By Aparna Gopalan* – The Nation
The 2019 Nobel Prize winners in economics represent a new strain of neoliberal thought.
In 1974, the neoliberal Austrian economist Friedrich Hayek was awarded the newly instituted Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel. In his acceptance speech, Hayek stated bluntly: “If I had been consulted whether to establish a Nobel Prize in economics, I should have decidedly advised against it.” Such a prize, he held, “confers on an individual an authority which in economics no man ought to possess.”
Economists are unlike physicists or chemists in that they wield tremendous power over laypeople without being subject to almost any democratic accountability. To grant them unthinking adulation, as even Hayek realized, would be a dangerous thing. Even though Hayek’s cautions against economists’ authority were rooted in his conviction that markets are “unknowable” and thus best left unregulated, the cautions themselves are still worth listening to, but have gone unheeded. Since the 1970s, economists have enjoyed unparalleled success in establishing themselves as unquestionable authorities: “One would have to look at the history of religions to find anything like it,” David Graeber aptly notes in a recent New York Review of Books essay.
All this faith in economists—and their long-held belief that growth, however unequal, is good—has helped get us to historic levels of inequality, a global crisis of chronic under– and unemployment (especially among young people), and, despite much false advertising, a rise in global poverty documented by scholars such as Sanjay Reddy, Camelia Minoiu, Arjun Jayadev, and Rahul Lahoti.
Yet economists’ efforts to pass themselves off as scientists continue. Take development economists Abhijit Banerjee and Esther Duflo—two of the 2019 Nobel laureates—who begin their new book, Good Economics for Hard Times, by lamenting that economists are among the least trusted experts on both sides of the Atlantic, beating out even weather forecasters.
The new laureates naturally don’t see this as a positive development: They invoke the term “trust deficit” to discuss how the public’s disillusionment can be fixed. The call for “trust” comes at a moment when, after 2008, more people are coming to see that economics is not a science. Unlike particles and forces, “economies” and “markets” are made by people. Economists create the systems they claim to merely be describing. Their research advances their own, often pro-rich, answers to the political and moral questions of “How we should distribute power and resources?” while it purports only to be explaining the technical question “How does the economy work?” Things, people are realizing, can be otherwise.
But even as faith in economists begins to be questioned in the West, when it comes to the “developing world,” many economists continue to enjoy free rein. The 2019 Nobel laureates are a case in point. Far from being beset by the mistrust that they fret about in their new book, Banerjee and Duflo are riding a wave of NPR profiles and audiences with prime ministers. Their work, crossing science with humanitarianism—you might even call it an attempt to “save” poor black and brown people—has been an instant hit with Western liberals. And even as poverty policy in the West is, albeit slowly, becoming understood as a political matter having to do with power and inequality, poverty in the Global South continues to be treated as a scientific matter, requiring data and deference rather than democracy and dissent.
Poverty in the Global South has always been a political matter, having to do with both money and power. To take just one example, since the 1980s the IMF and World Bank, advised by economists and bankers, implemented devastating Structural Adjustment Policies (SAPs) across the Global South under which countries on the verge of defaulting on their (un-repayable) loans were offered debt refinancing—with strings attached. To get new loans, countries had to dismantle public spending, privatize vital state-run services, and remove trade protections for domestic businesses. Thanks to SAPs, poverty and inequality increased dramatically throughout the Global South in the late 20th century. Since 1981, the world’s poor population is estimated to have risen by 1 billion, a number that London School of Economics anthropologist Jason Hickel reminds us is three times the size of the US population.
SAPs have faced decades of intense protests from the Global South’s poor, so much so that since the late 1990s they’ve had to be rebranded as “Poverty Reduction Strategy Papers,” or PRSPS. These merely continue privatization and austerity under a different name. “The strength of the new consensus,” as David Craig and Doug Porter note, “was evident in the fact that [the IMF and the World Bank] barely discussed the efficacy of its underpinning neoliberal market orthodoxy.” Instead, since 2000, insidious projects of privatization and pro-rich advocacy have been carried out not through a direct macroeconomic assaults but rather by intervening in the “organizing rubrics and technical means” of service provision.
The 2019 laureates are a product of their time. Rather than overtly preaching market fundamentalism, the laureates ignore the devastation caused by colonial and neocolonial processes like SAPs, quietly remove the question of restoring public budgets from the table, and lay the groundwork for further privatization, deregulation, and defunding at all levels of the economy.
More impressively, they make their work look apolitical, if not downright benevolent, paralleling the World Bank’s capacity to adopt an ever more pro-poor veneer while still advocating policies that are ever more pro-wealthy. Development economists, who seem inherently nobler and more liberal than their financial crisis–inducing macroeconomist counterparts, might in fact be more dangerous to the world’s poor. If the injustice of global poverty is to be challenged, their work deserves intense scrutiny, not uncritical celebration.
Abhijit Banerjee acknowledges that the 2019 Nobel was a victory not for the individual scholars but also for their wider “movement” of using the “experimental method” in development economics. Drawing inspiration from Randomized Controlled Trials (RCTs)—lab-based experiments used in the fields of medicine and public health—randomistas (as proponents of Banerjee’s movement are called) began treating the lives of the poorest as a giant open-air lab. Instead of studying already existing initiatives to understand what reduces poverty, randomistas introduced their own interventions to randomly chosen groups of poor people. One group might be given anti-malaria bed nets for free and another at 75 percent off, for instance; the two would then be compared to check the impact of price on bed-net usage. The cheaper it was to help poor people, randomista wisdom suggested, the more people could be helped.
Banerjee and Duflo have claimed that randomista economists pursue a simple technical repair devoid of all ideology—much like the way plumbers might fix a clogged drain, or engineers might construct a footbridge. But many economists disagree. Randomistas’ work is dogged with methodological, ethical, and political assumptions that follow no laws of physics. Do RCT findings from Kenya apply to India? What gives economists license to use the poor as guinea pigs?
Fifteen development experts, including three former Nobel laureates, publicly denounced randomista methods in The Guardian in 2018, recognizing that RCTs in development ignore root causes of poverty, excessively narrow the size of the problem, and focus solely on behavioral issues, casting poverty as the problem of bad choices.
The robust criticism is necessary and needs to be extended. The new development economics not only ignores structural determinants but also furthers austerity as the solution to existing austerity, casting more capitalist inequality as the solution to Global South poverty.
Let’s take one example: the 2019 laureates’ work on education. The question they started with was: In India, in Kenya, do kids learn in school? The answer was a resounding “no,” which led to the next question: Why?
Faced with uneducated parents, large class sizes, teacher absenteeism, a lack of textbooks, and the absence of midday meals, the laureates decided to choose among these problems instead of adding them up. What was the problem? Missing textbooks or missing midday meals? Worms in bellies or large class sizes? It turned out the problem was teachers. Test scores improved when poor children got remedial after-school lessons offered by “paraprofessional” NGO workers; when they played educational computer games run also by NGO workers; when researchers hired contracted teachers who were much more “motivated” (read: desperate thanks to insecure employment) than tenured counterparts; and when researchers put cameras in schools and began to dock pay for each day permanent teachers missed.
All of this obscures the simple fact that—according to calculations I carried out as part of doctoral research at Harvard—India spends 0.3 percent of its per capita GDP on each child. In comparison, the United States spends 26 percent. Many existing randomized control trials are biased from the start because they leave out this most significant variable outside the frame of measurement. Even within the RCT method, there might be space to ask better questions. Why not offer a randomly selected school sufficient public funds and compare it with an underfunded school? Why not try increasing teachers’ salaries or making their jobs more secure? Why not improve teacher certification programs and raise standards?
Instead, the laureates’ strategy tries to get a poor school to produce the same educational results as a well-funded school, just without the funding. In fact, all the solutions actually involve further cuts to already dismal public school budgets: lower teacher pay and fewer permanent teaching staff. Their “small solutions” not only let the government off the hook and fail to solve the political problems at the heart of the matter, they also tend to make those problems worse by advocating for further privatization and deregulation.
For example, Abhijit Banerjee has suggested that the solution to India’s health crisis might lie in legalizing untrained practitioners (quacks) using “a simple test which allows the government to certify these practitioners as health extension workers.” This is yet another cost-effective, regulation-lite strategy that enables further cuts to the health budgets.
The laureates’ work responds similarly to problems ranging from hunger to credit, not just ignoring the structural determinants of poverty but actively advocating public defunding and advancing unregulated markets as development solutions. In this context, other RCTs in India investigating how to get daily wage workers to accept lower wages appear not as aberrations but as logical endpoints of the dangerous trend started by the much-admired 2019 laureates and their followers.
In a revealing 2006 article in Boston Review, Abhijit Banerjee ranked potential interventions to increase school attendance by their price tags: deworming (costs $3.25 per child per year), school meals ($35), uniforms ($100), cash transfers to families ($6,000). “Choosing the wrong option,” he notes grimly, “can be very costly indeed.” For Banerjee, “cost” here is emphatically not referring to children having worms in their stomachs or going hungry; it instead refers to the extra money that donors might end up paying if the “wrong” choice was made between deworming, meals, uniforms, and family incomes.
Meanwhile, the laureates live in Cambridge, Massachusetts, a city whose public school system spends a total of $28,000 per pupil per year. Teachers at these schools always show up. They are not only tenured but unionized. Students attend school and they invariably learn to read and write. There are school nurses, nutritionists, counselors, athletic coaches, and there is a cafeteria, and there is soap in the bathrooms. The success of Cambridge public schools need not be a mystery: It’s because they are funded and regulated (and work in tandem with a larger public goods regime) that outcomes are good.
If the direction of causality isn’t clear, try (as conservatives suggest) cutting Cambridge public school budgets by 99 percent. Test scores will plummet. Well-trained teachers and wealthier students will leave for private schools. Undertrained teachers will be hired who stop coming to class. Imagine if, to respond to this crisis, economists recommended putting Cambridge schoolchildren in after-school remedial lessons with an NGO, installing cameras to monitor permanent teachers, docking their pay if they weren’t in class, and replacing permanent teachers with more “motivated” temps—all while the remaining 1 percent of the public education budget was further cut and the public school system was handed off to Teach for America volunteers.
If an economist recommended cutting permanent staff at public schools across the United States, they would be pegged as asking to privatize a public good. Some people, mainly conservatives and the wealthy, would surely be for that, but many wouldn’t: Just look at the ongoing transatlantic debate over the fate of public health care. But because it’s India, because it’s Kenya, and because it’s “development,” few can identify the economist’s political agenda. It’s as if in the Global South there is no right and left, only the neutral, scientific “forward.”
Countries of the Global South are regularly made into political exceptions. For example, even though the 2019 laureates’ RCTs have repeatedly ignored local contexts when scaling up experiments, their work has never attempted to breach the place-specificity of the “developed world.” If they wanted to scale up successful models from any decontextualized location that shows a good track record, why not scale up Cambridge to India?
It is hypocritical to sit in Cambridge, enjoy its comparatively robust public goods regime, and act like public goods have nothing to do with the well-being of Indians and Kenyans. The wealthy have never been experimented on by economists in order to become wealthy, and no RCTs were conducted in Cambridge before deciding to spend $28,000 per student per year. These are not questions of science that need to be left to experts. They are political questions that require political solutions—even in the Global South.
Ordinary people increasingly understand this, but many economists do not. In a gushing 2010 New Yorker profile of Esther Duflo, the French economist is pictured with the poor Rwandan farmers whose lives she claims to be improving. As if posing for a white savior photo-op weren’t condescending enough, the picture is accompanied by an article in which Duflo argues, “Most people who are not economists don’t get it. They don’t get the idea that there are budget constraints.”
But if there is one thing working people the world over can grasp, it’s budgetary constraints. What they also understand is the hypocrisy and the injustice of those constraints, which are only ever applied to them, not to billionaires or the IMF. In the streets across the world, people are rejecting IMF-led austerity and market fanaticism and demanding a redress to longstanding inequities. Development organizations are joining in, recognizing that being liberals at home and capitalists abroad won’t solve poverty. Oxfam has notably taken the unequivocal position that poverty in the Global South will be solved the same way it will in the Global North: progressive taxation, public funding for basic services, and labor protections.
The message is clear: Good economics isn’t rocket science for those who have an understanding of structural injustice and a moral compass. It’s time to stop delegating our thinking on poverty to the seemingly benevolent development economists, especially those who seem to have neither.
*Aparna Gopalan is a writer and educator pursuing her PhD at Harvard University. Her research focuses on the reproduction of inequality and poverty in rural India.