Letters from the Director, Dr. Ioannis Stivachtis:

The Moral Endurance of Poverty and Underdevelopment

In July of 2001 a senior economist at the World Bank wrote a provocative editorial for the Financial Times, criticizing the Bank's half-century record of helping poor countries out of systemic poverty and underdevelopment. William Easterly argued that the World Bank's development programs have long been modeled on the economic experiences of advanced countries and the problems advanced economies face - liquidity traps, deflationary pressures and the like. World Bank-sponsored aid programs, Easterly wrote, have often misapplied Western growth models to Least Developed Countries (LDCs), countries with vastly different economic, political, and cultural conditions. Not surprisingly, many of the Bank's assistance programs have failed to produce results, particularly in Africa. The editorial was a stinging indictment of his employer, but Easterly believed the Bank could do better after learning some hard truths.

Shortly after the op-ed appeared, Easterly was hauled before his superiors at the Bank, properly scolded, and then promptly fired. The New York Times ran several articles about the affair: the Bank, it was revealed, had even considered suing Easterly. Employment contracts at the Bank stipulate that prior approval is needed before senior officials publish anything related to their work, including a short opinion piece for a newspaper. The incident became a public-relations disaster for the institution. Under the leadership of James Wolfensohn, pictured here, the Bank was already under intense public scrutiny in the wake of the counter-globalization demonstrations in Seattle, New York, and Washington and other cities around the world.

Easterly quickly found a new job and turned his op-ed into a book. Entitled The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics, the book reads, in the words of the New Yorker's John Cassidy, "like the testimony of a Mafia turncoat who knew not only where the bodies were buried but who had put them there and why." It was a powerful case: the Bank's track record of fighting poverty has indeed been less than impressive. Nevertheless, Easterly spurs the institution on to seriously rethink how it lends money to poor countries and what it counsels these countries do with the aid. The author peppers the book with colorful vignettes of his experiences romping around the tropics at the behest of the Bank. Easterly is anything but the dismal scientist: he's a terrific writer, a good story teller, and best of all he has a sense of humor - all of this makes the book an easy and often delightful read for someone without the least training in development economics.

The book has been well received (except by the World Bank) and has attracted quite a lot of publicity, thanks in part to the Bank's handling of Easterly's dismissal. I teach the book in my political economy course, and students enjoy the first-hand accounts of what development economics is on the ground - how aid has succeeded at times, but more often than not how it has failed. A number of other books have emerged in the last couple of years that form a conversation on the promises and pitfalls of what economists call 'official development assistance' (ODA) and the challenges of integrating poor countries into the world economy. Joseph Stigliz's Globalization and its Discontents is noteworthy. Hernando de Soto's The Mystery of Capital comes to mind. A lesser-known work called The Ills of Aid, authored by a former official with the UN Food and Agriculture Organization, Eberhard Reusse, is another welcome addition to this collection of titles.

Last month Dr. Reusse was a guest of mine at Virginia Tech for a week, lecturing in two of my classes and talking with students about his career with the FAO and about his book. We were initially introduced one evening last summer when our paths crossed in a small town on the outskirts of Nuremburg. It was then that I first learned the power of his insights (some of them highly controversial) backed up by decades of experience in the practice, not the modeling, of ODA. In January I paid Eberhard a visit, spending a weekend with him and his charming wife Ruth at their home in Dortmund, his native city on the eastern edge of the industrial Ruhrgebiet. "This is the house I grew up in from the time I was five. My family moved here after my father was killed in a car accident," he explained as we climbed the stairs to his secluded, third-floor office hideaway. (Eberhard was riding in the car with his father but survived with minor injuries). "Eventually I inherited the house. I felt it was important to keep it - to have a home base, a place to return to after living in Rome, Ghana, Jamaica. Our children were raised here when we weren't living abroad."

Like Easterly and a growing number of development experts, Eberhard is cynical about foreign aid. His views are most severe when the topic turns to the West's failure to understand what is wrong with traditional approaches to helping societies most in need. He has learned these things first hand. As a former United Nations official, Eberhard, like Easterly, spent a career dealing with development economics up close. His work for the FAO took him to many countries in the tropics, especially in Africa and Asia. Senior IMF and World Bank officials working in the tropics typically do so on short trips, staying in five-star hotels in capital cities, chauffered about during the day in well-protected government vehicles. Eberhard lived in poor villages and cities for years at a time, writing reports for the FAO and working with domestic producers and exporters of agricultural commodities in Ghana, Jamaica, British Honduras (now Belize), Somalia and other countries. Our meals together in Germany, which Ruth prepared lovingly in the traditional German style, were occasions for telling stories of their travels. Ruth's eyes widened as she recalled their time in Jamaica. "The Rastafarians, Bob Marley . . . you cannot imagine how wonderful this time was for us, most of all the children."

Trained in law and business administration, Eberhard came to the study of development economics only after joining the FAO in the late 1950s. At the sunset of his career, in the early 1990s, he became more interested in the unquestioned assumptions of development economics. On the advice of a friend and thinking more about filling his time in retirement, he started work on a Ph.D. in international affairs and sociology at Ruhr University, in Bochum, Germany. His dissertation, The Ills of Aid, was the outcome of that effort; it was published in 2002 by the University of Chicago Press. The book critiques the "aid pathology" of official development assistance from behavioral, environmental, and cognitive perspectives, drawing on several case studies and his own experiences with the UN and his work on several World Bank consultancies.

Though he is now retired, Eberhard remains active writing articles and giving lectures in the United States and Europe. It has been an active retirement. Eberhard phoned upon returning to Europe to tell me the FAO had asked him to return to Rome and would soon dispatch him to Ghana to oversee the write-up of a UN-sponsored aid program. He has much to teach us about the successes and failures of foreign aid, and perhaps most important of all, the presumptions the West carries to LDCs about what poverty and under-development are. "Poverty and underdevelopment - these are relative terms, Scott," Eberhard said in his serene tenor as we sipped coffee together in Montreal in mid-March. "The West has a particular conception of development and modernization, not the conception. We must remember, most people in poor countries regard globalization as a threat, not as a way to improve their basic living standards. We must also remember . . ." Eberhard's British-accented English fell to a whisper and then grew to fortissimo, "development programs are designed to increase developing countries' exposure to world markets, and through this they become exposed to considerable risk. Powerful countries have ways of mitigating risk, but poor countries do not. Aid programs are therefore often viewed by poor societies as suspect from the start. Furthermore, aid programs increase poor countries' dependency on first-world capital, and first world countries then become dependent on poor countries as a source for capital investment. These dependencies create bad policies - in both first and third world." The Latin American debt crisis of the 1980s is a terrific illustration of this.

Eberhard speaks convincingly in The Ills of Aid about the need for a "paradigm shift" in development economics - a discipline that understands the world through Western eyes. His criticisms sometimes amount to a shattering of Western, liberal values and ideals. He has challenged my own on several occasions. Above all, what I think he teaches is the idea that Western ideals which power development institutions like the World Bank need to be understood historically, and also geographically. Human rights and the concept of the person as an autonomous, free-thinking agent willing his/her own life's course - these basic democratic values began to crystallize under certain political conditions in the late 18th century. And it is no accident that they came into focus in the snow zones of Europe, regions immune from the crippling diseases of the tropics. These liberal values were answers served up by European peoples searching for alternatives to the great dynasts and inclined toward secularizing notions of what it meant to be a political community. And they were underwritten by great powers' political and economic advancements achieved through colonial conquest, the long saga of which still determines the world's geo-political makeup today.

So the ideals of individual freedom and democracy are cultural values tied to specific political and economic choices that have been valorized throughout history, consciously or not. This Manfred Kuehn makes plain in his recent biography of Immanuel Kant. Kant's contemporary Adam Smith (sketched here by the artist David Levine) certainly understood as much. Unfortunately, North American development economists have little patience for such lessons.

We take it as given that it is our place to help poor people achieve higher living standards, even if they are not our compatriots. We feel that we are right to assist them in linking their economies to the powerful combines of global capitalism. We sense that doing so will ultimately bring about greater political freedoms - enabling nations, new and old, the right to choose their future. But people in the tropics often do not see things this way, and they do not regard efforts to promote development - efforts that have been folded into the great lending institutions of the West - as driven by altruism. Sure, access to safe drinking water, good schools, and basic health care are sacred commodities, but when they come with the societal transformations that global lending institutions require as conditions for aid, we should not be surprised to see our Western models fail. What is often at stake is something utterly foreign to the mindset of the political economist: culture. "People are ultimately self-interested and wish to protect their unique traditions and customs," Eberhard remarked to me on more than one occasion. "That is why sovereignty is so crucial and why it must only be violated in extreme circumstances."

Yet, the stubborn reality persists. As the UN Development Program reports, about eighty-five percent of global economic activity is produced and enjoyed by the richest one-sixth of the world's population. Over a billion people live on less than a dollar a day and over two billion people on less than two dollars a day. As Columbia economist Jeffrey Sachs reminds us, two hundred years ago poverty wasn't an issue because nearly everyone was poor. Now, however, with such terrific disparities in global income, we are inclined to see the yawning gap between rich and poor as a moral disaster. This reflects our habit of regarding the family of nations as somehow responsible to and for one another. This moral regard is one of the most prized commodities to come out of the Enlightenment. But there are real limits to its exercise and intrinsic ambiguities to moral principles pitched as ethics and as politics. At what point does our moral obligation to those beyond our borders produce policies that impose ends different societies do not see as equally ultimate?

For the past couple of years the United States has been preoccupied with the most eternal of world-political questions: war and the basic quest for security. After September 11 a number of international challenges were not included in the basic equations of power politics. Recent news reports of ethnic cleansing in Sudan, the struggles of Haiti - where living standards have plummeted since President Aristide was chased from office - these and many other events have been chased to the margins by the headlines generated in Iraq, a conflict with dubious moral grounds and unknowable political consequences. The challenge today of global terrorism is not unrelated to radical disparities in global incomes. Exploring the connections between the rise of the absolute number of poor people on the planet and the belief crystallizing in the minds of many that the West is simply powerful, and arrogantly so, must give us pause.

The way we frame the prevailing narratives of world affairs powerfully mediates our sense of urgency about the politics those affairs will usher in. We need novel ways of apprehending a wide array of challenges that form the reality of world politics, a reality which involves the basic instinct of security, to be sure, but a reality which, today at least, obscures rather than clarifies a host of other pressing challenges just on the horizon of world affairs. We will require diligence, persistence, imagination, and above all else the willingness to question our habits of thinking, asking how they became habits in the first place. Such questioning can lead to richer historical insights and, perhaps most important of all, a better understanding of the nexus of history and geography - two areas of knowledge vitally important as we confront the moral challenges of this new century.