4 - Cost–benefit analysis and compensation

Summary

In this chapter we turn to an illuminating item in the managerialist toolbox. To the extent that there is a systematic approach to the adoption and planning of development projects, the predominant model is cost–benefit analysis. The aim of this chapter is to determine whether cost–benefit analysis can take account of displacement in an ethically defensible manner. To begin, we provide a brief historical sketch of the emergence and adoption of cost–benefit analysis in the context of higher-level development planning, and then an elementary description of the method and ethical basis of cost–benefit analysis. We then bring in the issue of displacement and identify how cost–benefit analysis deals with it. Next, we deal with two issues of justice, focusing in particular on that of compensation and making an argument for full restitution as an elementary requirement of justice.

THE EMERGENCE OF COST–BENEFIT ANALYSIS

Economic development in poorer countries after the Second World War was based on several motivations. An immediate one in post-colonial countries was independence from the particular colonial power, including economic independence. Another consideration was the defensibility of the newly independent countries and the recognition that military capacity is related to economic capacity. The lesson of the Soviet Union's ability to resist and roll back the onslaught of fascist Germany 1941–5, based on its earlier development focus on heavy industrialization, was not lost on the leaders of the newly independent countries.