In Washington’s economic circles, the only animals we usually have to worry about are hawks and doves. (And the occasional raccoon or vole.)
If you’re doing development research in Ghana, however, things are more complicated. Zipping from village to village on her motorcycle, my friend Liz has become intimately familiar with the behavior — often stochastic — of different animals when confronted with a moto rider:
Goats are the ideal animal to encounter on the road in Northern Ghana. Street smart and properly aware of their place in the road hierarchy, they will run away and off the road at the approach of a vehicle. …
While goats are the ideal animal to encounter on the road, sheep are bane of Ghanaian drivers. Dismally stupid, they will invariably run directly into traffic. … The difference in behavior between sheep and goats makes distinguishing the two a key survival skill in Tamale. Remember: tail up, goat; tail down, sheep.
The U.S. military is now a major player in economic development. In Iraq and Afghanistan, for example, economic stabilization is a core tenet of its counterinsurgency strategy. Which makes good sense, in theory, but raises a troubling practical question: does the military actually know anything about economic stabilization and development?
In a recent essay in Foreign Affairs (Expeditionary Economics: Spurring Growth after Conflicts and Disasters), Carl Schramm answers in the negative. The U.S. military does not have these skills in anywhere near the measure that it should. He then recommends that:
[P]ostconflict economic reconstruction must become a core competence of the U.S. military. … It is imperative that the U.S. military develop its competence in economics. It must establish a new field of inquiry that treats economic reconstruction as part of any successful three-legged strategy of invasion, stabilization or pacification, and economic reconstruction. Call this “expeditionary economics.”
Schramm goes on to argue that expeditionary economics should emphasize entrepreneurship and “messy” capitalism, not just large-scale infrastructure efforts that often get the most attention. If you are interested in these issues, his essay is definitely worth a read.
For more context and other views, you should also check out the conference that Kauffman held to discuss these issues. You can read highlights from the conference here.
Some excerpts (not attributed to any of the specific participants):
The core idea behind the Marshall Plan was to stimulate the private sector through direct financial support of businesses rather than distribution through local government institutions, and it continues to serve as a potential model for efforts today, especially insofar as it deeply considered the nature of the war and the pre-existing institutional conditions in Europe.
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Stability and economic development operations in Iraq and Afghanistan have been problematic for quite different reasons. In Iraq, the United States squandered the opportunity to demonstrate a real concern for the welfare of the Iraqi people in the months after the invasion because it failed to adequately plan for stabilization and reconstruction activities after major combat operations—as a result, both the economic and security planning systems failed. Many government agencies were complicit in this failure, including the military. In Afghanistan, the rush to respond and the limits of time constrained stabilization and reconstruction planning along with a desire to maintain a light footprint. Military, political, and development strategy was cobbled together as the conflict progressed. This meant the United States began trying to catch up with ideas, and has been trying to acquire and deploy resources ever since. As part of a “peacebuilding” strategy for the future, the military should address these core challenges to improve its stabilization operations
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One pre-requisite of a market economy might be the rule of law, although China’s success over the past few decades offers an interesting challenge to that premise.
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There is debate and uncertainty over what we mean by the phrase, “rule of law,” and whether it simply includes a justice system, courts, and efficient policing or extends beyond that to contracts, finance, commerce, and beyond. The answer is no one knows, and the rules of the game don’t have to be perfect—they just have to be certain and perceived as fair. The two things businesses always look for are stability and certainty.
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In war, just as there are human casualties, there also are financial casualties, and we need to accept this reality. Some dollars will be misappropriated, and some will go to the enemy, to criminal networks, to ineffective local leaders, and to bad projects. This doesn’t make it okay, but we need a productive dialogue to determine what is a reasonable level of these financial casualties.
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Some disagree that economics is … a soldier’s job. Yet, economics is required to win, and a soldier’s job is to win. The military has no choice but to use economics as a weapon in stability operations, so let’s be as good as possible at it. What we need to be thinking is, “What are the appropriate economic principles we can teach military leaders so they can use them to accomplish their mission?”
At the TED conference in Oxford last month, Paul Romer put forward a big idea: charter cities. His basic vision is that the best way to promote growth in developing countries may be to start over. Of course, you can’t just sweep away the existing system of economic and political institutions; they may be killing growth, but they are well-entrenched. So do the next best thing: clear some ground and build new charter cities.
Those cities will have rules — indeed, economic history teaches that they must have rules — but they will be focused on providing an environment that promotes economic growth. In short, property rights and the rule of law are in, corruption and political patronage are out.
His provocative example: If the U.S. gives up on Guantanamo, Raul Castro should invite the Canadians to help manage the area as a charter city. Over time, perhaps Guantanamo could become the Hong Kong of the Caribbean.
To illustrate how prosperity varies around the globe, Romer uses the increasingly popular approach of showing night time satellite photos. North Korea is a sea of darkness next to South Korea, illustrating the perils of too much government control. The darkness of Haiti, as compared to its neighbor the Dominican Republic, similarly illustrates the perils of too little government or, at least, too little governance.
As Romer frames it, development is a classic Goldilocks problem of finding the right set of rules — not too hot, not too cold — and then allowing people to make the choices that eventually lead to prosperity.
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