Journal Issue

Rich Lands, Poor Lands: Recollections and Reflections

International Monetary Fund. External Relations Dept.
Published Date:
March 1965
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Escott Reid

IN THE PAST fifteen years or so the rich lands and the poor lands have been trying to create a working partnership through which the richer help the poorer to speed up their economic development.

Mutual Understanding

The basis of successful partnership is, of course, mutual understanding among the partners. A person from a rich land can achieve a reasonable degree of understanding of the problem of the poor lands only if he has a compassionate heart, imaginative sympathy, and a sense of history. For the seeker for wisdom about the problems of underdevelopment must, if he comes from a rich land, acquire the ability to feel in his bones something of what life is like for a poor man in a poor land and for a political leader in a poor land who must urge the poor man to sacrifice present goods for future hopes. It is difficult to acquire this ability without seeing the poverty of poor lands with one’s own eyes.

During the four and a half years that my wife and I were in India, we were fortunate in having many visitors from Canada. Whenever possible, we would take them to see two or three average Indian villages, not the best, the show places, not the worst, just the average. Some of these visitors from Canada were experts on the economic problems of India. They knew what the per capita national product of India was; they knew how many calories there were in the diet of the average Indian; they knew how many yards of cloth he used a year; what the statistics were on infant mortality; what was the average expectation of life. They had read about India. They had talked about India to people who had lived there. They had seen movies of India. But— and this is a revealing commentary on our inability to communicate with each other—no matter how much they had studied India’s problems and poverty, when they saw for the first time with their own eyes their first average Indian village, they were shocked by the depth of its poverty. It was so much worse than anything they had ever dreamed of.

Mr. Reid attended the universities of Toronto and Oxford. In the Canadian External Affairs Service he served in various posts including those of High Commissioner to India and Ambassador to Germany. In 1962 he was appointed Director of the Department of Operations—South Asia and the Middle East, at the World Bank. He is leaving the Bank in July to become the first Principal of Glendon College, York University, Toronto.

Only a comparatively few people from the rich lands can have this kind of opportunity to be shocked into the beginning of an awareness of what life is like for most people in most of the poor lands. Others in the rich lands have the harder task of stretching their imaginations in order to achieve this beginning of understanding.

And what do I mean by a beginning of understanding? I mean chiefly four things. Firstly, a realization of the extent of poverty in the poor countries. Of their total population of thirteen hundred million (excluding the Soviet Bloc and China), at least three quarters are poverty-stricken. Secondly, a realization of the intensity of this poverty. It is not the kind of poverty which people in rich countries think of when they talk about a war against poverty at home. Most people who are considered poor in the rich countries would be considered well off in the poor countries. Thirdly, a realization that most of the poor in the world are peasants living on the land and that the peasant is the key to the success of development programs in the great majority of poor countries. Fourthly, a realization that most of the poor of the world are not white, and that their culture, unlike that of the so-called Western world, is not derived from Western Christendom.

All the world’s great religions and philosophies unite in affirming that all men are brothers. One of the most encouraging developments since the War is the recognition by an increasing number of the people of the rich lands that they are a small, almost entirely white, island of privilege among the vast poverty-stricken majority of the brotherhood of man, which is far different from them in culture, way of livelihood, and physical appearance.

The Attainment of Understanding

This, I call the beginning of understanding of the problem of the relations between rich lands and poor lands. It is the beginning of wisdom about the problems of the economic development of poor lands. It is, of course, only the beginning of wisdom. Again I take my illustrations from India, the country in the underdeveloped world which I know best, and a country which constitutes a very large part of the underdeveloped world, since it has a population of almost five hundred million.

The Indian peasant is poor. A recognition of his dire poverty is central in any discussion of the problems of economic development in India. But the Indian peasant has many other attributes which are also relevant to these problems of economic development. There is the way he feels about the caste group he belongs to and about other higher or lower caste groups in his village. Because of the way he feels it is difficult for the various caste groups to work together to promote the interests of the whole village. The village tends to be divided into factions. There is the villager’s attitude to the cow and the monkey. Most Hindu villagers consider it a sin to kill either the cow or the monkey and India is plagued by useless cows and destructive monkeys. There is in most Indian villages what most people from rich lands would consider to be undue deference to the traditional ways of the past, whether they are ways of cultivating rice, or sowing wheat, or preparing food, or not using latrines.

I remember the first tour my wife and daughter and I made of Indian villages at the beginning of 1953. We spent ten days visiting village after village. We slept in government bungalows on the outskirts of the villages. One of the first villages we visited was, we were told, even poorer than the average. On our tour of that village we were shown a rich mango grove and a fertile tomato patch, and we saw that the crop had been mangled the night before by monkeys. In village after village we saw half-starved milk-bearing cows competing for scanty pasture with useless old three-quarter-starved cows. We heard stories of feudalistic privilege and oppression.

The natural reaction of the outsider is to conclude that what India should do—if India is to double its agricultural production in fifteen years or so, as it must—is to break down its caste system, destroy the useless cows and the destructive monkeys, and eradicate from its villages the hierarchical and feudal traditions.

This is a natural reaction. But I think that the second stage in the attainment of wisdom about the problems of economic development in underdeveloped peasant countries is an acceptance of the fact that changes of this sort cannot be made in a mere decade or two, and that to secure badly needed immediate increases in agricultural production it is necessary to work through existing social institutions. Thus if the greybeards dominate a village it is necessary to concentrate on the task of converting the greybeards to using improved seeds, fertilizers, new methods of cultivation, and so on. If the villagers will not kill monkeys perhaps they will look the other way if outsiders trap them and kill them far away from the village.

A third stage in the attainment of wisdom is, I suggest, the realization of why it is necessary that the leaders of the poor countries have even harder heads than the leaders of the rich countries and why it is more difficult for the leaders of poor countries to make hardheaded decisions.

The Hard Choices

Suppose agricultural production in a typical poor country were to go up by 5 per cent a year. Are the farmers to be allowed to increase their consumption by 5 per cent a year? They easily could, not by spending their increased income on luxuries but by spending it only on bare necessities for the growing population in the villages. The farmer and his wife and children could spend the little bit of extra income per head on a little more food, a few more clothes. But if the farmer consumes all the increase in his production, how is the poor country to finance its industrialization program and feed the fast-growing population of its towns and cities? If there is a 5 per cent increase in agricultural production, will it not be necessary for the government to siphon off in one way or another, say, one quarter or one third of the returns from that increase in order to finance industrial expansion?

Take another and a different kind of hard choice. A poor country is building a dam to irrigate land which has hitherto had to depend on scanty and irregular rainfall and water drawn from shallow wells. The farmers in the area are poor. They need water badly. It would be possible to distribute the water over 500,000 acres. Every farmer in the area would get some water for his fields. Every farmer would get bigger crops. It would also be possible to do a scientific soil survey and select out of the total area of 500,000 acres the best 250,000 acres and provide water only for those acres. The farmers who farm the other 250,000 acres would get no irrigation water. The experts say that by concentrating the water on the best 250,000 acres, instead of spreading it thinly over 500,000, one would get a much bigger increase in the total agricultural production of the area. Indeed the best guess of the experts is that if everybody got a little water the total agricultural production in the whole area would probably increase by about 50 per cent, whereas if the water were used only on the better land agricultural production in the whole area would probably be trebled. But the farmers who own the poorer land, who are for the most part the poorer farmers, would see their richer neighbors get plenty of water while they would get none.

Faced with this sort of problem the soft head ruled by the soft heart would always make the soft choice, and a poverty-stricken country would never lift itself out of its poverty. The soft heart ruled by the hard head would make something close to the hard choice, would make this choice in sorrow and grief of heart. This is the sad burden borne by the leaders of the governments of the poor countries.

It is a burden which can be borne by compassionate men only if they do their best to reconcile the necessity of increased production with the demands of social justice.

Thus in the last example of hard choices the farmers who get the scarce water should not be permitted to retain for their own use the whole of the resulting increase in the value of their farm production. They should be permitted by the government to keep only that proportion which is necessary to provide them with sufficient incentives to use the water efficiently. The rest of the increase in the value of their farm production should be siphoned off by the government by water rates or taxes of one kind or another. Some of the money thus siphoned off can wisely be used by the government to finance a massive rural works program which could employ the farmers in the area who do not benefit directly from the new irrigation project. The works projects should be of the kind which lead directly to increased agricultural production. They should include contour bunding, desilting canals and small reservoirs, damming rivulets and streams, digging surface wells, tree planting, and other projects for soil conservation and land reclamation.

Economic Costs of Choice

The inescapable task of an institution like the World Bank is to help the governments of underdeveloped countries shoulder the burden of hard choices. The World Bank helps them with loans. It helps them with advice. It helps them by giving them loans for hard projects and by refusing loans for soft projects. It helps them by refusing to give them loans if they are not taking adequate steps to mobilize their own internal domestic resources for development.

But it can only help the governments of those member countries that ask for its help.

If a member country asks it to do so, the World Bank will analyze as best it can the costs and benefits of alternative courses of action in respect of a particular project or a particular sector of the economy of the member country. Some of the possible courses of action will be softer than others. The result of the Bank’s analysis will be that before a government makes a soft choice it knows the economic cost of making that choice. And by economic cost I do not mean the cost in dollars or rupees or dinars. I mean the cost in terms of slowing down the pace of the economic advance of the country.

For in the examples 1 have given of decisions between hard choices and soft choices, the selection of the soft choice means just that. It means that the economic advance of the country will be slower than it otherwise would have been. There will be less food produced, and thus more hunger. There will be fewer resources available for building more factories, and thus more unemployment.

Rich countries are fully familiar with this kind of problem. It is the very stuff of politics. The governments of rich countries are constantly having to make decisions on how far they should slow down the material advance of the country as a whole in order to reduce disparities among regions or among social or economic groups, or in order to achieve political or cultural objectives. The governments of rich countries are constantly aware that the selection of one alternative rather than another may mean the loss of several constituencies in the next election. It may even mean the loss of the election.

If a rich country consistently chooses policies which involve sacrificing economic considerations, its rate of economic advance will slow down but it will still have a very high standard of living. In almost all the poor countries the situation is tragically different. In poor countries with rising populations, if governments over a period of time consistently sacrifice economic considerations, the rate of economic advance will fall below the rate of population growth and the people, already poor, will become poorer; the people who now have some hope of a better life for their children will be left without ground for hope.

Thus it is essential for the governments and peoples of the poor countries generally to make something close to the hard choices, whereas it is not essential for the rich countries. But at the same time it is much more difficult for a poor country to reject the temptation of soft choices than it is for a rich country. For the rejection of soft choices so often means holding down increases in consumption by the poor. It so often means putting off doing much to reduce inequalities and inequities among regions and among groups within regions. It so often means sacrificing today’s goods for tomorrow’s hopes. These are things which it is difficult enough for governments and peoples to do in rich countries. It is much more difficult in poor countries.

Hard Projects and Soft Projects

In giving their aid to poor countries, the governments and peoples of rich countries are constantly faced with the necessity of deciding between hard and soft ways. They can provide aid for hard projects or for soft projects. A hard project is one which a careful, expert investigation has shown to be well-conceived, well-designed, and well-engineered and which is likely to result in increases in production in the poor country that are commensurate with its real economic cost to that country.

A soft project may serve better in the short run the prestige of the government that gives it and of the government that receives it, but its real benefit to the economy of the poor country can be low. A typical soft project is the monumental large dam for irrigation which will not result in much increase in production because it is not accompanied by adequate subsidiary irrigation channels, by adequate grass-roots research on what crops should be grown on the newly irrigated land and what particular variety of seeds should be used, or on how much water should be used at various times of the year for each type of crop on each type of land in the area, or by setting up effective methods of teaching the farmers how to use the water. Even if the project for the large irrigation dam did not suffer from all these defects, it would be a soft project if it did not yield as big a return in increased production as alternative methods of using the resources which would be required to build the dam and make it effective. Alternative uses of the resources might be making better use of dams already built, or building a number of smaller dams, or digging deep wells, or improving dry farming.

The governments of rich countries can make the soft choice of using their aid to a poor country to build up their own industries for producing capital goods with little regard to whether these particular capital goods are really what the poor country most needs at that time. Or they can make the hard choice of reconciling the building up of their own industries with the long-run economic interests of the poor countries. Thus if steel plants and nuclear power plants are built in the wrong place at the wrong time in the wrong size they will slow down economic development. The expansion of the steel industry in India has been a wise use of scarce resources, but there are at least half a dozen underdeveloped countries whose pace of economic advance has been slowed down in the past fifteen years by building steel plants. They would be further advanced now if they had spent the money on projects of higher economic priority. There is danger that in the next five or ten years comparable misinvestments will be made by poor countries in nuclear power plants.

A great Western European statesman was talking to me a few years ago about the economic development program of a poor country whose president had just been visiting him. He said: “This country has a very sensible development program.” He paused. “No steel plant.” His simplification was the simplification of the political realist. For that country at that time to include a steel plant in its development program would have been to demonstrate that it was not serious in its efforts to raise the standards of living of its people.

The governments of rich countries can make the very hard decision to give their aid to poor countries not just in the form of grants and loans but also by opening their markets to the goods of the poor countries. They can give a reasonably large proportion of their aid through international agencies, or they can give almost all of their aid bilaterally and tie it to the purchase of their own goods and services. When their aid is tied to the purchase of their own goods and services they can turn a blind eye when their contractors and suppliers, not having to meet international competition, charge prices higher than they would on contracts subject to international competitive bidding. Or they can make the hard choice of deciding that, though their bilateral aid will be tied, the prices charged for such tied goods and services must not greatly exceed world levels.

Then there is the question of the terms of aid. How generous should the terms be? How big should be the element of subsidy in the loans? Should some of the aid be given in the form of outright grants? Here the paradox is that often the hardheaded decision is to give the aid on soft terms.

The more hardheaded choices the governments and peoples of the rich countries make, the easier it is for the governments and peoples of the poor countries to make hardheaded choices, and the more hardheaded choices they make the easier it is for the rich countries to increase their aid.

The Future of the Partnership

What is now required is for the rich and poor members of the partnership—and the middle class countries in between—to examine together the extent to which the poor lands have succeeded in the past fifteen years in their war against poverty, disease, and ignorance, and why it is they have not been able to accomplish more.

In the past fifteen years poor lands have increased their total production of goods and services at about the same rate as rich lands. This is a great accomplishment. But it does not mean much for the average man, woman, or child in the average poor land. In the first place, the same rate of increase in production in rich lands and poor lands does not mean the same rate of increase in production per capita, for the population of poor lands has been increasing twice as rapidly as the population of rich lands. And even if production per capita were to go up at the same rate in rich lands and poor lands, say, at 4 per cent a year, this would mean an increase of about $120 per capita in the United States but only about $3 per capita in India.

In the past fifteen years the population of the poor lands has increased by about two fifths, the population of rich lands by only about one fifth. It seems probable that in the poor lands more than half the increases in production are being absorbed by increases in population. It is this staggering rate of increase in population which constitutes the greatest single obstacle to substantial improvements in the standards of living of the poor lands. This obstacle is much more serious than we, either in the rich lands or the poor lands, thought fifteen years ago.

There are other important obstacles which are much greater than we had thought. The peasant is harder to move, the skills of public administration and business management are scarcer, the traditions and the social institutions which inhibit progress die harder, the relations between the giver and the receiver of aid are more delicate and complex.

It has become increasingly clear that the needs of the poor lands are much greater than we thought fifteen years ago. If the poor lands are to succeed in raising the standards of living of their peoples, they need to curb their population growth. They need to be able to draw on much larger resources. Resources of capital: capital derived from private foreign investors and from foreign governments; capital derived from domestic savings. Resources in terms of more and better entrepreneurs, engineers, social anthropologists, teachers, administrators, economists—from at home and from abroad. Resources of knowledge, in rich lands and poor lands, of what are the principal obstacles to rapid economic growth, and what are the best ways around those obstacles. Resources of faith and hope in the possibilities of economic and social progress in the poor lands. Resources in terms of a sustained determination by the governments and peoples of rich lands and poor lands to make the achievement of this progress a primary objective of national policy. Resources of political leaders in the poor lands who know that

Our stability is but balance, and wisdom lies in masterful administration of the unforeseen.1

Rare political skills are needed by the leaders of the poor lands and the rich lands if the partnership of poor lands and rich lands is to succeed. Rare diplomatic skills are needed by the people in poor lands and rich lands who serve the partnership. For the giving and receiving of advice is a delicate and hazardous operation. A country which is not proud is not worth helping.

The giver of advice can usefully remind himself of four things. Firstly, that human judgment is fallible. Secondly, that luck or providence or the unpredictable plays a large role in economic development. Thirdly, that while it is a good thing for poor people to have more to eat and to wear, better places to live in, more and better nurses, doctors, and teachers, and less illness, it is a better thing for them to have these goods without sacrificing those ancient values of their society which can give them a feeling of belonging to a group, a sense of dignity, and the possibility of serenity. The fourth thing which a giver of advice to a poor land can usefully remind himself of is that, even if final truth has been revealed to him, he is not Moses laying down the law from Mount Sinai. He is a partner speaking to a free and equal partner. For him, success is measured not by the wisdom of the advice he gives but by how much of his wise advice is accepted. His task is one of persuasion. When he intervenes with advice his “intervention should be in the least abrasive, the least corrosive way possible.”2

The receiver of advice can usefully remind himself that the advice is coming from a free and equal partner in a joint endeavor, that the resources this partner provides come from the savings or taxes of individuals in the rich lands, and that the willingness of these individuals to continue to put up money depends in large part on whether they believe the partnership is achieving what it set out to do. For that reason, the partner giving aid is inevitably concerned with the economic policies of the aid-receiving country and with the use which that country is making of all its resources, whether derived from foreign or domestic sources, from private foreign investors, from loans or grants from foreign governments, from taxes, from the profits of publicly owned companies, or from domestic savings. It is the total resources with which he is concerned, not just the resources from abroad or the use of the aid made available for one particular project.

The more clearly it can be demonstrated to the legislatures and peoples of the aid-giving countries that the economic policies are wise and the resources well used, the easier it is for governments and legislatures in the rich lands to resist pressures to transfer part of their aid from the fight against poverty abroad to the fight against pockets of poverty at home. The easier it is for them to open up their markets to the exports of the poor lands, and to make the other hard choices which face the aid giver. The easier it is for them to increase their aid.

What Has Been Learned

We, the people of the rich lands and the poor lands, have learned much in the last fifteen years from our partnership. We have come increasingly to realize that the partnership can evolve from one between two groups of countries, one rich and aid-giving and one poor and aid-receiving, to a partnership where each as it moves up the ladder of economic and social progress can increase the help which it gives to those below it on the ladder. The poor cannot give much money to the poorer but they can share the benefits of their experience and that experience has often cost them much in sweat and tears. When they pass on the lessons they have learned from their failures and their successes that gift can be of great worth. The countries which have recently succeeded in lifting themselves out of the ranks of the poor into the ranks of what one might call the middle-class powers, have an especially important role to play, since their economies and their problems are intermediate between those of the rich and the poor. They can interpret between the two groups. They can transmute the experience of the rich into a form in which it is more easily usable by the poor.

We have learned in the last fifteen years how intimate our partnership must become if we are to succeed in our war against the ancient enemies of man: poverty, disease, and ignorance. We realize better each year how important to our children and our children’s children is success in the partnership, how rewarding the partnership can be to all who participate in it.

Robert Bridges, “The Testament of Beauty.”

Mr. Abe Fortas referring to intervention by the Supreme Court of the United States in the criminal proceedings of a State in the argument before the Court in the Gideon Case in 1963. Anthony Lewis, Gideon’s Trumpet (New York. 1964), p. 172.

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