The Optimist

Get an MBA, Save the World

If you want to work in international development, go work for a big, bad multinational company.

Perhaps it's the combined Twitter power of the Two Bills (Gates and Easterly), but working in development is hot, and not just for their 5.9 million followers. I'm not kidding: The website GradSchools.com lists 204 master's programs in international development, meant to prepare students for the glamorous life of managing technical assistance to water and sanitation departments in Bangladesh or dealing with the logistics of emergency food programs in Somalia. Devex, the international development portal, boasts a database of 410,000 candidates for employers working in the aid arena to search. And the World Bank's Young Professionals Program, a route to a permanent position at the organization, routinely attracts about 10,000 applicants for about 30 spots each year. In other words, it's a lot harder than getting into Harvard. Kids today -- they just want to save the world.

But there is more than one way to make the planet a better place. Here's another option: Get an MBA and go work for a big, bad multinational company. Consider this: Over the past decade, foreign direct investment in Africa topped foreign aid -- and in 2011 alone, by $7 billion. And unlike food handouts or free latrines, this kind of investment built factories, financed banks, and opened mines and oil fields, creating tens of thousands of jobs and transferring invaluable knowledge to the countries that need it most. That's good news, because it is increasingly clear that new technologies are what's driving improved quality of life in Africa, and new ways of doing business are vital to sustaining economic growth on the continent.

Yet there's still a widespread feeling that multinationals are the rapacious, profit-obsessed spawn of globalization and free markets, running amok across the developing world. Some surely are. But think about how hard U.S. states compete to attract a Toyota factory. Or how happy Britain was when the Indian firm Tata bailed out its ailing steel industry. If multinationals can make that kind of difference in job creation and productivity in the rich world, consider the even greater role they play in poorer countries.

Foreign firms' biggest impact in developing countries may not be the jobs they bring or the money they pay out, significant as those are, but the products they make. Take Vodafone, which provides services from texting to mobile-phone banking in Africa. The company not only employs some 84,000 people worldwide, but it also provides telecom services to 213 million subscribers in developing countries. And mobile-phone service does a lot more than just allow you to gab all day. It gets people money in emergencies, improves the prices farmers and fishermen earn for their goods, and helps people search for jobs. Economists Stefan Klonner and Patrick Nolen estimate that the proliferation of mobile phones has increased employment in rural South Africa by as much as 15 percentage points by allowing people to search for jobs farther afield. In Kenya, Vodafone affiliate M-Pesa's mobile-banking service had 14 million customers in 2011 -- about one-third of the population. That's huge in a country with fewer than 900 bank branches -- or about one branch for every44,000 people.

How about improving personal hygiene and preventing deaths from diseases like diarrhea? Unilever, one of the world's biggest consumer products companies, produced items used by more than 2 billion consumers in 180 countries in 2010, and 53 percent of the company's revenues came from developing markets. In India, where Unilever's Lifebuoy soap has the largest share of the market, the company ran an 18,000-village campaign to educate and encourage people to wash their hands with soap. A review of evidence in the Lancet medical journal suggested that washing hands with soap is associated with at least a 40 percent decline in the risk of diarrhea and that if everyone worldwide washed hands with soap after going to the bathroom and before preparing food, between 500,000 and 1.4 million lives would be saved each year. (Granted, the study was partially funded by Unilever.) Does Unilever make a lot of money from selling soap in India? Yes. But it's also doing a lot of good.

Sure, multinational pharmaceutical companies get criticized for selling vital drugs at prices that poor people can't afford. At the same time, for every drug that helps with male pattern baldness or gives a bump to middle-age sex lives, Big Pharma develops another one to kill off parasites living in tropical water or protect kids from pneumonia. Take GlaxoSmithKline (GSK), which is testing a malaria vaccine in seven African countries. The Britain-based GSK donated more than 2.6 billion albendazole treatments to 58 countries from 2000 to 2010 to support deworming programs. Intestinal worms don't usually kill people, but they are a major cause of kids missing school, which leads to lower incomes as adults. GSK's ongoing donations are enough to deworm every schoolchild in the most affected countries. The same pill also works against the parasite that causes elephantiasis, a disabling disease that affects 120 million people worldwide. GSK's donation is sufficient to support the World Health Organization's effort to wipe out the disease by 2020. This is real foreign aid.

Of course, the private sector is motivated foremost by profits, not the drive to eradicate poverty worldwide. And multinationals have been involved in some pretty appalling investments. Remember when U.S. energy company Enron sold the Indian state of Maharashtra a $2.9 billion power plant that produced electricity at a cost four times higher than local producers? Or the infamous 1984 gas leak at Union Carbide's chemical plant in Bhopal, India, which killed thousands? Consider, too, the involvement of such firms in the everyday corruption of developing economies: In 2008, the German company Siemens agreed to pay $1.6 billion in fines as punishment for bribes it doled out around the world.

But that's far from the whole story. Across much of the planet, the items the rich world takes for granted on supermarket and drugstore shelves have for decades only been available to a lucky few. Multinational firms bring in technologies and business practices that lower the costs of these items and extend their reach. Competition creates markets in ways foreign aid just can't, turning goods like mobile phones and medicines that were previously luxury items for an urban elite into products used by rich and poor alike. When a simple bar of hand soap does so much to promote income growth, lower child mortality, and improve adult health, there's no shame in working for the faceless corporation that sells and markets it. So, get that international MBA. Then you can really say: "I work in development."

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The Optimist

The Narco State

There's good news on the drug war: The world knows how to end it -- so why can't the United States figure it out?

America's longest running war -- the one against drugs -- came in for abuse this weekend at the Summit of the Americas. The abuse is deserved. Forty years of increasingly violent efforts to stamp out the drug trade haven't worked. And the blood and treasure lost is on a scale with America's more conventional wars. On the upside, we know that an approach based around treating drugs as a public health issue reaps benefits to both users and the rest of us.

President Otto Perez Molina of Guatemala opened the rhetorical offensive against the drug war last week when he wrote that "decades of big arrests and the seizure of tons of drugs" have not stopped "booming" production and consumption. Molina argued that "global drug policy today is based on a false premise: that the global drug markets can be eradicated." Drug abuse, like alcoholism, should be treated as a public health problem, he suggested. We should consider a move towards drug regulation -- including taxation and prohibition of sales to minors. As this weekend's discussion made clear, Molina's statement represents region-wide concern with the business-as-usual strategy towards drugs. Indeed, most of Latin America has already moved towards decriminalization of drug possession in small amounts, and some are considering legalization.

But it isn't just in Latin America that the winds of change are blowing when it comes to drugs policy. Last June, the Global Commission on Drug Policy, which included Kofi Annan, three former presidents from Latin America, a prime minister and former president from Europe, former Fed Chair Paul Volker and former Secretary of State George Shultz, concluded much the same thing as Molina. "The global war on drugs has failed," they reported. It is high time to move towards experimentation with "models of legal regulation."

As a domestic policy, a harsh enforcement approach has done little to control drug use, but has done a lot to lock up a growing portion of the U.S. population. Cocaine and opiate prices are about half their 1990 levels in in America today. And 16 percent of American adults have tried cocaine -- that's about four times higher than any other surveyed country in a list that includes Mexico, Colombia, Nigeria, France, and Germany. And while criminalization has a limited impact on price and use, it has a significant impact on crime rates. Forty percent of drug arrests in the United States are for the simple possession of marijuana. Nearly half a million people are behind bars in the United States for a drug offense -- that's more than ten times the figure in 1980.

As a result, the United States is spending about $40 billion per year on the war on drugs -- with three quarters of that expenditure on apprehending and punishing dealers and users. All of those police out there slapping cuffs on folks found with a baggie of Purple Kush aren't watching for drunk drivers or burglars. And drug enforcement is more closely linked with violent crime than drug use. Meanwhile, the cost of lost productivity from jailed citizens is around $39 billion per year. Such sums are considerably higher than the costs of ill-health associated with drug use, suggesting in strict economic terms at least that it isn't drugs -- but drug control policy -- that is the problem. Add in the social effects of mass incarceration (from rape to split families to unemployment to poverty) and the uncertain benefits of the war on drugs become dwarfed by the known costs.

Harsh enforcement hasn't failed as a policy only in the United States, of course. Across countries, analysis by World Bank economists Philip Keefer, Norman Loayaza, and Rodrigo Soares suggests that drug prosecution rates or the number of police in a country has no effect on drug prices.

Conversely, the Global Commission on Drug Policy report compiled evidence suggesting that approaches based on treatment rather than punishment were far more effective in reducing consumption, HIV prevalence, and crime rates among users. For example, Britain and Germany, both of which long ago adopted harm reduction strategies for people injecting drugs -- programs that include needle exchange programs and medication -- see HIV prevalence among people who inject drugs below 5 percent. The United States and Portugal, by contrast, where such strategies were introduced later or only partially, see HIV prevalence among a similar community at above 15 percent.

Again, the global evidence that legalization would increase use is sparse. Use is far more connected with social, environmental, and economic contexts than legal status. Portugal decriminalized drug possession and use ten years ago, and has seen drug use fluctuate at similar rates to countries where possession remains illegal according to the Commission report. Similarly, U.S. states that have decriminalized cannabis possession have not seen greater increases in use than those states where it remained illegal.

But if the war on drugs is a failed domestic policy in the United States, it is also -- particularly as the U.S. population is the world's largest consumer of illicit drugs -- a failed global strategy. And a larger price for that failure is paid abroad. Drug crop eradication programs simply don't work to dry up global supply. They can drive up the local price of a crop -- but that alone is likely only to force a move in production rather than overall reduction. Aggregate coca cultivation in Bolivia, Colombia, and Peru was higher in 2007 than in the late 1990s, for example -- despite stepped up eradication programs in all three countries. In turn, this might help explain why multiple, expensive eradication efforts from Colombia to Afghanistan have done little to increase drug prices in Western markets, which reached historic lows in the mid 2000s.

Connected to all this is the fact that farmers are not the ones making big money from the drug trade. The price of one kilo of cocaine at the point of production in Colombia in 2000 was about $650. By the time it reached Miami, that price had risen to $23,000, with a final retail price of closer to $120,000 -- suggesting the point of production price is a little more than half a percentage point of the final price.

Given the low wholesale price, it's not surprising that experience from around the world suggests that given other crop options -- flowers in Thailand, onions in Pakistan, potatoes in Laos -- and the ability to get those crops to a functioning market, farmers will often abandon coca and poppy production for these more profitable sources of revenue. The war on drugs, by creating instability and weakening the operation of those markets, may have the perverse effect of increasing the attractiveness of drug crop production for farmers.

And while eradication doesn't work to reduce supply in rich countries, alongside interdiction efforts it can have catastrophic spillover effects in poor countries. Mexico is spending $9 billion a year to fight drug trafficking, for example, and yet the drug war killed 34,000 people between 2006 and 2010, according to the government. Some 27,000 Colombians died each year during the 1990s as a result of violence fueled by drug cartels. Analysis by Jennifer Holmes and colleagues at the University of Texas suggests that coca cultivation was not related to violence in Colombia between 1999 and 2001 -- but eradication efforts were. Again, economists Oeindrila Dube and Suresh Naidu found that U.S. military aid to Colombia was associated with greater paramilitary violence: A 10 percent increase in U.S. military aid was associated with a 15 percent rise in paramilitary attacks in regions where there was a Colombian army base, compared to other regions.

In fact, thanks to the profitable, violent, criminal oligopolies that are the spinoff of the global war on drugs, developing countries that produce drugs or are on drug trade routes face a risk of descending into narco-kleptocracy. In 2010, the commander of Venezuela's armed forces, the president of Nicaragua, the prime minister of Kosovo, the son of the president of Guinea, and a host of politicians allied with the Burmese junta were all deeply involved in the drug trade according to Moises Naim of the Carnegie Endowment.

Meanwhile, popular attitudes towards drug policy in the United States are finally shifting. For the first time since Gallup started asking the question, the majority of Americans think marijuana use should be legal. And the country already has what might be called a more nuanced approach to other addictive drugs. The U.S. government is happy to conclude trade agreements that actually encourage smoking around the world, for example. And the United States is willing to bear the domestic health costs of tobacco and alcohol use that kill 30 times as many people a year as do illegal drugs. Yes, policies towards cocaine or heroin should be far more constraining than those towards cigarettes or beer, but the rationale for such a completely different approach to one set of substances than the other is threadbare.

Nobody should underestimate the appalling toll of drug addiction -- it ends many lives and ruins many more. Of the 250 million drug users worldwide, the United Nations estimates around 25 million are dependent. The question is, does the current approach towards drug policy work to reduce that toll? And what are the spillover effects of America and Europe's hard line on drugs to other countries? The evidence suggests the policy has failed and that the spillover effects are considerable.

The good news is that a different strategy could turn around the violence and lower the economic, social, and health costs of narcotics. America and Europe should commit to a drug policy based around public health and regulation -- making drug use safer, legal, and rare -- rather than criminalization and paramilitary enforcement. That switch will save money and families at home alongside lives and livelihoods abroad. It is time the world ended its addiction to war as a tool of social control.

EPA/PAOLO AGUILAR