The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics [Hardcover]

This is the best economics book I have ever read. A must read for economists and non economists interested or concerned with economic development and globalisation. With profound knowledge of both statistical and anectdotal evidence Easterly reviews post WWII development and policy efforts in the first part: A tale of flawed analysis and massive failures. The second part draws lessons and outlines ways forward.
The best thing about the book: You do not need an economics PhD to read it nor will it be useful as a substitude for your sleeping pills. Accesible to anybody with a brain be warned that it is more exciting than a novel and you won't be able to stop once started.

I read William Easterly's book, White Man's Burden and found it to be well written; it was witty, yet provided deep insight into the failure of aid in lifting `tropical' countries out of poverty. After reading the Elusive Quest, which was written before the White Man's Burden, it is interesting to see how Mr Easterly's thoughts have developed. His message in The Elusive Quest was, reform Third World governments and the poor shall prosper with the aid of the IMF and World Bank. In White Man's Burden, his position was: Abandon the utopian blueprint to fix the Third World's complex problems. Instead focus on getting specific, incremental improvement in people's lives in fields such as health, sanitation and food security.

The Elusive Quest for Growth starts out with an examination of panaceas for development, cooked up by economists at the World Bank and IMF, which have been abysmal failures. William Easterly explains that Domer's financial gap approach to aid, which was a legacy of the Great Depression and rapid Soviet industrialisation, was applied without modification to the newly independent African States. This approach, which assumed that machinery was the key to economic development spectacularly failed to deliver development to the Third World because it was hopelessly flawed (it was intended for short business cycles in rich countries). After examining all the evidence on factors, which determine the long-term prosperity of a country, he showed that improvement in technology is the key determinant of labour-productivity and overall economic growth.

The author then goes on to examine some of the other `cures' that IFI (International Finance Institutions) have developed in the elusive quest for growth. One by one he tackles the `cures':

- Education: In itself it is as much use to a poor society that wants to grow as `hula hoops', it needs to be combined with other factors such as -wait for it - high-tech machinery or advanced technology to complement the high skills. No surprise here.

- Population control: Does not work. Even if desirable, subsidising contraceptives is not the way to go because the price of contraceptives is a minor factor in the decision to have a child. The evidence, instead, shows that, development is the best contraceptive

- Debt Relief: Has been misguided because it has tended to go to the countries with bad policies. William Easterly: "If there is any expectation that donors will continue to favour irresponsible governments in the future, then debt relief will run afoul of governments response to incentives

What I Liked about the Book

For my money, the best chapters are Chapters 11 and 12, where Mr Easterly discusses how governments can kill growth. The author states, to my surprise, "Despite the obvious importance of corruption in economic development, it has not attracted much attention from economists until recently. As a Nigerian, I don't need a Ph.D in economics to know that corrupt governments can break one's entrepreneurial spirit and kill off the incentive to invest or even to work hard.

Mr Easterly's subsequent analysis of the effect of corruption on growth is interesting; he distinguishes between centralised and decentralised corruption and posits that centralised corruption is "better" for growth, using the examples of Zaire and Indonesia. He argues that countries with institutional corruption are weak states with abysmally poor institutions. This analysis struck as me as been too dry. Surely, the fact that growth in Suharto's Indonesia outpaced Mobutu's Zaire must have been due to more complex forces. Mr Easterly's argues for institutional reform. However, the only example of a country, which established institutional reform, was Ghana. Now that's an example to scare corrupt elites everywhere because Ghana only established reform after a military coup led by Jerry Rawlings, in which he executed most of the old-style corrupt elite. Yikes!

What I did not Like about the Book

The author's analysis of the impact of ethnic diversity on growth is suspect, even puerile. His analysis is difficult to believe as he does not distinguish between correlation and causation. For example, he states that high ethnic diversity is a good predictor of civil war and genocide and that the most ethnically diverse countries are in Sub Saharan Africa. One wonders if the lack of strong conflict-resolving institutions, and not ethnic diversity, is a more plausible cause for conflict in Sub Saharan Africa.

Mr Easterly, no doubt, cares deeply about the poor. He relates his experience in several poor countries with wit and wears his knowledge lightly. He manages to avoid the matter-of-fact manner that is quite popular with economists writing about `serious' issues. However, Mr Easterly attempts to put some human stories into the numbers just to remind the reader that poverty in the Third World is not just about the sterile economic models but about flesh-and-blood people, who struggle to eke out a living every day.

While The Elusive Quest for Growth was a good read it was not as punchy as The White Man's Burden. The author seemed to think that the words `tropical' and Third World were synonymous. There were too many economic models and not enough humanity in the pages; the book seemed half-cooked. Therefore, the Elusive Quest deserves only 3 stars.
In conclusion, I would recommend White Man's Burden instead of the Elusive Quest to anyone who wants to get a better understanding of the failure of the IFI's and a more mature, worldlier William Easterly.

This is an excellent book which deserves to be widely read by all those with even the slightest interest in economics, globalisation or the developing world. As Easterly points out at the start of the book, it is written because he cares about the developing world and wants to see it grow. If only the 'make trade fair' movement wasn't blinded by its own worthiness and righteousness this book could really make an impact and help to genuinely improve lives. Highly recommended.