(Harvard University Press, 79 Garden St., Cambridge, MA 02138), 1981
293 pages • $17.50 cloth
Professor Peter T. Bauer of the London School of Economics is not an orthodox development economist. Rather than following the fashion and advocating the massive transfer of resources from developed countries to Third World governments, Bauer is the foremost critic of such foreign aid. It appears that many of his proposals are beginning to get the consideration they merit.
His latest volume is a collection of fifteen essays on a variety of topics. Some are revised and extended versions of articles which have appeared elsewhere. Bringing them together in one volume, Bauer offers a superb overview of the major issues in development economics. Anyone concerned with this subject should study the ideas presented in this book.
Bauer begins by undermining many of the popularly accepted justifications for massive income transfers to less developed nations. “In an open and free society,” he writes, “political action which deliberately aimed to minimize, or even remove, economic differences would entail such extensive coercion that the society would cease to be open and free. The successful pursuit of the unholy grail of economic equality would exchange the promised reduction or removal of differences in income and wealth for much greater actual inequality of power between rulers and subjects. There is an underlying contradiction in egalitarianism in open societies.” Indeed, economic equality is a chimera.
Unfortunately, among mainstream development economists it is widely assumed that the economic positions of people are properly the concern of official policy. As Bauer comments, “Political power enables rulers forcibly to restrict the choices open to their subjects. But posses sion of wealth does not by itself confer such coercive power in this crucial sense . . . . In any case, wealth as such does not imply coercive power. Indeed, those who are rich are vulnerable to envy and to criticisms founded on an unreasoning presumption in favour of economic equality. These attitudes have at times led to the persecution and even destruction of productive or prosperous groups, often ethnic minorities. Possession of wealth offers no sure protection against such dangers.”
Not only have the successful historically been victims of this envy and egalitarianism, the intended beneficiaries—the poor—also suffer. In many Western nations, the state provides for the necessities of life and the unexpected occurrences. Social security for old age, socialized medicine for ill-health, food stamps and aid to dependent children for poor, all these are financed by taxation. “As a result many people’s post-tax income becomes like pocketmoney which is not required for major necessities and hazards of life because these are paid for by taxes largely levied on themselves. This policy treats adults as if they were children. Adults manage incomes; children receive pocket-money. The redistribution of responsibilities implied in the operation of the welfare state means the reduction of the status of adults to that of children.”
This analysis of the effects of the welfare state within a country applies to income transfers on a global scale, known as foreign aid. There is a condescending attitude implicit in the policies recommended by orthodox development economists. As Bauer describes this outlook, “The poor are seen as helpless victims of their environment, people at the mercy of external forces and without wills of their own. The implication is that they are without the primary human characteristic of responsibility . . . . Poverty is thus a condition caused by external forces and not by personal conduct.”
Bauer presents a convincing case for the proposition that “economic achievement depends on people’s attributes, attitudes, motivations, mores and political arrangements. . . . Moreover, policies of many Third World governments are plainly damaging to economic achievement.” Here, a recommendation of Bauer’s has recently gained a limited degree of acceptance by the World Bank. Bauer proposes that in allocating aid, donors “should favour governments which within their human and financial resources try to perform the indispensable tasks of government, but who refrain from close control of the economy—briefly, governments who govern rather than plan. This would promote liberal economic systems, minimize coercion, reduce political tensions and favour material progress.”
Bauer shatters the misdirected attempts to promote Western guilt for Third World poverty. “The West has not caused the relative poverty of the Third World,” Bauer writes. “The opposite is the case. The contacts established by the West have resulted in improved living conditions, longer life expectation and much wider choice for hundreds of millions of people in the Third World . . . . Indeed, millions of people who would otherwise have died survived because of Western techniques and ideas, notably medicine and public security which came with colonial rule.”
The concept of exploitation is another chimera. The material progress in the developed West is not caused by depriving the Third World of its resources. In truth, “Western consumption is more than paid for by Western production. This production not only finances domestic consumption but also provides the capital for domestic and foreign investment as well as foreign aid.”
The West is not totally blameless for the plight of Third World countries. Bauer identifies several areas of fault. In particular, Western activities since the Second World War have done much to politicize economic life in the Third World. The politicalization of economic life is one of the primary inhibiters of economic progress. “In a subtle way, aid tends to perpetuate ideas and modes of conduct adverse to material progress.” Chiefly, Bauer observes, “Aid promotes the delusion that a society can progress from indigence to prosperity without the intermediate stage of economic effort and achievement.”
Bauer is perhaps at his best when destroying the prevailing myths in development economics. However, he also presents proposals for the reform of official aid, “while looking forward to its eventual termination and doing [the] best to bring that about.” Ideally, he would leave most aid to voluntary charities, for they are “usually more interested in assisting the poorest and most distressed than are Third World rulers.” The West must also reduce its barriers against Third World exports, a move which is unlikely to find much support among protectionist-minded businessmen in this country.