The road to hell is a two-way street

I often say, in connection with issues such as foreign aid, state subsidies, or celebrities stumping for Africa, that the road to hell is paved with good intentions. Good intentions alone do not justify policy. The consequences of policy are what matters.

This observation cuts both ways, however. This editorial by Gregory Clark, author of Farewell to Alms: A Brief Economic History of the World, uses the same aphorism, and then, ironically, proceeds to illustrate the point.

I’m in full agreement that aid has for fifty years singularly failed to achieve any of its anticipated aims. Other than to provide relief in time of acute crisis, it has not brought much of a sustainable improvement in African prosperity, freedom, poverty levels, or welfare. Where improvements in living standards have occurred, they have done so because of liberal economic policies and open markets, industrialisation and private investment, democracy and individual freedom. The rarity of these political features in Africa is the biggest obstacle to its development.

I couldn’t agree more with Clark’s conclusion, for example:

There is no simple formula for industrialization that is appealing to many. But that is where the focus must be of the attempts to help Africa. The [Jeffrey] Sachs plan is a proposal to ameliorate the symptoms of poverty, not treat its cause.

I too, believe that Sachs, author of The End of Poverty and economic advisor behind the UN’s Millennium Development Goals project, is not advocating the right remedy for Africa’s lack of development.

However, in reaching this conclusion, Clark follows a terribly tortured argument. He cites, for example, the “Malthusian trap”, which argues that population growth naturally outpaces the growth in resources and productivity required to sustain it, because the former is exponential and the latter linear. Pointing to Europe’s high rates of war, disease and death during the era in which industrialisation helped it to escape the poverty of the Middle Ages, Clark says the same holds for Africa:

The African environment has always created high disease mortality. This was a blessing for Africa’s living standards.

Eh, what? Okay, I understand what he’s saying. The weak and the sick die off, so there’s more for everyone else. Mortality reduces exponential Malthusian growth, so economic growth and development can keep up. But as Dani Rodrik points out, Clark misunderstands Sachs, who’s entire thesis is based on the Malthusian premise.

This premise, however, is false, whether employed by Sachs or by Clark. It is based on an outdated oversimplification of actual growth in resources and productivity. Given limited land availability and linear increases in agricultural productivity, sure, Malthusian population growth would create a trap. But not only do industrialisation and technology fundamentally change this linear productivity equation, the increasing prosperity it brings also limits the tendency for populations to grow at Malthusian rates — without requiring artificially high mortality rates.

So I agree with Clark that Sachs’s plan — which I can best describe as a sort of quaint green notion of subsistence farming and self-sufficiency ginned by generous dollops of aid — is more likely to impoverish Africa than to enrich it. It throws good money after bad. It floods markets with lots of artificially cheap stuff against wich local producers can’t hope to compete, so local production never gets to grow.

I agree that industrialisation is the only way to achieve sustainable African development. It needs railways and steel smelters and power plants and factories, not merely ecotourism and organic farming. Africa might be able to industrialise more rapidly than the West did, and it can perhaps do so with less of the associated environmental costs than the West incurred for its own industrialisation, but it cannot do without industrialisation.

In getting from there to here, however, I simply can’t go along with perverse, patronising logic such as this:

Modern medicine, airplanes, gasoline, computers — the whole technological cornucopia of the past two hundred years — have succeeded [in African countries] in producing the lowest material living standards ever experienced.

Sachs’s project may indeed fail, but it won’t fail because it attempts to lower mortality rates in Africa and simplistic Malthusian laws apply. It will fail because treating the symptoms of underdevelopment is a remarkably effective disincentive to development itself.