Monday, August 11, 2014


In several of my classes we discuss why some countries are poor while others are rich. In the process we look at how history, political development, imperialism, and culture (among others) hinder or help nations develop.

We also look at inappropriate or poorly thought out policy decisions that set nations back. To help students understand what happens when we fail to think policy decisions through - as we are currently seeing in Iraq and Afghanistan (more on this below) - I occasionally use the experience of a village in Borneo in the 1950s.

With the Borneo village story we learn that malaria was undermining the ability of farmers to work and produce crops. To deal with the problem the World Health Organization sent supplies of DDT - yeah, that DDT - to help eradicate the malaria carrying mosquitoes. Large amounts of DDT were sprayed inside and around homes in the village.

The problem was that as the mosquitoes fell dead hordes of roaches and insects could now feast on the dead mosquitoes. After eating the mosquitoes the roaches and insects were now filled with DDT. The DDT laced roaches and insects, in turn, were eaten by lizards indigenous to the region (geckos), who also became laced with DDT.

This made things fun for the cats. They found the now lethargic and slow lizards convenient play things, who also made a good meal. The lizard population plummeted as the cats feasted on the reptiles.

Things got worse for the cats because after rubbing and scratching their way through the DDT sprayed homes they continued to groom regularly. As they licked their fur in their usual cleaning routine the cats ingested even more DDT. Combined with eating DDT-laced lizards the village's cats became toxic and died off, en masse.

Cats, as we all know, are natural predators of rats. With no more cats in the village the rat population exploded and began eating the villagers crops. But a shortage of food was the least of their worries. Villagers were now concerned with the plague.

To deal with the rat problem officials had cats flown into the region and air dropped into the Borneo village by the Royal Air Force.

The Borneo village story is a humorous lesson in what happens when we don't think things through. But it's also instructive because it's a cautionary tale about what happens when people who have strong ideas, or entrenched ideologies, make decisions for others.

In this case we had a group of people from the West who said that the Borneo village needed to emulate the experiences of the West. To do this villagers were prodded to produce more agriculture products so Indonesia could export more and acquire more income.

According to a larger strategy Indonesia was then supposed to use the new revenue to invest and industrialize. This strategy was a product of a widely accepted theory at the time, Modernization Theory.

Modernization Theory derived its energy from the post-war era, when the United States became concerned that poor and developing nations might turn to the Soviet Union for assistance after World War II. The primary assumption of Modernization Theory is rooted in American Exceptionalism. It told us that we alone could help the rest of the world develop and become "just like us." We just needed to apply modern science techniques and then used our unique historical experiences as a guide for the rest of the world.

This was our gift to humanity.

Mystic wisdom ... an integral part of American Exceptionalism

Of all the theories of development used to inform countries as they became modern and "just like us" perhaps the most absurd - at least for me - is Modernization Theory (or MT). In very simple terms, MT ignores both history and the manipulation of markets, while naively assuming free markets alone will save the day.

Apart from glossing over how the developed countries became developed by exploiting the poorer countries (the history of imperialism and mercantilism), MT also ignores the developing countries early dependence on raw material goods and how they are affected by larger rule-based impediments to fair trade (structuralism). Worse, MT doesn't acknowledge the role of the state in creating the conditions under which wealth is created (choosing to believe in the myth of the free market).

The tariff-laced protectionist history of the United States is virtually ignored too.

In spite of all this (and more), MT was used to inform and justify our interventions around the world as we tried to lift the rest of the poorer nations into modernity after World War II. Unfortunately Modernization Theory's ahistorical and market-based assumptions are still promoted by many (referred to as Neoliberalism today).

In fact, the developmental assumptions we embraced before we went into Afghanistan and Iraq followed many of the assumptions of MT. But we are far beyond the simple policy decisions that had the Royal Air Force parachuting cats into villages so farmers could (ultimately) farm more. No, we've supercharged the process.

Apart from invading and installing puppet governments in Afghanistan and Iraq, we're also shipping billions to prop up free-loading private contractors, and to help spike markets. In the process we're losing billions of dollars to theft and corruption (perhaps as much as $70 billion).

Then we have the Borneo village-like forced policy walk in Afghanistan that says do it our way.

American agriculture experts marvel over soybeans as a protein rich super food. They believed that if they introduced soybeans into Afghanistan that Aghani farmers would gravitate to the product, reduce malnutrition in the country, and help to make Afghanistan food sovereign. There was the drug angle too. If Afghanistan could start producing soybeans for export they would have a viable alternative to cultivating the opium poppy (for heroin).

A miracle protein product. Food sovereignty. Fighting the war on drugs. What could go wrong? It turns out, plenty. Like our Borneo village case, the issue wasn't thought through.

The list of things that weren't right with the soybean story in Afghanistan is long.

First, no feasibility studies were ever done by the parties involved, which included the American Soybean Association (ASA). As well, the ASA had a big hand in pushing for the multi-million dollar U.S. Department of Agriculture soybean grant project. Then we have the reality that millions of dollars were used to purchase soy products from U.S. farmers, rather than in building market viability in Afghanistan.

Worse, widely ignored - if it was even read - was research done by the United Kingdom's Department for International Development. The report concluded that "soybeans were inappropriate for conditions and farming practices in northern Afghanistan, where the program was implemented ...".

Finally, we have the logic behind the drug trade. As I tell my students when I lecture on drug economies, you don't have to be a rocket scientist to understand why the opium trade is favored by poor farmers in places like Afghanistan (as this brief review helps to explain).

Still, none of this mattered to the grant makers at the U.S. Department of Agriculture.

The USDA decided to spend $34 million to introduce and promote soy-based products in Afghanistan. What did we get for our money? We learned that Afghanis didn't like the stuff when it was introduced. We also learned that they still didn't like it after we spent millions promoting the product. Then we have the problems of sub par harvests (as the UK study suggested would happen), while the logic of the drug trade made converting to soybeans a nonstarter for most farmers targeted for conversion.

In a few words, the soy effort in Afghanistan has fallen flat on its face. As Yogi Berra might say, it's Modernization Theory déjà vu all over again

To be sure, we aren't parachuting cats into Afghanistan. But we are flying pallets of money into Iraq, and can't account for billions in cash.

Pallets of money airlifted into Iraq. 

Guarding pallets of money in Iraq.

These on the ground realities, coupled with the many political and military mistakes that we have made in the region, have turned Iraq and Afghanistan into unmitigated disasters. They are complete foreign policy blunders.

At the end of the day we need to stop naively believing that if we throw enough money at the problem, if we introduce the magic of the market, and if we remove dictators so freedom and liberty can work their magic that democracy and the spirit of the market will flourish around the world. They won't.

The primary assumptions of Modernization Theory - and now Neoliberalism - can't stand the light of the real world. Gaps between the rich and poor nations of the world are increasing, while inequality within nations is surging. There are no "add magic market dust, and stir the liquid of freedom" recipes to development.

Those of us who study the issue have known this for a while now.

Apart from our military and political blundering in Afghanistan and Iraq, one thing is clear: Our economic development strategy when we entered the region after 9/11 was flawed from the beginning, and is still flawed today.

So, yeah, our children will be dealing with this mess in 30 years.

- Mark 

No comments: