January 17, 2006
Jeffrey Sachs and the Underpants Gnomes

One of the all-time greatest episodes of South Park is “Underpants Gnomes,” wherein the coffee-addled character Tweak finds that his missing underpants are being stolen by -- you guessed it -- a group of underpants gnomes. (In a parallel plot line, Tweak’s father runs a coffee shop, and enlists the boys to help him lobby the town government to block the “Harbucks” Coffee chain from opening a competing shop in town.)

When asked to explain why they are stealing underpants, the gnomes offer the following as their business plan:
Phase 1: Collect underpants
Phase 2: ?
Phase 3: Profit
Here’s a screen shot of a gnome contemplating the plan.

The gnomes themselves don’t understand Phase 2; the underpants are simply piling up. The lesson (reinforced by the parallel plot line): profit doesn’t appear by magic. You have to do something appropriate that actually yields a profit.

Now consider Jeffrey Sachs’ plan for enriching sub-Saharan Africa:

The rich world should offer impoverished regions like sub-Saharan Africa more economic support to break out of poverty. Of course, aid should be directed to specific needs – for example, malaria control, food production, safe drinking water, and sanitation – whose fulfillment can be measured and monitored to resist corruption. By raising living standards, we would also be empowering both civil society and impoverished governments to defend the rule of law.

Or in essence:

Phase 1: US taxpayers give (more) money to sub-Saharan African governments or multinational aid agencies, “directed to specific needs”.
Phase 2: ?
Phase 3: Africa embarks on cumulative growth.

It seems to me that, despite the list of “specific needs” to be met, Phase 2 is missing from the Sachs plan. How do transfers promote “breaking out of poverty”?

Of course, as a matter of arithmetic, if $X in cash or $X-worth of in-kind benefits is provided to a country’s ruled (putting aside the question of how well measuring and monitoring have ever been at preventing diversion to the rulers’ private benefit), it makes a one-time contribution to living standards: an average member of the public gains $X/population. But how does a transfer via African governments or aid agencies “empower[] civil society” in Africa rather than exacerbate dependency and subservience to the state? Have such transfers ever, anywhere, promoted the kind of embourgeoisiement that Africa needs?

Posted by Lawrence H. White at 09:45 PM in Economics  ·  TrackBack (0)

The statesman who should attempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. -Adam Smith

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