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Angus Deaton’s ‘The Great Escape’ fetes growth

by Clive Crook

Bloomberg

In “The Great Escape: Health, Wealth and the Origins of Inequality,” Angus Deaton sets out to tell a familiar story — that of the long arc of global economic advance — in a fresh way. The author is an economics professor at Princeton University, a renowned development economist and an exceptionally gifted teacher.

Even those familiar with his accomplishments might be surprised by how brilliantly his book succeeds.

The world, he emphasizes, is a vastly better place than it was, and he shows that the usual preoccupation with growth in measured output understates this astounding transformation.

Unusually, “The Great Escape” gives the same weight to progress in health as it does to other measures of material well-being. Health is where the changes wrought by economic progress (especially in rich countries, but by no means confined to them) have been most startling.

Consider this: In the United Kingdom, until about 1900, adult life expectancy — the number of additional years a 15-year-old person could expect to live — was greater than life expectancy at birth. Despite having already lived 15 years, young adults could look forward to a longer future than they could on the day they were born.

It’s a measure of how dangerous it was to be young. A century later, a Briton’s chance of dying in childhood is tiny, and the gap between life expectancy at birth and adult life expectancy is almost the full 15 years it would be if every child grew up to be an adult. The book is full of smart statistical insights of this kind, forcing you to reimagine the brutal past that the West has left behind.

The miracle of sustained economic growth re-emerges in high definition, and the dully familiar becomes as awe-inspiring as it ought to have been all along.

“The Great Escape” also deals at length with the countries that haven’t yet made the transition. “Almost a billion people still live in material destitution, millions of children still die through the accident of where they are born, and wasting and stunting still disfigure the bodies of nearly half of India’s children,” Deaton writes.

Global inequality — the consequence of the West’s acceleration — is a call to action. People in the rich West, Deaton argues, are under a moral imperative to do what they can to help.

Yet, Deaton is a foreign-aid skeptic, and he explains why. The essential point was crisply stated more than 40 years ago by Peter Bauer: “If all conditions for development other than capital are present, capital will soon be generated locally, or will be available to the government or to private businesses on commercial terms from abroad, the capital to be serviced out of higher tax revenues or from the profits of the enterprise.

“If, however, the conditions for development are not present, then aid — which in these circumstances will be the only source of external capital — will be necessarily unproductive and therefore ineffective.”

Deaton brings an unsurpassed yet lightly carried expertise in statistical methodology to his discussion of the effectiveness of aid. He traces the history of the controversy, looking at the various arguments and changes in approach that have been adopted from time to time. He’s for better aid evaluation but isn’t much impressed by the grandiose claims made by proponents of the current leading development fad, which calls for randomized controlled trials of specific aid projects.

The randomistas, as they’re called, model their approach on drug testing. They compare the results of an aid intervention in one village or group of villages — say, a new way of running schools — with a control group of otherwise similar villages where the policy isn’t adopted. It’s all the rage in development circles, but Deaton demurs. This method may tell you whether the particular project in question succeeded, he says, yet reveal little about whether the policy would succeed in general, which is what you want to know.

The experimental and control groups are often too small; moreover, without a good understanding of other supporting factors, there’s no reason to think that what succeeds in one place will work elsewhere.

Deaton draws attention to “the irritating but frequently encountered problem that projects do much better as experiments than when rolled out for real.”

Aid and aid-funded projects, he goes on, “have undoubtedly done much good; the roads, dams and clinics exist and would not have existed otherwise. But the negative forces are always present; even in good environments, aid compromises institutions, it contaminates local politics and it undermines democracy.

If poverty and underdevelopment are primarily consequences of poor institutions then, by weakening those institutions or stunting their development, large aid flows do exactly the opposite of what they are intended to do.”

If rich countries are morally obliged to help, as Deaton says, what should they do?

He looks much more favorably on aid directed at improving health, because that can address specific failures of market provision. Aid in the form of knowledge rather than money is valuable, too.

Rich countries’ investment in research whose benefits would flow principally to poor countries can be particularly effective, he argues.

Diseases such as malaria and tuberculosis are a case in point. Their rarity in rich countries means there’s little profit to be made in researching treatments or methods of eradication. Advance market commitments (where governments and aid-givers agree to buy drugs that are yet to be invented) and other devices to bring rich countries’ purchasing power to poor countries’ priorities are a fine idea.

Above all, Deaton argues, rich countries should stop putting obstacles in the path of the development of poor countries. Rich-country trade restrictions and farm subsidies put poor countries at a disadvantage. Rules on intellectual property rights need to be reformed so that they don’t unfairly discriminate against the poor.

Freer immigration may be the best aid policy of all. Migrants from poor to rich countries are better off than before, and their remittances make their families back home better off as well. These flows, which are almost three times bigger than flows of aid, “can empower recipients to demand more from their government, improving governance rather than undermining it.”

“The Great Escape” combines, to a rare degree, technical sophistication, moral urgency, the wisdom of experience, and an engaging and accessible style.

It will deepen both your appreciation of the miracle of modern economic growth and your conviction that the benefits can and should be much more widely enjoyed.

Clive Crook is a Bloomberg View columnist. (ccrook5@bloomberg.net.)