In his recent article with Project Syndicate Jeffrey Sachs presents his views on what is the proper help the world should offer to poor Africa. He contrasts proper Chinese approach with ill-functioning approach adopted by the World Bank. It is striking, how the views of this respected economist evolved over time. Almost two decades ago he was in Poland advising the government on free-market policies. He was a herald of the Washington consensus: stabilize, liberalize, privatize. Now, after two decades of empirical proof that Washington consensus policy failed in many parts of the world Jeffrey Sachs proposes an industrial policy approach, that assumes significant role for the state, and for the state expenditures. As Lord Keynes once said when asked why he changed his view: When facts change I change my opinion. Do you, Sir? Unfortunately, the world is populated by narrow-minded leaders who are unable to learn and update their understanding of the world. Global knowledge economy requires knowledge leaders. A quote from Sachs article follows:
“Of course, the African leaders were most appreciative of the next message: China is prepared to help Africa in substantial ways in agriculture, roads, power, health, and education. And the African leaders already know that this is not an empty boast. All over Africa, China is financing and constructing basic infrastructure. During the meeting, the Chinese leaders emphasized their readiness to support agricultural research as well. They described new high-yield rice varieties, which they are prepared to share with their African counterparts.
All of this illustrates what is wrong with the World Bank, even aside from Wolfowitz’s failed leadership. Unlike the Chinese, the Bank has too often forgotten the most basic lessons of development, preferring to lecture the poor and force them to privatize basic infrastructure, rather than to help the poor to invest in infrastructure and other crucial sectors.
The Bank’s failures began in the early 1980’s, when, under the ideological sway of President Ronald Reagan and Prime Minister Margaret Thatcher, it tried to get Africa and other poor regions to cut back or close down government investments and services. For 25 years, the Bank tried to get governments out of agriculture, leaving impoverished peasants to fend for themselves. The result has been a disaster in Africa, with farm productivity stagnant for decades. The Bank also pushed for privatization of national health systems, water utilities, and road and power networks, and grossly underfinanced these critical sectors.
This extreme free-market ideology, also called “structural adjustment,” went against the practical lessons of development successes in China and the rest of Asia. Practical development strategy recognizes that public investments – in agriculture, health, education, and infrastructure – are necessary complements to private investments. The World Bank has instead wrongly seen such vital public investments as an enemy of private-sector development.”