E-Book Overview
Since the end of World War II, economists have tried to figure out how poor countries in the tropics could attain standards of living approaching those of countries in Europe and North America. Attempted remedies have included providing foreign aid, investing in machines, fostering education, controlling population growth, and making aid loans as well as forgiving those loans on condition of reforms. None of these solutions has delivered as promised. The problem is not the failure of economics, William Easterly argues, but the failure to apply economic principles to practical policy work. In this book Easterly shows how these solutions all violate the basic principle of economics, that people—private individuals and businesses, government officials, even aid donors—respond to incentives. Easterly first discusses the importance of growth. He then analyzes the development solutions that have failed. Finally, he suggests alternative approaches to the problem. Written in an accessible, at times irreverent, style, Easterly's book combines modern growth theory with anecdotes from his fieldwork for the World Bank.
E-Book Content
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. Lyrics from ”God Bless the Child,” Arthur Herzog, Jr., Billie Holiday 0 1941, Edward B. Marks Music Company.Copyright 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 :economists’ adventures and misadventures in the tropics /William Easterly. p. cm. Includes bibliographical references and index. ISBN 0-262-05065-X (hc. :alk. paper) 1.Poor-Developing countries. 2. Poverty-Developing countries. 3. Developing countries-Economic policy. I. Title. HC59.72.P6 E172001 338.9’009172’4-dc21
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To Debbie, Rachel, Caleb, and Grace
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Contents
Acknowledgments ix Prologue: The Quest xi
I
Why Growth Matters
1
To Help the Poor
1
5
Intermezzo: In Search of a River I1 Panaceas That Failed
2
Aid for Investment
21
25
Zntermezzo: Parmila 3
45
Solow’s Surprise: Investment Is Not the Key to Growth Intermezzo: Dry Cornstalks
4
Educated for What?
70
71 85
Intermezzo: WithoutaRefuge
5
Cash for Condoms?
87
Zntermezzo: Tomb Paintings 6
16
99
The LoansThatWere, the Growth ThatWasn’t Zntermezzo: Leila’s Story
121
103
47
viii
7
Contents
Forgive Us Our Debts
123
Intermezzo:CardboardHouse
138
I11 PeopleRespondtoIncentives
141
8
TalesofIncreasingReturns:Leaks,Matches,andTraps Intermezzo:War and Memory
9
170
CreativeDestruction:ThePowerofTechnology Intermezzo: Accident in Jamaica
10 UnderanEvilStar
193
215
11 GovernmentsCanKillGrowth
217
Intermezzo: Florence and Veronica 12 Corruption andGrowth
240
241
Intermezzo: Discrimination in Palanpur 13 Polarized Peoples
171
195
Intermezzo:Favela Life
255