Fishy business

Feb 1st, 2009 | By | Category: International

BBC Radio 4’s The Food Programme at lunchtime included an item on Omega 3 and Omega 6 acids.  A right balance of the acids in one’s diet is crucial to good health.  The interviewees explained that one’s cholesterol was not the problem, it was no more than smoke from the real fire that was the excess of Omega 6 in the system.  The presenter asked, why then so much attention was paid to cholesterol?  The answer referred to the pharmaceutical industry  producing cholesterol reducing drugs .  The closing remarks spoke of a fight between the drugs companies on the one hand and, on the other, the seafood industry, whose products are the source of Omega 3.

It was an item that might as easily have featured on a politics programme, as on one devoted to food, and prompted thoughts as to whether the free market is necessarily the best way to make progress in health care.  Does the need to protect one’s investment and make a profit not militate against the objective judgment of evidence?

It is not just in health care that the protection of interests can colour judgment.  The overseas aid industry, those whose decisions are sometimes literally a matter of life and death, is not averse to seeking conclusions to research that accord with its existing policies.

William Easterly, for sixteen years senior research economist at the World Bank, is critical of the aid industry’s belief that a ‘Big Push’ is all that is needed and of their faith in the possibility of producing a ‘plan’ for a way forward.

Aid groups believe that small and medium enterprises are critical for poverty reduction and expressed dismay when research showed there was nothing sacrosanct about such enterprises.  Easterly writes:

The aid community believes in SMEs’ catalytic role, with the World Bank having lent $10 bil­lion to support SMEs over the last five years. USAID spends about $170 million a year on micro enterprise promotion.

Unfortunately, in a thorough review of both firm-level and macroeconomic data, Beck, Demirgüç-Kunt, and Levine found no evidence that SME promotion created economic growth or poverty reduction. They sensibly point out that there is nothing sacred about small firms. Firm size reflects many things, such as whether it is more efficient to handle transactions in the mar­ketplace or inside the firm or whether a given technology is more productive at a large or small scale. Some countries and sectors may be more competitive with small firms; others with large firms. There is no reason that aid Plan­ners should try to artificially promote one size firm versus a different size firm.

This skeptical paper caused panic in the pro-SME aid community. I my­self got an e-mail from a contractor for an aid agency asking me to write a paper refuting Beck, Demirgüç- Kunt, and Levine. I declined, explaining that academic researchers usually don’t first find the defendant guilty, and then afterward hold a trial.

Other development researchers study many aspects of economic policy, institutions, and politics of poor countries to identify things that seem to contribute to development, based on statistical evidence from household ­level, firm-level, and country-level data. These studies point to piecemeal ways to move toward prosperity, such as keeping roads in good condition or pursuing good monetary policies to keep inflation low-not big answers or comprehensive reforms.

Unfortunately, the stubborn survival of the legend of the Big Push, de­spite evidence of its failure, has continued to foster the planning approach to development.

Easterly’s opponents, amongst them vocal critics of the World Bank and its policies, might respond, ‘Well, he would say that, wouldn’t he?’  They might suggest that his judgment is coloured by his own presuppositions and political loyalties.

The alarming conclusion is that even decisions crucial to human well being, are taken without objectivity and one is left wondering who there is that might be trusted. As Europe slides into deep economic depression and growing social upheaval, those questions of objectivity and trust are going to become increasingly vital.

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