Tag: Center for Global Development

Hope and Dismay about Haiti’s Future

Nicholas Kristof provides “a useful reminder of the limitations of charity and foreign aid” in his New York Times op-ed about Haiti today. “Nearly a year after the earthquake in Haiti,” he notes, “more than one million people are still living in tents and reconstruction has barely begun.”

He emphasizes the importance of “trade, not aid” and of the role of business: “It’s hard to think of a charitable project that will be as beneficial as the Coca-Cola Company’s decision to build up the mango juice industry in Haiti, supporting 25,000 farmers.”

He also cites a seemingly successful microfinance aid project that lends money to poor women in Haiti to begin and expand business ventures by, for example, investing in livestock or growing fruit for sale. It is impossible to evaluate the record of that organization based on the anecdotes Kristof provides, but, while microcredit may for a time alleviate the conditions under which poor recipients live (and be successful at pulling some recipients out of poverty), there is little evidence from its overall record that microcredit effectively reduces poverty. It is certainly not a way to reduce poverty on a widespread or sustainable basis. David Roodman of the Center for Global Development notes, for example, that “microfinance institutions in Haiti only reach perhaps 250,000 people, about 2.5% of the population.” (For a critique of some of the claims of microcredit proponents see Thomas Dichter’s Cato study.)

In line with Kristof’s main argument and with decades of evidence of successful countries around the world, the most effective way to reduce poverty in economically repressed Haiti is by opening its markets and increasing economic freedom. Unfortunately, Haiti’s reconstruction and long-term development plan, according to which the United States and international donors have pledged more than $15 billion, reads like a relic of central planning with virtually no mention of policies that promote economic freedom. Two sentences in the document mention the importance of clarifying land titles. One page mentions the role of the private sector, but it is in regards to its cooperation with the government’s “development centers” that will operate throughout the country to stimulate predetermined industries using government funds and guarantees and for “better redistribution of [the] population.”

We’ve been down this road before. If the Haitian government wishes to avoid disappointment and free itself from dependence on international aid, it needs to rethink its approach to development.

In Praise of the Brain Drain

The standard view in policy discussions is that emigration of skilled workers from poor countries to rich countries is bad for development becuase it deprives poor countries of much-needed human capital and it reduces growth.

A new study by Michael Clemens at the Center for Global Development challenges this view. Clemens shows that efforts to slow the so-called brain drain “generally brings few benefits to others, and often brings diverse unintended harm.” There is little evidence that limiting skilled migration improves growth or public finances in poor countries, while following such a policy may reduce the demand for education, international trade and capital flows, and the diffusion of ideas and norms. There is also a gap between the policy discussion (that takes the negative aspects of the brain drain for granted) and the research literature (that reaches much more ambiguous conclusions). Clemens also rightly stresses choice and freedom as central factors to consider when formualting policy–an element so far missing from the policy discussions.

The study was first released this spring as a background paper to the UN’s forthcoming Human Development 2009 annual report, which will focus on migration and incorporate much of Clemens’ work.