Friday, January 28

Cargo Cult Economics

21st century cargo cult economic theory joins watered down marxist - leninism among the destructive varieties of magical thinking

In the 19th century and particularly after World War II a series of religious movements appeared in areas of the South Pacific that had experienced often jarring contacts with the West.
Cargo cults are usually revivalist, and in some cases messianic and millenarian, movements found among certain peoples indigenous to Oceania. The word cargo refers to foreign goods possessed by Europeans; cult adherents believe that such goods belong to themselves and that, with the help of ancestral spirits, the goods can be returned to them through magico-religious means. Some cult prophets promise that the arrival of cargo will herald a period of prosperity and well-being.
Essentially, the desired objects, i.e. cargo - included everything from Spam and Coca Cola onto metal tools and textiles - were divorced from the societies and institutions that produced them and were instead seen as the result of rituals. By that faulty logic, building runways complete with life size model airplanes and log control towers along with other detailed re-enactments of the American occupation could entice more cargo planes to land and usher in a future of paradise and plenty.

Of course, natural human logic dictated that the cargo cults faded away while their former members quickly moved on to more fruitful and productive engagement with the modern world that has seen consistent economic growth. To make some real money, many former practitioners revived the rituals and pretended to believe for a time for the sake of tourists (and given the Margaret Mead story, probably some anthropologists as well).

Wikepedia has an introduction to the cults and links to the University of Calgary where there is a detailed historical presentation. Today, the term is used for "studies with all the trappings of real science, but which are nonetheless pseudoscience."

so ...

Ethiopia’s rulers have also mastered just enough of the rituals of prosperous and free societies to hang on to power - fro example, pretending to have a free market and pretending to hold elections. The intended audience for that massive Potemkin village of rituals is not the Ethiopian people, but potential aid donors - the foreigners in their turn pretend to believe that the rituals are meaningful.

So abysmally low are international expectations of Ethiopian governance, that the simple act of not being Mengistu's Dergue is enough to cause considerable international satisfaction and delight with the current state of affairs. Indeed, 70 million Ethiopians are hostages to the willingness of their own rulers to let foreigners help them while they have not been allowed to help themselves.

The rather obvious policies and practices that made the donor countries rich to begin with, that have allowed many others to emulate them and escape seemingly eternal poverty are denied to Ethiopians in the service of their ruler‘s insecurities.

Government is beholden to the archaic and destructive leftovers of revolutionary ideology and laws are based upon the atavistic call of ethnicity and the practice of tribal divide and rule. There are purposeful barriers to external and internal investment. Meanwhile, efforts to develop independent civil society are tenaciously resisted.

These are all ongoing themes for ethiopundit, take a look at the archives on the right sidebar.

Dictated by policy, a situation has been created where aid does not just help but where national survival has become impossible without aid. So aware are the rulers of the harm they are causing that they are unwilling to risk the evolution of a society and economy in which any possible rivals may emerge.

Dynamism of any variety originating from Ethiopians is assumed by her rulers to be dangerous and to be put down. So the only way to even stagger forward is ... more rituals and the dream of more cargo.

Some in donor governments and aid organizations clearly appreciate the degree of pretense but comfort themselves with the hope that some minimal amount of practices conducive to eventual democracy and development are being accepted.

They are wrong. The very credibility of those vital institututions, whose practices are daily subject to pretension, is being destroyed by the feigned participation of all concerned.

The natural intelligence and common sense of millions of weary Ethiopians tells them that ...
... democracy is not an effective one party state that wastes reams of paper every few years in 'elections' to please foreigners.
... freedom doesn't mean peasants are government sharecroppers in a country where all have no basic rights of ownership, public speech and assembly.
... a free market is not a place where the mass of the powerless compete with the actual businesses or allies of an inseperable government and party.

Decades of lies and slogans have made many cynics and current practice is corrosive to every manner of public life. Today's short sighted pretense is stealing from the present and the future.

Ethiopia does not have all the time in the world to get things right.

Ultimately nations are prosperous and free because of political, economic and social INSTITUTIONS supported by rational laws, experience and beliefs. Ritual talk from every variety of international commission and sincere recommendations from a thousand think tanks together with all of their grandiose plans that ignore the development of INSTITUTIONS are worse than nonsense.

Cargo, if it does magically appear in the form of massive foreign aid or a flood of petrodollars is assumed to be better than nothing at all - but it may not be. Anyway, cargo is by definition unsustainable and will be corrupting and harmful if unsupported across the whole spectrum of human development.

Given the opportunity and instituitons that they are denied there is little development that Ethiopians could not achieve on their own and no limit to their ability to use aid effectively. We must wonder if more cargo alone will hurt or help.


The Millennial Development Goals (MDG) from the U.N. are self described as
... the opportunity in the coming decade to cut world poverty by half. Billions more people could enjoy the fruits of the global economy. Tens of millions of lives can be saved. The practical solutions exist. The political framework is established. And for the first time, the cost is utterly affordable. Whatever one’s motivation for attacking the crisis of extreme poverty—human rights, religious values, security, fiscal prudence, ideology—the solutions are the same. All that is needed is action.
Sounds great right? At least $100 billion dollars a year just for the MDG! Eventually rich nations are to provide 0.7% of GDP for foreign aid programs - up from 0.15% now in the U.S. For Americans that would mean a total foreign aid budget of well over $80 billion dollars a year.

No one really expects that much to be spent - it is actually just the first bid in the international aid bazaar made of poor countries / international and government aid bureaucracies / NGOs / and weary Western taxpayers. Even the fraction of that amount that appears will matter - as the Congressional saying goes “a billion here, a billion there, pretty soon you’re talking real money.”

One problem for supporters is that there is a huge, and many would argue, very justifiable stockpile of global cynicism about most foreign aid programs of the past half century. This editorial from The New York Times decries such ‘carping’ while nevertheless allowing that the
strongest, and probably most legitimate, critique of approaches that flood poor countries with money is that many of these poor countries are run by corrupt governments that will stash most of the donor money in private Swiss bank accounts. That has certainly proved true in the past, particularly in Africa, where the poor have stayed poor while a succession of despots have run country after country into the ground.

But it is counterproductive to make poor people suffer because they have bad governments. Mr. Sachs says now is the time to try the radically different approach of giving bigger amounts of real, quality aid directly to recipients on the ground.
The MDG approach as interpreted by the Times appears to assume that throwing enough money around will just have to some do good. We will try to see if that is wise in the rest of this series of posts. Then we will vow to write shorter posts for a while.

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