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Improving the World With Academic Advice

RUSSIA'S First Deputy Prime Minister Yegor Gaidar knows quite a bit about the problems Latin American nations have had with populism and hyperinflation. That's because Rudiger Dornbusch, a Massachusetts Institute of Technology (MIT) economist, "Fed-Exed" the Russian economic reformer a bundle of 15 or so books on that topic, figuring it would help him deal with Russia's similar difficulties.

"He actually studied them," says Dr. Dornbusch, one of several United States professors giving economic advice to the Russians.

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Another MIT economist, Stanley Fischer, got back last Saturday from Moscow after spending several days working with the Russian Central Bank.

These two aren't alone. A sizable group of well-known academics from MIT and Harvard University are acting as consultants, paid or unpaid, to foreign governments. Their advice is actually having some impact on world affairs.

Probably the most famous of these economic advisers is Jeffrey Sachs, a Harvard economist who has been on leave for almost two years. He helped the Polish government undertake crash economic reforms aimed at moving toward capitalism. Nowadays he has an office in Moscow, advising the government of Boris Yeltsin on such matters as negotiations with the International Monetary Fund (IMF) over economic reforms, foreign debt issues, and budget questions.

"Jeff is a bulldog," Dornbusch says. "He has made a difference."

Several other economists from MIT and Harvard dabble part time in the mini-industry of giving advice to foreign governments.

"We do it because it is extremely interesting," Professor Fischer says. While in Moscow, for instance, he learned enough about the political situation to anticipate the resignation of the Central Bank's chairman, Georgi Matyukhin. He can even speculate on successors. Fischer also gives advice to Israel on visits to that country.

Another MIT economist, Paul Krugman, was recruited by the United Nations Development Program to help draft a report on the Peruvian economy. "I was convinced it was for a good cause," Dr. Krugman says.

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He has also spent several weeks of research in the Philippines, making economic suggestions to the National Economic Development Administration there. "I have a yellow mug which says, `I had coffee with Cory,' " says Krugman, noting that it was actually mango juice and that he and outgoing President Aquino talked more about US-Philippines relations than the economy.

"You do these things because you hope it will do some good," he notes. "The reform-minded people can sometimes benefit by pulling people like myself in to say what they basically know themselves."

A major actor in the advice business is the Harvard Institute for International Development. For three decades, HIID and its predecessor organization have worked with government officials and researchers in developing countries "to help them define their own reform agenda," as director Dwight Perkins puts it.

The institute has 90 full-time professionals in such areas as economics, finance, anthropology, medicine, and management, plus about 200 more a year on a part-time basis.

For example, HIID experts in finance, law, and computerization have helped reform the tax systems in such countries as Kenya, Indonesia, Malawi, Cameroon, Gambia, and Thailand.

"We provide technical knowledge of the best practices," says Mr. Perkins, an economist himself. Yet without a commitment to reform by leaders in the developing countries, "there is little that outsiders can do to help."

Many top economists, finance ministers, central bankers, and other officials in developing countries have gone to school in the US. The Mexican finance minister studied at MIT, the Argentine minister of economics at Harvard. Most Brazilian cabinets include one or two ministers who studied in Cambridge, Mass.

So why do such educated people seek external advice?

Dornbusch offers several reasons: They want to try out their ideas on someone who is an independent expert, perhaps even an old professor. They want someone with a strong reputation in economics to back their proposals, maybe to help persuade a president or prime minister or the public of the wisdom of their reform strategy. They want help in negotiating a reform program with the IMF or the World Bank, someone with a big enough reputation and intellectual clout to challenge the suggestions of these insti tutions if they disagree with them. Or they want to interest experts in their country, hoping to obtain a greater diversity of opinions on development strategies.

As for the visiting professors, Dornbusch says: "You learn an enormous amount. You see the context in which policy is made. And perhaps you will make a speech that may help change a president in the right direction."

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