Easterly on why big top-down development schemes don't work

By Max Borders | 5 July 2005

In the New York Times, William Easterly offers a nice antidote to current development thinking exemplified by Make Poverty History and the ONE Campaign:

It's great that so many are finally noticing the tragedy of Africa. But sadly, historical evidence says that the solutions offered by big plans are not so easy. From 1960 to 2003, we spent $568 billion (in today's dollars) to end poverty in Africa. Yet these efforts still did not lift Africa from misery and stagnation.

Why don't big plans work? Because they miss the critical elements of feedback and accountability. If consumers like a product, its maker prospers; if they don't, the company goes out of business. If voters complain about public services to their local politician, the politician either fixes the problem or gets voted out of office. It doesn't always work, but it works well enough for rich people to get potato chips and paved roads.

For the poor, Professor Sachs and the United Nations Millennium Project propose everything from nitrogen-fixing leguminous trees to replenish the soil, to rainwater harvesting, to battery-charging stations, for, by my count, 449 interventions. Poor Africans have no market or democratic mechanisms to let planners in New York know which of the 449 interventions they need, whether they are satisfied with the results, or whether the goods ever arrived at all.

Easterly is pointing to what is referred to by economists as the principle-agent problem. The G8 leaders would do well to study up on this.