In 1991, India faced a looming balance of payments crisis. India’s leaders responded, making what are now generally agreed to be some very good decisions: they devalued the exchange rate and instituted a systematic set of economic reforms that lowered high trade barriers and eliminated repressive internal regulations, helping to dismantle India’s notorious license-permit Raj. These reforms averted what might have been years of stagnation or slow growth (avoiding the fate of a Mexico or a Brazil in the 1980s). The reforms also paved the way for the next decade and a half of accelerated growth, and helped some 300 million people escape extreme, grinding poverty.
Lant Pritchett, Professor at Harvard’s Kennedy School for Government, argues that the aid industry deserves credit for these reforms and the associated huge improvement in human well-being, but not quite in the way you might expect.
It wasn’t that the World Bank and the IMF required India to make those reforms through conditionality. Instead, Pritchett says, it was the existence of a broad, international movement called “Development,” and an industry called “Aid” that created the conditions for Indian leaders to act as they did.
How so? First, many policy makers involved in India’s reforms spent their early careers working abroad for multilaterals, gaining exposure to ideas not prevalent in India at the time, and gaining experience watching these ideas either work or crash and burn in countries around the world.
Second, the aid industry funds the thousands upon thousands of obscure, detailed economics papers and studies that make up the knowledge base of the movement called Development. Without the painstaking work behind those studies, the movement of Development would never have a chance at producing those rare, brilliant insights with the power to transform hundreds of millions of lives.
To produce those fortuitous moments of brilliance, where the right policy meets the right person and the right opportunity, the movement called Development has to have the depth and breadth within it to produce detailed technical knowledge on a million different topics from tariff codes in India, to migrant remittances in Spain, to firm governance in Korea. Here’s where the piano recital part comes in:
I see the aid industry a lot like a piano recital. It’s kind of boring and it’s tedious and most of the people are wasting their time. But every now and again by God we make a difference and when we do make a difference it really transforms economies and lives for a very long time….
Any movement, be it development or classical music, has to maintain its core. Music has thousands of young aspiring pianists performing bad recitals that no one but their parents want to hear, all for the purpose of producing just one virtuoso Vladimir Horowitz or one innovative Philip Glass. Aid projects that can’t demonstrate impact and economics papers read by an audience of ten are the development movement’s equivalent of a million and one timid and dissonant renditions of Für Elise performed in student piano recitals the world over. But they are the core that allows for the possibility of “transformational excellence” in a movement.
For Pritchett, what aid does best is to “form the base of the pyramid that creates the possibility of the top.” And the power of successes in development—the rare policy insight, or the competent handling of a potentially disastrous crisis—is so great, and has the power to transform so many lives, that those successes justify the existence of the whole flawed movement, many times over.
Agreements or counter-arguments, anyone?
You can watch Lant Pritchett’s full presentation from the 2010 DRI annual conference, in which he argues this case much more skillfully (and employing other entertaining metaphors), in the audio slideshow below. The audio file of the Q&A following the talk is also posted.