Economic Development Theory, Sub-Saharan Africa, and Intervention Strategies for the Most Impoverished
Development has meant many things, depending on the era and context. For the scope of this paper, development refers to economic growth that leads to increased standard of living. The latter term itself is problematic, depending on whether it is measured simply in economic terms, like Gross National Product (GNP), or if it includes social and health measures, like education and life expectancy, which one finds in the Human Development Index (HDI). One assumes that social workers will not be satisfied with an end-point at econometrics, since human welfare depends on much more than the accumulation of wealth. While, in general, this paper will presume a broader understanding of “standard of living” than economics, many citations will stop at econometrics, since they were produced by economists. Thus the hazards of international studies and its interdisciplinary nature—we obtain both the strengths, as well as the weaknesses of narrowly focused fields. Robertson proposes that a new discipline is not required for the study of globalization, but rather, our current disciplines must be “refocused and expanded so as to make concern with ‘the world’ a central hermeneutic, and in such a way as to constrain empirical and comparative historical research in the same direction” (Robertson, 1992). My goal in this paper is to do some of Robertson’s comparative work, utilizing tools from sociology, economy and social work to explore the specific issue of international economic development, especially as it applies to the continent with most of the lowest HDI ratings—Africa.
Intuitively there is a strong relationship between wealth and quality of life. Especially in capitalist states, where most citizens consider wealth to be linearly correlated quality of life--or at least the capacity to consume is equated with happiness (Baudrillard, 1998). Empirically, data supports these presumptions, as measured by several indices: quality of life ("Quality of Life Index," 2005), rule of law (Kaufmann & Kraay, 2003), infant mortality(Friedman & Schady, 2007), life expectancy (Berleen, 2005), education (Huebler, 2005), and life satisfaction ("Global Views on Life Satisfaction, National Condition and the Global Economy," 2007). GDP is one of the three components of the HDI, indicating the United Nations’ recognition that per capita income should be considered in a general social measure of quality of life. Given these relationships, it is not unreasonable for the social worker to factor economic development into strategies for intervention at all levels (macro, mezzo, and micro), if not even as a core factor.
Cox and Pawar (2006) highlight the importance of economic issues for social workers in dedicating a significant portion of their text to poverty and development. Specifically, in their four sector model of societies, the market economy is one of the four pieces, along with civil society, state/institutions, and families/communities. While the clinically-oriented social worker would typically identity the latter as the primary site of intervention, each of the other sectors can be sites of intervention for the social worker as well, but work at the level of macro/mezzo as opposed to the micro. Intervention at these levels, as described by Cox and Pawar, can be imposed by agents external to the state, such as structural adjustment programs of the IMF or World Bank, they can be controlled by the state, such as specific government policies and structures, and finally, macro-level development can be externally assisted, in the form of foreign aid and investment. Local level development would refer to investment into small community projects, whether a small business, a health clinic, or a school, for example.
From a related perspective, Ferguson (2006) describes several macrosystemic economic processes that contribute to poverty, such as the construction of a ghetto underclass, as described by Wilson, dependency theory, as described by Wallerstein, or Rostow’s modernization theory. While the latter was initially described as a model of reducing poverty, the results are frequently in the opposite direction. Regardless of causation of poverty, Ferguson believes that social worker intervention can come at three levels, all related to increasing various forms of capital—human, financial and social. While the social worker understands that none of these three can become the sole site of intervention in hopes that it will automatically produce the others, economic theories of development focus on creating growth of financial capital with the belief that it will catalyze, and lay the foundation for the other two (although recent economic models, as will be discussed, recognize coordination of all three will probably produce the strongest benefits).
HISTORICAL OVERVIEW OF MACROECONOMIC DEVELOPMENT THEORY
Before a focused examination of several specific economic theories of development, an historical background can provide a context for understanding the dialectic changes in the international institutions’ approaches to poverty alleviation. Weiss (Weiss, Forsythe, Coate, & Pease, 2007) describe four eras of development theory at the United Nations and its subsidiary organizations. First, what they term “national state capitalism,” is characterized by a Keynesian approach, initiated by the Bretton Woods organizations (IMF, World Bank), the goal of which was to create infrastructures for economic growth. As post-WWII policies, these began to change with a shift away from U.S. economy hegemony in the 1960s. At this time the UNDP encouraged technical support to low-income countries to further facilitate growth after it was realized that economic contribution alone was not sufficient for human-capital impoverished communities to grow. International organizations began seeing the north-south economic divide, as well as becoming concerned about long-term impacts of capitalism on the environment. The Bretton Woods institutions expanded their efforts to bottom-up loans, rather than simply state-focused loans. Wallerstein’s dependency theory began to become an important critique to the history of hegemonic dominance of the northern hemisphere powers (Portugal-Netherlands first, then Britain, finally the U.S.). The third state was a revival of classic Smith, as envisioned through Hayek. The Reagan-Thatcher decade of the 1980s was characterized by the beginning of the neoliberal hegemony, where the pendulum swung back to privatization, deregulation and liberalization of trade (opening global markets). Finally, Weiss, et al, describe the current era as an emphasis on “sustainable development.” Building on the international environmental conferences that began in the 1960s creating a series of global protocols, theories of development began to incorporate policies that would encourage patterns of growth that would allow for long-term sustainability, as well as an emphasis on incorporating women into subsequent programs. At this point the UN Secretary General, Boutros-Gali, asserted that development was a fundamental human right and united the triadic concepts of development, peace, and human security. The Millennium Development Goals evolved into an internationally approved UN roadmap for achieving these three goals.
A more specific review is in order of these eras of development theory. One of the first models used to understand how states and regions started on the path to economic growth was Rostow’s modernization theory. Analyses of European growth after WWII indicated a fairly rapid and linear trajectory of economic growth that was built on a simplistic model of saving and investment. According to Rostow’s analysis, modernization takes place in a series of five stages: 1) traditional societies eventually start to develop 2) preconditions for growth, such as increased education, manufacturing, and other forms of capital development. 3) Take-off stage occurs when the economic norms become established at micro, mezzo and macro levels, which lead to 4) a drive to maturity, characterized by economic diversification and increased standards of living. The final stage, 5) is characterized by mass consumption, which drives continued production, technological development, and job growth. Rostow assumed the validity of the primary economic model of growth at the time, the Harrod-Domar growth model(Todaro & Smith, 2006), which was the basis for the savings + investment = growth formula. While intuitively attractive (to the capitalist worldview) and empirically supported at the time, it assumed a linear growth based on the two isolated variables of savings and investment. While such seemed to be the case in Europe after the world wars, Europe’s advantage over other regions (like southeast Asia and Africa), is that it already had a pre-existing infrastructure, and a population already educated in the skills and norms necessary for technologized life. Among other factors, it ignores hegemonic consequences of having military, political and economic power at a state/region’s disposal to procure capital external to itself.
The Marxist perspective became dominant in the 1960s-70s as Euro-American sociology began to recognize the contribution of this once-taboo thinker. Wallerstein (1983) expanded Marx’s simplistic model of local proletariat and bourgeois to a global model of regional exploitation. According to Wallerstein, different regions dominated the global economic system at different times in the previous and current centuries, making the rest of the world dependent on them for inclusion into profitable global markets. With the capacity to control the market rules, the hegemons were able to control the system, typically with economic sanctions, but failing that, with military force. Multiple levels of dependency were required: core states are high-income states who are the primary consumers and make the systemic rules; semi-peripheral states typically produce the goods consumed by the core states, and are middle-income, or poorly diversified; peripheral states, the low-income states, are exploited for their natural resources and are hegemonically kept in place by their hope of becoming a base for factories and thus become middle-income. Not coincidentally, peripheral states today were typically colonies, now abandoned and in disarray following the politicking of decolonization.
While dependency theory was an important realization—that countries were not necessarily to blame for their own poverty, that a history of exploitation and colonization had put them at extreme disadvantage, the resolutions proposed by Marxists at the time were either anemic, or faulty (for example, economic autarky and import substitution programs). Subsequent models took a much more proactive approach with the goals of alleviating poverty through trade liberalization and freeing the invisible hand of the market. This was the era of neoliberal deregulation and privatization, where the IMF and World Bank returned to state-centered approaches, as well as big-business loans. The primary strategy was to encourage governments to restructure their economies to financial models based on those of economically successful European and North American states, especially geared to the Hayek vision of smaller government and trade liberalization. The primary assumption was that the economic purpose of government was to create a market-friendly climate (and otherwise to make itself scarce). Along with this came assumptions about growth, more complex than the Harrod-Domar model (although still including the foundation of savings and investment). The free-market models incorporated Solow’s neoclassical growth model (Snowdon, 2004), which included an analysis of labor and technology. In the case of the former, Solow realized that growth required increases in the sheer numbers of the labor force, such as through population growth, as well as increases in labor quality, in the form of education. For technology, Solow also realized that efficiencies in production and novel products could increase growth completely separately from increases produced by the labor force and the saving/investment patterns. Based on the confidence in the new models, as well as the combined policy powerhouses of Reagan (U.S.) and Thatcher (U.K), the global financial institutions began granting loans on the condition of structural readjustments to meet the criteria of a “proper capitalist state,” even if that meant diverting funds from indigenous social programs and reducing spending below population dependencies. Unfortunately these programs largely failed and saddled these states with large, unpayable debts.
Contemporary models continue to problematize the simplicity of earlier models, typically by adding organizational or cultural factors. Endogenous Growth Theory (Romer, 1990) adds the recognition of internal factors for stimulating growth. Previous models assumed exogenous factors were required for sustained development—stimulation or assistance from external sources. Endogenous Growth (NGT) accepts that knowledge is a public good and acts as capital. While similar to Solow in accounting for education, Romer does not assume that knowledge is simply a modifying constraint to labor (an educated workforce), but acts independently to produce synergistic effects with the other factors. For EGT, human capital development is a primary driver of growth. Another contemporary model recognizes coordination problems as a cause of underdevelopment. In this model, coordinating individual capacities, state institutions, and external opportunities will lead to growth, in what is called a “big push,” where all economic sectors’ decisions are mutually reinforcing. For example, education and saving alone are insufficient for growth without a functioning transportation system, manufacturing industry, financial systems for credit and loans, energy systems to power the system, good governance, and civil peace. What is also recognized is the importance of widespread education. Electrical engineers are of little use without electrical technicians, mathematicians, physicists, and computer professionals. In what is called the “underdevelopment trap,” the essential process to post-agrarian societies of the division of labor is obstructed when there is insufficient capacity or education to allow a majority of the population to specialize (Berthelemy, 2006; Rodriquez-Clare, 1995).
Contemporary debates about development aid have been popularized by cheerleaders on both sides (aid vs. free-market approaches) such as Jeffrey Sachs and William Easterly (respectively). Between these voices lay apparent moderates like Paul Collier. Each has best-selling books championing a different position on what might seem like a linearity between the opposite poles of Smith and Keynes and their international application. Sachs’ recent books, Common Wealth (2008) and The End of Poverty (2005), unceasingly support the Millennium Development Goals, and the necessity of increasing foreign aid to accomplish these goals. Criticizing the United States’ international ambivalence and lack of commitment to promised foreign aid contributions, Sachs assures the reader that if we give enough money to poor countries, together with appropriate socio-economic planning (not structural readjustment), we can rescue the world’s impoverished, by disease prevention, providing clean water, consistent food and medical care, kick-starting local economic growth, and subverting processes that lead to post-colonial resource conflicts. Easterly, on the other hand, attacks Sachs by name every few pages in White Man’s Burden (2006), rejecting the idea that foreign planners can resolve indigenous economic and social problems—as he believes was already attempted and failed under colonialism. Contrasted with Sachs’ macro-level planners, Easterly prefers the strategy of the searchers, who, entrepreneurially resolve local, small-scale problems, which may turn into a small-business for the individuals involved, thus facilitating economic growth.
While these issues are typically discussed as if they are recent, the core debate, according to Alacevich (2007), originated in a question between balanced growth and unbalanced growth in the 1940s. Rosenstein-Rodan proposed that the industrial sector be seen as a “huge firm or trust” that needed to be coordinated in times of underdevelopment. From this came the idea of the “big push”—that the many pieces of industrialized processes needed to be put into place simultaneously if growth were to occur. Otherwise market failures result, since low income prevents investment and saving, fundamental components for growth, and without growth, incomes remain low. Efficiency, and thus profitability, increases with economies of scale, which themselves are created with multiple, coordinated investment in specific industry subcomponents. Conversely, Hirschman proposed that unbalanced growth is the natural, evolutionary process of finding an economic equilibrium for any region. Rosenstein-Rodan assumed “missing elements” of the economy needed to be externally superimposed. Hirschmann, in contrast, assumed the elements already existed indigenously, but remained latent, and should be discovered by local entrepreneurs. As needs are discovered, more entrepreneurs will appear to resolve the problems, a necessarily piecemeal process, and “unbalanced,” but the only long-term functional solution to the equilibrium problem. The language (unmentioned by Alacevich) is very similar to Easterly when he contrasts the “Planners” and the “Searchers.”
Similarly, as Alacevich continues, the application of this debate to loans is evidenced in the IBRD’s conflicting approaches of program versus project loans. Program loans assume a structural plan has been created, similar to Rosenstein-Rodan’s “huge firm or trust,” while project loans, much smaller, assume a specific local issue. Contemporary policies, in contrast to Rosenstein-Rodan’s vision in the 1950s, might be considered a “social welfare push” instead of an “industrial push” (Beaulier & Subrick, 2006). In critiquing the debate itself, Alacevich quotes Amartya Sen, who says, “Put in their native forms, both the doctrines look right; examined from the other’s point of view, each looks totally inadequate.” He continues by referencing their considerable common ground, and that Hirshmann overstates his case. Considering the [at times vitriolic] tone of Easterly’s book, Sen might assume the same of this particular cheerleader for unbalanced growth.
Intermediate to these rhetorical battles is Collier, who, in the Bottom Billion (2007a), describes the same problems as the above authors, but charts a mixed course (although ultimately closer to Sachs’ planned approach), advocating for a more complex approach to global poverty. Like Sachs, he believes foreign aid and technical assistance is important to alleviating poverty in low-income regions (Collier & Dollar, 2001). Like Easterly, he problematizes the usefulness of ex ante foreign aid, and emphasizes its judicious use. Specifically referencing both of these positions, Collier rejects what he calls the optimism of Sachs regarding aid, and the cynicism of Easterly regarding external interventions. He divides his subsequent analysis into two sections: traps and instruments. Four traps keep the bottom billion from achieving economic growth, and four instruments are available for intervention by high-income states.
The traps Collier describes are primarily reflections of continuing problems in sub-Saharan Africa. Bhalla describes patterns of income and growth in specific global regions, in a larger effort to analyze the question of economic convergence or divergence due to globalization (2002). As expected, per capita income is highest in industrialized countries and has seen continued per capita growth rates: 1.6% from 1980-2000. Other regions have benefitted from globalization and have seen even higher growth rates, such as Asia, with 4.6% growth. Other regions, however, have seen much slower growth rates, such as Latin America (0.1%), the Middle East and Africa (combined total of 0.2%), and some have even experienced negative growth: sub-Saharan Africa with -0.6% and Eastern Europe with -1.9%. Despite Eastern Europe’s profound negative growth rates since 1980, its average per capita income still remains significantly above most of Asia and Africa. Utilizing such data, Collier focuses his discussion of traps and interventions on the region that remains both impoverished and with negative growth, specifically, sub-Saharan Africa.
Briefly, Collier’s traps represent impediments to economic growth: conflict, Dutch Disease, being landlocked, and bad governance. The concept of poverty traps is repeated frequently in the literature. Returning to Rosenstein-Rodan, the existence of poverty traps (inefficient, or low equilibria) are assumed to be the primary cause of localized poverty, and must be resolved through coordination efforts (Glavan, 2008). But the ontological nature of the traps themselves is not without critics. Several models and tests for traps have failed to find them (Kraay & Raddatz, 2007). Similarly, evidence for traps’ remediation is questioned--Glavan likens “big pushes” to a return to centralized planned economies, which have little historical evidence of success (Glavan, 2008). Analyses of big push efforts have found less than robust results (Beaulier & Subrick, 2006). Much of the evidence opposed to traps and coordination efforts comes from the econometric evidence, though even within that field, opinions are not convergent. Unsurprisingly (though disappointingly), the literature itself appears to contain biases, depending on the journal and editorial boards (Doucouliagos & Paldam, 2008).
Though economists debate whether traps exist, and whether big pushes have long-term impacts on growth, there is reason for other social scientists to persist in accepting aid and coordination pushes as a meaningful endeavor, as well as important for donors. First, aid can have many purposes, only one of which is to impact growth. Growth aid is typically for investment in economic infrastructure, whether for profitable business ventures, or macroeconomic restructuring. Other types of aid may be for political restructuring (enhancing democracy), for social/human capital building, disaster relief, or chronic poverty-reduction (Carter & Barrett, 2006; Clemens, Radelet, & Bhavnani, 2004; Hermes & Lensink, 2007; Nissanke & Ferrarini). Less beneficently, some aid is simply given for political favors (Clemens, et al., 2004). Many of these aid forms would not expect to produce economic growth, nor is it intended to do so. Therefore calculations that discount the effectiveness of aid should factor in these differences. Moreover, different regions affect calculations of effectiveness. Asia, for example, evidences little growth from aid, while Africa shows greater benefit (Ekanayake & Chatrna), so including all aid-receiving regions into one regression measure will also evidence less robust results from aid.
Several other factors have been examined as they influence aid effectiveness. Intuitively, strong institutions, effective governance, and increased social capital should impact the effectiveness of aid and early studies supported this hypothesis (Burnside & Dollar, 2000). Like the debate about aid in general, however, subsequent studies problematize these results, and this contrary evidence seems so far to be convergent (Angles & Neanidis, 2009; Buttrick & Moran, 2005; Feeny, 2005; Ram, 2004). The issue of ex ante aid, or aid that is given on the promise of government restructuring, frequently results in either temporary reforms, then a reversion back to the original, corrupt or autocratic state, or simple noncompliance (Collier, 2007a; Easterly, 2001; Radelet, 2006). Even worse, aid has been shown to be detrimental to democratic trends, since government can utilize aid rather than taxation, government has less incentive to implement/strengthen public checks and balances, and sudden increases of funding can lead to patronage systems (Collier, 2007b; Djankov, Montalvo, & Reynal-Querol, 2008). This pattern has shifted the focus of conditional aid onto ex post aid, or aid that is granted after significant restructuring has been accomplished, and democratic trends have been observed. The U.S. led Millennium Challenge account is one of the newest versions of this pattern (Radelet, 2006), granting aid in graded forms to states that have met certain goals. “Good” states (according to an objective criteria similar to, but different from the World Bank’s Country Policy and Institutional Assessments criteria) get more control over the usage of their funds, to whom it is distributed, and greater amounts of aid. Poorly-governed states are limited to project-specific aid, and distribution to specific NGOs or local communities.
Just as Asia and Africa respond differently to aid, different economies seem to show different responses to aid. Bos proposes three economic regimes that need different kinds factors to encourage growth (Bos, Economidou, Koetter, & Kolari, 2010): mature economies grow best with factor accumulation—diversified production; emerging economies primarily need technology to grow; and developing economies need both technology and increased labor quality and quality. In the case of Africa, this means that aid may best be utilized if focused towards building their technology/information base, and creating human capital in the form of education and job training. Finally, Bos found that trade liberalization hurts developing economies, since they are not able to compete with economies of scale in the global market. Dorward, et al, looked at institutional arrangements and how they interact with markets (Dorward, Morrison, & Colin, 2005). Different regions seem to have developed different economic coordination mechanisms: Northern Europe has strong industrial coordination, Southeast Asia has strong group and family-based coordination, and Southern Europe (including France) has strong state-led coordination. While neoliberal forces are pushing restructuring towards free-market coordinated economies, it is evident that economies based on other coordination schemes can also perform strongly, indicating that forcing Africa into U.S.-British patterns is probably not necessary, and may even be counter to the region’s productivity if those patterns are not compatible with the culture and different patterns of production.
Finally, there are several other specific factors that seem to affect growth that are unrelated to macroeconomic factors. Many of these are considered traps, since they are inherent forces that produce states of low-equilibrium, and match the aforementioned list attributed to Collier (Collier, 2007a). Geography, both human and physical, seems to have a profound effect on the ability of a region to produce economic growth. Collier proposes three types of economies based on physical geography (Collier, 2007b): resource rich areas (oil, diamonds, coltan); resource-scarce, coastal regions; and resource-scarce, landlocked regions. The first suffer from several problems, including “Dutch Disease” (or the resource curse), macroeconomic volatility, and bad governance. Resource-scare, but coastal regions, seem to do the best in terms of governance and stable growth. They began to follow the Asian pattern of creating coordinated (agglomerated) markets, and thus had early growth. However Asia grew faster and edged them out of competition. The regions with the poorest growth, the resource-poor, landlocked states, are completely dependent on their neighbors for survival. Since they have little access to global markets except through neighboring transportation markets, their growth depends on several factors: good relationships with those neighbors; stability and peace in those neighbors; good transportation networks and low transaction costs with those neighbors (Faye, McArthur, Sachs, & Snow, 2004). Another geographical factor seems to be location in the tropics, which may be a proxy for increased disease burden (Sanchez, Palm, Sachs, & Denning, 2007), or low success of cereal grains (Sachs et al., 2004), but may have many causative relationships that hinder growth (Dalgaard, Hansen, & Tarp, 2004).
A second trap Collier describes is Dutch Disease, named for the decreased growth experienced by the Netherlands after they discovered natural gas. Several features can explain why growth stagnates, if not declines, once a profitable natural resource is discovered. First, other domestic industries lose value as the economy shoots up due to the newly discovered resource. Those industries may begin to decline since they are not as profitable. Another factor may be conflict that ensues over control of the resource. A third factor is revenue instability due to floating markets. The value of the resource is dependent on global demand. A fourth factor may be corruption due to attempts to control the resource, and decreased need for public accountability. Some have noted that these factors are all involved in the poor growth associated with aid. Since “free money” coming into a state can perform economically like a valuable natural resource (often contributing substantially to the GNP, especially in very poor states), all of the above factors can produce effects counter to the intent of the aid (Djankov, et al., 2008).
A related trap Collier describes is the presence of conflict. Frequently this involves ethnic or resource conflict, so may be initiated by the discovery of a lootable commodity like oil, or diamonds. Several studies have confirmed the relationship between slow-growth and conflict (Angles & Neanidis, 2009; Clemens, et al., 2004; Easterly, 2001). Not only does conflict itself decrease productivity, but it reduces the inflow of aid, and post-conflict phases are fragile and more likely to return to conflict than states with no history of conflict. Barbara notes especially that aid to many sub-Saharan African regions cannot be considered neoliberal state building, since the state is so unstable as to make such a venture untenable (Barbara, 2008). He suggests that such states be considered “post-conflict developmental states” and need unique measures to facilitate stability. First, market-failures are highly likely, so market-oriented reforms are likely to be useless. Second, the markets that develop will need protection from external markets since post-conflict states will be little able to compete with economies of scale. Third, international authoritarian approaches may be necessary to help maintain post-conflict peace, minimize corruption, and facilitate state-building (see also Collier 2008, who suggests post-conflict military peacekeeping enforcement as an instrument of trap remediation).
Collier’s final trap is bad governance, which, again, is related to each of the above. While it has already been mentioned that there is inconsistent evidence that government policies have a significant impact on growth, there are certainly other life-quality factors that are affected by poor governance. Moreover, corruption subverts markets, institutions and public trust, thus weakening social structure and civil society. Angles, et al, propose a novel insight into bad governance and its relationship to the poverty trap. He found that a history of colonialism has an impact on current growth, as well as a strong relationship to poor governance. The relationship they found was robust and linear: the higher percentage of the land mass that had been settled by colonists, the worse the effectiveness of aid. One possible mechanism they propose is that the greater the number of colonists, the more destruction to indigenous culture, and the greater the levels of autocratic practice by the colonists. Meredith describes the anti-colonial land reform platform that helped Mugabe attain power in Zimbabwe (Meredith, 2007). But while Mugabe’s stated goal of extracting indigenous lands from the almost complete ownership of Europeans was successful, the land went primarily to political supporters of Mugabe, and was not returned to the people of Zimbabwe.
A different set of traps, from Sachs, et al (2004), overlaps with Collier’s list: high transportation costs, small market size, low-productivity agriculture, high disease burden, adverse geopolitics, slow diffusion of technology from abroad and being landlocked. Many of these issues are mentioned above, and represent only minor divergence. For example, disease-burden is heavily related to geography, since tropical diseases are geographically-based. Diamond describes how geographical factors helped natives to temperate climates (Europe and Asia, for example) develop immunity to many diseases, due to close spatial relationships to animals that act as hosts to pathogens or attract vectors (like mosquitoes). In Africa, by contrast, the massive insect/pathogen burden in hot and rainy climates, as well as the lack of domesticated animals has limited the development of immunity to the indigenous, deadly diseases (Diamond, 1997). Geography in this sense is also related to Sachs’ mention of low-productivity agriculture, whether caused by desertification, or tropical climates. Similarly, just as Collier mentions being landlocked, so does Sachs, which is related to other factors Sachs mentions, like high transportation costs, small market size, and slow diffusion of technology—especially as these relate to the landlocked, resource-poor countries.
Sanchez, et al describe each of these traps, along with others not mentioned by Sachs and Collier (hunger, rapid population growth, and environmental degradation) as mutually-reinforcing factors (Sanchez, et al., 2007). Taken in isolation, any of these would be harmful for any economy, but likely not devastating. When multiple factors accumulate, they not only cause increasing social and economic problems, but make other poverty traps more likely. The recognition of the multiplicity, and interrelatedness of factors leading to poverty helps provide a theoretical foundation for the big pushes, regardless of econometric questions related to effectiveness of aid in stimulating growth.
If factors leading to low economic equilibria in fact exist, and are further, mutually reinforcing, it is reasonable to propose multiple, concurrent avenues of intervention. As mentioned earlier, there are several purposes of aid—humanitarian disaster relief, relief of chronic poverty, motivation for political correctives, development of human and social capital, and aid intended for economic growth. Returning to Collier, he proposes four instruments for poverty remediation. Other efforts will be examined subsequent to Collier’s suggestions.
First, Collier affirms the development aid dogma that aid is crucial if low-income states are to become stable and sustainable. However, he urges that we listen to the data and provide aid where it seems to be most effective. First, he reinforces the convergence of data that aid is subject to diminishing returns (Angles & Neanidis, 2009; Hermes & Lensink, 2007; Snowdon, 2004). Clemens, et al, indicate that maximum growth is achieved once aid reaches 8-9% of the GDP, and there is diminishing returns once aid reaches 15-18% of GDP (Clemens, et al., 2004). Along with limits on aid, revisions in processes for aid deliverance are important. As already mentioned, the Millennium Challenge account is attempting to implement the findings that ex post funding seems to have a greater impact, since government reforms are more stable, what Radelet calls “pull” processes instead of “push” (Radelet, 2006). Collier’s second instrument is military intervention, as mentioned above, may be necessary to maintain post-conflict peace and prevent coups. Since aid itself can act as a resource curse, making conflict more likely, military intervention may be especially necessary in situations where large amounts of aid or natural resources are present. Given that conflict increases many of the aforementioned poverty traps (hunger, disease, increased transaction costs, decreased social and human capital, etc), resolving genocidal conflict, even if by external military intervention, seems to be an appropriate, if not critical component to stabilizing low-income states.
The third proposal Collier makes is a series of international charters and laws that will support developing economies. For example, since valuable natural resources should be increasing growth rather than leading to violence and destabilization, international charters to limit consumptions of resources that have a violence-free chain, such as the “no blood on my cell-phone” campaign, and the Kimberly Process to assure violence-free diamonds. Other specific suggestions are charters that promote democracy, budget transparency and conflict resolution in sub-Saharan African states. Easterly’s research supports the idea that strong institutions are mitigate the effects of ethnic fractionalization in diverse states, but that ethnic conflict reduces the effectiveness of aid (Easterly, 2001). Peacebuilding teams can facilitate post-conflict situations, as can experiences of truth and reconciliation groups. Finally Collier’s fourth proposal, related to international charters, is revised trade policy. Post-conflict states need protection from open-market processes on the one hand, since they lack most competitive advantages of peaceful states (Barbara, 2008). Specifically, such low-income African regions need protection from Asian markets. The Africa Growth and Opportunity Act represents an effective attempt to grant trade privileges to sub-Saharan states.
Arguably the largest interventions in global poverty are the Millennium Development Goals. Designed to assist the most disadvantaged internationally, many specific goals have been met, although many will not be reached by the original goal deadlines. One specific program that relies on coordination effect processes is the African Millennium Village Project. Several locales were infiltrated with multisectoral interventions (Sanchez, et al., 2007). Given that poor health, poor agriculture, poor market access, and poor human capital (education, skills) are all fundamental social components to poverty traps, the MVP utilized aid to alleviate each of these issues in small-scale (5,000-55,000 people), long-term (5-10 year commitment) projects. Since coordination failures represent the core macroeconomic feature of poverty traps, addressing each of the factors concurrently is essential. Subsequent evaluation shows positive results: 85%-350% increase in agricultural yield due to training, fertilizers and better seeds; 50% reduction in malaria; increased prenatal care leading to better maternal health and infant survivability (Buse, Ludi, & Vigneri). After positive results were evidenced, several states have modified policy to align with MVP processes and goals. These small-scale efforts essentially represent large pilot-projects that may develop into cluster-scale (30,000-50,000 people), and finally to district scale (300,000-500,000 people). The term cluster-scale refers to the coordination effects of economies of scale, when industry and producers can create agglomeration effects. Much like European and North American industries “cluster” together to decrease transaction and transportation costs, clustering represents a way of thinking about designing (by planning or facilitating market forces) geographically and functionally related production.
The MVP represents a large-scale, multi-sector approach to overcoming coordination failures and low-equilibrium economies in sub-Saharan Africa. The subcomponents that produce the larger MVP plans are well-established. One of the key approaches is a focus on agriculture. Several studies have implicated a thriving agriculture market in stimulating growth, and stabilizing regions, as well as the importance of targeted government subsidies (as opposed to strict neoliberal approaches). While the eventual self-sustainability of regional agriculture is the goal, overcoming low-equilibrium requires intervention on several levels. First, access to land and property rights is one of the first steps in achieving farming self-sustainability (Dorward, et al., 2005). Land reform, if necessary, is assumed in this early stage. Access to resources and human capital are also required, necessitating investment in education, research and development in soil, seeds, fertilizers, and irrigation, as well as multiple-season seed subsidies. Such subsidies are all long-term commitments, since none of these are quick-fixes, nor do short-term investments protect against hazard shocks, like drought or conflict (Kydd, Dorward, Morrison, & Cadisch, 2004). Another component is increasing information availability, thus lowering transaction costs and increasing producer bargaining power. Frequently trader information is the farmer’s only source of information about pricing, which may not provide the checks and balances necessary for competition (Porter, Lyon, & Potts, 2007). Producer’s organizations can facilitate both increased information, as well as bargaining power (Eaton, Mijerink, Bijman, & Belt). Government support of such institutions seems important to increasing the social capital required to trust other members, as well as empowering the organizations if there is resistance from other links in the food market chain. All of these measures are not meant to be permanent solutions, but rather, long-term commitments to facilitating the indigenous development of competitive markets (Peters, 2006).
Finally, microfinance is a related intervention that was originally designed to fill a market niche not available with commercial lenders. Began as the Grameen Bank in Bangladesh, the primary borrowers were self-organized groups of women who provides accountability for repayment (Cull, Demiguc-Kunt, & Morduch, 2007). While microlending does not fill every niche of the poor, it does tend to reach much poorer borrowers, including more women, than commercial lenders. Microfinance follows three general patterns: group liability, as seen with the Grameen bank; village banking, where entire communities coordinate to lend to locals; and individual based loans. The latter suffer from the least repayment, but also tends to be directed towards better-off clients. Group and village-based tend to be directed more towards poor borrowers and women (Hermes & Lensink, 2007). Microfinance can (and possibly should) be coordinated with larger efforts, and was combined with the MVP. Since microfinance gives entrepreneurs the ability to create a market, one must assume consumers and market processes exist—i.e., are not suffering from a poverty trap. Larger coordination efforts can raise equilibrium levels to facilitate microlending borrowers in finding markets. One such effort was the Ijebu-Ode experiment, a community in Nigeria who organized microfinance in coordination with education and community stakeholders (Mabogunje, 2007). While the project can be counted as a qualified success, sustainability has become a problem, since leadership has always been volunteer, is aging out, and loan repayment rates are decreasing as the program progresses. However, this is not universally the case, but potentially points to the need for cluster-level interventions, to allow linkages between many communities to facilitate creation of economies of scale.
Clearly, none of the above has significant implication for the clinical social worker, or intervention at the micro-level. However, there is significant possibility for the social worker at the mezzo and macro level. Lombard suggests that social workers are especially poised to be active in international poverty reduction and public works programs (Lombard, 2008). For example, the MVP project requires community level interactions. Significant planning must precede any intervention, to determine the needs of a locale. Depending on the condition of an area, basic life-sustaining interventions may be necessary, implying humanitarian aid, or perhaps chronic poverty alleviation funding. Mezzo-level reconnaissance, and coordination are a prime domain for the social worker. Based on mission goals, and donor availability the social worker can make specific policy recommendations and be an advocate for social welfare (Mubangizi, 2008). In addition to interacting with donors and policy-makers, the social worker can directly intervene with community individuals to make them aware of rights and services, and help them organize into functional groups of empowerment. The social worker can also be available to make recommendations for microlending to individuals, fund distribution to responsible community groups, facilitate community self-learning and integration into global information markets, and coordinate with other developing communities.
This paper began as a history of economic theory relating to economic development policies. From simplistic savings + investment models of development, later adding technology, then education (human/social capital), then moving from external sources of growth to endogenous sources of growth, evidences an increasing recognition of the complexity of the causes of poverty and the complexity of development aid needs. Built on theory are specific social experiments, and again, greater complexity of understanding how to define the problem, whether poverty is about limited economic growth, or whether poverty runs deeper, into depleted human and social capital, as well as profound structural impediments such as geography and colonial histories that laid the foundation for contemporary bad governance and depleted resources. Econometrically, the jury is still out on development aid and growth. But as service providers, and global citizens, it is clear that absolute poverty, and conflict-embedded regions, as well as regions subjected to natural crises like desertification, require immediate and profound humanitarian assistance, even if it will not produce strict economic growth (according to 4-year panel studies, on which most econometric regression models are based). Finally, this paper explored specific large-scale intervention processes that follow theory: market coordination failure remediation, such as the MVP, and multi-community agricultural and microlending regimes that not only immediately benefit the poorest individuals, but also contribute to the larger economy and facilitate community development. Each of these coordination efforts utilize current economic development theory, and require social workers to implement and organize the efforts.
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Development Theory and Africa 1