Does economic rigour actually enhance the fight against global poverty?
Peter Boone has a paper in the Summer issue of CentrePiece which argues for restricting or redirecting aid to programmes such as education or health which can guarantee outputs. In part, he is arguing in line with the stated objective of the current DFID Secretary of State, Andrew Mitchell – to change DFID’s expenditure pattern so that it focuses less on inputs (eg the amount spent on teacher training) and more on outputs (eg the number of children educated to a certain level). And there is nothing wrong with emphasising the need for results, or of course with education or health spending (there is some uncertainty that this is really much of a change in policy for DFID – it could just be a way of making DFID’s new policies look different from the old ones, to deflect the attention of those on the right who would like to see DFID’s budget cut or on the left from complaining more about spending money on airports in the South Atlantic). In DFID’s case, the coalition pledge to spend 0.7% of GNI on overseas aid means you can increase spending on something without cutting everything else.
But Boone’s article is arguing for cutting back on DFID programmes such as building active civil societies or infrastructure investment (he claims these are not proven to deliver positive outputs) and, tentatively, making the case for not reaching the 0.7% target because better targeting of programmes can produce the same outcome more cheaply. In both cases, I think he is going further than Andrew Mitchell would want to go.
And Boone is making the classic error of the professional economist: to concentrate on what can be measured simply because you can measure it. The old joke is relevant – an economist is found looking at the ground under a street light in the middle of the night. When asked what he is searching for, he replies that he’s looking for his car keys. And when he is asked where he dropped them, he points out into the darkness of the road. So why is he looking under the street lamp, if that’s not where he dropped them? Well, because that’s where he can see things better – that, in Boone’s case, is where the evidence is.
There are two other errors at work in Boone’s argument. First, an empirical one. Although he says that there is no evidence that building active civil societies is an effective way to combat poverty, the experience of western societies is that active civil societies accompanied, and at least arguably helped deliver, economic growth. Without freedom, economies are constrained by corruption, inequality and often some fairly basic inefficiency. Evidence of impact is difficult to attain because of long timescales and other influences, and it is uncertain how much faster China, for example, would grow if it opened up further. But on the other hand, the development of civil society is more difficult than defeating a particular disease, because the opponents of freedom are, frankly, more powerful than bacteria, so defeating disease is bound to be cheaper.
On its own however, the historical analysis might not be enough to challenge Boone’s thesis. But then, how strong is the case for measurable improvements in health or education as the most effective drivers of poverty reduction? It’s clearly better for people to be healthy and wise, and certainly that prevents the poverty that results directly from paying for treatments. But health and education tended in developed countries to result from growth, or at best be associated with it, and we are all familiar with the argument that the biggest improvement in life expectancy and general health in the UK occurred as a result of the infrastructural investment in London’s Victorian sewers.
And, to return to the importance of building civil society, how much of the improvement of working people’s living standards was the result of trade union campaigns for reduced working days or the elimination of child labour, or, in another century, the increased power of trade unions in the USA after World War Two which led to the huge increase in middle class income that created the affluent society?