In his 2021 book Value(s), Mark Carney used the phrase “Tragedy of the Horizon” as shorthand for the catastrophic impacts of future climate change. People in business, politics, banking – and most of us – accord little value to avoiding costs beyond the “horizon.” The benefit of acting now to avoid “beyond the horizon” catastrophes is often perceived as less than the current cost of undertaking mitigation policies.¹ Another way to describe the problem is cognitive dissonance: most of us recognize two or more outcomes, but highlight only one.

A perfect example of cognitive dissonance took place in the months leading up to the spring 2025 federal election. Opposition Leader Pierre Poilievre repeatedly used “axe the tax” as a rhetorical weapon against the federal government’s carbon tax. To be generous, Poilievre emphasized that the carbon tax on fossil fuels was mildly regressive as a share of family income. His rhetorical weapon ignored the mitigation potential of the carbon tax to reduce greenhouse gas (GHG) emissions.

Once elected Prime Minister, Carney acceded to public hostility and eliminated the carbon tax. Many argue that more effective mitigation policies are caps on estimated emissions from energy-intensive sectors such as manufacturing cement and refining Alberta’s oil sands. The cap constrains, at least somewhat, the external costs borne by the world’s population due to Canada’s high per capita GHG emissions – in particular emissions from oil sands exploitation.² At present, it appears that the majority of Canadians are unwilling to accept any significant mitigation policy – unless the costs to them are offset by a very large subsidy.

Paying for forest fires

Most political leaders – but not all, President Donald Trump being a prominent exception – agree that burning fossil fuels is the major cause of a dramatic increase in forest fires across Canada and the United States in the summer season. The political and policy difficulty is to address the “tragedy of the horizon” and cognitive dissonance. In other words, we need to publicize the future, thereby stretching the horizon sufficiently that taxpayers appreciate today the cost of future climate change catastrophes. One way to do that is to examine the cost of dealing with forest fires in recent summers. The province of British Columbia provides a good test case of the hypothesis that climate change is already dearly costing taxpayers.

FIGURE 1: BC SUMMER FOREST HECTARES BURNT, 2008–25

Source: Government of British Columbia, Wildfire Season Summary, 2025.
Note: 1 square kilometre = 100 hectares

Figure 1 illustrates the area (in thousands of hectares) of forest burnt in British Columbia between 2008 and 2025. The first observation is the dramatic increase in average annual forest area burnt: 930,000 hectares in 2017–25 relative to 165,000 hectares in 2008–16. It is hard to find factors other than climate change to explain the difference. The second conclusion is a dramatic increase in variance of annual forest area burnt in the second period. With better forest management, it may be possible to reduce future forest area burnt. Perhaps the annual area burnt will decline in the next decade. It is doubtful. Extending the trend line is a better prediction of future events than a return to the 2008–16 range.

The record annual area burnt to date is 2,840,000 hectares in 2023. In that year, the BC government estimates the cost of provincial fire suppression at $1.1 billion. Robert Gray, a wildfire ecologist, Robin Gregory, an adjunct professor at UBC, and Calvin Sandborn, a legal counsel at University of Victoria, have recently published estimates of indirect forest fire costs, ranging from 1.5 to 20 times the direct cost of fire suppression:

  • Evacuating communities threatened by oncoming fires and housing them in hotels;
  • Restoring burnt homes, farm buildings and public buildings;
  • Where insurance is accessible, the cost is rising;
  • Forgone benefit of harvesting trees that have been burnt;
  • Health costs attributable to air pollution arising from fires.

Based on Gray, Gregory and Sandborn, my estimate of average annual 2017–25 direct plus indirect costs of BC forest fires is ten times the direct cost of forest fire suppression. The estimated average annual adaptation cost per family (direct plus indirect costs per family) is $1,260.³ Most indirect costs accrue to individuals, subject to insurance. In addition to fire suppression, some indirect costs (e.g. evacuation of communities, increase in health care costs due to fire impact on air quality) accrue to the province.

There is a good case to require that BC households finance the direct plus indirect costs borne by the provincial government via an earmarked tax – as opposed to an addition to the provincial debt.⁴ Introducing an earmarked tax enables households to appreciate the rising cost of climate change and minimize cognitive dissonance. The tax could take several forms – for example, a supplementary personal income tax or a change in the provincial sales tax. Inevitably, the political temptation is to bury these costs as one more item increasing the provincial debt.

Cognitive dissonance at work

The term cognitive dissonance might seem more suitable for discussions among psychologists. But it is on display in the current debate over development of an oil pipeline from the Alberta oil sands to BC’s north coast. With Canada representing only 1.5 per cent of annual global emissions, Canadians have a more or less GHG free ride when refining and transporting oil sands. Doing so, we add substantial GHGs to the world atmosphere but distribute 98.5 per cent of the GHGs to non-Canadians.⁵

Alberta Premier Danielle Smith hopes to refine more oil sands and export the bitumen via the BC coast. She is keen to get her pipeline, increase oil tankers and thereby increase Alberta’s GDP. Firmly opposed to any such project is BC Premier David Eby, who intends to protect the environmentally sensitive BC coast from the threat of pollution from oil tanker disasters. On a much larger scale, Brazil faces an environmental disaster: enabling transition of tropical forest to agricultural use. It is doubtful that Smith intends to enter into a discussion of the environmental value of either the BC coast or Brazil’s tropical forest. In early October, Danielle Smith captured the Globe and Mail lead:

The Alberta government is taking the lead on an application for a major new oil pipeline to the BC coast in an attempt to break through several federal policies that Premier Danielle Smith has blamed for scaring away private investors.

The idea is to hammer out a proposal for a one million barrel a day bitumen pipeline. The proposal would be sent to Ottawa’s new Major Projects Office by May 2026 … Alberta does not want to be the financial backer but hopes the project will be deemed in the national interest.

Two questions arise, and both relate to cognitive dissonance.

Why was Poilievre’s “axe the tax” campaign so popular with voters that Carney’s first decision as Prime Minister was to axe the tax? The short answer is cognitive dissonance: most Canadians are not willing to address both cost and benefit of a carbon tax on fossil fuels. Carney ignored the potential benefit that the “polluter pays” today for future environmental benefits. A similar event took place when Prime Minister Brian Mulroney introduced the value-added goods and services tax (GST) in 1991. The GST simplified the federal sales tax and spread it more equitably among sectors than its predecessor. His government also introduced a negative income tax that addressed the regressive impact. Nonetheless, in the subsequent election his government was swept from office.

The other question is, who bears today’s cost of the environmental damage, whether forest fires or potential costs of damage from an oil spill on the BC coast? Are Danielle Smith and the potential owners of a new pipeline discussing the consequences to the Alaskan coast of the 1989 Exxon Valdez oil spill of 240,000 barrels and willing to bear the costs if something similar should happen to the BC coast? The coast is not for sale. Why then should BC acquiesce to a pipeline when today Alberta’s provincial per capita GDP is the highest among Canada’s ten provinces?

Continue reading “Climate change and cognitive dissonance” →

Tom Flanagan discusses two themes: that Trudeau’s large increase in income transfers to First Nations has done little to resolve Indigenous social dysfunctions, and that Trudeau publicized allegations of death of Indigenous children in residential schools with flimsy evidence.

I agree with these themes. One measure of social dysfunction is the Indigenous homicide rate. From 2014 to the 2021 census, the Indigenous homicide victim rate rose from 7 to 9 per 100,000; the non-Indigenous rate was stable at below 2 per 100,000. Most of the increase in Indigenous homicides was in the Prairies. Between 2017 and 2021, the average Prairie Indigenous homicide rate was 15 per 100,000.

Flanagan does not address these social dysfunctions. The Statistics Canda essay accompanying the census statistics on homicide does not address them either. The essay blames residential schools and other shameful treatment of Indigenous communities prior to the mid-20th century. We cannot undo the past, and “White settlers” are not going to return to Europe.

There is no “silver bullet” to rectify social dysfunction. A partial solution is better education outcomes. Good formal K–12 education is not sufficient, but it is a necessity for reducing “deaths of despair” and increasing employment. A necessary condition for Indigenous students realizing a good job and a decent income is high school certification from good schools – whether on- or off-reserve.

In 2010, the Assembly of First Nations elected Shawn Atleo as chief. Atleo came from a family of school teachers. By chance, Chuck Strahl, at the time Minister of Aboriginal Affairs in Stephen Harper’s government, also prioritized the problem of unacceptably weak on-reserve schools. The two struck a deal. Disagreements arose over the next three years, but Harper and Atleo successfully made a deal that turned into Bill C-33, tabled in Parliament in 2014 – accompanied by an extra $2 billion in the budget for K–12 reserve education. Many rural chiefs and Indigenous lawyers immediately denounced the bill as “neocolonialism.” The NDP caucus (led by Tom Mulcair) and the Liberal caucus (led by Justin Trudeau) joined the accusation. After a month of virulent criticism, Atleo resigned as AFN chief. Harper responded by pulling the bill and eliminating the promised extra $2 billion committed in the budget.

Trudeau’s government pursued “reconciliation.” The key report defining reconciliation is the 500-page summary of the final report of the Truth and Reconciliation Commission. Only in a few places does it discuss education. It refers to “Indigenous knowledge” and teaching the legacy of residential schools. Fair enough: teachers should teach a curriculum that incorporates relevant Indigenous culture – but there is no reference to teachers’ ability to teach English or French, perform relevant mathematics and teach science. On-reserve schoolteachers are typically hired on contract for a year; they have no security of employment and little collegial interaction with other on-reserve teachers. Reserve school buildings may be new but they operate as one-room schools.

Harvey McCue, a First Nation academic, has had an eclectic career. He managed school systems, taught at a university and pursued several other activities. He was one of four consultants who advised on Bill C-33, along with Michael Mendelson, Gordon Martell and myself. With his permission, I conclude with a quote from an email exchange:

One of the critical reasons for the lack of success in First Nation (K–12) education is the disconnect between the curricula in First Nation schools (which is the provincial curricula, unfortunately) and the reality facing First Nation youth in their communities. The disconnect is severe enough in my opinion that a majority of kids simply give up on their education because of it. Of course, other factors come into play – a revolving door of unprepared teachers, principals for whom accountability is pretty well non-existent, and parents who for historical reasons see little value in what’s offered in the classrooms.

Defeating the disconnect would place a premium on getting an education, give cause to parents to encourage their kids to go to school, and provide kids with purposeful learning that they see as important and valuable. The (curriculum) should increase the applied education content … to at least 50% of the overall curriculum. This approach worked for most Canadians during the first half of the 20th century and I see many good reasons for re-implementing this approach for First Nation schools.

Gregory P. Marchildon, Tommy Douglas and the Quest for Medicare in Canada. Toronto: University of Toronto Press, 2024. 728 pages.

Greg Marchildon has written the definitive 700-page book on Tommy Douglas’s political career and the political conflicts surrounding Canada’s “single-payer” health insurance system. If you are inclined to read it, it helps if, first, you know about the Social Gospel tradition (for example, J.S. Woodsworth and Stanley Knowles); second, you are interested in 20th-century Canadian and Saskatchewan politics; and third, you have been engaged in managing a single-payer insurance system and/or multidiscipline community primary care clinics.

I qualify. Long ago, I was a Saskatchewan MLA and briefly served as legislative secretary to the health minister, Walter Smishek, who figures prominently in Marchildon’s book. For three decades I have assumed various board responsibilities for a multidiscipline primary care clinic in East Vancouver.

The rise of Tommy Douglas

Marchildon begins with a detailed biographical account of Tommy’s early years, introducing aspects of his family. He was born in Scotland in 1904 to a devout Protestant family. The family emigrated to Canada in 1912 and settled in Winnipeg. The key to understanding Tommy’s political career is the severe tuberculosis infection he suffered in one of his knees. He received high-quality care, thanks to a young surgeon at the University of Manitoba hospital in Winnipeg. By chance, this surgeon came across Tommy’s case in a general ward and performed, pro bono, a complicated procedure that saved his leg from amputation.

Two decades later, Tommy shifted his career from Baptist preacher to politician as a major leader of the Co-operative Commonwealth Federation (CCF), predecessor of the NDP. In the 1935 federal election, he ran successfully in Weyburn, a town in southeastern Saskatchewan, and was one of seven CCF candidates elected. In 1942 he became leader of the Saskatchewan CCF, and in the June 1944 provincial election the CCF won an overwhelming victory. As Premier, he kept the health portfolio for himself.

Tommy’s political rhetoric was in the populist tradition of both the Canadian Prairies and the Great Plains U.S. states. In small towns or a CCF conference, his typical speech started with a few jokes at the expense of the Canadian Pacific Railway or bank owners in Montreal and Toronto. My favourite among his 1940s-era jokes is based on cream separators. A farmer pours fresh milk into a separator; a worker turns the handle. A banker has his mouth on the cream spout; the farmer sells the skim milk. From time to time, bloated bankers want no more cream. They call for an economic depression: workers are laid off and farm prices collapse. In due course, bankers repeat the cycle. Another standard joke concerns the farmer who buys hammers in the town hardware store. The farmer buys the first hammer for $1.25, goes outside and sells it for $1 to anyone passing. He goes back into the store, buys a second hammer and again sells it for $1. When the hardware employee sees the farmer repeat this money-losing exercise a third time, he asks the farmer why. “It’s better than raising wheat,” the farmer replies. After the jokes, he praises farmers for doing God’s work by raising wheat and feeding the world. Finally, he speaks about socialist solutions – often health insurance – to current problems.

Unlike most rhetorically skilled Prairie politicians – such as John Diefenbaker, who became Prime Minister in the 1950s, and William Aberhart, Social Credit Alberta Premier in the 1930s – Tommy relied on progressive professionals once he became Premier. He made amends for sending Japanese Canadians to internment camps of during World War II by inviting a dozen well-educated Japanese Canadians to live in Regina. The best known among them, Tommy Shoyama, led the provincial economic planning board. After the CCF defeat in 1964, Shoyama moved to Ottawa and finished his career as federal deputy minister of finance. Al Johnson, a farm boy from rural Saskatchewan, served as provincial deputy minister of finance over much of Douglas’s reign and completed a Harvard PhD in public administration. Post-1964, he became assistant deputy federal finance minister, then headed the CBC. He played an important role in composing the 1984 Canada Health Act, which legislated the five principles of Canadian medicare, as well as in expanding equalization transfers to the provinces.

In the middle of World War II, William Beveridge, a U.K. economist, published a postwar welfare state agenda (Social Insurance and Allied Services). Leonard Marsh, a student of Beveridge’s, wrote a Canadian equivalent. Both reports figured in postwar policy debates, and high on the list of goals was universal health insurance. Under Clement Attlee’s postwar Labour government in the U.K., the most important social policy achieved was a universal single-payer medical insurance system with no payments at point of service. Implementation of the National Health System began in 1948. Tommy hoped to implement a similar comprehensive medical insurance program in Canada before his second election, in 1948.

Marchildon undertook detailed archival research on the disappointing postwar conferences of the prime minister and premiers. Ottawa and most of the premiers balked at the administrative complexity and cost of major welfare state programs, the most costly being universal medical insurance. One reason why Saskatchewan successfully led Canadian health insurance, as opposed to other provinces or the federal government, is the failure of Canadians to elect a CCF government anywhere else.

After World War II, there was a large supply of progressive professionals and limited demand for their ideas. If they wanted to stay in Canada and do something – as opposed to writing articles and books in universities – reform-minded professionals had to leave Toronto, Ottawa or Montreal and move to Regina, a small city with minus-40-degree winters “in the middle of nowhere.” Despite these drawbacks, many accepted Tommy’s invitations.

Tommy tried to persuade Ottawa and the provinces to share the cost of a national single-payer medical insurance scheme. Ottawa and the largest provinces, Ontario and Quebec, flatly refused. Finally, Tommy narrowed his initial goal to a single-payer hospital insurance plan to be in place in Saskatchewan by 1947, well before the second provincial election. Fortunately, Tommy had the backup of a dozen ideologically dedicated physicians and administrators. Marchildon describes their respective roles.

Dr. Mindel Sheps, a young doctor from Winnipeg, and her husband Cecil worked day and night to inspire rural municipal leaders, design necessary regulations and contend with consistent opposition by senior physicians leading the College of Physicians and Surgeons (CPS). From the beginning in the 1940s to the intense conflict in the 1960s, the CPS argued that the majority in the province paid insurance premiums and already had some form of health insurance; all that was needed was a means-tested subsidy for the poor. Despite CPS opposition, the Saskatchewan hospital insurance plan, initiated in January 1947, turned out to be a well-managed program that required no payment at time of service. Successful introduction of hospital insurance was an important factor in the CCF’s second provincial victory.

The introduction of medicare and the doctors’ strike

Sixteen years after 1944, Tommy faced his fifth and what would almost certainly be his last provincial election. He made the 1960 election campaign a referendum on comprehensive medical insurance. After winning the election, he turned to the administrative complexities. He assumed that, as in the earlier hospital insurance conflict, the provincial physicians would ultimately accept a single-payer system, with some compromises. Tommy was naive about the intense opposition of the CPS. In addition, he succumbed to pressure from David Lewis, the foremost advocate for transforming the rural-based CCF into an equivalent of the U.K. Labour Party, to become the first leader of the federal New Democratic Party.

Tommy resigned as premier in late 1961 to take on the federal NDP leadership. The Saskatchewan CCF-NDP selected Woodrow Lloyd as Tommy’s successor. Woodrow was one of nine children in a farm family in southwest Saskatchewan. The family could not afford university; instead, Woodrow became a teacher in Biggar, a small town near Saskatoon. (Passing by the town’s large sign on the highway, drivers read, “New York is big; this is Biggar.”) Tommy realized Woodrow’s political sophistication and insisted he run in the 1944 election. From 1944 until he became Premier, Woodrow served as education minister, and did for rural schools what Tommy did for the provincial health system.

During the first half of 1962, it looked as if comprehensive medical insurance might collapse. With financial support from the Canadian Medical Association, the CPS mounted an effective antisocialist, antimedicare campaign. The Liberal official opposition in the legislature was led by Ross Thatcher, a CCF MP who had become an apostate. Further complicating the conflict, the provincial health minister resigned, crossed the floor to join the provincial Liberals, and supported the CPS campaign. The CPS endorsed Keep Our Doctors, a citizens’ society campaigning for withdrawal of the medicare legislation. KOD organized public meetings around the province, culminating in a large demonstration in front of the provincial legislature in early July.

In the midst of the growing polarization, a federal general election took place on June 18. Tommy ran as the Regina CCF-NDP candidate (the Saskatchewan NDP members were reluctant to drop their “CCF” acronym). In the election, the Conservative MP won reelection, with double Tommy’s vote.

The provincial medical insurance program came into effect on July 1, 1962. The same day, the CPS triggered a doctors’ strike. Woodrow Lloyd was one of the major actors in the 1962 drama – as was Allan Blakeney, who became health minister in mid-1962 (and Premier in 1971). More than a hundred U.K. doctors were invited to Saskatchewan to provide at least minimum primary care. Woodrow invited Lord Taylor, a Labour member of the House of Lords, to serve as mediator during the strike. After ten days of shuttle diplomacy between the cabinet and the CPS offices, Taylor successfully negotiated a workable compromise that maintained the single-payer principle. (Taylor refused payment for his task – except for a government-paid week fishing in northern Saskatchewan lakes.)

Woodrow lacked Tommy’s rhetorical skills and lost the 1964 election to Ross Thatcher. Fortunately, both Lloyd and Blakeney were exceptionally competent administrators. They introduced the complex insurance plan in the midst of political polarization and a doctors’ strike. Two years after introduction, public opinion in Saskatchewan had switched. Universal medicare was too popular for Ross Thatcher to cancel.

In 1964, I was a naive young summer employee in the provincial planning board. Thatcher, the new Premier, shook hands with us. The new cabinet mistrusted civil servants, some of whom were using government cars for personal use. I wrote the memo to cabinet with the solution: all government cars would henceforth have a licence plate number preceded by “G,” which would shame civil servants tempted to abuse use government cars.

In 1968, I came to know Woodrow Lloyd as a friend. He was concerned about the Saskatchewan CCF-NDP. Would there be a generational renewal? Would the party collapse, as was the fate of most populist parties in the U.S. plains and Canadian Prairies? That summer, Woodrow trekked to Chicago to attend the conflict-ridden Democratic convention. He empathized with Hubert Humphrey’s Farmer-Labour party and wanted to discuss with Humphrey why he was willing to lead the Democrats in pursuing the French colonial Vietnam war.

Woodrow wanted me to enter politics. I did so. Sandy Nicholson, one of the last Social Gospel CCF-NDP members of the legislature, held a Saskatoon riding. He retired in 1970, and I won the nomination to succeed him. One day, Sandy took me to northeast Saskatchewan where he had campaigned in the 1930s. He recalled his youth, campaigning in winter by horse-drawn cabins on sleighs. My wife was not impressed. I was a one-term MLA: elected in 1971, defeated in 1975.

Marchildon devotes the last third of his book to post-1963 politics in Ottawa and other provinces. During Lester Pearson’s reign as Prime Minister, 1963 to 1968, he and his cabinet colleagues introduced major programs: the Canada/Quebec Pension Plan, the Guaranteed Income Supplement and a national copy of Saskatchewan’s single-payer medical insurance. Al Johnson and Tommy Shoyama had their fingerprints on all the program designs and funding. Not surprisingly, cabinet ministers disagreed – and the CMA lobbied against a single-payer system.

Tommy resigned his NDP leadership in 1971 and was succeeded by David Lewis. Douglas remained an MP until the 1979 election. In his final decade, he consistently pressured the government to entrench principles for medicare. He died in 1986, having lived to see enacted the five principles of the Canada Health Act.

Bilateral monopoly

 A theme throughout Marchildon’s history is physicians’ organized opposition to single-payer medical insurance – from Saskatchewan hospital insurance in the 1940s through the 1962 doctors’ strike to the Canadian Medical Association’s adoption of “extra billing” until enactment of the 1984 Canada Health Act.

Marchildon documents in great detail examples of “bilateral monopoly” (economists’ jargon). If the suppliers of a good or service have the ability to limit market supply and sell at high prices, and agents of the purchasers are similarly well organized to limit their collective willingness to pay, the outcome is unpredictable.

Individually, physicians are largely well-intentioned suppliers of quality health care. Collectively, they exercise a monopoly: they organize themselves into very powerful associations at the provincial and national levels. Provincial governments have monopsony power: the ability to control the number of practising physicians. They have taxpayers’ money with which to hire health care providers and determine their number and remuneration.

In Canada, the most dramatic illustration of bilateral monopoly was the 1960–62 conflict in Saskatchewan. The outcome of that battle enabled Canada to develop a single-payer insurance system. Despite Canadian Medical Association lobbying, Lester Pearson’s cabinet in the late 1960s extended the Saskatchewan system to all provinces.

By the 1990s, I was neither a naive summer employee in Regina nor a radical graduate student. Saskatchewan is a small province, and I was part of the CCF-NDP provincial “family.” In the 1991 election, NDP leader Roy Romanow defeated Grant Devine, the academic economist who had become Conservative Premier in the 1980s. To the shame of academic economists, Devine sold Saskatchewan crown corporations and created the largest debt relative to provincial GDP. By 1991, Allan Blakeney was in retirement, but he exercised considerable influence behind the scenes. I recall his conclusion that Romanow might well be a one-term premier because his first obligation was to “clean up the Devine financial mess.” Blakeney was wrong: Romanow remained Premier into the new century.

In the mid-1990s, after two decades of continuous deficits at both provincial and federal levels, Canada had a debt/GDP ratio above 100 per cent. It is ironic that the first province to balance its budget in the 1990s was Saskatchewan under the fiscally prudent CCF-NDP. Romanow increased taxes and cut spending. The province exercised its monopsony power by closing more than 50 small rural hospitals.

The federal Liberals under Jean Chrétien were a shoo-in to win the 1993 election. They prepared a “Red Book” campaign document which promised to continue expansion of federal spending. Chrétien’s senior Finance Department officials warned that, if Ottawa honoured the Red Book promises, the Canadian dollar would collapse as had the Mexican peso. Chrétien threw away the Red Book. The 1995 federal budget reduced transfers to provinces, trimmed employment insurance benefits, doubled Canada/Quebec Pension “contributions” and increased federal income tax rates. The premiers, obliged to cut spending and increase provincial taxes, blamed Ottawa. There followed a round of bilateral monopoly conflicts. On one side, physicians’ associations, nurses’ unions and public sector unions damned their respective provincial governments, three of them led by the NDP. On the other side were provincial finance departments.

Not surprisingly, given fiscal conflicts in the 1990s, provincial governments are avoiding further bilateral monopoly conflicts this decade. In the health sector, provinces have allowed physicians’ associations a too-expansive role. I have abandoned radical rhetoric and wound up using policy wonk prose on behalf of preserving single-payer health insurance. For anyone interested, I have recently written a C.D. Howe Institute critique of physicians’ policy dominance. Here are several pieces of circumstantial evidence that link the power of physicians’ associations to the present political crisis of lack of adequate primary care providers:

  • Canadian physicians have reduced average weekly hours of work since 1990. Legitimately, young physicians want a better work/family ratio than the physicians they are replacing. Their associations have been able nonetheless to maintain stable inflation-adjusted remuneration.
  • Normalized, Canadian general practitioners (GPs) in 2021 are at the 70th per cent rank among family physicians in OECD member countries; specialist physicians are at the 79th per cent rank.
  • Canada’s ratio of practising physicians per thousand population is low. The OECD average in 2021 was 3.6 per thousand; Canada’s ratio, at 2.8 per thousand, was well below the average.
  • In all countries, the ratio of physicians per thousand population is higher in urban than in rural regions. The Canadian urban/rural ratio is much higher than the OECD average, an indication of inadequate provision of rural health care.

The inadequate supply of primary care provision came to a boil during the COVID-19 pandemic. Every two years, the OECD surveys national respondents’ satisfaction with availability of quality health care. In 2019, 78 per cent of Canadians responded that they were satisfied with access to quality care, well above the OECD average. In the same survey conducted in 2021, the Canadian score was 56 per cent, a decline of 22 percentage points; the OECD average fell only four percentage points in the same period, from 71 to 67 per cent.

The major proposals of physicians’ associations are to train more GPs, build new medical colleges and, to some extent, certify more foreign-trained doctors. To date, the provinces have acquiesced. A partial solution to give governments more ability to challenge physicians’ associations is a massive expansion of nurse practitioners. All rigorous evaluations undertaken over the last quarter-century have concluded that nurse practitioners deliver ambulatory primary care as well as do family physicians. Provincial limited scope of practice is not the problem. Scope for nurse practitioners is nearly as broad as it is for general-practice physicians.

Three decades ago, I hosted Alimullah Miyan at Simon Fraser University in Vancouver. No one else in my department was interested. Distressed by the political polarization at the University of Dhaka, Miyan had resigned his comfortable tenured position in 1991. Instead, he founded a university – IUBAT (International University of Business, Agriculture and Technology), the first private university in Bangladesh. The Canadian High Commissioner in Dhaka gave Miyan a small grant, enough to finance a trip across Canada in search of Canadian university support for his fledgling university. After an hour-long exposition on the flaws of his country’s education system, he invited me to visit his campus – three classrooms, six computers, a small chemistry lab and offices squeezed into an old rented building. I accepted the invitation.

Since 1993, I have been visiting his country annually. After Miyan’s death in 2017, I continued visiting. I was in Bangladesh a month after Sheikh Hasina’s fourth election victory in January 2024. Sheikh Hasina is the daughter of Sheikh Mujib, Bangladesh’s first prime minister. My IUBAT colleagues loathed the authoritarian, corrupt nature of her regime, but assumed nothing could be done about it. They were wrong.

The straw that broke the regime

Hasina decided to collect more “boksheesh” by increasing the payments to her party required of applicants wanting a government civil service job. It was the straw that broke her regime. Throughout June and July 2024, university students demonstrated against the status quo. By “bloody Sunday,” August 4, the estimate of student deaths was nearly 1,000; that Sunday the police and the student wing of Hasina’s party killed another 100 students. Students responded by calling a “march for justice” on Monday, August 5. When tens of thousands began to march toward the prime minister’s residence, Hasina called on the army to stop the marchers. Gauging the public mood and fearing a massacre, the generals refused. They insisted Hasina go into exile. She is now living somewhere in India.

The student leaders, generals and notables opposed to her regime invited Muhammad Yunus to head an “interim” government. Yunus, age 84, is one of the major “social entrepreneurs” who, upon Bangladesh’s independence from West Pakistan, undertook major improvements in social services ranging from schools to health clinics. Yunus founded Grameen, a large NGO known primarily for its extension of microcredit. Most recipients have been women. Grameen also trained nurses and partnered with a Norwegian mobile phone company, among many other projects. In 2006, the Nobel committee awarded Yunus the peace prize for his extensive social programs.

On Thursday, August 8, after three days of no government, Yunus and his cabinet took the oath as members of the Council of Advisers, which nominally reports to the figurehead president of the country, a nod to constitutional continuity. Among the 16 cabinet ministers, two are student leaders. Some are academics, some are lawyers, one a woman, one a Hindu, one a deeply religious Muslim. To my knowledge, all are honest.

Perhaps the most knowledgeable of her portfolio is Rizwana Hasan, minister of environment, forest, and climate change. Wherever they live, Bangladeshis are condemned to polluted rivers and urban air, illegal logging and corporate “grabbing” of public land. Before August, Bidhan Roy was director of the psychiatric division of the national mental health hospital. He knows about managing large institutions; managing 15 million children in government primary schools will test his administrative capacity. Hopefully, he is a fast learner. Asif Nazrul, novelist, journalist and law professor, is the minister of law, justice and parliamentary affairs. In an interview with Dhaka’s Daily Star, he describes his 10-to-12-hour days at his office, seven days a week.

Party before country

In the 1960s, the fundamental reason East Pakistanis wanted to secede from West Pakistan was the desire to be independent of fundamentalist Islam and the overbearing presence of the Pakistani army. The 1971 “liberation war” freed Bangladesh from Pakistan. Sheikh Mujib, Bangladesh’s first Prime Minister, was a powerful political orator who rallied support for the new country, but he turned out to be an incompetent administrator. In 1974, Bangladesh suffered a famine. His response was to create a one-party state. By 1975, the optimism of “liberation” had degenerated into a Shakespearean tragedy of assassinations, bitter revenge, corruption, violence and refusal of elites to compromise. In August 1975, a group of young military officers assassinated Sheikh Mujib and all his family, except the two daughters – one of them Sheikh Hasina – living outside the country. In a New York Times article, Tahmima Anam, a Bangladeshi novelist, has described the tragedy inherent in Bangladesh’s politics:

Ever since our young nation was born 53 years ago in a traumatic war of liberation from Pakistan, historical amnesia and censorship have afflicted Bangladeshis like a chronic illness. When a regime is toppled, its successor moves quickly to erase the symbols and legacy of the previous one as if it had never existed.

That is why, for decades, when one of the two political parties that have dominated Bangladesh – the Awami League and the Bangladesh Nationalist Party – was in power, the other would often boycott Parliament or refuse to participate in elections it alleged were rigged. There has never been a healthy relationship between the people in power and those who oppose them. Party was always placed before country.

This has been a curse, preventing solid democratic institutions from flourishing in Bangladesh and making our politics fractious, hateful and peppered with violence and counterviolence. The unexpected revolution that toppled the increasingly autocratic and corrupt rule of Prime Minister Sheikh Hasina this month offers Bangladesh a chance to break free of this cycle. What makes this revolution unprecedented and so meaningful is that it was a grass-roots movement led by idealistic university students, not one of the warring main political parties. As a Bangladeshi, I am watching with jubilation.

Is jubilation justified?

if the interim government achieves little, cynicism will return. Reform events such as the August coup arise rarely in the life of a nation. Sensibly, the interim government’s first priority is to restore nonpartisan professionalism in the police and the courts. That is not enough. The complex network of corruption and inefficiency has condemned the majority of children to remain illiterate as adults, and those who are ill to seek often-dubious overpriced private care.

Shakespearean tragedy is one description of Bangladesh politics; another is the Sicilian mafia. The two major political parties play a role similar to mafia families. For example, the party in power expects “boksheesh” in the range of $5,000–$10,000 USD from a trained nurse wanting a job in a government hospital or a trained teacher wanting a position in a government primary school. In exchange for paying boksheesh, nurses’ and teachers’ unions expect minimum accountability of work undertaken. Admittedly, basic education outcomes in Bangladesh are not much worse than in India (see box).

Measuring corruption is a difficult exercise. One credible measure of national governance quality is the World Bank’s annual Worldwide Governance Indicators (WGI). The WGI entail synchronizing numerous public surveys of governance quality across 200 countries. Among the six WGI governance indicators is “control of corruption.” In 2003, Bangladesh held the dubious WGI rank as the world’s most corrupt country. Bangladesh had improved somewhat by 2008, with 15 per cent of countries ranked worse in terms of controlling corruption, and peaked in 2013, with 21 per cent of countries ranked worse. However, Bangladesh then slid back, with 17 per cent of countries ranked worse in 2018, and in 2023 it had returned to its 2008 rank with 15 per cent of countries ranked below.

Both the Awami League (AL), led by Sheikh Mujib’s daughter, and the Bangladesh National Party (BNP), led by the widow of a charismatic 1971 “freedom fighter” assassinated in 1981, are guilty of massive corruption. In 2003, the BNP was in power. In 2008, Bangladesh was under a caretaker government of nonpartisan professionals. From 2008 to July 2024, Sheikh Hasina’s AL was in power.

The student demonstrators in the summer of 2024 are the parallel of the Parisians who conquered the Bastille, symbol of arbitrary government under the ancien régime, in 1789. Initially, moderate elites governed France. They did not survive. Napoleon transformed a democratic revolution into a dictatorship that engulfed continental Europe in war. Many of my Bangladeshi colleagues are pessimistic and fear the future. Predictably, leaders of the AL and BNP have undertaken no self-criticism. As Anam fears, political leaders will continue to place “party before country.” They expect to restore the status quo ante in due course. If the interim government fails to place “country before party” and realizes few reforms, the coup in August 2024 will be deemed a failure.

Most of the political problems facing Bangladesh are present throughout South Asia. In India, government schools are not much better than in Bangladesh, and corruption is pervasive. At the time of writing (December 2024), Gautam Adani, the wealthiest of Indian Prime Minister Narendra Modi’s corporate cronies, has been prosecuted in New York. Adani sold bonds in the United States to finance a renewable Indian energy project. It appears that $250 million USD raised by Adani supplied boksheesh for Modi’s political colleagues and senior bureaucrats in Delhi. A further dilemma faces Yunus. Many of Hasina’s cronies are in India fomenting opposition to his government. Elements of Modi’s government are interpreting the August coup as an anti-Hindu pogrom.

Were Edmund Burke alive writing to a Bangladeshi student demonstrator opposed to Sheikh Hasina’s regime, he would say roughly what he said to a French correspondent in 1790. Burke is hard to classify as a conservative or as an exemplar of the 18th-century Enlightenment. He supported radical reform in France, but opposed revolution: “What is the use of discussing a man’s abstract right to food or to medicine? The question is upon the method of procuring and administering them. In this deliberation I shall always advise to call in the aid of the farmer and the physician, rather than the professor of metaphysics.” Coincidentally, Burke pursued with passion the long impeachment trial of Warren Hastings, the first governor-general of the Bengal colony, who was accused of corruption. The trial lasted seven years (1788–95). Hastings was exonerated but fell deeply into debt, and died in 1797.

Sooner or later an election will take place. The outcome looming over the present interim government is that one of the mafia political families will win the election and restore the status quo ante. Maybe there will be a more positive outcome. This is not the time to abandon hope. I share Tahmima Anam’s “jubilation.”


“Learning poverty” in South Asia


The two regions of the world in which the majority of teenage children cannot read the local language are sub-Saharan Africa and South Asia. In 2019, the World Bank published an estimated “learning poverty” rate for most of the world’s countries. The learning poverty rate is an estimate of children in the cohort aged 10–14 who are not able to read a simple text at Grade 2 level – whether they are out of school or in school but illiterate. In Pakistan, the learning poverty rate is 77 per cent (23 per cent can read the Grade 2 text); in India, the rate is 56 per cent (44 per cent can read); in Bangladesh, 58 per cent (42 per cent can read). Sri Lanka is the only South Asian country with a good primary school system. Its learning poverty rate is 15 per cent (85 per cent can read). Given the abysmal learning outcomes of government primary schools in South Asia, the elites rely on “high cost” private schools; a large minority among the poor, if they can afford it, send their children to “low cost” private schools. On average, the “low cost” schools perform far better than government schools.

Eric Cline, Squandered: Canada’s Potash Legacy. Regina, SK: University of Regina Press, 2024. 170 pages.

Eric Cline is a well respected spokesman in Saskatchewan – on many subjects. For ten years in the 1980s, he practised law in Saskatoon. He entered the legislature in 1991 and served as a senior cabinet minister during much of the NDP reign, 1991–2007, before deciding not to run in the 2007 election. In much of the following decade, Cline served as a vice-president of a private potash company. He resigned from the NDP in 2019 as a result of Jagmeet Singh’s rash ejection from caucus of Regina MP Erin Weir.1

During his stint as a company vice-president, he obviously ruminated over many ideologically motivated decisions concerning the province’s principal mineral resource. Ultimately, he decided to write a book on the history of potash politics from the mid-20th century to the present. His book is not an easy read, especially when he unnecessarily introduces accounting terms, but it is worth reading. The book’s title says it all: ideological decisions by past premiers “squandered” the potential provincial royalty income, income that could have substantially increased provincial “own source” (net of federal transfer) revenue.

Saskatchewan’s potash layer

Three hundred million years ago, the Prairies were covered by an inland sea. Over the next 100 million years, the sea evaporated and ultimately became brine. In the final stage, sodium chloride (table salt) and potassium chloride (potash) formed a stable layer running across what is now southern Saskatchewan, southwestern Manitoba and North Dakota. In the mid-20th century, companies drilling for oil and gas discovered that wherever they drilled in southern Saskatchewan, they found potash.

Potash is one of three components (nitrogen, phosphorus and potassium) in chemical fertilizer required for cereal crops. There was a major obstacle. Above the layer of potash is an underground river, under immense pressure. The first mines relied on thick concrete walls to get to the potash layer and hoist the ore. Within a few years, the water pressure overcame the concrete and flooded the mines. The engineering solution was time-consuming and expensive: freeze a large block of water in the underground river. Once the ice block was large enough, miners drilled a column in the middle of it and installed cast-iron rings, anchored above and below the 200 metres of water.

With the engineering obstacle overcome and high world cereal prices in the 1960s, U.S. mining companies invested the equivalent of about $20 billion in today’s dollars in drilling ten mines. At the potassium layer, mechanical drills tunnelled and created vast underground cities. Political expectations of the economic benefits of potash in Saskatchewan paralleled Alberta’s oil and gas wealth.

Two ideologues: Ross Thatcher and Grant Devine

Ross Thatcher had been a CCF member of Parliament, but had become an apostate who consistently quipped about socialists trying to sell refrigerators north of 60. In 1957 Tommy Douglas, then Premier, challenged Thatcher to what became a famous debate in rural Saskatchewan, pitting socialism (i.e. crown corporations) versus capitalism. Over a thousand people attended the meeting in a village community hall; the CBC broadcast it live across the province. As I recall, the debate was more or less a tie. As the bluest of blue Liberals, Thatcher became leader of the provincial Liberals and, from 1964 to 1971, was Premier.

Thatcher believed in business acumen and encouraged private investment in potash mines. Provincial tax rates were low. However, in 1970 the potash market crashed and the mining companies were on the verge of bankruptcy. Having lost his faith in business acumen, Thatcher damned the mining executives as fools and found himself negotiating with the Governor of New Mexico (a state with potash mines) to save the potash companies from bankruptcy. The duo negotiated an agreement among North American potash corporations to limit aggregate production and respect a price floor. The dubious deal triggered an anticompetition investigation in Washington.

In 1971, the NDP returned to office. Fortunately for the Saskatchewan treasury, the potash market thrived and Thatcher’s deal with New Mexico became defunct. As Premier, Allan Blakeney proposed an increase in provincial royalty payments. The mining companies balked at Canadian “socialism” and sued the province for reneging on low royalty rates. In 1973, the story became more complex. OPEC, the cartel managing Middle East oil production dramatically increased world oil prices. Ottawa and Alberta squabbled over which government should capture the windfall from sale of Canadian oil and gas. The squabble wound up in the Supreme Court, which ruled for Ottawa.

The Supreme Court decision threatened Saskatchewan’s claim on high potash royalties. In 1976, Blakeney decided that the least risky means to capture revenue from potash was to buy out half the provincial mining capacity. (According to a longstanding convention, Ottawa does not tax the earnings of provincial crown corporations.) Furthermore, as a crown corporation the Potash Corporation of Saskatchewan (PCS) would have directors in Saskatoon, not in Chicago. Provincial potash revenue rose from under 5 per cent of sales revenue in 1971 to 25 per cent in the early 1980s.

In 1982, the NDP suffered a devastating electoral defeat. From 1982 to 1991, Grant Devine, an economist from the University of Saskatchewan, led a Conservative government. Like Thatcher, Devine believed public officials were inefficient whereas business leaders had acumen – hence, the province should not be involved in business. In 1989, during a market slump, Devine sold the crown-owned mines for only $630 million CAD, a price that Cline argues amounts to politicians’ squandering a public asset. In 1997, the market value of potash assets was $6.2 billion CAD.

This century, the market value of Saskatchewan potash has continued to rise. In 2010, BHP, a large Australian firm, offered $38.6 billion CAD to buy out shareholders in the privatized Potash Corporation of Saskatchewan. For various reasons, Ottawa blocked the sale.

From financially prudent social democracy to conservative populism

Having risked large sums to solve the underground river obstacle, initial private investors deserved profits. Thatcher’s faith in business acumen ignored the speculative motivation of new mines that dramatically increased North American potash supply and thereby came near to bankrupting the continental potash mining sector. Devine’s belief in public sector incompetence led him to sell Blakeney’s potash crown corporation for an inexcusably low price.

Cline is among the financially prudent CCF-NDP leaders in Saskatchewan – Woodrow Lloyd, Allan Blakeney, Tommy Shoyama and others – who simultaneously initiated many social programs and balanced the books. Since 2007, Saskatchewan’s financially prudent social democratic tradition has given way to conservative populism, which articulates rural concerns and pays little attention to maximizing public revenue from potash sales. Thatcher and Devine’s ideological dismissal of crown corporations has been transmitted to today’s Saskatchewan Party.

From 1976 to 1982, the years during which half of Saskatchewan’s potash capacity was in crown-owned mines, the provincial treasury captured 23 per cent of total sales revenue on average. From 2011 to 2022, the provincial tax share, from entirely privatized mines, averaged only 12 per cent. Admittedly, potash prices were higher in the late 1970s and early 1980s than in much of the 2010s, but price differences do not explain much.

Saskatchewan voted in late October 2024. The Saskatchewan Party comfortably won its fifth uninterrupted majority in the legislature. While the NDP increased the size of its caucus in the province’s cities, it has yet to come to grips with the rural/urban divide, reforms needed in the health and education sectors and the ecological crisis of wildfires and drought. And not to be ignored is the “scandal” of lax potash taxation.

Continue reading “The politics of potash” →

In January 2024, a coroner’s inquest on the massacre at the James Smith Cree reserve was underway. I thought it an appropriate time to write a eulogy for Harold Johnson, highlighting his career in tackling the consequences of alcohol and drug abuse in rural communities of northern Saskatchewan. I submitted it to the Johnson Shoyama Graduate School of Public Policy (a combined project of the University of Saskatchewan and University of Regina), which maintains an online series of policy monographs. The academic responsible for deciding on publications rejected it, on grounds that it does not have an Indigenous co-author. Here we publish it in Inroads.

What would Harold Johnson have said about the massacre at James Smith Cree reserve?

Harold Johnson died in February 2022, seven months before the mass killing on a Saskatchewan reserve. Had Johnson lived, he would have said many things about Myles Sanderson’s killing 11 people and injuring another 17. According to Sanderson’s wife’s testimony at the inquest, he was “sometimes” a good parent of their five children. However, even when they first met in 2007, when Myles was 17 and Vanessa Burns was 21, Myles was an alcoholic. Later, he also became a cocaine addict and sold cocaine on the reserve.

This is an occasion to honour Johnson’s wisdom contained in Firewater, a memoir of his career.¹ Incidentally, Firewater was shortlisted in 2016 for a Governor General’s literary award. As introduction to his memoir, Johnson wrote,

I cannot stay silent any longer. I cannot with good conscience bury another relative. I have now buried two brothers who were killed by drunk drivers. I cannot watch any longer as a constant stream of our relatives comes into the justice system because of the horrible things they did to each other while they were drunk. The suffering caused by alcohol, the kids with Fetal Alcohol Disorder (FASD), the violence, the poverty, the abandoned children, the mental wards and the emergency rooms, the injuries and the illness and the loss of hope and the suicides have all piled up within me to the point that I must speak.

I must speak because so few are speaking. Our political leaders, our chiefs and councillors, the Assembly of First Nations, the Indian federations, the tribal council – all seem so silent. (Non-Indigenous leaders) have turned and looked the other way … If one of them were to speak up, they would be called racist and accused of stereotyping.

If Johnson was alive, he would have discussed the role of alcohol and drugs in Indigenous communities. He would have criticized fur traders for having introduced alcohol. However, he would have gone beyond history. He would have called on Indigenous people to recognize their failings, which have created so much misery. Johnson never satisfied himself with fatalistic arguments based on historical wrongs: “If we believe that the only reasons for our problems rest with colonization, we can never fix our problems, because we cannot go back and fix colonization. We cannot go back and change residential schools.”

Johnson was a member of the Montreal Lake Cree Nation in northern Saskatchewan, son of a Cree mother and a Swedish father (who identified as Cree). He lived a very full life. Before pursuing his final career as a writer of fiction and nonfiction, he undertook many careers. He was a logger, miner, trapper and fisher. He joined the navy. Having decided to be a lawyer, he got a law degree from the University of Saskatchewan and subsequently a master’s degree in law from Harvard. He spent two decades as a senior Crown prosecutor in northern Saskatchewan.

The central theme of his memoir is straightforward: alcoholism is the key dysfunction in First Nation communities. He concluded that the Canadian elites, both Indigenous and non-Indigenous, had avoided discussion of a serious problem. In discussing the 1996 report of the Royal Commission on Aboriginal Peoples (RCAP), he wrote that alcoholism “was too blatant a subject to ignore … The commissioners argued back and forth about this study and that study and which might be correct … They said, ‘the widely held belief that most Aboriginal people consume excessive amounts of alcohol on a regular basis appears to be incorrect.’” Johnson’s response: “The Royal Commission obviously got it wrong.”

From his experience as crown prosecutor, Johnson described many harrowing cases. To give an example:

I know a young man from a community near here who had a girl-friend. The two of them were having a few relationship problems and had walked away from the community … They were standing on the bridge consuming alcohol. The girl decided to punish the young man by committing suicide – she jumped in front of a semi-truck that was passing by just then. The young man was devastated and confused … The experience haunted him, and he went to talk to an aunt for advice. She told him, “Go get good and drunk and let it go.” … He drank as much as he could for as long as he could. He woke up one morning in his car. The police were knocking on the window. They were investigating a hit and run. They found the victim’s DNA under the young man’s car. Sometime during the night he had run over his cousin and killed him … At that moment, he quit drinking. Trauma, grief and drinking seem to go together in our communities.

There is no definitive evidence on the prevalence of alcohol abuse in First Nation communities or on the extent of negative consequences. Johnson firmly believed his case studies were representative. He alluded to anecdotal evidence in the form of conversations with police, probation officers, judges and a forensic anthropologist, and personal experience with Indigenous friends – primarily those who did not drink. He cited the indirect evidence arising from coroners’ reports of proximate causes of death in northern Saskatchewan, where roughly two thirds of the population identify as First Nation or Métis. In the north, the leading cause of death between 1998 and 2007 was “injury” (at 23 per cent). In the province overall, “injury” was far less prevalent (at 6 per cent), and would be lower yet (at 4 per cent) were the north excluded.

Johnson’s conclusion: “These deaths from injuries in our communities are caused by suicide, car accidents, snowmobile accidents, drowning, stabbing, shooting, beating, house fires, and freezing to death. And behind these deaths by injury is one thing, and that is alcohol.” Having introduced his anecdotal and indirect evidence of excessive use of alcohol, he concluded by noting that 35 per cent of the Indigenous population does not drink, a higher percentage than among the non-Indigenous.

“Injury” (which includes suicide) is one of ten standard causes of death listed in coroners’ reports. It is, admittedly, an ambiguous residual category. One of the few comprehensive studies to make use of “injury” statistics was undertaken a decade ago by the First Nations and Inuit branch of Health Canada. The study analyzed the distributions of proximate causes of death among on-reserve First Nation and non-Indigenous in western Canada. The overwhelming difference between the two distributions was the dramatically higher incidence of “injury” among First Nation relative to non-Indigenous Canadians.²

As evidence that non-Indigenous elites are unwilling to address alcoholism, here is the conclusion of Wayne Arthurson’s (very negative) 2017 review of Firewater in Quill & Quire, the trade publication of the book industry in Canada: “Johnson’s basic argument – that alcohol is killing so many indigenous people – is flawed from the start … He offers no supporting research, no police reports, coroner reports, or medical records, to back up his claim.”³

Johnson pursued many careers, but statistician was not one of them. He was as aware as the author of the Quill and Quire review of the need for better statistical evidence. Johnson described an unsuccessful attempt to persuade a statistically competent colleague to research evidence on the role of alcohol among First Nation people in Saskatchewan:

I wanted to find out many things. How many deaths were the direct results of alcohol? What percentage of accidents? How many cancers? How many heart attacks? How many suicides? Could he determine how much shorter a child’s life would be because the parents were drinking and not providing proper nourishment during the child’s formative years? What is the cost to society for one child with Fetal Alcohol Spectrum Disorder (FASD) during that child’s life?

The 2021 census provides evidence relevant to Johnson’s concern for the legal consequences of alcohol and drugs.⁴ Over the five years 2017–21, among the non-Indigenous population the average homicide victim rate was 1.48 per 100,000 population. Among the Indigenous population outside the Prairies the rate was about 4.5 per 100,000; among the Indigenous population in the Prairies it was about 15 per 100,000. The majority of victims knew who killed them (see tables 1 and 2).

Johnson’s tentative short-term solution was expansion of “sober houses”:

If you have a sober house, if you are one of the 35% of our people who never use alcohol, you put a Sober House sign on your door and people will know that you welcome sober people to come and join you … A safe place, a cup of tea, someone to talk to, some who understand: the experience of what a healthy life and a healthy home look like would be, for many of our relatives, something superior to any treatment centre.

“Sober houses” may help, but they are probably a weak reed on which to rely. Johnson had much to say about revival of Indigenous values. In his chapter on employment, his conclusion was pessimistic:

We seem to be caught in a cycle. We claim to drink because we have nothing to do, and in our drinking we create the misery, dysfunction, and violence that drives the greater part of our economy. Most of the infrastructure in our territory – the hospitals, police stations, the courts, and the jails – depend upon our continued suffering … Maybe, if we are sober, we can imagine how to make our living from the land again.

Allan Blakeney and RCAP

Former Saskatchewan Premier Allan Blakeney, appointed by Prime Minister Brian Mulroney as an RCAP commissioner, would have agreed with Johnson about the commission, although they diverged on other matters. Allan Blakeney was a politician ahead of his time in his concern about the condition of the Indigenous population in his province. Many would now dismiss as inadequate his attempt as Premier in the 1970s to create Indigenous-run municipal governments throughout northern Saskatchewan. At the time, they were significant innovations.

Prior to publication of the RCAP report, Blakeney resigned as a commissioner. I asked him why he did this. He replied,⁵

In my opinion, roughly a quarter of those who identify as Indian or First Nation truly want a communal lifestyle available on self-governing reserves, and that should be acknowledged and respected. Another quarter are reasonably well integrated in mainstream Canadian society. The half in the middle are migrating between reserve and town and facing many social dysfunctions in both contexts. For two years, I travelled with other RCAP commissioners across Canada, but could never generate a serious discussion about the need for education and employment. My frustration was such that, finally, I thought it preferable to resign.

Blakeney placed more emphasis than did Johnson on formal education, and the desirability of most – not all but many – First Nations opting to go to town. Maybe Johnson was right, and Blakeney wrong. Whatever the ultimate explanation of excess Indigenous deaths by “injury,” Johnson made a convincing case that both Indigenous and non-Indigenous leaders are minimizing a major social scourge.

Continue reading “Remembering Harold Johnson” →

In analyzing the Canadian housing debate, it is useful to distinguish between two time periods: 2000–15 and post-2015.

2000–15: Chrétien, Martin and Harper

Figure 1 illustrates, post-2000, the annual increase in Canada’s population and annual number of housing units completed (all types). Between 2000 and 2015, the ratio of the two was fairly stable, somewhat less than two additions to Canada’s population (most but not all due to immigration) relative to each completed housing unit. Overall, during the Chrétien, Martin and Harper governments, aggregate supply of new housing was adequate. Few people were talking about inadequate housing supply.

Admittedly, there were other housing problems. A price spike took place in 2006–07, when the annual price increase reached 10 per cent (see figure 2). There was not much debate about the cause of the spike: the real estate speculative bubble in the U.S. housing market spilled over into Canada. In 2008, the bubble “popped” and a minor price decline followed in 2009. Post-2008, Canadians prided themselves on the rarity of bankruptcies in Canada as a result of better-regulated Canadian banks.

By contrast, in the United States there was legitimate fear of a worldwide freeze of financial markets as in 1929. The U.S. Treasury bailed out bankrupt large financial institutions, at great cost to American taxpayers. However, explosion of the housing bubble wreaked serious financial damage not only on major financial institutions but also on many middle-class Americans, who had invested in one or more houses on the basis of the conventional wisdom that housing prices always increase, never decline. As a result, much of middle-class America accepted the Tea Party interpretation of events: when house prices collapse, elites get bailed out; ordinary people go bankrupt. The political outcome was the victory of Tea Party Republicans in the 2010 congressional election.

In the early 2010s, the Canadian discussion of house prices was more or less limited to Toronto and Vancouver. These two cities have large immigrant diasporas and are the destination of 40 per cent of new immigrants. Much of the housing debate in these two cities turned on the hard-to-measure effect of wealthy offshore investors buying Canadian housing units as a safeguard for their wealth and a potential source of capital gain. British Columbia and Ontario brought in provincial legislation that attempted to limit foreign investment in housing – for example, taxes on “empty homes.” The two provinces realized modest reductions in house prices.

2016–present: Trudeau

A feature of Justin Trudeau’s government has been to champion multiculturalism and project a doubling of permanent immigration by the mid-2020s. It also encouraged the provinces to expand visa-based immigration. By 2019, the Statistics Canada estimate of the ratio of annual population increase to housing completions had nearly doubled from the 2000–15 ratio.

Given the second price spike in 2021–22, many housing policy analysts looked seriously at the combination of higher permanent resident numbers and visa-based de facto immigration. The articles in Inroads by Anne-Michèle Meggs and Pierre Fortin have made a significant contribution to the debate. The majority of visa-based immigrants have no intention of returning to their home countries; they hope to become Canadian citizens. For the years since 2020, Statistics Canada has been obliged to revise upward its estimates of total population – in 2021 and 2022, the revised estimates of annual population increase have exceeded one million.

It is hardly surprising that when we increase population by a million people annually – as opposed to 330,000, the pre-2015 average – we experience a second house price spike. The drop in house prices in 2023 has been due to a dramatic increase in interest rates.

In its summer 2023 retreat in Prince Edward Island, the Trudeau cabinet finally took note of the unexpected consequence of its post-2015 immigration policy. No doubt, the ministers studied the polls, which display a major change in public opinion. Between the Nanos immigration poll in March and the more recent poll in September 2023, opinion has changed: “accept more immigrants” declined from 15 to 8 per cent; “accept about the same” declined from 46 to 34 per cent; and “accept fewer” increased from 34 to 53 per cent.

As Trudeau repeats often, “Canada is a country of immigrants.” True, but one of the responsibilities of a sovereign country is to reach a compromise that acknowledges the negative as well as the positive implications of large immigration. Because of the Liberals’ under-the-table immigration policy, until recently there has been negligible public discussion of the implications for the housing market of tripling the pre-2015 population increase.

Belatedly, the provinces and Ottawa have now implicitly acknowledged that recent immigration numbers are a major cause of the spike in house prices and rents. To reduce immigration numbers, however, poses political problems for both Ottawa and the provinces. Ottawa has perhaps decided to reduce the number of postsecondary study visas. The federal immigration minister has, for example, acknowledged that 40 per cent of Indian students seeking study visas have fake reference letters. The prospect of universities and colleges receiving fewer foreign students, who pay up to four times the fees of domestic students, imposes sizable financial costs on provincial budgets.

A second problem to tackle is the impact of high rents in exacerbating homeless numbers. Ottawa and the provinces are increasing subsidies to encourage construction of more low- and middle-income rental units. To have a substantial impact, this strategy will require some combination of higher deficits and higher taxes.

At the time of writing (October 2023), no major political party at the provincial or federal level has argued openly for a lower immigration number (permanent residents plus visa-based arrivals).

Image: Kwaku Griffin via Pexels.

Earlier this year, I attended a Comparative and International Education Society conference in a five-star hotel in downtown Washington, D.C. For me, this was a new cosmopolitan community. The CIES brings together academics and practitioners engaged in education for developing countries. The largest contingent was USAID staff. Among bilateral donors, the United States plays the prominent role in financing pilot projects and thereby “nudging” host countries to pursue sensible education goals, such as learning outcomes, that host governments are often reluctant to pursue. The U.K.’s smaller equivalent does the same.

Some of the attendees were education professors; some were education PhD students hoping to be hired by an NGO; some were representatives of private firms that manage donor-financed projects. The firms were either competing for new projects with “development partners” (i.e., countries with weak public education systems) or reporting on the projects they were implementing in faraway countries. The conference lasted ten days.

It was not all earnest discussion. Seasoned NGO managers came to Washington to catch up with one another’s activities. I attended as lead author of a book assessing primary education in South Asia.¹ Shahidul Islam, one of my co-authors, persuaded the society to host a launch for the book (Manzoor Ahmed, emeritus director of Bangladesh’s major education institute, is the third co-author). Shahidul, who spent two decades directing U.S. and U.K. education projects throughout South Asia, was comfortable in this community. He recruited Baela Raza, a senior Pakistani activist, to chair the launch. Baela is refreshingly blunt in discussing the state of education in her country. She emphasized Pakistan’s depressing “learning poverty” statistic – only 23 per cent of Pakistani children aged 10–14 are able to read at a Grade 2 level. (More on learning poverty below.)

Among the plenary conference presenters was Mme Sidibé Dedeou Ousmane, at the time Mali’s Education Minister. She enjoys an exceptional professional reputation for dedication to education. The chair of her session wanted the panel to discuss diversity, equity and inclusion. She was not much interested in such woke goals. In impeccable Parisian French, the minister discussed the problems she faced, the most traumatic being the effects of the loss to jihadis of the northern half of her country. Jihadis have shut down all schools in territory they control – for boys as well as girls. At present, there is no schooling for 600,000 school-age children in central and northern Mali. The contrast between Mme Ousmane’s school system and a five-star Washington hotel is stark.

Mali is one of six African countries that have experienced coups d’état since 2020 (Niger, Burkina Faso, Chad, Gabon and Guinea are the others). In some countries there have been more than one. In addition, there are simmering civil wars in Ethiopia, Angola, Nigeria, the Central African Republic, Cameroon, the Democratic Republic of Congo (DRC) Sudan and Mozambique. For reasons not discussed in the local media, Mme Ousmane subsequently lost her portfolio.

The World Bank divides developing countries into three groups based on per capita annual income: low (below $1,135), lower-middle ($1,136–$4,465), and upper-middle ($4,466–$13,645). There is a strong case that universal, reasonable-quality basic education, usually defined as primary plus some secondary schooling, is essential for low-income countries to escape “low” or “lower-middle” income status. Universal basic education is not sufficient for a country to prosper, but for many reasons it is a necessity.

There are exceptions. If governing elites capture sufficient resource rents and spend efficiently on basic services, countries with large petroleum and mineral resources can provide decent basic services to all citizens. Several African states (including Nigeria, Niger and the DRC) have large potential public resource revenues, but most don’t provide decent services. Most dissipate the potential through dismal national governance.

Dismal governance is at the heart of Africa’s “darkness” (apologies to Joseph Conrad). By almost any criterion, the quality of governance in high-income countries is better than in any African country. However, that is not a fair comparison. Britain became the world’s first industrial country more than 200 years ago because its governance, dismal by 21st-century high-income country expectations, was slightly more accommodating of industrial initiatives than that of other European countries. From David Hume and Adam Smith in the 18th to Charles Dickens and Karl Marx in the 19th century, numerous writers damned British governance with as much passion as some current African intellectuals acknowledge their domestic failures.²

Many, perhaps most, 21st-century African intellectuals are convinced that European colonialism is the major source of present “darkness.” However, debating the extent to which this is true gets us nowhere in addressing the question that Lenin made famous: “What is to be done?” To answer that question, we must first face the facts.

Africa is the continent with the lowest per capita incomes and the highest fertility rates. At present, its population is 1.4 billion and the average total fertility rate is 4.6. The World Bank estimates that 87 per cent of the next generation of teenagers is illiterate, and hence the majority will likely be doomed to informal low-wage employment, and early marriage for girls. The UN population projection is a doubling to 2.8 billion by 2050.³

Combined with probable further desertification in the Sahel, deforestation, higher temperatures and drought, a doubling of the continent’s population is a profoundly pessimistic prospect. The UN qualifies its projection: if African countries achieve better basic education, the continent’s “human capital” will rise, which will enable better-paying jobs in industrial and service sectors; more women will work; marriage will be delayed; the fertility rate will decline. Based on present trends, this optimistic scenario is doubtful. To realize it requires significantly better governance.

China offers one model. An authoritarian post-1950 government enabled China to impose a one-child policy for two generations. Whatever Mao’s sins, by the time Deng Xiaoping assumed power in late 1970s, Chinese public schools had created an adult industrial work force of both men and women able to read and do basic arithmetic. Other – less authoritarian – examples in the post–World War II era are Malaysia, Thailand and Sri Lanka. The probability of an equivalent development in Africa, hopefully in a more benign way than in China, is negligible.

The next section examines three basic socioeconomic measures: basic education, total fertility rate and poverty rate.

Education, fertility and poverty

The debate among economists is more or less over as to the importance of universal literacy and numeracy, the bottom rung of the “human capital” ladder. If quality primary education is limited to private schools for those able to pay, the bottom rung is effectively broken and the majority remain poor. In 2019, the World Bank introduced the concept of “learning poverty” (LP), a crude measure of basic reading ability comparable across all developing countries.⁴ The World Bank has published LP rates for regions and for 78 individual countries. The estimate for African children aged 10–14 able to read at Grade 2 level is 13 per cent.

As an example, consider Côte d’Ivoire. Over the decade prior to the COVID pandemic, the average rate of a cohort of children in Côte d’Ivoire surviving in school to the final primary grade (Grade 5) was 75 per cent; 25 per cent dropped out. The country’s LP rate is 83 per cent, consisting of the 25 per cent who are not in school plus, among the remaining 75 per cent who are in school, 77 per cent who cannot read Grade 2 stories.

Not surprisingly, median LP rates in Africa decline from 90 per cent among low-income countries to 71 per cent in the lower-middle income group and 46 per cent in the upper-middle group. There is ambiguity as to what is cause and what is effect. Is realization of decent basic education a major cause of higher future per capita income? Or does parental interest in decent education for their children arise only in countries that, for reasons other than education, have achieved higher per capita incomes?

In the long run, causation runs both ways. In one generation, the evidence for the first interpretation – that basic education comes first – is strong.⁵ Reliance on private schools enables some countries to achieve “lower-middle” income status without reasonable quality government schools. Such is the case in South Asia, where half the population is below the poverty threshold in table 1.

Another robust conclusion among developing countries is the positive impact of girls’ education, which increases family incomes and reduces the number of unwanted (at least by mothers) children. Campaigns for family planning have some impact; female literacy is a more powerful incentive to limit early marriage and reduce family size. The prospect of higher earnings than can be obtained in traditional activities is a powerful incentive to educate girls and postpone marriage. In general, educated girls exercise more authority in domestic family matters, which in turn reduces fertility rates. Median total fertility rates in Africa decline from 4.6 among the low-income to 3.9 among the lower-middle and 2.8 in the upper-middle group – which is nonetheless above the stable fertility rate of 2.1.

Unfortunately, sub-Saharan Africa has been unable to copy the post–World War II progress in southeast and east Asia. In some countries (such as Kenya), the key problem is tribal conflict. In countries with large Muslim populations, leaders of fundamentalist Islamic movements, many of which are brutally violent, argue that modernization is an insult to the Qur’an. Closing schools, in particular blocking education for girls, is a high priority, as can be seen in Mali’s loss of the northern half of the country. In western Africa, jihadi movements have conquered much of the northern rural regions of countries from Nigeria to Mauritania.

Governments can reduce poverty by direct cash transfers. Among the old without family support, cash transfers make sense. Also, governments can reduce poverty by subsidizing certain commodities, such as farm fertilizer or basic staples. However, provided governments have a long-term perspective, investment in quality basic education is the best means of reducing poverty.

Governance

Governance is an ambiguous concept. Francis Fukuyama has a (blessedly) short definition: “a government’s ability to make and enforce rules, and to deliver services, regardless of whether that government is democratic or not.”⁶ The only way to measure governance among countries is through public surveys. Probably the most sophisticated of the many such surveys is the World Bank’s Worldwide Governance Indicators (WGI).⁷ Annually, the WGI define national governance on six dimensions in about 200 countries. The scores among African countries in three of six dimensions are listed in table 2. Rankings are in the form of percentiles⁸:

  • Voice and Accountability: perceptions of the extent to which a country’s citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association and a free media.
  • Political Stability and Absence of Violence/Terrorism: perceptions of the likelihood of political instability and/or politically motivated violence, including terrorism.
  • Government Effectiveness: perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation and the credibility of the government’s commitment to such policies.

The most salient dimensions of the WGI governance dimensions in terms of association with literacy (measured by learning poverty) are perceptions of political stability and government effectiveness. The role of democracy is much less prominent in responses.⁹

Occasionally, coups d’état in Africa have brought about effective governance. Two examples are the Tigray revolt in Ethiopia against the Marxist generals who ran the country before 1992, and Paul Kagame’s Tutsi-based victory in Rwanda over a Hutu-dominated government that in 1994 promoted genocide of the Tutsi.

Income inequality

Among OECD countries, high income inequality is often a background factor conducive to left- and right-wing populist demagogues upsetting the apple cart.10 The two most prominent in this century have been Donald Trump and Boris Johnson.

A simple measure of national income inequality is the ratio of the share of income among the top 10 per cent of the population to that of the bottom 10 per cent. Among high-income OECD members, Scandinavian countries display the lowest ratio; Canada is roughly in the middle (with a ratio of 8.4); the U.S. and U.K. demonstrate high inequality. The ratio among low- and lower-middle-income African countries is about 12:1. The median ratio (27.7) among African upper-middle-income countries is three times that in Canada (see table 3).

If high income inequality in OECD countries is a factor contributing to the success of populist demagogues, presumably high income inequality is a relevant factor in explaining political instability in Africa. The “top 10 per cent” in African countries are typically urban and well educated. In francophone countries, the urban elites historically relied on the French army as guarantor. No longer. Several of these countries (including Mali) have turned to Russian mercenaries as guarantor of urban security.

Disillusionment and the desire to leave

Among many Africans there is profound disillusionment with the quality of governance in postcolonial nation-states. The illiterate, largely rural, majority are drawn to populist authoritarian ideologues – Salafist Muslims or tribal leaders. Among the minority with education and skills, a desire to emigrate, either legally with a visa or illegally via traffickers, is common. The desperation that leads many Africans to want to leave is captured in these excerpts from an article based on informal interviews by journalists in five countries. The article was published in the Guardian in October and was a copublication with the nonprofit platform ZAM, which works with a network of African journalists.11

Nigeria: ZAM reporter Theophilus Abbah stops and questions builders, plumbers and doctors in the capital, Abuja. Nine out of 10 say they want to “japa”, the Nigerian term for exiting the country at the “slightest opportunity”. They cite poor governance, the dismal state of health, education and other public services, a massive wealth gap, corruption and the oppression of media and civil society organisations.

Cameroon: A funeral is being held for Bryan Achou (name changed), whose body was pulled from the Mediterranean and returned to his family less than a year ago. Friends and relatives commiserate about his fate. “He’s a child from my neighbourhood. In less than two weeks, we lost two children: one was in the ocean between Turkey and Greece, the other was in Tunisia,” says one woman. “Really, before 2035, this country will have been emptied of its citizens,” another mourner says.

This is a reference to the government’s new development paper Cameroon vision 2035, an outline of plans by the president, the 90-year-old autocrat Paul Biya, to turn his ailing, conflict-ridden country around. Judging by the resignation in the reactions to the remark, no one here believes it will succeed. There have been so many plans since Biya came to power in 1982.

Uganda: At Entebbe airport in Kampala, a human rights worker waiting for a flight sees a line of veiled young women seated in the departure area. They look Ugandan. An immigration officer tells him the group is travelling to Saudi Arabia and other Gulf states to take up jobs as domestic workers. The activist is perturbed. Many reports say that this domestic worker route often ends up with young women trapped in modern slavery conditions, where they suffer long working hours, beatings, rape and even murder. How have these Ugandans missed the numerous radio and news reports?

Kenya: Patricia Wanja Kimani, who experienced months of abuse as a domestic worker in the Gulf, says: “It’s like telling a child not to put its hand in the fire; it will still put a hand in the fire.” Kimani has written a book about her experiences and now works for an NGO that aims to warn Kenyan women off leaving. Her colleague Faith Murunga, who works at an NGO with a similar mission, says that Kenya’s young people, 67% of whom are unemployed, have few alternatives. As in Uganda, a wealthy elite does little to tangibly improve the lot of the majority. “We try to engage with the government. We do what we can,” says Murunga.

Zimbabwe: 95% of teachers would emigrate given the opportunity, according to a 2022 survey. The reason, says Obert Masaraure, president of the Amalgamated Rural Teachers’ Union of Zimbabwe, which conducted the survey, is that teachers earn too little to take care of their families “even without food or school fees”. Speaking to ZAM reporter Brezh Malaba, Masaraure says he regards a colleague who made it to Saudi as “so lucky”. Zimbabwe boasts some of the world’s richest gold and diamond reserves, as well as lithium and other minerals. But the proceeds don’t reach state coffers; many reports have exposed how income is appropriated by individuals in the ruling Zanu-PF party.

Continue reading “Mme Ousmane’s School System and the Prospects for Africa” →

Ashoka Mody, India is Broken: A People Betrayed, Independence to Today. Palo Alto, CA: Stanford University Press, 2023. 528 pages. Deepti Kapoor, Age of Vice. New York: Riverhead Books, 2023. 548 pages. Ram Gopal Varma (director), Sarkar 3 (film).

Ashoka Mody is an economist, currently a faculty member at Princeton University. He has written a history of India’s politics and economic development over 75 years, from independence in 1947 to the management of COVID in 2020–22. Given his career – he spent over a decade at the World Bank, followed by nearly two decades as a senior official at the International Monetary Fund (IMF) – the reader might expect his book to employ the cautious style of international agencies such as the IMF. Admittedly, Mody discusses exchange rate policies, tax policies, income distribution, poverty rates and such. Neither the Bank nor the IMF would ever publish this book. Mody’s goal is to damn the priorities of Indian politicians, from Jawaharlal Nehru to Narendra Modi. Numerous academic colleagues (Indian, American and British) have reviewed the manuscript and provided implicit support for Mody’s prosecution.

Some academics, graduate students and motivated general readers will read Mody’s book. Its audience will probably be small. Those not willing to read a lengthy academic book can get a feel of Indian politics via “realist” authors and movie directors – such as Salman Rushdie’s Midnight’s Children, Aravind Adiga’s The White Tiger, the film Slumdog Millionaire (based on Vikas Swarup’s Q & A) and Ram Gopal Varma’s “Godfather” Sarkar films. Deepti Kapoor’s Age of Vice is a new novel with themes that overlap with Mody’s: unacceptably large income inequality; unacceptable corruption in government and business, much of it in construction and real estate; elite capture of state-level governments; and blurring of the distinction between corrupt politicians and corrupt businessmen. Her novel may not be as complex as Salman Rushdie’s, but it is a good read.

Mody’s two accusations

Mody’s first accusation is that, from the beginning, Nehru and most – albeit not all – Congress leaders failed to prioritize provision of universal quality services such as primary health care and, above all, basic education. Nehru was enamoured of large-scale infrastructure and industrial projects such as steel mills. He described himself as a socialist, but he avoided the complex administrative details required to establish school systems able to provide universal literacy and numeracy.

The second is that, after Nehru, no prime minister has given priority to containing corruption. Indira Gandhi abandoned her father’s discomfort with corruption. She described it as a “global phenomenon,” making no distinction between Scandinavia and India. Over the following decades, Mody argues, corruption expanded and has become deeply embedded in the conventions of India’s public services. The potential for democratic accountability to rectify matters has more or less disappeared.

By prioritizing Hindu nationalism (Hindutva) and dismissing Mahatma Gandhi’s insistence on religious tolerance, Narendra Modi has eliminated the possibility of a major political party campaigning successfully on a platform reversing the political rot dating back to Indira Gandhi. Among many items of evidence, Mody notes the rise in the share of members of parliament (Lok Sabha) with pending criminal cases: from 24 per cent in 2004 (Congress government led by Manmohan Singh) to more than 40 per cent in 2019 (BJP government led by Modi).

Mody’s conclusion, echoing Kapoor: India is broken.

Basic education failure in South Asia and the Sri Lanka exception

Mody devotes a chapter to Rabindranath Tagore. Tagore is known as a poet and novelist, but he was also a passionate advocate of universal public education: “In my view the imposing tower of misery which today rests on the heart of India has its sole foundation in the absence of education. Caste divisions, religious conflicts, aversion to work, precarious economic conditions – all centre on this single factor.”1 Tagore travelled widely; he examined public school systems in many countries. As mentor to Nehru, he (unsuccessfully) recommended that an independent India pursue the education strategies of countries such as the Soviet Union, Japan and Sri Lanka.

Akin to Canada in the mid-19th century, by the 1930s governments in the provinces of the British raj controlled domestic policy. Unlike the rest of the subcontinent, the leading politicians in Colombo prioritized universal basic education in the decades prior to Sri Lanka’s gaining sovereignty in 1948. The education minister, C.W.W. Kannangara, played a powerful role in cabinet debates over priorities. He and Tagore offered mutual support on the importance of education. By the time Kannangara retired from politics in 1947, Sri Lanka had an adult literacy rate of about 65 per cent, four times the rate elsewhere in the subcontinent. Tagore died in 1941. Had he lived past 1947, he would have been deeply disappointed.

Mody thanks his 96-year-old father for providing help on the early chapters dealing with the politics of Nehru’s reign. Presumably, this passage reflects both his and his father’s conclusion:

The government persisted in dedicating insufficient funds to primary education and spending those scarce education funds on higher education. Thus, India acquired a lopsided education system that did not serve the people and created the incentives among students for acquiring degree certificates rather than acquiring education. Corruption infiltrated the administration, especially, of colleges and universities.

Convincing evidence exists to confirm the conclusion of Mody and his father that, since 1947, India has continued to suffer a “lopsided education system.” Tagore’s “imposing tower” of illiteracy has shrunk over the last 75 years, but the majority of Indian children remain illiterate. The first five-year plan (1951–56) promised that all children aged 6–11 would achieve, within a decade, at least universal primary education and hence basic literacy and numeracy. Six decades later, in 2009, the Congress government enacted the Right to Education Act, which specified universal education to age 14. At the central and state levels, governments spent money on better school facilities but made no progress on reducing corruption in hiring and posting of teachers, decentralizing administration and increasing teacher supervision. Overall, student outcomes have not improved.

The only credible assessment of primary education outcomes across rural India is very large in-home surveys organized every two years by Pratham, a large NGO. The two key results of these surveys are the ability of Grade 5 students (the final primary grade in South Asia) to read a short story at a Grade 2 level and successfully divide a three-digit by a one-digit number. In the 2018 survey, the most recent pre-COVID, on average 50 per cent of more than 500,000 children surveyed could read the story; 28 per cent could do the division. Admittedly, the variance across Indian states is large.2

A new piece of evidence is the World Bank’s learning poverty statistic, a heroic attempt to compare basic literacy rates across countries in the cohort of children expected to be in upper-level primary grades. In India, the 2022 learning poverty rate (proportion of children between the ages of 10 and 14 who can’t read a Grade 2 story) is 56 per cent. That is, only 44 per cent of children in that age range can read at a Grade 2 level. The comparable rate in Bangladesh is 42 per cent able to read, in Pakistan 25 per cent. By contrast, 85 per cent of Sri Lankan children can read, at least at the Grade 2 level.

Failure to control corruption

The World Bank defines corruption as “the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as ‘capture of the state’ by elites and private interests.”3 Those engaged in corruption have an incentive not to divulge their illegal activity. Hence, measuring corruption is open to much debate. One respected measure of corruption at the national level is Transparency International’s annual Corruption Perception Index. In 2022, of 147 countries ranked top to bottom, India ranked 85th. Incidentally, the corruption in other South Asian countries is worse. Bangladesh ranked 147th, Pakistan ranked 140th, Nepal ranked 104th and Sri Lanka ranked 101st.4

Here is Mody’s abstract to Chapter 22 (“Modi Breaks India’s Fractured Democracy”):

A democracy works for the people when it provides public goods that help everyone enhance their own well-being. By that test, Indian democracy definitively betrayed its people. When Narendra Modi became prime minister , Indians suffered from poor quality education and health services, cities were chaotic, the judicial system worked only for some, and rampant environmental pollution was depleting the inheritance of India’s children. The centrality of construction as a growth driver was contributing to corruption and the injection of criminals in politics; this was true for even progressive states such as Tamil Nadu. With Modi’s ascent, an intolerant Hindutva became an added impediment to democracy. Modi’s initiatives to provide more toilets and gas stoves helped but made no dent in the broader lack of public goods. The 2019 election brought election spending, legislators facing criminal charges, and Hindutva to a new crescendo, sending Indian democracy into possibly irreversible decline.

Mody provides a critique of Indian business elites, politicians (in all major parties) and the judiciary. At time of writing (February 2023), it appears that Gautam Adani, head of a conglomerate with headquarters in Gujarat (Modi’s home state), has manipulated financial accounts. The result is a halving of Adani’s known corporate share values, previously $200 billion USD. The Economist’s summary of recent events is consistent with Mody’s:

The Modi years have in many ways eroded India’s checks and balances. His government has steadily undermined the independence of the courts and the police. The media are mostly too cowed to investigate the mighty as they once did. Few Indian newspapers would have touched a story about Mr Adani had an American firm not asked the tough questions first. Mr Adani himself recently bought NDTV, a news channel that was once critical of the government but is now supine.5

South Asia’s “realists”

Kapoor’s novel is partially an autobiography. Neda, a central character in the novel, is an investigative journalist for a Delhi newspaper. Kapoor was a journalist while in her 20s. She admits to participating in the dissolute lifestyle of Delhi’s young and rich. The second central character, Sunny Wadia, is the dilettante son of the powerful though thoroughly corrupt and brutal patriarch of the Wadia construction firm. The third is Ajay, son of an impoverished single mother whose husband has been killed by a neighbouring farmer. Ajay’s mother sells him to a trafficker of child servants and prostitutes. Ajay ultimately becomes Sunny’s personal assistant.

At times in the novel, Kapoor assumes the role of journalist and describes the tactics whereby the Wadia firm displaces slum dwellers in Delhi and buys up land titles of farmers with small holdings in the city’s outskirts. There is a corrupt beneficial link between the Wadia corporation and the chief minister of Uttar Pradesh. I don’t want to spoil the climax. Reviewers in the New York Times and the Guardian refer to Mario Puzo’s Godfather as a precedent.6 Both novels are based on the complex codependence of organized criminals and senior politicians. There are other literary precedents to note.

Kapoor has obviously been inspired, in terms of plot, by Adiga’s White Tiger, a brilliant satire and winner of the 2008 Booker prize. Adiga’s equivalent of Ajay is Balram, a very smart, very ruthless peasant from Bihar. He rises in status to become the driver for Mr. Ashok, owner of a coal mine. To get the permit for a new mine, Mr. Ashok must pay a very large bribe to the relevant cabinet minister in Delhi. As he drives his employer to the minister’s apartment, he slits Mr. Ashok’s throat and disappears with the duffel bag stuffed with cash. This provides Balram with the necessary financing to become a successful entrepreneur in Bangalore. The novel is written as a series of letters to the prime minister of China who is about to visit Bangalore and witness India’s high-tech developments there. Balram wants the Chinese guest to learn about the actual manner of conducting business in India, not the Potemkin village version prepared by political elites.

Much as Balzac, Dickens, Dostoyevsky and Gogol described the indefensible extremes of wealth, poverty and corruption in 19th-century Europe, Kapoor and Adiga are two of many realist novelists who describe the contemporary shape of Indian society. To these two can be added their Pakistani equivalents, Mohsin Hamid and Mohammed Hanif.

A link from Dickens to contemporary South Asian writers is Slumdog Millionaire, a film loosely based on Vikas Swarup’s novel Q & A that won the 2009 Oscar as best film of the year. The actors were all Indian; the director, Danny Boyle, was British. The equivalent of Fagin in Oliver Twist could be the thugs who recruit street children on a Mumbai garbage dump, blind them and set them up as productive beggars. The Mumbai Oliver and a young girl escape the clutches of Mumbai’s Fagins. He becomes a chawallah (tea seller), working for a television company that runs a popular quiz show; she becomes a prostitute. By good luck, Oliver finds a benefactor; by good luck, the chawallah becomes a quiz contestant and wins a million rupees. He elopes with the girl, who is liberated from a brothel. The ending is a Bollywood song and dance.

Ram Gopal Varma has, in the manner of Francis Ford Coppola, directed several “Godfather” Bollywood movies. He freely acknowledges his inspiration from Coppola and Puzo.7 His most recent Sarkar was released in 2017. Varma is here testing the limit of free expression in Modi’s India. Sarkar is a Mumbai don, the equivalent of Brando’s aging mafia don. The film introduces corrupt businessmen, corrupt politicians and corrupt police, as well as the role of vigilante justice. In Godfather II, the opening scene is an old man appealing to the don to revenge the rape of his daughter by beating up the rapist. In a similar scene in Sarkar, Sarkar’s lieutenants murder the rapist as he steps out of an expensive car parked at the entrance to a five-star hotel. As Al Pacino succeeds the old don, Sarkar’s “good son” agonizes over his family obligations. Ultimately, he sacrifices a peaceful domestic life in America with his fiancée and, instead, continues Sarkar’s tradition of vigilante justice.

The defence

Mody’s book is the prosecutor’s case against Indian elites. However, there is a defence case to be made. The defence is in the bullet points, with the prosecutor’s response in italics:

  • The share of the population living below the “low” income country poverty threshold of $2.15 USD per person per day8 has dramatically declined since 1947. It is now only 10 per cent. The World Bank classifies India as “lower-middle” income with a recommended poverty threshold of $3.65 USD per person per day. With this somewhat higher threshold, 45 per cent of Indians are poor.
  • India has had an impressive rate of per capita GDP increases since the turn of the century. The average annual increase from 2000 to 2019, the last year prior to COVID, was over 5 per cent, not as high as China but well above the increase among nearly all other “lower-middle” income countries. Despite embedded corruption and grossly inadequate public services, India illustrates that a country can achieve impressive growth rates. There is a ceiling to per capita GDP of “low middle” income countries with lamentable social services and high corruption. All “upper middle” income countries, such as China and Malaysia, deliver tolerably good education and health services.
  • Over the last 50 years, Indian life expectancy at birth has risen from about 50 to 70. The life expectancies at birth for both Sri Lanka and China are higher.
  • If we compare India 75 years after independence to, say, Britain 75 years after the publication of Adam Smith’s Wealth of Nations, we should discuss the Great Exhibition of 1851. It was an overly self-satisfied celebration of the British economy. It took another century before Clement Atlee, Labour Prime Minister following World War II, created adequate universal social services in the U.K. This is a legitimate argument against the British, but in post-1947 India everyone expected better than Britain in 1851.
  • Mody elaborates on the role of corruption in destroying the environment of the subcontinent. For example, the air in India’s megacities is undeniably dangerous to human health, but probably no worse than the air in London as described by Dickens in Bleak House (published in 1853). Given rising temperatures and sea levels, we cannot wait for a century before Indian elites assume social responsibilities.

These are five credible qualifications but, were I the judge, I would still endorse Mody, the prosecutor.

Continue reading “India’s Corruption Through Three Lenses” →

Stefan Dercon, Gambling on Development: Why Some Countries Win and Others Lose. London: Hurst & Company, 2022. 360 pages.

Born in Belgium, Stefan Dercon now lives in the U.K. and is a professor at Oxford University. He is a worthy addition to the list of academics, mostly economists, trying to understand why some countries escape the World Bank’s “low income” category and reach at least “lower-middle income” status; why some stall at “lower middle” and others graduate to “upper middle.”¹

Table 1 lists the countries Dercon discusses at length. I have added Canada to drive home the fact that Dercon’s book concerns those in the first three categories – countries with per capita GDP far below that of high-income countries. Despite its phenomenal manufacturing prowess over the last half century, China’s current per capita GDP is only one third of Canada’s; India’s is one seventh. Dercon devoted his early career to Ethiopia which, until its post-2020 civil war, had a growth rate second only to China’s among the countries in table 1. However, after a quarter century of rapid growth, Ethiopia’s per capita GDP in 2019 was only 5 per cent of Canada’s.

I quote from Dercon’s preface:

A decade or so ago, I came to a realisation. I needed to radically rethink how development comes about. By then, I had one foot in academia – as an Oxford professor – and one in government – … as chief economist and the most senior technocrat in the UK’s Department for International Development. My moment of truth came not long after I first flew into Beijing … I never saw in China the extreme deprivation I had seen in Burkina Faso, Ethiopia, or India … In the 1980s China was the country with the largest number of people living in such deprivation … By the time I was travelling around China, more than half a billion Chinese had risen from those depths.

Dercon’s epiphany came while travelling across China. At the time of Mao’s death in 1976, per capita incomes in China and India were similar. By 2019, China’s per capita income was two and a half times India’s. Whatever criticisms might be made of World Bank estimates, there is no denying, Dercon insists, that China has lifted 500 million people, the equivalent of half Africa’s population, out of “extreme deprivation.” When Deng Xiaoping assumed power, he had no Soviet-style five-year plans to implement. What underlies the phenomenal development success of post-1978 China, Dercon concludes, is a pragmatic agreement among Communist Party elites to pursue economic growth.

Dercon’s epiphany is the importance of elite agency: “The political and economic elites have much more agency than is usually allowed by the historical approach to institutions.” (I discuss the institutionalists in the accompanying box.) Among “low income” countries, Dercon is not much interested in democracy and honest elections, constitutions with ringing statements on human rights, the ideal of politically neutral courts and politicians subject to rule by law, or efficient implementation of taxes. On all these dimensions, successful developing countries vary widely in the scope accorded to government or courts. What the successful countries share is “a development bargain … an underlying commitment to growth and development among members of the country’s elite.”

Dercon defines a successful “development bargain” as having three shared components:

  • A durable political and economic deal: Development requires long-term horizons among the elites, which implies that they agree not to undertake violent intra-elite conflict.
  • A sensible state: The scope of the state differs widely among successfully developing countries. It may tolerate corruption and criminality in some sectors, provided it manages other important sectors well. What the state does take on, it performs “sensibly.” If, for example, the elites decide the state should provide primary and secondary schools for all, it does so with attention to school learning outcomes. In South Asia, the Sri Lankan government has – despite the corrupt incompetence of the Rajapaksas over the last 15 years – managed good public schools, reflected in the fact that the illiteracy rate among children aged 10 to 14 is 15 per cent, compared to the 58 per cent average in South Asia as a whole.
  • The ability to acknowledge errors and correct course: Dercon acknowledges that Bangladesh displays corrupt “volatile rent-seeking politics,” but the state does ultimately correct major obstacles to economic development. Bangladesh is the world’s second largest garment exporter. For decades, Bangladeshi governments tolerated massive violation of health and safety regulations in garment factories. For example, a political insider blatantly flouted all regulations and constructed a large building housing seven garment factories on a swamp. In 2013 the building collapsed: 1,100 workers died and more than 2,000 suffered injuries. The owner was captured and shot as he fled to India. Over the next five years, the government markedly improved safety regulations.

Dercon’s definition of the three components is admittedly fuzzy and omits some important factors that determine per capita GDP growth rate – education in particular. More on this later.

Yes, minister

About the time he visited China, Dercon found himself with a new minister in his department. She told the press, “I didn’t come into politics to distribute money to people in the Third World.” He provided her with a large pile of books, written mostly by economists, on economic development – whether she wanted them or not. Among the authors are four winners of the Nobel economics award. He insisted that she spend an afternoon in a tutorial discussing the authors’ conflicting analyses. Implicitly, he does the same for readers of his book (see Box).

Ideally, Dercon should have tutored his minister for more than one afternoon and offered his conclusion on the numerous debates among the development economists. However, his tutoring was cut short. In an interview, the Prime Minister (David Cameron at the time) said that Daron Acemoglu and James A. Robinson’s Why Nations Fail was his favourite book on development. So be it. Dercon decided his duty as a senior civil servant was to design policy consistent with the Prime Minister’s view of the world. This was not particularly difficult. Dercon, like Acemoglu and Robinson, is among the institutionalists, with the qualification that he thinks governing elites have more “agency” than most institutionalists acknowledge.

Dercon’s zoo

To say Dercon has travelled widely is a serious understatement. Very few academics, journalists or diplomats have visited as many countries. He describes meetings as a journalist with politicians and senior economic advisers in Kinshasa and conversations with peasants in rural Ethiopia. When I was in Bangladesh this past summer as a guest of BRAC, the country’s largest NGO, my hosts discussed Dercon’s visit in 2020, just before the COVID pandemic. As a policy analyst, he discusses in detail various successful programs pursued by Meles Zenawi, leader of the Tigrayan coalition that, in 1991, toppled Ethiopia’s Marxist dictator. Meles was not a democrat; he led a meritocratic government in the tradition of Deng Xiaoping in China and Lee Kuan Yew in Singapore. Dercon has a high regard for Meles, who died in 2012. (As noted above, Ethiopia ranks second only to China in per capita GDP growth among the countries in table 1.)

Dercon is, obviously, an economist. He alludes to other goals, but his principal criterion in evaluating countries is growth rate of per capita GDP. He began his academic career teaching in Addis Ababa and participated enthusiastically in early initiatives of Meles’s government. The optimism of youth has mellowed with age:

With the end of the Ethiopian civil war (in 1991), it was hoped that peace would launch a new period of change and progress across the country and on the continent as a whole … I did not see the genocide coming (in Rwanda). I was not alone. For many of us, it dashed our hopes that peace and open politics would bring rapid prosperity to the continent … Political systems seemed to change, but in too many places the change only ensured that everything stayed the same. Improvements in people’s lives were barely evident in the data we researchers collected and analysed, even though we looked hard for them.

Four economically successful countries in east and southeast Asia – South Korea, Taiwan, Hong Kong and Singapore – are often labelled as the Asian tigers (Hong Kong is no longer a country, but would very much like to be independent of mainland China). To leaven his discussion of economic progress – or lack of progress – among the countries he discusses, Dercon creates an imaginary zoo. China, the world-changing outlier, is a dragon; India is a peacock, very showy with promises but short on fulfilling them. Indonesia is a tiger cub, which may or may not mature into a full-fledged Asian tiger. He reaches the same conclusion with respect to Bangladesh.

Many African countries are compared to hippos in a lake. The visitor sees the eyes above water, but the political action is below the surface, hence invisible. As hippo examples, he discusses Sierra Leone and Malawi. He is more hopeful for Kenya, Uganda and Ghana, which may achieve economic takeoff. He has no faith in either Nigeria or the Democratic Republic of Congo escaping low-income status. Their governing elites engage in continuous zero-sum games that benefit themselves – but no one else.

The worst Ethiopian catastrophe of the 20th century was not the Italian invasion or Haile Selassie’s “traditional military and aristocratic” government; it was the economic incompetence of the Marxist regime that ran the country from 1976 to 1991. It did little to limit the 1984–85 famine, estimated to have killed up to a million people. After 1991, Tigrayans dominated the Ethiopian government for a quarter century. By 2018, resentment of their political and military dominance came to the fore. In 2018, a non-Tigrayan became prime minister. Subsequently, Tigray attempted to secede, and the ensuing civil war has shattered Ethiopia’s “development bargain.”² Biafra’s attempted secession from Nigeria half a century ago is an ominous precedent.³

Dercon labels several countries as hyenas. The secession of South Sudan from Sudan has yielded negligible benefits for citizens of both countries: “The South Sudanese state and its leaders could have been lions, but they chose to be clans of hyenas fighting over the scraps.” Other hyenas are Afghanistan, Nepal, Lebanon and Somalia. At various times over the last half century, these countries have experienced anarchic violence. At present, Lebanon, Afghanistan and Nepal are nominally at peace. But even in Somaliland, the most stable region in Somalia, no one places much faith in ever realizing a successful development bargain.

Paul Kagame of Rwanda is similar to Meles inasmuch as they both saved their countries from hyena status and introduced economic and social policies far more efficient than those of their neighbours. Like Meles, Kagame is a meritocratic dictator (Rwanda’s per capita GDP growth in table 1 is close to that of Ethiopia). Had Dercon published his book before COVID, he would probably have labelled post-1991 Ethiopia as an African lion (lions being the symbol of the Ethiopian empire). He would have done the same for post-1994 Rwanda. Now, faced with ethnic conflict in Ethiopia erupting into civil war, he adds a question mark to both. It is to be hoped that ethnic tensions in Rwanda and eastern provinces of the Democratic Republic of Congo won’t reignite the civil war of 1994.

Education matters

Many academics in developing countries are content to blame European imperialism for their countries’ poverty. The argument rings true, for example, when discussing the problems posed by arbitrary national borders, which oblige multiple ethnic communities to accept rule by other ethnic elites. However, we cannot rewrite history. Dercon argues that blaming the colonizers is intellectually lazy: it minimizes the responsibility of governing elites to undertake “development gambles.”

I am sympathetic to his argument, with one major exception. His discussion of basic education as an element in a development bargain is superficial. Whatever the errors of Chinese policy in Mao’s reign, by the time Deng Xiaoping adopted “sensible” policies and persuaded his politburo colleagues not to “cancel” one another, the majority of Chinese adults could read at a basic level and do basic arithmetic; hence, they could migrate to cities and become productive industrial workers. By the early 1990s, according to UNESCO’s (excessively) modest criteria, nearly 80 per cent of Chinese could read, whereas less than 50 per cent of Indians could do so. This literacy gap is a relevant factor in any explanation for why India’s per capita GDP is currently only 40 per cent of China’s – and countries in sub-Saharan Africa rank much lower relative to China.

In 2021, the World Bank launched a “learning poverty” statistic to estimate the national share of children aged 10 to 14 who cannot read short Grade 2–level stories comparable across countries (see table 1). In the specified age range, children are expected to be in an upper primary grade. A country’s learning poverty rate is the sum of (a) children in this age cohort who have dropped out or never enrolled in a school and are assumed not to be literate and (b) children who are in school but unable to read a simple story.⁴

In South Asia, for example, the proportion no longer in school is about 15 per cent; the proportion of students in school but unable to read is 50 per cent. In a random sample of 100 South Asian children aged 10–14, about 15 cannot read having dropped out or never enrolled; half of the 85 in school cannot read simple stories. The average learning poverty rate in South Asia is 58 per cent unable to read; in China the equivalent share of children aged 10–14 is only 18 per cent. In sub-Saharan Africa it is 87 per cent. In Dercon’s “home” country, Ethiopia, he discusses in detail Meles’s sensible macroeconomic and agriculture policy. He doesn’t discuss Ethiopian schools. In Ethiopia, the learning poverty rate is 90 per cent, slightly worse than the sub-Saharan average.

Table 1 illustrates national poverty rates based on the World Bank’s suggested poverty threshold for lower-middle-income countries (US$3.65 per person per day). For a family of four living at the poverty threshold, annual income is equivalent to US$5,330. There is very high correlation between high 2019 per capita GDP and low poverty rate. There is also very high correlation between high 2019 per capita GDP and low learning poverty rate. The implications are that more prosperous countries achieve lower poverty rates, and that producing literate children contributes to high per capita GDP. Disentangling the role of education from other relevant factors in explaining per capita GDP is an interesting statistical exercise. Here it suffices to say that education matters.

Finally, there is very high correlation between a low learning poverty rate and a low poverty rate. The implication is that, independent of per capita GDP, literacy contributes to low poverty rates. Relative to illiterate women, for example, women able to read are more likely to earn income for their families, and usually exercise more authority on issues such as limiting the number of children. In addition to Dercon’s zoo, I grade table 1 countries in terms of achieving a low poverty rate. The “A” grade countries are Sri Lanka, China and Indonesia (poverty rate 14–22 per cent). The countries deserving a “B” grade are Nepal, Pakistan, India, Ghana and Bangladesh (40–52 per cent). The “C” grade countries are Kenya, Nigeria, Sierra Leone and Ethiopia (60–65 per cent); “D” grade countries are Uganda, Tanzania, Zambia and Rwanda (72–78 per cent). The unambiguous failures are Democratic Republic of Congo, Malawi and Somalia (88–90 per cent).

Dercon’s Reading List for his Minister

Jeffrey Sachs, an economist at Columbia University, wrote The End of Poverty: How We Can Make It Happen in Our Lifetime (Penguin, 2005). He emphasized two factors to explain the persistence of poverty in “low income” countries. First, most such countries are prone to a high incidence of debilitating tropical diseases, which reduces productivity. Sachs was the chief economist associated with the Millennium Development Goals (MDGs), the ambitious United Nations campaign between 2000 and 2015 to achieve eight social policy goals. One MDG set a target for reduced under-five mortality, another for reduced maternal mortality. Second, per capita GDP in these countries is so low that it is unrealistic to expect them to save and invest in needed infrastructure and quality social services. His basic advice: high-income countries should give lots of aid.

Paul Collier, an Oxford colleague of Dercon’s and former World Bank economist in Africa, wrote The Bottom Billion: Why the Poorest Countries are Failing, and What Can be Done about It (Oxford University Press, 2007). The book contains detailed advice to donor agencies when they are faced with corrupt host governments. The problem of corruption is particularly acute, Collier contends, in countries (such as Nigeria and the Democratic Republic of Congo) that have large resource rents from oil and minerals. The magnitude of such rents is an irresistible incentive for host-country politicians to concentrate on zero-sum conflicts that maximize income for those allied with the governing party – and provide only rudimentary services to the majority.

William Easterly, a “rogue” World Bank economist, wrote The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (Penguin, 2006). His critique goes further than Collier’s. If countries had democratic elections, property rights and the rule of law, and the governing elites let markets function, economic growth would take place. He cites Thailand and Japan as fortunate never-colonized countries that, before World War II, realized significant development without aid. Donors complain about corrupt governments, but in practice they subsidize bad behaviour. Hence, in most circumstances, aid has done more harm than good: it is a prop for corrupt governments and hampers the emergence of “sensible” governments.

Dambisa Moyo, author of Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa (Farrar, Straus and Giroux, 2009), is a Zambian economist. She more or less agrees with Easterly, and emphasizes the potential advantage for host governments of pursuing international capital investments.

Joseph Stiglitz, Nobel economics prize recipient and yet another senior World Bank economist, wrote Globalization and its Discontents (W.W. Norton, 2002). He emphasizes the monopoly power of multinational firms. They capture far too large a share of revenue arising from their investments in developing countries. Decisions of international organizations such as the World Trade Organization, the World Bank and the International Monetary Fund function in a manner unduly favourable to multinational firms. Stiglitz wants major reform in all three. Nonetheless, he favours developing countries engaging in international trade. Why? Despite unequal income distribution, workers in tradable sectors benefit because they typically earn more than they could in traditional sectors (such as agriculture) and, over time, local entrepreneurs may replace multinational firms.

Ha-Joon Chang, a Korean professor at Cambridge University in the U.K., is the author of Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism (Bloomsbury, 2007). He fundamentally disagrees with Stiglitz. Chang wants developing countries to do as South Korea did: protect the domestic market until host countries mature and are able to compete effectively with multinational firms.

Abhijit Banerjee and Esther Duflo shared a Nobel economics prize for their many carefully implemented randomized control trials. The technique requires two samples identical in all relevant respects except that the treatment sample receives a policy intervention while the control sample does not. If allocation to the treatment sample is random, the only explanation for a significant difference in sample outcomes must be the treatment. Such trials have demonstrated many potentially productive policy interventions. Banerjee and Duflo jointly wrote Poor Economics (Penguin, 2011). The problem with randomized control trials is external validity: will the result obtain outside the confines of the trial? Critics of their work, such as Douglass North and the team of Daron Acemoglu and James A. Robinson, insist that randomized control trials ignore underlying institutional obstacles that prevent adoption of productivity-enhancing interventions.

This brings us to the institutionalists. Douglass North earned the Nobel economics award in 1990 for his critique of market “fundamentalists” (such as Easterly) and his rehabilitation of institutional analysis among economists. The first sentence of Institutions, Institutional Change and Economic Performance (Cambridge University Press, 1990) is as good a definition of institutions as any: “Institutions are the rules of the game in a society or, more formally, are the humanly devised (formal and informal) constraints that shape human interaction.” Acemoglu and Robinson are disciples of North. Their book Why Nations Fail: The Origins of Power, Prosperity, and Poverty (Random House, 2012) begins with a discussion of Nogales, a city straddling the U.S.-Mexico border. In the Mexican half, average income is one third that in Arizona. The fundamental explanation of this 3:1 ratio, they argue, is differences in U.S. versus Mexican institutions.

Continue reading “Why Some Countries Are Poor and Others Are Not” →