Naked Economics, Wheelan, Charles [open ebook .txt] 📗

into civil war.) Once again, natural resources can make things worse by financing weapons and giving the factions something to fight over. (Collier coined the sadly clever phrase “Diamonds are a guerilla’s best friend.”)28 The important point is that security is a prerequisite for most of the other things that have to happen for an economy to flourish. In 2004, The Economist published a story about the challenges of doing business in Somalia, a country that had been in the throes of civil war for thirteen years. The story noted, “There are two ways to run a business in Somalia. You can pay off the local warlord, not always the most trustworthy of chaps, and hope he will stop his militiamen from murdering your staff. Or you can tell him to get stuffed and hire your own militia.”29

Woman power. Imagine two farmers, each with a thousand acres. One of them cultivates all of his land every year; the other leaves half of his land fallow, year after year. Who will grow more? It’s not a trick question. The guy who uses all of his land can grow more. What does this have to do with women? Bill Gates made the connection when speaking about technological progress to an audience segregated by sex in Saudi Arabia. A New York Times Magazine article on the role of women in economic development recounts the incident:

Four-fifths of the listeners were men, on the left. The remaining one-fifth were women, all covered in black cloaks and veils, on the right. A partition separated the two groups. Toward the end, in the question-and-answer session, a member of the audience noted that Saudi Arabia aimed to be one of the Top 10 countries in the world in technology by 2010 and asked if that was realistic. “Well, if you’re not fully utilizing half the talent in the country,” Gates said, “you’re not going to get close to the Top 10.”30

The Saudis shouldn’t have been surprised. The Arab Human Development Report came to the same basic conclusion (in a lot more pages) several years earlier. In the 2002 report, several prominent Arab scholars sought to explain the paltry rate of growth in the twenty-two countries that make up the Arab League. Over the previous two decades, real per capita income growth had been a paltry 0.5 percent a year, lower than any place in the world except sub-Saharan Africa. One of the three key problems identified by the authors was “women’s status.” (The other two were a lack of political freedoms and a dearth of human capital.) The Economist reported on the findings: “One in every two Arab women still can neither read nor write. Their participation in their countries’ political and economic life is the lowest in the world.”31 Investing in girls and women can be like planting the other half of that 1,000 acre field. There is another subtle (and mildly amusing) part of “women power.” Women in the developing world (and maybe elsewhere) do smarter things with their money. As women get wealthier, they spend more money on the family’s nutrition, medicine, and housing. When men get wealthier, they spend more money on alcohol and tobacco. Really. There was an elegant little experiment on this point in the Ivory Coast, where men and women traditionally grow different crops. In some years the men’s cash crops are bountiful; in other years the women’s cash crops do particularly well. MIT economist Esther Duflo found that when the men have a banner year, the household spends more on drinking and smoking; when the women rake in the cash, the household spends more on food.32 Development officials have learned that if they give cash to the female head of household, it will do more good.

Experts could tick off many other things that matter in the development process: savings and investment rates, fertility rates, ethnic strife, colonial history, cultural factors, etc. All of which raises a question: If we have a decent idea of what constitutes good policy, why is the path out of poverty so steep and treacherous? The answer lies in the difference between describing why Tiger Woods is a great golfer and actually playing like him. It is one thing to explain what makes rich countries work; it is quite another to develop a strategy for transforming the developing world. Consider some simple examples: Building effective government institutions is easier when the population is literate and educated, yet decent public education requires effective government institutions. Public health is crucial, but it’s hard to build health clinics when huge amounts of money are lost to corrupt officials. And so on.

There is a broad continuum of expert opinion on what, if anything, rich countries can do to improve life elsewhere in the world. Jeffrey Sachs anchors one end of that continuum. As you may have inferred from some of the research in this chapter, Sachs believes that impoverished nations are caught in poverty traps, and only capital from the developed world will rescue them. If we were to care and spend more in the developed world, we could jump-start the development process in poor countries—like getting a big boulder moving at the top of a hill. For example, Sachs argues that the world’s rich countries should undertake a comprehensive program to fight AIDS in Africa. He reckons that America’s share of such a program would cost about $10 a person—the price of a movie and popcorn.33 So far, U.S. contributions to such efforts have been far smaller. Indeed, America’s total foreign aid budget comes to one-tenth of 1 percent of GDP—a fraction of what we are capable of and a third of what the Europeans give. Mr. Sachs warned long before September 11 that we ought to invest in the developing world, “not only for humanitarian reasons, but also because even remote countries in turmoil become outposts of disorder for the rest of the world.”34

William Easterly, whose work has also been cited extensively here, anchors the