Super interesting! I hadn’t come across that permanent crisis book.
All this does give some evidence against the critique that “we don’t know how to increase growth.” That’s not something you’ve said, but was a common reaction to the randomista development post. It also implies that there’s still lots of potential growth to unlock through policy change in those countries that have resisted or been unable to implement reforms.
I’m not sure I quite understand the sentence about how SAPs “radically delegitimize all sorts of good economic policies”—do you mean that while the SAP reforms as a whole might look good on recent analyses, they included some harmful recommendations, such as removing gasoline subsidies?
Agree that outsiders working on institutional reform is much more fraught and difficult. If I was going to work on this, the first interventions I’d be interested in evaluating are technical assistance programs like the ODI Fellows, and home-grown policy advice orgs like the Africa Center for Economics Transformation. I’m very unsure about the impact of those orgs at the moment, but I’m so curious to know what a rigorous evaluation would find.
There are two meanings of “we don’t know how to increase growth.” One is that literally no one knows what Malawi could do to increase growth. That’s very likely wrong. The second is “given all of the social and (especially) political constraints in existence right now, no one knows what marginal thing they could actually do that would increase growth in Malawi.” I think that’s basically right. Leaders in LICs themselves generally know, or have advisors that know, which policies could increase growth. If a LIC isn’t growing it very likely isn’t because leaders lack knowledge of what they should do. They lack incentives, and those incentives should be taken seriously. It’s kind of like pointing out that US sugar subsidies are a bad economic policy, which they totally are. Everyone knows this. They don’t persist because US politicians or anyone else lacks that knowledge. They persist because of bad incentives, and changing those is very hard.
In sum on this point, I agree that “there’s still lots of potential growth to unlock through policy change in those countries that have resisted or been unable to implement reforms.” My claim is that neither you nor I nor basically any outsider has any lever to pull on that, and that thinking really hard about it will not solve this. Growth is pretty attractive to people in LICs, so almost by definition if it’s blocked then something real and hard to move is blocking it. As I said above “The reason people gravitate towards things like bed nets is purely on tractability.”
Lastly, on the confusion re: delegitimizing policies. Sorry if I phrased that badly. To be clear, gasoline subsidies are horrible! We should be taxing gasoline, not subsidizing it. I picked that as an example of a good policy that is plausibly viewed more skeptically because the IMF pushed it. I think it is plausible that there are a lot of good policies that are now viewed more negatively they were part of SAPs. I hold this view weakly as it’s hard to test, but I think it’s a real thing. If all of a sudden China started telling the US to get rid of its sugar subsidies I actually think that would make them harder not easier to remove. This is the same dynamic.
All that said, I think I’d probably also favour people chipping in towards an endowment for a liberal, free market think tank in Nigeria (though I haven’t give this much thought and for all I know 5 might already exist).
Super interesting! I hadn’t come across that permanent crisis book.
All this does give some evidence against the critique that “we don’t know how to increase growth.” That’s not something you’ve said, but was a common reaction to the randomista development post. It also implies that there’s still lots of potential growth to unlock through policy change in those countries that have resisted or been unable to implement reforms.
I’m not sure I quite understand the sentence about how SAPs “radically delegitimize all sorts of good economic policies”—do you mean that while the SAP reforms as a whole might look good on recent analyses, they included some harmful recommendations, such as removing gasoline subsidies?
Agree that outsiders working on institutional reform is much more fraught and difficult. If I was going to work on this, the first interventions I’d be interested in evaluating are technical assistance programs like the ODI Fellows, and home-grown policy advice orgs like the Africa Center for Economics Transformation. I’m very unsure about the impact of those orgs at the moment, but I’m so curious to know what a rigorous evaluation would find.
There are two meanings of “we don’t know how to increase growth.” One is that literally no one knows what Malawi could do to increase growth. That’s very likely wrong. The second is “given all of the social and (especially) political constraints in existence right now, no one knows what marginal thing they could actually do that would increase growth in Malawi.” I think that’s basically right. Leaders in LICs themselves generally know, or have advisors that know, which policies could increase growth. If a LIC isn’t growing it very likely isn’t because leaders lack knowledge of what they should do. They lack incentives, and those incentives should be taken seriously. It’s kind of like pointing out that US sugar subsidies are a bad economic policy, which they totally are. Everyone knows this. They don’t persist because US politicians or anyone else lacks that knowledge. They persist because of bad incentives, and changing those is very hard.
In sum on this point, I agree that “there’s still lots of potential growth to unlock through policy change in those countries that have resisted or been unable to implement reforms.” My claim is that neither you nor I nor basically any outsider has any lever to pull on that, and that thinking really hard about it will not solve this. Growth is pretty attractive to people in LICs, so almost by definition if it’s blocked then something real and hard to move is blocking it. As I said above “The reason people gravitate towards things like bed nets is purely on tractability.”
Lastly, on the confusion re: delegitimizing policies. Sorry if I phrased that badly. To be clear, gasoline subsidies are horrible! We should be taxing gasoline, not subsidizing it. I picked that as an example of a good policy that is plausibly viewed more skeptically because the IMF pushed it. I think it is plausible that there are a lot of good policies that are now viewed more negatively they were part of SAPs. I hold this view weakly as it’s hard to test, but I think it’s a real thing. If all of a sudden China started telling the US to get rid of its sugar subsidies I actually think that would make them harder not easier to remove. This is the same dynamic.
All that said, I think I’d probably also favour people chipping in towards an endowment for a liberal, free market think tank in Nigeria (though I haven’t give this much thought and for all I know 5 might already exist).