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Wednesday, November 15, 2006

A defense of Friedrich Hayek

Betsy's Page presents a counter to a Jeffrey Sachs' "higher taxes can save the world from poverty" push and attack on Hayek here.

I like her bottom line:
I think I'll stick with Hayek and Milton Friedman. The solution to world poverty is not in massive programs run by the U.N.

I note that our domestic War on Poverty has been going on for 42 years. A couple of years ago, Thomas Sowell took a look at the results:
Never had there been such a comprehensive program to tackle poverty at its roots, to offer more opportunities to those starting out in life, to rehabilitate those who had fallen by the wayside, and to make dependent people self-supporting. Its intentions were the best. But we know what road is paved with good intentions.

The War on Poverty represented the crowning triumph of the liberal vision of society -- and of government programs as the solution to social problems. The disastrous consequences that followed have made the word "liberal" so much of a political liability that today even candidates with long left-wing track records have evaded or denied that designation.

In the liberal vision, slums bred crime. But brand-new government housing projects almost immediately became new centers of crime and quickly degenerated into new slums. Many of these projects later had to be demolished. Unfortunately, the assumptions behind those projects were not demolished, but live on in other disastrous programs, such as Section 8 housing.

Rates of teenage pregnancy and venereal disease had been going down for years before the new 1960s attitudes toward sex spread rapidly through the schools, helped by War on Poverty money. These downward trends suddenly reversed and skyrocketed.

The murder rate had also been going down, for decades, and in 1960 was just under half of what it had been in 1934. Then the new 1960s policies toward curing the "root causes" of crime and creating new "rights" for criminals began. Rates of violent crime, including murder, skyrocketed.

The black family, which had survived centuries of slavery and discrimination, began rapidly disintegrating in the liberal welfare state that subsidized unwed pregnancy and changed welfare from an emergency rescue to a way of life.
While some good things did come out of the 1960s, as out of many other decades, so did major social disasters that continue to plague us today. Many of those disasters began quite clearly during the 1960s.

But what are mere facts compared to a heady vision? Liberal assumptions -- "two Americas," for example -- are being recycled this election year, even by candidates who evade the "liberal" label.
I wonder how much damage could be done to the world with UN supervision?

UPDATE: An earlier article by Dr. Sachs from The Economist here:
The idea that the UN system could provide real leadership on the great development challenges will strain credulity in some quarters. A steady drumbeat of criticism about the UN agencies during the 1990s, led by right-wing leaders in Congress, has left the impression of nearly moribund institutions, busy securing patronage slots for friends and relatives, and disconnected from the rapid advances in technology, finance and globalisation. Indeed, when I began my own intensive work with the UN agencies three years ago, as chairman of a commission for the World Health Organisation, and then more recently as a special adviser to the secretary-general for the Millennium Development Goals, I was unsure what to expect within the specialised agencies of the United Nations.
Tried and tested

The truth is almost the opposite of what the UN bashers say. Despite a decade of criticism and budget cuts, the specialised UN agencies have far more expertise and hands-on experience than any other organisations in the world. Even the World Bank, with its knowledge base and ability to disburse and monitor funds in some of the most difficult settings in the world, can address problems of health or environment or other specialised concerns only in partnership with UN agencies that have expertise in these specific areas. No bilateral donor agency can substitute for the scale of UN expertise and engagement, though these agencies can be important partners in a global effort.
No bilateral donor agency can substitute for the scale of UN expertise and engagement

This under-appreciated capacity is why the UN system has vastly outperformed expectations in Kosovo, East Timor and other tough assignments in recent years.
Kosovo? From here:
- Kosovo. The commission looks forward to a significant EU role in Kosovo's development once its status has been resolved. The report notes that little progress has been made in reforms; administration and rule of law remain weak; the position of minorities unsatisfactory; and little progress has been achieved in establishing a functioning market economy.
The most recent UNMIK Fact Sheet (10/06) (pdf downloadable here) shows unemployment in Kosovo at 35-50%, a declining GDP and hundreds of milions of "aid being poured in by donor states (over 13% by the US). Another study (ahere (pdf) deals with the impact of UN spending in Kosovo and the efect of potential down-sizing, the conclusions (found on page 46) are that the UN has dumped a lot of money into Kosovo and had a significant impact on the economy and if the UN downsizes, that could have an impact on Kosovo, including the loss of over 1,000 jobs.

East Timor? From The New Republic:
But in reality, Timor, the world's newest nation, was never the U.N. triumph it appeared to be. After 1999, when tiny Timor voted to separate from Indonesia, which had taken over the territory when Portugal left in 1975, militias linked to the Indonesian army leveled East Timor, leaving much of the country in ruins. The United Nations stepped in, taking a mandate in Timor until 2002, the first time in history the United Nations had completely run a nation. After Timor officially gained its independence in 2002, the United Nations maintained a sizable presence in the country, along with a hydra of other major non-governmental organizations.

By the end of 2005, the United Nations and other agencies were showering themselves with praise for their work in Timor. Timor seemed relatively stable, and it appeared to have developed a vibrant civil society and a nascent democracy. One of the former U.N. negotiators involved in Timor's transition published a memoir showing how the United Nations had overcome major odds and helped Timor onto the path of success. When World Bank President Paul Wolfowitz visited Timor this April, he lavished plaudits on the country for its "functioning economy and vibrant democracy." In last year's U.N. progress report on Timor, delivered to Secretary General Kofi Annan, the organization announced, "The overall situation [in Timor] ... remained calm and stable."

But this praise concealed serious problems--problems the United Nations seemed to ignore or even make worse. Despite Wolfowitz's praise, in reality the Timorese government had done little to promote broader economic growth, and has shown worrying signs of high-level corruption--trends some staff in Wolfowitz's own organization had warned about.

Indeed, today Timor is the poorest nation in Asia, with unemployment rates topping 50 percent. Though the United Nations' presence initially created thousands of jobs for locals and pumped money into the economy, the organization did little to help ensure that these Timorese would be able to find work after the blue helmets left. When the United Nations began to draw down some of its operations in 2002, many Timorese immediately lost their source of employment, and the U.N.-created economic bubble collapsed, with Timor's economy actually shrinking.
UN outperfomed expectations in Kosovo and East Timor? Only if they were remarkably low to begin with...

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