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An Undismal Economist

from the magazine

An Undismal Economist

London Diarist Summer 2002
Economy, finance, and budgets

Peter Bauer, the distinguished development economist, died peacefully at his home in London, in his 87th year, at the beginning of May. He had just won the Milton Friedman Prize for the advancement of freedom and, though very frail, was planning to go to Washington to receive it in person.

As he was fond of remarking, he was the son of a Budapest bookmaker who ended up in the British House of Lords. His entire professional life was devoted to proving that poverty was not an ineluctable destiny, that escape from it was possible and had in fact happened on a mass scale, but that false ideas could and did inhibit the creation of wealth, both among individuals and in nations. This is not to say that he regarded the creation of wealth as the whole business of life: he was always extremely careful to make the necessary philosophical distinctions.

Having arrived in England in 1938 at the age of 23 as a student with very little English, he soon mastered the language sufficiently to write prose of outstanding clarity and limpidity. He always disdained to conceal his ideas behind a screen of technical jargon, a disdain that did not necessarily increase his standing in the academic world, which often places little value on literary excellence or readability.

His ideas themselves went against the dirigiste orthodoxies of his age and discipline, and earned him much disdain and opprobrium. He is perhaps best known for having denied the value of foreign aid to poor countries as a means of developing them economically. He was ahead of his time in recognizing that the word by which a phenomenon was named could foreclose debate about it because of the word’s connotation. It thus became difficult to oppose foreign aid because such aid was by definition help for the needy: and who except Scrooge could oppose help for the needy?

As he pointed out, practically all aid is government-to-government subsidy. As such, it has several undesirable, indeed disastrous, effects: for example, because the corrupt diversion of foreign aid is often the quickest and surest way in very poor countries to personal enrichment, it increases the bitterness of political competition and fosters the wholesale politicization of economic and social life, to the detriment of real development. Moreover, it creates a perverse incentive: for the poorer a country remains, the greater its alleged need for aid. Thus foreign aid becomes an addictive economic drug.

Although he always denied having said it, Bauer became known as the originator of the dictum that foreign aid is the means by which poor people in rich countries give money to rich people in poor countries.

He was vehemently opposed to the implicitly condescending idea of a cycle of poverty, according to which no one who started off poor could accumulate the capital necessary to improve his economic condition and therefore needed outside assistance to get started. If this were true, man would still be living in the caves. For Bauer, economic development depended upon a subtle blend of individually held ideas, cultural factors, and economic policies.

Bauer’s writings on economic development are a rich source of inspiration for those who are concerned with the social problems of the poor in rich countries. Many of the nostrums that were applied to haul the poorest countries out of their poverty (but never did) have been applied to the poor in rich countries, with similarly disappointing results. Bauer always insisted that connected thinking, combined with elementary knowledge of human nature, was more important than technical sophistication in understanding how the human world worked.

Personally, he was the most charming of men. His manners—in an unmannerly age—were impeccable. And his studies of Malayan smallholders and West African traders and farmers only enlarged his deep respect, sympathy, and affection for poor people who were trying to better their lot.

Although combative in his ideas, he was the opposite of an ideological monomaniac. There was an almost eighteenth-century balance to him: for while he believed in the possibility of improvement, he did not believe in the possibility of perfection, and he was alive to life’s ironies. He was not what would once have been called an Enthusiast: he did not judge everything by one criterion, and he thus could observe the world’s follies with amusement. His favorite saying came from Pascal: Let us labor, then, to think well, for such is the foundation of morality.

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