The Zombie Enlightenment and Its Discontents
The Idealist: Jeffrey Sachs and the Quest to End Poverty
New York, NY: Doubleday, 2013, 272 pp.
Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty
New York, NY: Penguin, 2011, 321 pp.
Political economy was the original development theory. In his classic The Wealth of Nations, published in 1776, Adam Smith proposed that people are most productive—both in terms of exercising their full capacities and benefiting society more generally—if their labour is rationally organized and not simply allowed to follow default hereditary paths, which in Smith’s day were largely protected by the law. Thus, if my father was a carpenter, I would be entitled to become one as well, regardless of my talent, disposition, etc. In effect, Smith was calling for a more proactive state whose functions went beyond simply keeping the peace. The state would intervene in people’s lives because “normal” was no longer presumed to be good enough. Those involved in the theory and practice of development aid still resonate to these sentiments.
But Smith’s idea of “state intervention” was not ours—in fact, it was almost the exact opposite. If the state intervenes to ensure that people are employed or otherwise categorised according to merit rather than entitlement, we presume that the state will, for example, provide for some education and administer some examinations. In contrast, Smith was much more liberal, if not “neoliberal.” He believed that creating markets where none had previously existed would smarten up humanity, as people are forced to make decisions about things that in the past would have been decided for them, if only by virtue of lack of choice. Thus, Smith was the great enemy of hereditarily protected trades whereby one would have to be born of a carpenter to become a carpenter. Instead he believed that anyone should be allowed to try their hand at a trade and potential consumers be left to decide the outcome. Caveat emptor!
Underwriting Smith’s liberalism was a fundamental faith that left to their own devices people can sort themselves out. In this respect, he was very much a child of the “Age of Reason.” Aspiring carpenters who fail to find enough customers will either try to cater to the market better or shift to a new trade. But make no mistake: For Smith the state and the market do not counterbalance but mutually promote each other. Today’s ideas of “state failure” and “market failure” (each requiring the assistance of the other) were not part of his vocabulary. A strong state is needed for markets to thrive, so Smith thought, if only so that hereditary privilege is not simply replaced by upstart oligopolies that can turn initial market success into a perpetual advantage. This is one of several of Smith’s lessons that Jeffrey Sachs, development economist and activist extraordinaire, never seemed to have learned, despite sharing most of Smith’s guiding intuitions.
The Sachs effect
Sachs has been the world’s most famous development economist for the past quarter-century. His stellar CV includes having been the youngest tenured professor at Harvard and head of the United Nations Millennium Project to eliminate global poverty. He was recently nominated by a coalition of developing world countries to run the World Bank, and is perennially cast (at least by the sort of people attracted to Ralph Nader) as a future third-party US presidential candidate. From the start of his career, Sachs has been well placed to improve the living conditions of various parts of the world in need of economic rehabilitation, including the former Soviet empire, and various nations of Latin America and Africa. Nevertheless, whatever success his policy advice has enjoyed, it has been very much against the spirit in which he offered it.
As The Idealist makes clear, Sachs sees himself—and has persuaded many others to see him—as the ultimate humanitarian, someone with unbounded faith in the ability of even the poorest of people to raise themselves, once afforded opportunities that Westerners can easily supply. On the other hand, were Sachs to die tomorrow, he would be mainly remembered as the person who persuaded various former socialist regimes to engage in drastic marketisation policies that ruined many people’s lives in the short term before a new economic equilibrium was found. Once another generation or two has passed, perhaps in the hands of some late 21st century Hegel with a taste for world-historic irony, Sachs may be hailed as a pioneer of globalised neoliberalism, a master of foresight. But it is clear that in the interim the so-called “Russian Oligarchs” already owe a debt of gratitude to Sachs for having enabled them to take full advantage of the fire sale on Soviet assets after 1989.
However, in the circles where the phrase “The Idealist” is taken non-ironically to encapsulate Sachs’ career to date, he is credited with the sort of inspirational bookkeeping that hovers over all development aid discussions— namely, that poverty could be eliminated simply with a 1-2% redistribution of the world’s wealth. That this has failed to happen is taken to be indicative of the greed and callousness of the rich. Depending on the preferred diagnosis, this in turn may be due to either cultural stereotypes that the rich may hold of the poor—feckless, undeserving, whatever—or more general evolutionary tendencies that bias aid toward those with whom one is in mutually beneficial relationships (for example, Israel, Egypt, Pakistan, in the case of the United States)—that is, not poor people in remote places with whom one has little chance of future contact. But whichever diagnosis one prefers, idealists like Sachs assume that the prescribed redistribution policies would do the trick. The problem is “simply” one of the donors stepping up to the plate, since once they do so the poor will respond accordingly to improve their standard of living.
Sachs and his entourage of conscientious celebrities such as U2’s front man Bono Vox (who penned the Foreword to Sachs’ best-selling The End of Poverty) and more sober academic fellow-travelers such as utilitarian philosopher Peter Singer appear never to have mastered the difference between what economists call “direct” and “indirect” costs. As a result, they fail to see that decisions are not simply triggers for action but actions in their own right that carry their own costs—in this case, on the one hand, to get potential benefactors to the point where they make appropriate donations, and, on the other, to get beneficiaries to the point that they receive, and then use, donations in the spirit in which they are intended. When Sachs’ colleagues question outright his economic competence, it is just this blindness to the pervasiveness of indirect costs that they have in mind. In The Idealist, Sachs’ most formidable critic turns out to be the co-author of Poor Economics, MIT’s Esther Duflo, who argues that Sachs never seemed to have learned that “development aid” is less about “aid” and more about “development,” the costs of which go well beyond the sheer transfer of wealth.
Lest one think that Sachs is being considered unfairly, a telling moment in The Idealist occurs in an exchange between Sachs and Paul Farmer, a famous medical anthropologist and founder of Partners in Health, whose secular piety rivals that of Sachs himself. In his exhortation to Farmer, Sachs declares that the problems of poor health care in Haiti require raising the funding ante from millions to billions of dollars. The reader is left with the impression that Sachs believes that the main problem here is a weakness of will on the part of potential donors— and not any resistance or perhaps deficiencies on the part of the recipients themselves.
Seen in historical perspective, Sachs’s enthusiasm for development aid combined with his obliviousness to its indirect costs mark him as a vestige of the Enlightenment in its original 18th century form. Indeed, Sachs and his fans promote a “Zombie Enlightenment” that fails to see that its premises are nowadays dead on arrival. By today’s standards, the original Enlightenment wits—not least Adam Smith—were bold and reckless. They were guided by a theological vision that was to be redeemed in very material terms, issuing in a “heaven on earth,” to recall the phrase used by the greatest modern American historian of this period, Carl Becker. Here we need to recall that over the centuries the Roman Catholic Church had been very effective in reminding humanity of its biblically fallen status to cast doubt on our capacity for self-determination. Yet at the same time, from the onset of Christianity, various heretical strands—most notably the one stemming from the fifth century Celtic lawyer Pelagius—have argued that humanity can pull itself up from its bootstraps, without any explicit help from God, to regain its divine entitlement. Indeed, if Pelagius is correct, God may even want it that way.
Generally speaking, the Protestant Reformation helped to advance the idea that “where there’s a will, there’s a way” with regard to salvation, but the Enlightenment took it one step further. Certainly many reformed Christians, not least the English Puritans whose forced exile to America resulted in the United States, disdained the profligate spending patterns of the largely Catholic monarchies of Europe. But the original Enlightenment wits believed that such consumption was itself a form of investment, the full returns of which could be realized only if ordinary people were released into a free labour market that allowed them to cater competitively to whatever new tastes the nobles may have developed as they learned more about what the wider world had to offer. Over time, so the wits thought, this would raise everyone’s level of civility as supply and demand became subject to greater discrimination, not least by consumers discovering post facto whether they received value for money.
The dark side of the Enlightenment
But there was a dark side to this Enlightenment optimism, which helps to explain how Sachs, now the great humanitarian saint, could have started his career by applying what his critics now call “shock therapy” to open up markets in formerly socialist regimes. In The Dialectic of Enlightenment, the foundational work of the Frankfurt School of critical theory, Theodor Adorno and Max Horkheimer argued that the Enlightenment released people from their hereditary social bonds only to force them to prove in a sink or swim fashion (as one might a scientific proposition) their fitness in the emerging liberal social order. In effect, people were legally stripped of the little humanity to which they had been entitled (via an ascribed social status) and forced to reapply for a potentially much greater sense of humanity but now under conditions of considerable uncertainty. The hope was that people would spontaneously discover their own special talent, or ‘comparative advantage’, and seek to maximize it in their newfound state of liberty. By implication, those who failed to secure employment in this environment failed to qualify as “human.” Of course, one could question the sincerity of the nobles to whom the Enlightenment wits made their pitch for free markets. (And Sachs himself has certainly complained that his political clients have failed to follow through on his advice.) But the wits themselves were clear that whatever subsidies were provided to these newly free subjects should be in the spirit of capital development—as opposed to charity, which the nobles had all too readily dispensed to pacify the poor, with the unintended consequence of arresting economic growth.
In other words, the difference between the Enlightenment’s original optimism and the more sober awareness that led Thomas Carlyle in the mid-nineteenth century to dub economics the “dismal science” lay in recognising the indirect costs of doing the work of development. Two types of indirect costs relating to development aid go beyond the value of the wealth that is transferred from rich to poor. First, there are opportunity costs—that is, the costs from, on the one hand, depriving benefactors of alternative prospects for investment and, on the other, depriving the beneficiaries of continuing with their current mode of existence. Second, there are transaction costs, some of which are calculated as “overhead” in budgets, which may be more important in terms of the ultimate efficacy of development aid. These include the cost of persuading the rich to part with their wealth and the cost of persuading the poor to accept the wealth, both in the right spirit—and more specifically, the cost of getting both to behave in the appropriate manner on a regular basis, especially in terms of inducing the poor to embark on their own voyage of “comparative advantage” discovery. Sachs’ unabated enthusiasm in the face of these challenges marks him most clearly as a latter-day Enlightenment figure in zombie mode.
In terms of opportunity costs, it is instructive to contrast China’s attempt to “buy the world,” to adapt a phrase from the British development economist Peter Nolan, with what is normally regarded as “development aid.” China provides enormous financial subsidies to Africans—more than the World Bank—but just enough to enable them to supply goods and services for the Chinese workers who are imported to mine Africa’s natural resources. Without demonstrating any concern for the benchmarks of Sachs’ Millennium Project, China aims to ensure that the Africans remain cooperative in the extraction of their resources. This is one rather ruthless but so far successful way for a benefactor not to suffer an “opportunity cost” by helping the poor. For the United Nations to exhort China to increase or even reorient its African investments would raise the spectre of transaction costs, something that normally inhibits big business from investing in countries with minimum wage laws and robust health and safety codes.
But an opportunity costs-based analysis equally applies to “the culture of poverty” that prevents the poor from seeing aid as the self-capitalisation scheme that the developers intend it to be. Here the poor’s resistance should be seen positively as a simple defence of their culture. While some of the poor may wish to trade out of their heritage, others may regard the loss of cultural identity as an intolerable cost and hence prefer to remain in an “undeveloped” state, adapting their aid packages to already existing needs without substantially transforming their mode of being. Poor Economics presents this situation as the main “cognitive” barrier to the efficacy of development aid, where “cognitive” implies that the authors believe that it would be in the poor’s long-term interest to adopt the new identity that the aid is designed to promote. Put bluntly, the poor must learn to think better. In the nineteenth and twentieth centuries, this attitude was dubbed “Imperialist” for presenting the “underdeveloped” with the stark choice of going forward with the rest of humanity or staying behind in their cultural backwater. Such Imperialism—and its ironic offspring World Communism—is basically how the Enlightenment continued to be promoted once it was mugged by reality in the form of the negative unintended consequences of the French and Industrial Revolutions, both of which had been inspired by policy advice given during the Enlightenment.
This brings us to the transaction costs of enabling both the potential benefactors and the beneficiaries to stay the course required for either party to realize that their investment is worthwhile. The level and duration of investment goes beyond the showcase development projects to which Sachs has drawn much media attention, which are often the product of a spike in donations in a relatively small space over a relatively short period. A little known precursor of modern economists, John Rae, advanced as early as 1834 a “sociological theory of capital” that proposed “anticipation” and “abstinence” as the moral qualities necessary for promoting long-term economic development. Taken together these qualities could override certain default behavioural patterns—encapsulated in the phrase “selling short”—that prevent people from acquiring the long-term vision and staying power required of sustained prosperity. Nowadays economists deal with these matters under the rubric of “time preference theory,” which forms the intellectual core of Poor Economics’ case against Sachs.
In short, Poor Economics accuses Sachs of underestimating the extent to which those most in need of development “discount the future” because, no matter the good fortune that development aid temporarily brings, the poor continue to believe that they will live for roughly the same forty years that their ancestors have lived and for which their culture and institutions have been designed. Simply telling them that the science and technology is now available to double their life expectancy is likely to met with the same incredulity as the TED talks that regularly tell us in the developed world that we will soon be able to double our own life expectancy to 150-200 years. Moreover, in both cases, the resistance of the target beneficiaries is sufficient to give pause to potential benefactors who are worried about the viability of their investments. Here Poor Economics makes some quite plausible but expensive proposals for scaling-up development aid successes. These, it turns out, are not so different from what enabled Imperialism to work as well as it did, if “Westernising” the non-Western world is understood as the goal. Thus, the migration of talented Westerners to the developing world, the deep recruitment of promising non-Western natives to the cause, and a vigorous ideological campaign aimed at both the would-be developers and developed were all involved in the Imperialist effort to meet the transaction costs entailed in the transfer of wealth from the developed to the developing world.
But even then, as historian Niall Ferguson has ruefully observed, Imperialism failed not because it was failing to have the desired long-term effects, but mainly because after the Second World War its most active promoters (including Winston Churchill) decided that it was no longer affordable. (Witness India, since its inception, the world’s largest democracy.) The matter boiled down to the likely rate of return on any future investment. A similar judgement probably awaits development aid on the heroic scale promoted in both The Idealist and Poor Economics. In the end, the only real difference between Sachs and the critical authors of these two books is that the latter have much better bookkeeping skills, representing the harder face of an Enlightenment mugged by the reality of transaction costs. Whether that is sufficient to unleash the political will and economic resources worthy of an Imperialism 2.0 is very much an open question. But the long-term prospects for development aid may depend on it—that is, unless, of course, the Chinese succeed in teaching the world how to be proper neoliberals.