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Harvard Economist Calls for New Approach to International Development

2001-08-09

The International Monetary Fund's structural adjustment policies are "a complete failure," said Harvard economist Jeffrey Sachs, during a speech this June at the International Development Research Centre (IDRC) in Ottawa. "The IMF should get out of the poverty business and leave it to others," he argued.

"After 20 years of structural adjustment, there has been no structural adjustment," claimed Dr Sachs. "Structural adjustment got it 100 percent wrong."

Dr Sachs, Director of Harvard University's Center for International Development, also chairs the World Health Organization's Commission on Macroeconomics and Health. He serves as an economic adviser to governments in Latin America, Africa, Asia, Eastern Europe, and the former Soviet Union. Dr Sachs was invited by IDRC to discuss economic development in the context of globalization.

Globalization a reality

"We need a strategy that understands that globalization is no panacea, it's no curse, it is a reality," he told an audience of about 200 people. "It's a reality that's going to do a world of good for large parts of the world. It will bring hundreds and hundreds of millions of people, maybe a couple of billion people, into economic development. International trade is a good instrument for that — foreign direct investment is a very powerful instrument if you can get it. But it will not solve the crises of sub-Saharan Africa, it will not solve the crises of the Andean region, it will not solve the crises of a large part of the Eurasian landmass. For that, were going to have to think a lot harder."

Dr Sachs said that existing programs and economic models of the World Bank and IMF don't recognize that globalization isn't happening on a level playing field. National economic failures are often blamed solely on governance, even though some countries have natural geographic advantages that help them to prosper in the global economy, and others have natural obstacles to prosperity. Unfortunately, almost all existing macro-economic texts and models fail to take these "huge" factors into account, he stressed.

Complex process

"The world is really a more complex structure, and development is really a much more complex process, than some of the simple visions that we have: of running the same race or of everyone participating in the same globalization process," he said.

Dr Sachs noted that few landlocked countries — except Switzerland and Luxembourg, which are both special cases — have prospered. Countries with tropical climates also have other factors working against them, including nutrient-poor soils that sap food productivity and a range of endemic diseases that sap energy. By contrast, nearly all temperate-zone countries that did not fall under Soviet influence during the Cold War are well off.

Geography downplayed

By ignoring such geographical factors, both the U.S. government and international bodies such as the IMF misunderstand "quite deeply" what globalization is, and what it does, he said.

According to Dr Sachs, global inequities will continue unless the United States plays a larger role, because it now dedicates only about 0.1 % of its gross national product to international development. The U.S. has huge influence upon and power over global development, "but unfortunately very little understanding," said Dr Sachs. The American government needs to become serious about global macroeconomic development, and to do that, it must improve its diagnoses of what's wrong.

Key issues

He said a serious approach to economic development must address three main issues: social development, or a society's capacity to raise and educate healthy children; economic reform, based on a far more complex understanding than is found in current approaches; and ensuring that countries have workable industrial policies. For economic development and anti-poverty programs to succeed, international development organizations must also invest more in science and technology, and address the special problems of tropical countries.

Other countries and development players will need to use "the politics of shame," to embarrass the U.S. into contributing more to development, said Dr Sachs. He recommends more emphasis on tapping private dollars to fund development, in concert with U.S. government funding.

Keane J. Shore is an Ottawa-based writer and editor.

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