Peter Bauer's uphill battle against prevailing orthodoxies

Posted: May 10, 2002 12:00 AM

The death of Peter Bauer cannot pass unmarked. He was one of those people to whom we all owe a great debt, whether we realize it or not. He insisted on talking sense, even when dangerous nonsense was at the height of its popularity.

In the last two decades of his life, he was Lord Peter Bauer, courtesy of British Prime Minister Margaret Thatcher. For most of his career, however, he was Professor Peter Bauer of the London School of Economics. His specialty was the economics of under-developed countries.

The dominant orthodoxy in development economics was that Third World countries were trapped in a vicious cycle of poverty that could be broken only by massive foreign aid from the more prosperous industrial nations of the world. This was in keeping with a more general vision on the left that people were essentially divided into three categories -- the heartless, the helpless, and wonderful people like themselves, who would rescue the helpless by playing Lady Bountiful with the taxpayers' money.

Peter Bauer never bought any part of that vision. He had too much respect for people in the Third World, where he had lived for years, to think of them as helpless. "Before 1886," he pointed out, "there was not one cocoa tree in British West Africa. By the 1930s, there were millions of acres under cocoa there, all owned and operated by Africans." He rejected "condescension toward the ordinary people" of the Third World and "the classification of groups as helpless."

Third World people were just as capable of responding to the incentives of a market economy as anyone else, according to Professor Bauer, despite development economists like Gunnar Myrdal who depicted them as needing government planning imposed on them to get ahead. Development economists' hostility to the market and "contempt for ordinary people" were to Bauer "only two sides of the same coin."

If poverty was a trap from which there was no escape, Bauer declared, we would all still be living in the Stone Age, since all countries were once as poor as Third World nations are today.

Peter Bauer considered it arbitrary and self-serving to call international transfers of money to Third World governments "foreign aid." Whether it was an aid or a hindrance was an empirical question. Sometimes it could turn out to be simply "transferring money from poor people in rich countries to rich people in poor countries."

Bauer likewise rejected "overpopulation" as a cause of Third World poverty, even though that was also one of the key dogmas of development economics. Like so much else that derived from the liberal-left vision of the world, "overpopulation" theories served as justifications for running other people's lives.

Peter Bauer pointed out that many Third World countries were much more thinly populated than such prosperous industrial nations as Japan, which had 10 times the population density of sub-Saharan Africa. Moreover, some Third World countries had ample fertile land, much of it lying unused, and often also had valuable natural resources, such as were lacking in Japan.

The later research of Hernando de Soto, published in his book "The Mystery of Capital," added still more evidence that supported Peter Bauer's thesis that Third World people were capable of creating wealth, even if their governments followed economically counterproductive policies that held them back.

For decades on end, Peter Bauer stood virtually alone in opposing the prevailing dogmas of development economists. They in turn dismissed him as someone far outside the mainstream. But, with the passing years and the repeated and catastrophic failures of policies and programs based on the theories of development economics, the orthodoxy began to erode and finally to collapse.

At the end of his life, Peter Bauer was in the mainstream -- not because he had moved but because the mainstream now moved over to where he had been all along. It is a painful reflection on those who award Nobel prizes that Gunnar Myrdal received one and Peter Bauer did not. Yet, on the eve of his death, Lord Bauer was awarded the Milton Friedman prize, worth half a million dollars, for his work.

Peter Bauer's career should be an inspiration to all those who fight an uphill battle against prevailing orthodoxies.