The End of Poverty

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The End of Poverty, by Jeffrey Sachs

In the late 1990s, aid officials — keen to revive the global fight against poverty — came up with a novel strategy. They proposed to both developed and developing countries that, rather than vague commitments in health, food production and primary education, it would be more effective to have a clear set of quantified objectives that governments could aim to achieve within a set timeframe.

This strategy resulted in the adoption at a United Nations summit in 2000, of the eight Millennium Development Goals (MDGs). Each of these embodies a set of targets that, if achieved, could in principle go far towards eliminating poverty and social deprivation on a global scale.

In order to figure out how to reach these goals, Kofi Annan organized a panel of over 250 development experts to lay out practical strategies for promoting rapid development. Headed by economist Jeffrey Sachs, the panel published their final report in January of 2005. The report calls for both an increase in aid from Western countries and a reallocation of funding priorities in the developing countries themselves. The report also calls for more aid to be given on a local level. By bypassing governments, the UN hopes to spark more immediate and effective development.

Shortly after the release of the UN report came the publication of Sachs' book, The End of Poverty, in which he laid out his own strategies for eradicating poverty by 2025. Sachs, who gained renown for advising Latin American and Asian governments on economic reform, has gained popularity as "can-do" economist amidst a cacophony of naysayers on development.

There are according to Sachs more than one billion human beings living at the lowest level of poverty. They are without basic health and educational services. Twenty- thousand of these people die each day.
His work here is an effort to transform the situation of these people, and provide them with the opportunity for a more decent life. In order to do this he believes that there must be an investment on the part of Western and prosperous nations amounting to less than half - of - one percent of their annual GNP. He believes this capitol if used wisely can be a vital element in moving the poorer societies from situations of stagnation to one of modest growth and trade.

In the early chapters, Sachs talks about why certain countries have made it rich while others are still mired in poverty. Why the "new" countries of the west (UK, USA) haveenjoyed economic prosperity while "old" civilisations (China, India) have been lagging. Next, Sachs writes about his experiences in Africa. AIDS, malaria, extended droughts, rampant corruption and civil wars - all together have created the "perfect storm" for the extreme poverty in sub-Saharan Africa. Sachs contends that corruption is not the key for poverty and notes that other more-corrupt nation like Indonesia and Bangladesh, seems to have climbed up the economic ladder.

This book has been written in a simple lucid narrative form and even some concepts of economics have been explained so unequivocally, that it is very easy to comprehend, even for non specialists.

Sachs places an emphasis on using appropriate techniques and technology to boost agriculture, upgrade educational institutions, improve healthcare and lay down the necessary infrastructure that would be instrumental in changing the state of poverty in the world today. The focus of his argument is the idea that with more money devoted to the problem, poverty can be eliminated.

As an advocate, Sachs's chief cause is persuading Western governments, and particularly the United States, to live up to their obligation of spending 0.7 percent of each nation's GDP on aid.

Along the way, he exposes the lamentable hypocrisy of the developed world and the institutions allegedly working for the development of the poor world.

Sachs is a good writer, which explains how this book can get so convincing. It is even more convincing because it touches upon the West's sense of guilt. The problem with this sense of guilt is that it is easy to convince people in rich country that money can solve poor country's problem.

It focuses solely on more money as the solution to the problems besetting poor countries. But simply throwing good money after bad does not solve the complex social and political problems deeply rooted in a country's history and demographics.

But it is way too optimistic, forgetting all about the reality of corruption, injustice, both of the rich and of (leaders of) the poor and forgetting almost all about participation, empowerment and advocacy, assuming that macro scale economics are the same at micro (village) scale. Just a small example: one of the main ideas in the book is: give villages a big push, so that they can start climbing the economic ladder. Increased economic activity leads to increased taxes which leads to increased public services, which helps increase economic activity. The first causal relation overlooks the fact that 80-90% (to sometimes 100%) of economic activities in African villages take place in the informal economy, where there are no official tax systems. The second causal relation overlooks the fact of corruption. The example of Nigeria (enough income through oil exports, and corruption not mainly at the lower ranks but even at the very highest rank) shows that corruption is not a matter of need because of lack of money. 

Unfortunately, Sachs ops for a very top-down solution. He proposes the development of a goliath governmental project by suggesting the U.N. secretary general personally run the overall plan, coordinating the actions of thousands of officials in six U.N. agencies, U.N. country teams, the World Bank and the International Monetary Fund. That's a recipe for bureaucracy on steroids.

Sachs has neither one word of criticism for anything the UN has ever done nor a single suggestion of reform - other than to empower it further - before the developed world starts coughing up more than $100 billion per year in new ODA (Overseas Development Aid), in addition to their present UN dues. With regards to this issue, Sachs is very much one-sided.

Sachs calls for huge increases in aid to his favourite countries, like Malawi and Ethiopia, overlooking inconvenient factors such as the worsening of Malawi's famine because corrupt officials sold off its strategic grain reserves and because autocratic Ethiopian rulers have favoured their own minority ethnic group. Sachs is right that bad government is not disproportionately an African problem; democracy has been making progress in Africa. But Sachs's anti-poverty prescriptions rest heavily on the kindness of some pretty dysfunctional regimes, not to mention the famously inefficient international aid bureaucracy.

There are thorough rebuttal of Sachs's argument that poor countries are stuck in a "poverty trap" from which there is no escape, except by massively scaled-up foreign aid. Statistical evidence prove that many newly developed countries - indeed, most of them - attained their higher status without large amounts of foreign aid. This is especially damaging to Sachs's poverty trap thesis, which is the rationale for increasing foreign aid.

Others criticize Sachs by arguing that the United Nations has misled by setting specific, but immeasurable, targets for the Millennium Development Goals (for example, to reduce maternal mortality or malaria).

So what’s the alternative? The piecemeal reform approach would acknowledge that nobody can fully grasp the complexity of the political, social, technological, ecological and economic systems that underlie poverty. It would eschew the arrogance that "we" know exactly how to fix "them." Large-scale crash programs, especially by outsiders, often produce unintended consequences. The simple dreams at the top run afoul of insufficient knowledge of the complex realities at the bottom.

In fact, ending poverty is not easy at all. In those five decades, poverty researchers have learned a great deal about the complexity of toxic politics, bad history, ethnic and regional conflicts, elites' manipulation of politics and institutions, official corruption, dysfunctional public services, malevolent police forces and armies, the difficulty of honouring contracts and property rights, unaccountable and excessively bureaucratic donors and many other issues. Sachs, however, sees these factors as relatively unimportant. Indeed, he seems deaf to the babble and bungling of the U.N. agencies he calls upon to run the Big Plan, not to mention other unaccountable and ineffectual aid agencies.

The real solution to poverty is attracting quality long term capital flows that finance building efficient competitive industries, something government aid is simply not capable of. The problem with this is that it requires long term institutional reform and years of building investor confidence and human capital.

Foreign aid's prospects will brighten only if aid agencies become more accountable for results, and demonstrate to the public that some piecemeal interventions improve the lives of desperate people. So yes, do read Sachs's eloquent descriptions of poverty and his compelling ethical case for the rich to help the poor. Just say no to the Big Plan.