The Elusive Quest for Growth : Economists' Adventures and Misadventures in the Tropics

355 Pages·2001·11.13 MB·English

by  William R. Easterly

The Elusive Quest for
Growth
Economists’ Adventures
and Misadventures in the
Tropics
William Easterly
The MIT Press
Cambridge, Massachusetts
London, England
0
2001 Massachusetts Institute of Technology
All rights reserved. No part of this book may be reproduced in any form by any
electronic or mechanical means (including photocopying, recording, or information
storage and retrieval) without permission in writing from the publisher.
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Lyrics from ”God Bless the Child,” Arthur Herzog, Jr., Billie Holiday 1941, Edward
B. Marks Music Company.C opyright renewed. Used by permission. All rights
reserved.
This book was set in Palatino by Asco Typesetters, Hong Kong, in ’3B2’
Printed and bound in the United States of America.
Library of Congress Cataloging-in-Publication Data
Easterly, William.
The elusive quest for growth :e conomists’ adventures and misadventures in the
tropics /William Easterly.
p. cm.
Includes bibliographical references and index.
ISBN 0-262-05065-X (hc. :a lk. paper)
1. Poor-Developing countries. 2. Poverty-Developing countries. 3. Developing
countries-Economic policy. I. Title.
HC59.72.P6 E172 001
338.9’009172’4-dc21 00-068382
To Debbie, Rachel, Caleb, and Grace
This Page Intentionally Left Blank
Contents
Acknowledgments ix
Prologue: The Quest xi
I Why Growth Matters 1
1 To Help the Poor 5
Intermezzo: In Search of a River 16
I1 Panaceas That Failed 21
2 Aid for Investment 25
Zntermezzo: Parmila 45
3 Solow’s Surprise: Investment Is Not the Key to Growth 47
Intermezzo: DrCy ornstalks 70
4 Educated for What? 71
Intermezzo: Withouta R efuge 85
5 Cash for Condoms? 87
Zntermezzo: TomPb aintings 99
6 The LoansT hatW ere, the Growth ThatW asn’t 103
Zntermezzo: Leila’Ss t ory 121
viii Contents
7 ForgivUe Os uDr ebts 123
IntermezzoC: ardboardH ouse 138
I11 PeopleR espondt oI ncentives 141
8 Taleso fI ncreasingR eturns:L eaks,M atches,a ndT raps 145
Intermezzo:W ar and Memory 170
9 CreativeD estructionT: heP owero fT echnology 171
Intermezzo: Accident in Jamaica 193
10 Undera nE viSl tar 195
IntermezzoF: avela Life 215
11 GovernmentsC anK ilGl rowth 217
Intermezzo: Florence and Veronica 240
12 Corruptiona n dG rowth 241
Intermezzo: Discrimination in Palanpur 253
13 PolarizePd e oples 255
Intermezzo: Violent for Centuries 282
14 Conclusion:T heV iewf romL ahore 285
Notes 293
References and FurtherR eading 313
Index 335
Acknowledgments
I am very grateful to Ross Levine and Lant Pritchett, who made
comments on various drafts and provided many insights through
numerous discussions of growth. I ama lso grateful for comments to
my editors at MIT Press, five anonymous referees, Albert0 Alesina,
RezaB aqir, Roberta Gatti, Ricardo Hausmann, Charles Kenny,
Michael Kremer, Susan Rabiner, Sergio Rebelo, Sergio Schmukler,
Michael Woolcock, to my coauthors of various studies I use here,
from whom I have learned much, including the late Michael Bruno,
Shanta Devarajan, David Dollar, Allan Drazen, Stanley Fischer, Rou-
meen Islam, Robert King, Aart Kraay, Paolo Mauro, Peter Montiel,
Howard Pack, Jo Ritzen, Klaus Schmidt-Hebbel, Lawrence Summers,
Joseph Stiglitz, Holger Wolf, and David Yuravlivker, to the orga-
nizers of the very educational National Bureau of Economic Research
meetings on growth, including RobertB arro, Charles Jones, Paul
Romer, Jeffrey Sachs, and Alwyn Young, and to the many partic-
ipants in seminars, classes at Georgetown and Johns HopkinsS chool
of Advanced International Studies, and training courses whereI
have presented parts of the draft of this book. I alone am responsible
for views expressed here.
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Prologue: The Quest
The theme of the quest is ancient. In many versions, it is the search
for a precious object with magical properties:t heG olden Fleece,
the Holy Grail, the Elixir of Life. The precious object in most of the
stories either remains elusive or is a disappointment when found.
Jason got the Golden Fleece with the help of Medea, who betrayed
her own father, but Jason and Medea’s subsequent marriage was
ratherd ysfunctional.J asonb etrayed Medea int urn for another
princess; she worked out her disappointment by killing Jason’s new
bride and her own children.
Fifty years ago, in the aftermath of World War 11, we economists
began our own audacious quest: to discover the means by which
poor countries in the tropics coubldec ome rich like the rich countries
in Europe and North America. Observing the sufferings of the poor
and the comforts of the rich motivated us on our quest. If our ambi-
tious quest were successful, it would be one of humankind’s great
intellectual triumphs.
Like the ancient questors, we economists have tried to find the
precious object, the key that would enable the poor tropics to be-
come rich. We thought we had found theel ixir many different times.
The precious objects we offered ranged from foreign aid to invest-
ment inm achines, from fostering education toc ontrolling population
growth, from giving loans conditional on reforms to giving debt
relief conditional on reforms. None has delivered as promised.
The poor countries that we treated with these remedies failed to
achieve the growth we expected. The region we treated most inten-
sively, sub-Saharan Africa, failed to grow at all. Latin America and
the Middle East grew for awhile, but then spiraled into a growth
crash in the 1980s and 1990s. South Asia, another recipient of inten-
sive attention from economists, has suffered from erratic growth that