He orders us to revenge our wrongs. It’s He who will direct our arms and bring us the victory. It’s He who will assist us. We all should throw away the image of the white men’s god who is so pitiless. Listen to the voice for liberty that speaks in all our hearts.

If you were a white, Catholic French person or Haitian plantation owner, I can see why you would characterize this as a prayer offered “to the devil.” The black Haitians are postulating the existence of two Gods, one for the whites and one for the blacks. The whites regard the God they pray to as the one true God. So if the blacks are praying to some second god, and doing it with a Vodou ceremony, it stands to reason that they’re engaged in a satanic ritual of some sort.

But there’s no reason for 21st century Americans to accept this interpretation of the story. From the Haitian perspective, I think you’d say they were just praying to God for his assistance and asserting the justice of their cause. This is what pretty much everyone does before heading into battle.

Yglesias’ treatment of the Robertson Affair digs deeper than 95 percent of the other commentaries I’ve read. And, like Yglesias, I think this is the incident on which the “pact with the devil” story is based.

But I think he misses key points. He conflates the “Haitian perspective” (presumably the desire for freedom from oppressors) with the perspective of a voodoo practitioner, which isn’t quite the same thing. He thinks all “21st-century Americans” will think like good secularists, and reduce theological language of prayers to purely political acts. But theology has content. The Bois Caïman Prayer isn’t the Schema Israel or the Lord’s Prayer. Sure, voodoo is not Satanism but it is a syncretistic and, in my opinion, unsavory religion that blends elements of Catholicism with traditional animistic African religion. And it has been a significant part of Haitian culture from the beginning.

This may all seem like a detour for theology nerds, but it ties back to the burning question, which you can ask without answering the tough spiritual questions: why is Haiti so poor? (It is Haiti’s poverty, after all, that causes earthquakes to be not just national emergencies, but humanitarian disasters.) More pointedly, is there something about its cultural, political, and religious history, which differs from other much less poor Caribbean nations, that contributes to its poverty? The role of religion in development and economics is often ignored entirely, but I and many others have argued that the Judeo-Christian tradition, as it worked itself out in some Western countries, gave rise to wealth-producing institutions. Conversely, are there elements to Haitian voodoo that have helped keep the country in poverty? I don’t know the answer but surely that’s a serious, if uncomfortable and easily misconstrued question.

In any case, without the full answer to the question of why Haiti is so poor, we may never know how to help Haitians become prosperous, rather than simply helping them survive in times of dire need.

Image by eliogarcia.

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Mark J. Perry

World Poverty Rate Plummets

By Mark J. Perry

November 18, 2009, 7:19 am

In Kevin Hassett’s National Review article “The Poor Need Capitalism,” he points to a new NBER study, “Parametric Estimations of the World Distribution of Income,” and writes:

The chart [below] draws on a landmark new study by economists Maxim Pinkovskiy and Xavier Sala-i-Martin. The authors set out to study changes in the world distribution of income by gathering data from many different countries. As a byproduct of their work, they are able to count the number of individuals who live on $1 per day or less, a key measure of poverty.

poverty11

According to their calculations, the number of people living in poverty so defined has plummeted, from 967,574,000 in 1970 to 350,436,000 in 2006, a decrease of a whopping 64 percent. Whence the reduction? The biggest factor is the emergence of middle classes in previously poverty stricken China and India. And the spread of capitalism to other countries has similarly been followed by prosperity. The trend is even more impressive if one considers that the world population skyrocketed over that time, increasing by 3 billion.

If the trend continues for just 40 more years, poverty will have been essentially eradicated from the globe. And capitalism will have done it. There are those who have argued that the current financial crisis has served as proof that capitalism is a failed ideology. The work of Pinkovskiy and Sala-i-Martin suggests that there are about a billion people whose lives prove otherwise.

The NBER paper also finds that the world poverty rate fell by 80 percent, from 26.8 percent in 1970 to only 5.4 percent in 2006 based on the $1 per day poverty measure (see chart below).  poverty2

The study also estimates poverty rates separately for five geographical regions (see chart below), with some pretty amazing results for East Asia (China, Taiwan, and S. Korea), which in 1960 had the highest regional poverty rate in the world by far, at 58.8 percent, compared to 39.9 percent for Africa, 11.6 percent for Latin America, 8.4 percent for MENA (Middle East and North Africa), and 20.1 percent for South Asia. In the 36-year period between 1970 and 2006, the poverty rate in East Asia fell to only 1.7 percent, which is now below all of the other regions: Africa (31.8 percent), Latin America (3.1 percent), MENA (5.2 percent), and South Asia (2.6 percent). poverty3Bottom Line: The 80 percent decrease in the world poverty rate between 1970 and 2006 has to be the greatest reduction in world poverty in such a short time span ever in history, and the 97 percent reduction in the poverty rate of East Asia (from 58.8 percent to 1.7 percent) has to be the most significant improvement in a regional standard of living in history over such a short period. Thanks to Hassett for pointing out that capitalism is alive and well, and is spreading around the world helping to eliminate poverty.

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Roger Bate

Hope for Zimbabwe

By Roger Bate

May 5, 2009, 11:43 am

A BBC report says that neighboring and regional African nations have opened lines of credit to the Zimbabwean government worth $400 million. The country’s finance minister, Tendai Biti, said the funds would allow civil service salaries to be paid, which is essential to help rebuild the largely destroyed economy. Biti is a member of the Movement for Democratic Change (MDC), which was in opposition until a power sharing deal was made two months ago. As long as the MDC controls the funds they will probably be used as intended. But risks remain because of the entirely untrustworthy ZANU PF party and its autocratic leader Robert Mugabe, who remains president of the wretchedly poor country.

It is good to see the Southern African region attempt to assist Zimbabwe. Regional leaders have announced multibillion dollar aid packages before — including a $5 billion pledge in March — but never followed through. When I read the fine print about the March package, all the cash was supposed to be provided by Western governments and the World Bank.

So the new African funds buy time for the MDC to negotiate with Western governments and establish practices that will protect any aid provided for the use of the population (so it will not be stolen by Mugabe and his thugs). If the MDC does not do this, it won’t be long before it becomes part of the problem.

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