Monday, 17 March 2008

The Two Famous Bills

Bill Easterly, formerly of World Bank prominence, always manages to ruffle the establishment. This time the establishment is Bill Gates, the philanthropist extra special. Gates in recent times told the Wall Street Journal that he hated Easterly's latest book. Easterly was keen to respond. The general idea of Easterly's argument is that the profit motive of capitalism is stronger - and more effective in reducing poverty - than the philanthropy motive of donors.

Even if philanthropists are well-intentioned, how can they choose just which product is going to reduce poverty? Much research suggests that "picking winners" through government industrial policy hasn't worked for increasing growth; and that picking developing countries with "upward potential" doesn't work either. Recent research in fact shows that foreign aid may result in the same rent seeking behaviour as documented in the “curse of natural resources” literature. Commentators argue that Bill Gates should know better.

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