Chris Blattman on Glenn Hubbard on a Marshall Plan for Africa

Chris Blattman points out four important questions left apparently unanswered by Columbia Business School dean Glenn Hubbard's recent call for a Marshall Plan for Africa in Foreign Policy.

1. Aren’t we doing this already? And can’t we check if it’s working? The World Bank and USAID provide enormous commercial sector support–loans, incentives, tax breaks, you name it. Do these generate more growth than public sector aid? Or does Hubbard have something different in mind?

2. Is cheap credit the big constraint? B.E.T. founder Robert Johnson has made millions in cheap loans available to Liberian businesses the past year. The result I’ve heard? No one’s taking it up. I’ve heard this anecdote repeated in many countries.

3. Could context matter? World War II decimated Europe’s labor and capital, but its political and financial institutions remained strong, and its stablity assured by decisive defeat of the Axis and the presence of American troops. Injections of capital thrived in that environment–in a simple growth model, we might say that the Marshall Plan sped Europe’s return to its equilibrium growth rate. Can the same be said of Africa today?

4. Did the Marshall Plan ignite European growth? One of my favorite economic history papers of all time, by Brad Delong and Barry Eichengreen, answers “yes, but not the way you think.” Overall flows were small, as were the effects on private investment. And infrastructure was mostly rebuilt by the time funds arrived. The Plan mattered because its conditions tipped governments towards a market rather than a planned economy. Western Europe quickly pushed beyond simple recovery to unprecedented growth.

Like healthcare, economic development is a deeply tricky debate. I was once quite enamored of microfinance as a silver bullet (no so much); and in general there is this nothing-new-under-the-sun sort of cyclical quality to development fads. Like the G8's new "teach a man to fish" agricultural development policy - it sounds great, as it did when Robert McNamara tried it in the 1970s. I think that business schools and business thinkers and business in general have a huge amount to contribute, but they (at least the first two) have to avoid this hubris that economic development is a tractable problem which will yield up its secrets, if only the right management analysis techniques are applied. So like Chris, I am teased by Hubbard's proposal, but I'd like to see the nuts and bolts.