International Policy | |
Bartlett: The Right Path For Third-World Development |
Peter Bauer, one of this century's great economists, was one of the early pioneers in the field of development economics. From his own experience, Bauer knew that the same economic principles that applied in Europe and North America applied equally in Africa and Asia. Yet development economists in the early postwar period were basing their work on the idea that somehow a different set of economic principles applied in underdeveloped countries. In those countries foreign trade was said to be harmful, saving and capital formation were impossible because of low incomes, and the lack of investment opportunities prevented access to foreign capital. Thus the key to development was to transfer capital from the Western industrialized countries to the developing nations; that is, foreign aid. Such aid would then be used to develop indigenous manufacturing industries that would obviate the need to import manufactured goods from abroad. To implement this agenda, developing countries instituted comprehensive economic planning, while the industrialized nations poured billions upon billions of dollars of aid into the nations of Africa, Asia and Latin America. We all know what happened. Thriving indigenous businesses and industries died or went underground, while government bureaucrats built uneconomic steel mills and other trophy projects. Virtually all of the foreign aid money of the last 50 years was completely wasted on worthless projects. Meanwhile the restrictions on trade and private businesses stifled economic activity, leading to declining growth, rising poverty and unemployment. As a result, most of the former colonies of Africa are poorer today than they were at independence. Eventually, the nations of Asia and Latin America rejected the teachings of the development experts and moved to dismantle their planning agencies and base their economies on exports. The results were too spectacular to ignore, leading to wholesale repudiation of the development model Bauer long fought against. Source: Bruce Bartlett (senior fellow, National Center for Policy Analysis), March 11, 1998. |
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