Emerging from Poverty: The Economics That Really Matters
Professor Gerald Meier’s purpose is set out in the first sentence of his book. He wants to appraise “the efforts by economists to understand the economics of being poor as well as the policy measures they have proposed that will allow the countries of Asia, Africa, and Latin America to emerge from poverty.” According to Meier, “the economists’ primary goal must be the elimination of poverty.” Economists since Adam Smith, he notes, have created theories to try to explain why countries are poor and what can be done to improve their economic performance. In one way or another these theories have become the basis for government policies.
After World War II the rich countries devoted much effort to applying economists’ ideas to the damaged economies of Europe and to the poor countries of Africa and Asia, many of which were just gaining political independence. Prominent economists advised governments to make loans of large amounts of money for poor countries to invest in dams, factories, agricultural improvements, and other projects that were thought necessary for reconstruction and economic recovery. In other cases, the poor countries received credits and other direct aid.
Many of these efforts have been subject to criticism in recent years for being ineffectual, wasteful, and misguided. Meier believes that some of them were successful. For example, he says that after the Korean War, foreign aid helped South Korea to develop from “a subsistence economy with 60 percent of its cultivated land laid waste, most of its limited industrial capacity destroyed.” As the economy grew, foreign aid was replaced by an increase in domestic savings and foreign exchange earnings.
In other countries, he says, government aid policy has been largely responsible for development. For example, when the Ivory Coast became independent from France in 1960, it was among the poorest nations in the world, with a per capita income of about seventy dollars. Shortly after independence, the French government decided to promote agricultural exports and use “foreign capital and know-how.” It encouraged the importation of skilled labor from abroad, mainly from France.
Agriculture was encouraged through public investment in infrastructure [such as roads] and by direct incentives to production, especially the maintenance of relatively high and stable producer prices for the main agricultural products. Continued efforts toward agricultural diversification gave the Ivory Coast a clear advantage in the production of coffee, cocoa, oil palm products, copra, pineapple, and bananas. It has also become economically feasible to produce cotton, groundnuts, rice, and maize.
As a result of these policies, Meier writes, income per person reached $680 in 1976, and “over the period 1960–1975, the real growth in national output averaged a remarkable 7.5 percent per annum.” By 1975, he reports, “its exports of cocoa, coffee, and timber were, respectively, 4, 5, and 30 times the 1950 exports in volume. The Ivory Coast now ranks third among world coffee and cocoa producers.”
But other countries, especially those in sub-Saharan Africa which rely heavily on producing agricultural crops for …