The blind spots in the UN development agenda

David Cameron, Britain’s PM, is one of three world leaders chairing the UN’s post-2015 development agenda. Today he outlined his vision in a WSJ op-ed. (Now ungated.)

As it happens, I’m about to launch into a discussion of foreign aid in my undergrad development class this afternoon. I’ve just come off of discussing the origins of weak states, and in a week or two we launch into democratization, then industrialization and trade. So I’ve been thinking about these issues more than usual. There’s a lot to like about Cameron’s push, but the ways in which we differ might be more important.

The overall vision is a big, important change I can support:

…that means a radical new approach to supporting what I call “the golden thread” of conditions that enable open economies and open societies to thrive: the rule of law, the absence of conflict and corruption, and the presence of property rights and strong institutions. It is only when people can get a job and a voice that they can take control of their own destiny and a build a future free from poverty.

Stability is paramount, and I’m happy to see it so prominent. It’s simply amazing than freedom from war and violence was never a Millennium Development Goal. It’s even more amazing that someone didn’t point out the gap every day of the past fifteen years. Britain has been a leader in bringing conflict to the fore of the development debate.

The same with property rights and strong institutions. This is a big leap for the UN. Cameron is trying to haul them into the 1990s. He’ll get a lot of credit for that. You’ll forgive me, though, for wishing we didn’t live in a world where we’re delighted when our global government is just 20 instead of 40 years behind the times.

Even so, saying we need “strong institutions” is a little like saying we need “strong economics”. The details matter.

This is where we start to diverge. Below I’ll get to the really important “institutions” differences. But the first indication (to me) that something is off: “corruption” is up there with “property rights”, “conflict” and “rule of law”. I find corruption as infuriating as the next person, but can a serious case can be made that it drives poverty to the same extent as anything else on that list?

It helps to remember: every economic marvel of its day–from the US to China to (dare I say) England — were paragons of corruption. Few can match Tammany Hall or the Chinese Communist Party in their ingenious machinations. It’s not clear this is a hindrance to development. Taking the long view, corruption may even be part of the glue that keeps societies from falling apart in the midst of transformative economic change–like it or not, elites need something to compensate them for losing their influence, or the’re unlikely to let go without a fight.

My feeling: Anti-corruption is a 20th century Anglo-American fetish, important, but nowhere near as important as political stability or basic property rights.

The exception might be kleptocratic rulers like Mobutu. They are major impediments to, well, everything important to their citizens. But I’d argue theft of that magnitude is merely a symptom of the much more important institutional issues–the absence of any check or balance on Presidential power foremost among them. Fix the underlying institutional problems of over-centralized political power before picking at corruption around the edges.

Unfortunately, put a US President or UK Prime Minister at a lectern, and the path to better institutions seldom seems to run through stronger legislatures or bureaucracies–the very institutions these two nations pioneered, and that brought them such stability and prosperity. Instead, they push first the very last institutional reform their societies pioneered: universal suffrage. Here is Cameron:

Eradicating poverty requires the growth that is fueled by open economies, and open economies are themselves best ensured by open societies: rights for women and minorities, a free media, integrity in government, and the freedom to participate in society and have a say over how your country is run.

Voice to the voiceless is inherently important. We can debate whether it delivers economic growth. It’s more important to recognize it is an outcome in itself. Cameron would have been on stronger footing if he pushed voice as an end rather than a means. If I had to pick one governance reform to promote growth, it wouldn’t be one of these.

What did the US and Britain do? They gradually strengthened the capacity of their central governments while slowly diffusing power to a wider and wider group of people. They designed or evolved checks and balances that kept one cabal from taking over the state. A free press was one, but so were strong parties, professional militaries, judges, professional associations, unions, and civil societies.

If I had to pick the greatest threat to stability and growth in many poor countries, it is the virtually unchecked power of the President. This is not the same thing as an autocracies. Plenty of autocracies check the power of the supreme leader. In many East Asian countries, the party, the military, big business, and others make sure no one faction hijacks the nation.

Cameron’s partner in this post-2015 vision is Ellen Johnson Sirleaf, President of Liberia and a Nobel Peace prize winner. Her country, and her regime, is a perfect example of what is wrong in African politics, even with good elected leaders. Her legislature is laughably weak. The parties are ineffective. She personally appoints virtually every position of importance in the nation down to the local level.

Sirleaf came to power saying that devolving power and creating checks on the Presidency would be a first priority. Instead she has built roads. Elections are being held, but one powerful leader could brush them away. What her nation needs for long term stability is not transport, but insurance that she or (more importantly) her successors will share power.

What do I wish Cameron would say? First, advocate for voice, but not without more fundamental democratic institutional change, checks and balances most of all.

Second, if we’re going to push the voice agenda, let’s push voice for it’s own sake. I’m a vociferous democratizer in spite of the fact I think it could stymie growth for a time. No one has a good answer to this question–whether democracy hurts or helps growth. Anyone who does is fooling themselves or you. My hunch: until there are strong civil societies, parties, and legislatures (all of which will take decades) know that every election carries a risk of conflict, and that most will be shambolic charades. Hopefully less so every time, though.

Finally, turning to economic policy, this is where the opinion piece starts to disappoint me the most.

Making this transformation a reality means using our aid differently, as a catalyst to unleash the dynamism of developing economies: from professionalizing cross-border customs services and enabling farmers to access price information by mobile phone, to using satellite photos to map plots of land that will facilitate the creation of property rights. From supporting the development of an independent police and judiciary, to investing in the political leadership of women and girls whose contribution is so vital in improving governance and achieving sustainable and equitable growth.

With the exception of independent police and judiciaries, these are amazingly small economic aspirations. Prices by mobile phone? Stronger customs services?

Small, achievable, measurable interventions are good. They are examples of the kind of marginal, evidence-based changes that people like Abhijit Banerjee and Esther Duflo have been pushing, rightfully so. But do they belong at the heart of a strategic vision, one that at the same time places ambitious political transformation at its center?

What’s astonishing to me is that the UN can spend two decades setting the world’s development agenda and never utter the words “industrialize”, “firms”, or “exports”. This op-ed was no exception.

I have not done the math, but here’s a conjecture: unless you are sitting on a billion barrels of crude, it’s practically impossible to become a middle-income country without an industrial sector. Simple arithmetic with national accounts should tell us the following: to get the GDP, wages, and consumption of a middle income country, you need to produce high-value goods and sell them to other countries. In most places, agriculture and minerals don’t cut it in terms of value-added production.

Helping poor women set up a market stall, or small farmers double their profits, is a good and noble goal. Figuring out how to do this is my day job. But it is a humanitarian strategy, not a growth strategy. Real economic change will wait for industry.

Industry needs stability and rule of law first and foremost. So it’s fantastic that Cameron (and possibly the UN) are talking about good governance. But why jump next to mobile-delivered market prices?

Once you put industrialization at the center of your agenda, it looks very different than the one Cameron proposes. It requires a different sort of commitment from the US or Europe than aid, one they are less likely to make. It also sets a less glamorous policy agenda that does not involve cell phones in the hands of farmers. What that agenda looks like, however, is something we never get to argue about, however, because it’s mostly ignored in favor of helping adolescent girls become literate but ultimately unemployed, or helping small unproductive farmers become slightly less small and unproductive farmers.

Why is industry so unfashionable among the aid elites? I honestly don’t know. No heart strings are tugged. And I suspect organizations committed to halting climate change fear the environmental fallout. If so, it’s a tragedy. Make no mistake: I am a huge proponent of green industry, starting with the rich countries. But I won’t impose this burden on small impoverished nations, certainly not before we end the mind-blowing rich-country hypocrisy on the subject.

In many ways Cameron’s is a big change for the UN–a good one. But the cliche holds: the more they change, the more they stay the same. In the end, we get what we always get from the UN: most of the right development goals, but humanitarian plans rather than growth-igniting ones.

What would I like to see? At the heart of the post-2015 agenda, a recognition that low income countries need industry first and foremost, and that this will require a radical rethinking of governance, trade and aid. Buying things other than corn and cotton from poor countries is part of the deal. In the midst of a rich-world depression, however, where jobs overseas are antithetical to re-election, poor countries are very much on their own where it matters most.

129 Responses

  1. Corruption is a big obstacle to development, interdependent with lack of law and order, weak judicial systems, weak property rights, weak institutions. Corruption creates huge uncertainty and therefore adds enormously to financial risk and uncertainty in planning a business.

  2. Jesse,

    ex-World Bank Chief Economist proposed industrial policy/development using comparative advantage, but Ha-Joon Chang noted historical examples of countries defying comparative advantage.

  3. Great post, I agree with most of what you say. But I think you may want to nuance your target a bit more – basically what you’re saying is we need to talk about industry, and therefore about industrial policy. It’s only UN institutions that have been keeping this flame alive for the past 30 years – think of the work of UNDESA and UNCTAD for example. In the face of a concerted push by the World Bank, backed by countries such as Britain, to insist that it doesn’t matter. All you need to do is free your markets and focus on your comparative advantage. So you’re right about the high level targets of the UN (which were driven by rich countries, particularly the UK) but I think you’re wrong to suggest the UN is to blame for the failure to focus on Industry. Quite the opposite I think.

  4. “But why jump next to mobile-delivered market prices?”

    Because it is the same tired trope you see about once a week in any newspaper article or puff piece about mobile phones in Africa.

  5. If by industry you mean factories, I’m not so sure. Do you think people need to learn morse code and how to operate a telegraph before being allowed to use a mobile phone? Similarly you’re telling countries that want to end up with a developed economy with say a silicon valley or pharma-based exporters, to … build steel mills! Why can’t they jump straight to the exciting and profitable stuff?

    Industry is going the way of agriculture, so mature and efficient that it becomes an ever shrinking proportion of the world economy (in money terms), so it’s really not the sort of loser an emerging economy should bet on. They can use their second (or n-th) mover advantage to jump straight to the promising activities, which, as luck would have it, are more robust to weak institutions (a steel mill is very hard to move and tempting to confiscate, while knowledge based companies can move much more easily and leave the naughty dictator with an empty office block).

  6. It is true that opening a market stall does not contribute to industrialization. But I am not sure whether promoting manufacturing businesses in the “informal sector” and promoting “industrial development” are two completely separate agendas. This issue is an oldie in informal sector theory – In countries like Kenya banks rarely finance new businesses, they finance businesses that are already doing well in the market, that’s why many firms have to start small and then grow their way out of the informal sector.
    This is probably one point where “poverty-alleviation” and “growth” strategies could meet. Though I agree with you that if a country’s industrial policy focuses only on the micro-scale, it won’t go far. .

  7. A great post. Congratulations.
    Checking the power is central.
    When I read the official “transition”or “fragility” strategies, I conclude the bottom line is that we choose to support the powers that be. aka Qaddafi and Assad.

  8. That’s a very interesting piece, and the message is true. But then, I am convinced of it already: from theory, and from the history of Western Europe from the twelfth century onwards. (The example I use, in my UK context, is Flemish weavers coming over to England in the fourteenth century.) Commenters have already noted how politically difficult it is to sell the idea that the jobs of people working in western coffee packing plants or chocolate factories could have their jobs put at risk by policies like tariff reduction.

    For that reason, you let your case down badly — very badly indeed — by a continued, insistent description of your key points as ‘feeling’, ‘hunch’ and ‘conjecture’. I appreciate you do not want to over-state your case; but given the importance of it, should you not find the evidence which certainly must exist?

    It is as if /you/ do not really believe what you are saying; and with that attitude, how will you convince anyone else? For make no mistake: there are large swathes of the population who /do/ need convincing.

  9. The industry-based development miracles you are thinking of (Asian tigers) achieved this by strengthening their exporters. The logical conclusion of telling LDC’s to follow Asian tigers’ example is to say “we will help your exporters enter our markets”. Any European leader who utters those words will pay a domestic political price, especially during the global recession. It is easier to tell European and American voters “we are helping poor nations by giving them money for small producers (who do not threaten the jobs)”.

  10. Excellent response to Cameron’s article. Also very much appreciated Afrophile’s response. Thank you for bringing the ‘less sexy’ idea of industrial development into the discussion. I’m a fan of taking emotion (almost entirely) out of development agenda making and focusing on these issues as a multi-national would focus on the bottom line.

    (If you are using ‘industry’ interchangeably with ‘business’ or ‘private sector’ in your post then please ignore the rest of this comment.)

    I’d argue (although, like you, without data to prove it… yet) that it’s not just growth in industry that matters, it’s growth in the entire private sector (including industry) that should be the focus. The industrial sector may have the largest impact and may have to come first (though I remain to be convinced of this latter point), but without a banking system, telecommunications network, vibrant transportation sector, etc. economic growth will certainly reach a ceiling and may even stagnate before a country can reach its true potential.

  11. “It requires a different sort of commitment from the US or Europe than aid, one they are less likely to make.” – In your opinion, what is that commitment? Are there key policies that otherwise-aid-advocates should be pushing for to encourage industry growth? Write-in Blattman for President? :)

  12. Excellent response about industry being missing from the overall picture.

    Sounds like Ha-Joon Chang’s Hamlet without the Prince of Denmark.

  13. These are all good, well-considered points. Thanks, Chris, for such a thoughtful post.

    While I generally agree with the direction of your thinking, in my ideal world the post 2015 agenda would include a greater dose of modesty about what the UN and the rest of the “development” community is really capable of delivering. Not that I’m against putting industrialization on the agenda, it’s just that there’s not much evidence that “we” know how to bring it about any more than any of the other lofty goals in the development agenda.

    I think before we start tinkering with the items on the development agenda, I’d like to see the UN (and others) commit to something along the lines of Dani Rodrik’s Hippocratic Oath for Development Policy.

  14. Great post. some good food for thought. One small quibble. Neither the MDGs nor their replacement are really a “UN” development agenda, at least not in the sense of the UN as an organization, they are rather what governments collectively are willing to agree on through an inter-governmental process. What’s in and what’s out is therefore as much or more a function of what common ground governments can agree on as it is the views of “aid elites” at the UN.

  15. Great post. I think, however, there may be a spot so blind that even you did not catch it: free inter-country migration. According to Michael Clemens, it could double world GDP. Shouldn’t we be at least be talking more about this?