Chapter 10 of Poor Economics by Banerjee and Duflo put two leading economists against each other in a pros and cons debate having to do with development aid. These leading economists they sufficiently put up against each other are Jeffery Sachs who graduated from Columbia University and William Easterly who graduated from NYU. Each economist provides valid points but in this debate I am going to have to take the side of William Easterly. I agree with Easterly because he states that we need to focus more on sorting out the political process and before the developing countries just start trying to change policies. He also believes we need to see the “view from below” when speaking about institutions. Jeffery Sachs sees corruption as a poverty trap. He says, “Poverty causes corruption, and corruption causes poverty”. To break the trap Sachs suggests on focusing more on making people in developing countries less poor by providing aid for specific goals that can be monitored. Some examples of these specific goals would be malaria control, food production, safe drinking water, and sanitation.His argument is that raising living standards would empower the civil society as well as governments to maintain the rule of law. The reading provided specific examples of how sending aid money to the poor and it not even being able to help because it doesn’t always make it there. If we can get people in poverty to learn how to improve their society and help themselves. If they learn how to help themselves then how can that money get lost? It wouldn’t, and thats why I take William Easterly’s side. Easterly says, “There is no point to figuring out the best way to spend a dollar on schools, if 87 cents will never reach the school anyway…Without good politics it is impossible to design or implement good policies”. It is clear that the politics need to be helped before anyone in poverty will be able to come out of it. In 1996 a man and women, Jakob Svensson and Ritva Reinikka, made it their job to answer a simple question: What amount of funds allocated to schools by the central government actually made it all the way to the schools? They began by sending out survey teams to randomly selected schools in Uganda to see how much aid the schools would report to have received. Next they compared the numbers to computer records of how much aid had actually been sent. They found that only 13 percent of the funds ever even reached the schools and more than half received no aid at all. It has been suggested that a lot of the money most likely ended up in the pockets of district officials, which shows how worthless this way of aid was. If the politics are right, good policies will emerge. Multiple newspaper articles were published about these findings which caused an uproar, which may have been for the better. What ended up resulting from the uproar was that the Ministry of Finance now started giving monthly reports on how much money had been sent to the various districts for the schools.In 2001 Reinikka and Svensson repeated their school surveys. Their findings were incredible. They found that on average schools were getting 80 percent of the discretionary money that they were supposed to be getting, compared to the tiny 13 percent back in 1996. This is progress. It was obvious that the district officials didn’t mind taking the money for their pocket when no one was watching but stopped when people started keeping their eyes on them. This theft of money looks like it was mainly possibly because no one had bothered to worry about it. It now seems that if we have these evaluations they can help shape these systems to keep corruption and inefficiency in check.
“Yet one must remember that extensive aid ($4 billion wroth) from the United States did not stop Taiwan from developing into major exporter during the 1950s; in fact it did just the opposite, as US aid allowed Taiwanese farmers to buy large amounts of fertilizer to increase their crop yields, enabling farmers to produce more rice per hectare of farm than almost any other country in Asia.” This quotation shows that there other arguments that could be made about foreign aid; lets not forget that there are success stories. When there has been so much bad shown by studies and newspapers I hope that people still understand there is good happening in the world at the same time. For some reason it just isn’t given as much attention and news time.
Banerjee and Duflo address the issues of food security, hunger, how to promote sustainable agriculture, and others in their book. In a chapter I recently read they addressed the issue of banks in developing countries, such as Burkina Faso which I touched on in my last blog post, and how they have come up with the process of microcredits which have provided an easier way for people to get their feet off the ground and start up their own businesses when there are a lack of jobs. The book has also spoke about how people living in poverty choose to spend their money poorly. They may spend a lot of money on food they will not actually make them stronger and healthier which would help their worth ethic. Their book has taught me a handful of things I had no prior knowledge of and they have sufficiently addressed a ton of important issues. I didn’t know the way these people in developing countries think is so much differently than the way we think, when spending money especially. Banerjee and Duflo helped me understand the lives of people living in poverty better. I feel like I can better relate to them now and understand why they have been making some of the poor choices they make. One thing that worked well that I spoke about earlier in this blog was the policy measures better put in place. In Uganda when they started keeping track of where the money went and how much money the schools actually got. When this policy had been set in place they percentage of money going to where it should have been the entire time shot up. Global measures have absolutely not been taken sufficiently. There is still so much to fix and it will take time but we need to bring some more attention to these countries in need.
Banerjee, A. V., & Duflo, E. (2011). Poor economics: a radical rethinking of the way to fight global poverty. New York: PublicAffairs.
Warren, Richard. The Purpose Driven Life. Cleveland: Findaway World, 2005. Print.