We’ll be hearing a lot more about this topic in the next month or so. I’m pretty excited about it I must say. Tim Colebatch’s column captures my own feelings pretty much. There may be bugs on what’s flying around at present, but there are real achievements occuring. And if anything matters in our lives, if other people matter, this matters.
In any event, Rafe Champion did a post on it over at Catallaxy. Since it was a post on Sachs’ book and I’d been reading it – and didn’t notice anyone else in the post or the comments had, I put in a comment. Since I’d like to get the conversation away from the now fairly trite observation that we won’t do too much good if our gifts are soft headed – to very corrupt governments, or come with great faith in failed ‘industry policy’ solutions – towards some of the things discussed in Sachs’ book, I’m reposting my comments on Rafe’s post over the fold – to get our own discussion going.
They’re far from definitive comments, as you’ll see, but I’ll be interested in the discussion.
Oh and by the way, I intend to moderate the discussion strictly. That means I welcome debate from any side of the political fence but not cheap shots or sloganeering which will derail the conversation – or rather rail it – into the usual grooves. If I think a comment will do that I will simply delete it. Since I’ll probably be more offended by sloganeering with which I disagree than with sloganeering with which I agree, here is a plea for all sides to try to be as constructive as possible. If you object to this – please start your own post saying how terrible it is – somewhere else.
I’m about a third of the way through Sachs’ book. I thought it dull and worthy until I got to the last two chapters that I’ve read on ‘clinical economics’ and ‘bolivia’s hi-altitude hyperinflation’- both of which were so good I went and scanned them into my computer. Email me at nicholas AT gruen DOT com DOT au if you’d like a copy.
So far Rafe there’s none of the insights about socieities and inward lookingness that I agree are important to avoiding the disasters of the past fifty years. Then again, some of this can now be taken in one’s stride. We can move on. No-one of any seriousness now argues in favour of highly statist micro-economic solutions. I’ve not read them yet, but I’m sure Sachs’ chapters on India and Poland will gladden the heart of enemies of inward looking industrial statism (like me).
But economics is a world of positive feedback. That means lots of things, and it means both that societies can get in huge problems that are self re-inforcing. If they’re deeply ingrained politico-micro-economic problems they can be very difficult to tackle. And simply handing over more cash isn’t going to help. On the other hand it also means that aid can be of great benefit – if it can help turn vicious circles into virtuous ones.
So far Sachs’ focus is on the kinds of disastrous positive feedbacks that are involved in national debts and (in the chapter I’ve just read) hyperinflations. And on the way in which he’s come to believe in himself as ‘clinical economist’ making house calls, and thus on the importance of knowing about the countries to which one is handing out advice on and on how poorly his training has equipped him for this.
As for the idea that debt forgiveness is wrong and breeds moral hazard, of course it does. The question is as usual to weigh the two sides and decide what is, in a practical sense, best. My own view (which I won’t pretend is any more informed than others in these comments) is that where debt forgiveness is a good idea, if its practicable it might be even better to hand money to people other than those owing money. But this is often not practicable. Particularly where some rapacious and corrupt government has borrowed and squandered the money – and the lenders have often known that this is the kind of govt to whom they’re lending.
Ultimately we’ll go astray here however in getting too excited with the moral rights and wrongs – which are complex. We’ve had a pretty good system on this domestically for a century or so which has been bankruptcy and (I imagine in my shameful ignorance) that it is the approrpriate analogy for much third world government debt in the poorest countries. As for why we can’t pursue my proposal regarding private debt – don’t forgive the debt but make an equal payment to others – I’d be interested to read in further comments. I expect that an important part of the problem will be that the private debt is bank debt and that not forgiving it cripples the economy. But please commenters – enlighten me.