By Santiago Rico May 2021

In The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics, former World Bank Economist, William Easterly, navigates through decades of failed approaches to growth. Upon its release, the book received acclaim from such figures as Bruce Bartlett, Robert Solow, and Paul Romer, and has since become widely cited in the Economic Development literature. The myriad of theoretical remedies put forward in the past half-century never delivered on their expected outcomes, resulting in a heightened need for improvisation, retrospection, and reimagination. This article will summarize Easterly’s arguments as to why these practices failed by synthesizing his anecdotal and contextual evidence presented in the book. Easterly believes that personalized incentives are the true engine of economic development. He claims that there will never be a universal panacea for countries to get “richer” and that the quest for growth has only just begun. This article will then critique Easterly’s work by introducing additional external documents that will both aid and deviate from his stance. Although Easterly’s evidence-backed arguments as to why decades of poverty alleviation techniques have failed are excellently and thoughtfully laid out, there is still room for improvement in his guiding vision of a more effective and productive development sector, especially since we find ourselves in the era of the United Nation’s Sustainable Development Goals.

Easterly begins the novel by explaining why growth matters in the first place: to help the less fortunate. The desperate search for the magical toolkit for growth is not just to raise GDP levels but to prevent the death of babies, the malnutrition of children, and the oppression of women. Easterly emphasizes that the well-being of the next generation of human beings depends on whether this generation’s quest for growth is successful.

As the first step in the direction of growth, Easterly begins by discussing all the panaceas that have failed in the past. Beginning with the Harrod-Domar model of the 1940s, which would become one of the most widely applied growth models in economic history, Easterly notes that although it lacks realistic assumptions, it became popular due to its simple prediction: growth will be proportional to investment. This idea influenced post-WWII policy experts to deem the “aid for investment” approach reasonable. Post-war economists also believed, based on the Domar model, that the Soviet Union would surpass the U.S. in terms of economic production due to the efficiency of widespread investment coming from a coordinated central authority. After the fall of the USSR and the subsequent economic analysis that followed, economists would not only rethink this model but rethink growth as a concept entirely.

Next, Easterly tackled the idea that miseducation and overpopulation are the major barriers to growth. By demonstrating the little to no impact that primary and secondary enrollment rates have had on growth in low-income countries, he asserts that creating skills where there exists no capital to use them is not going to foster economic growth. Later, Easterly addresses the “Cash for Condoms” approach by clarifying that the data shows the opposite is true: when countries get richer, people seem to have smaller families and fewer children. He ends up being a strong advocate for development being the best contraceptive.

In the last part of the section about failed panacea, Easterly touches on the widely criticized adjustment loans given by international organizations. This reformed mechanism of concessional finance hoped to improve policymaking among its recipients. Armed with this new approach, the 1983 World Development Report predicted a 3.3% per capita growth in developing countries while the actual rate turned out to be roughly 0.0%. The recipient governments, knowing the loans would arrive regardless of repayment, didn’t prioritize long-term growth but instead opted to keep relationships with their donors stable enough to reach the next installment. Along with the subsequent widespread debt forgiveness, Easterly points out that both these approaches have negatively affected governance in low-income countries as there is a lack of incentives to change the way they govern national finances and that ultimately no steps are taken to better the lives of their citizens. Unlocking these incentives is what Easterly claims to be the development path.

In the second core section of his book, he addresses how people respond to incentives and how this power can be harnessed to drive growth. In his explanation of knowledge leaks, Easterly focuses on people’s environments and how they relate to knowledge acquisition. In his example of a Bangladeshi textile mogul, Easterly explains how the factory workers learned more efficient and practical techniques from a temporary partnership with a leading textile company from South Korea, which had far more production capacity and experience in the industry. As the Bangladeshi textile sector grew from $50,000 in sales to $2 billion, Easterly highlights the potential impact of knowledge dissemination. Here, the importance of having a foundation of knowledge for there to be exponential increments from it is emphasized, best described by being in what Easterly calls a virtuous cycle. In these conditions, knowledge has the potential to grow while returns on physical and human capital investments are higher, incentivizing positive economic contributions. On the other hand, if economies are caught in what Easterly labels a vicious cycle, there is no room for growth as little to no knowledge is available. This binary trap is a framework Easterly refers to many times in the book. The idea of either being caught in a good cycle or bad cycle comes up again in his discussion of technology. Easterly marvels at the power of technological advancements but is cautious of the destruction it can cause. For example, those left behind by the dot com boom in the late 1990s due to insufficient knowledge of computers or hardware. While Easterly admits technology is a tremendous boost for growth, he once again turns to the idea of incentives as he draws upon history as his evidence. Mayans and Aztecs only used the innovative wheel for children’s toys, Romans created steam engines just to open and close temple doors, and China had a long history of innovation but lacked growth as they closed their borders to the world and couldn’t capitalize on their creations. Once again, Easterly emphasizes the need for incentives to match whatever other approach is being used for there to be true long-term growth for all.

In one of his final chapters of this section, Easterly concludes that one of the most significant elements that prepare economies for growth is luck. While effective policies and governance can optimize the possibility of growth, unprecedented situations such as wars or natural disasters can be helplessly detrimental for economies. Although inescapable, countries should be prepared for these situations in the best way possible but this is made extremely difficult if the government doesn’t spearhead initiatives on growth or is ineffective in general. Easterly claims that the worst thing that a government can do is strip their people of incentives that have the power to change their lives, especially in times of disaster. Harboring polarizing political parties, social dishonesty, ethnic conflict can severely hinder growth as governance is ineffective to the masses. Easterly, in a repetitive fashion, refers to the danger of some being incentivized to stay in these vicious cycles of corruption, deception, violence, and ultimately poverty. Only when those incentives to “stay poor” are removed or, more realistically, incentives for a better life are presented will real growth occur.

Unsurprisingly, Easterly’s conclusion of his novel is succinct: people respond to incentives. It is the responsibility of the people’s government and international institutions to align the people’s incentives to that those of economic growth. Easterly also ironically states that there is no single quest for growth, every economy must pave its own path: one of luck, hard work, and hope. Ultimately, Easterly claims there is nothing economists know for certain about the future and that we, as human beings, must continue to embark on this naturally chaotic quest for growth, learning from our failures in efforts to help the poor.

Easterly expertly shines a light on the lived realities of many of these failed panaceas. Backed by strong statistical evidence and effective historical anecdotes, his thorough analysis of these lackluster approaches was digestible, interesting and leaves the reader asking “what is next?” after each approach is debunked. His critique of the programs carried out by organizations worldwide will hopefully provide a guiding light in future policy development and aid implementation. His incessant repetition of the power of incentives was, at the time the novel was released, a refreshing take on development. But one of Easterly’s most compelling concepts caught my eye the most. The notion of knowledge leaks plays a crucial part in understanding human capital accumulation, especially in urban areas. Famed British economist Alfred Marshall once argued that industrial clusters only exist in part due to individuals learning from each other. In 1998, Harvard economist Edward Glaeser formalized Marshall’s theory in a model where individuals acquire skills by interacting closely with one another, much aligned with Easterly's virtuous cycles. Glaeser’s model in his paper “Learning in Cities” focuses on faster human capital accumulation in cities as a result of learning through imitation. The number of contacts per period rises with city size and the speed of learning rises with the number of contacts. Glaeser’s paper supports Easterly’s argument by giving concrete analysis as to how urban areas, containing a plethora of experiences, can contribute to skill-building which increases productivity, leading to growth. This is just one of the many academic studies that can be used to defend Easterly’s long-lasting arguments.

While Easterly’s contentions hold veracity, his vision and rhetoric do not reflect the same strength and completeness. Throughout the novel and particularly during his many concluding remarks, Easterly fails to significantly acknowledge the colonialist legacy and its impact on widespread poverty and underdevelopment in the Global South. It is never identified as being part of the problem or even part of the solution. Furthermore, Easterly himself admits his lack of awareness as to how the environment plays a role in economic growth. This has now become unacceptable. Easterly’s loose and theoretical solutions only reinforce the environmentally damaging and classist donor-recipient relationship present in the aid sector since the 1980s. Easterly’s rhetoric relating to his own positioning in the process of development is one of dominance and verticality where he proposes to “make” countries richer and provide “remedies”, affirming the “us vs. them” power dynamic, often assuming that he has the explanation to other’s obstacles. By having these wealthy nations continue to erroneously decide on the methodology, location, and processes as to how aid is dispersed and managed, it does nothing more than reiterate the traditional and soon to be outdated international aid paradigm. Before any change can be made, a shift of mentality needs to take place all over the world. Detailed in, former Director of Sustainable Development at Ipsos, Jonathan Glennie’s “Five Paradigm Shifts for a New Era of Aid”, widespread advancements in rhetoric and mindsets are needed to embark on a new era of development. Glennie points to the transition away from the “foreign aid” mentality and towards a “public investment” one. Within this transgression, five shifts have to occur. Keeping in mind the limitations of this article, only two main shifts will be discussed that apply directly to Easterly’s shortcomings. Firstly, the progression from “reducing poverty” to “reducing inequality”. This transformative ideology helps redefine the target countries, from just being characterized as “low-income countries” to being part of the same global community. Glennie advocates for the continuation of poverty eradication but also promoting sustainable development and global public goods worldwide. Glennie wants to change the way the idea of poverty is perceived, from their problem to our problem. Easterly’s piece sorely lacks this perspective as most of his book is written from a position of extreme privilege, strongly insinuating toxic otherness. Furthermore, Glennie wants to steer away from the notions of “charity” within foreign aid and replace it with the idea of “public investment”, where returns aren’t strictly financial but social or environmental. Glennie describes this “Global Public Investment'' as an obligation for every country to contribute, even the poorest countries, as it can spawn positive social impact for the global common good. For too long has it just been a one-way capital flow with no real or concrete progress. As an advocate for democratic governance, Glennie writes that every stakeholder involved must have “a seat at the table”, promoting collaborative horizontal relationships amongst donors and recipients, unlike Easterly’s traditional vertical approach. There has been close to four decades of the traditional approach to foreign aid and development and little relative progress to what has to be done. Glennie and policymakers alike are leading the new era of development, one where they can learn from Easterly’s work but not follow his vision. Although William Easterly’s rightful scrutiny of all the approaches to development was eloquently presented with substantial anecdotal and statistical evidence, his vision for the quest for growth cannot be applied to the world today. The toxic legacies of brute global capitalism and colonialism have wounded the environment and the poorest parts of humanity. The new era of development has to approach things under a different mentality. Years after the release of the book, Easterly went on to write The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. In this sequel, he dives into taking more accountability of the past and discloses more about the inadequacies of the structures that the international development sector has ingrained in the economic and political systems in reciept countries. This article should serve as a introduction into maintaining the standard of holding each other accountable using the most innovative and ethically sound approaches. By doing this in a constant and thorough manner, the global community can move forward to reap the best rewards in approaching global challenges.