The End of Poverty How can we make it happen in our lifetime By Jeffrey Sachs

 

Jeffrey Sachs, the author of ‘The End of Poverty’, worked as the Special Advisor to UN Secretary-General Kofi Annan, and as the director of the Earth Institute at Columbia University. He served as economic advisor to countries of Africa, Asia and Latin America. He has made relentless contribution to Millennium development Goals (MDG) and poverty reduction. 

 

The book is an attempt to suggest how the world can get rid of the cases of extreme poverty situations. The writer is not forecasting what will happen; rather he is suggesting what can happen. He believes that our generation holds the capacity to eliminate the extreme poverty in next twenty years. The capacity we have- in terms of wealth of the rich world and the power of knowledge- and through collective decisions- can provide promising ways to fight poverty and shape our future. His insight, conviction and argument-presented in this book- are based on his field experiences over hundred nations with around ninety per cent of the world population.

The book begins with an overview of the distribution of world’s poor by region. The distribution is based on the degrees of poverty- mainly extreme poverty (below $1 per day) and moderate poverty (between $1 per day and $2 per day) - and it shows the situation in 2001. Out of 1.1 billion poor people, 93 per cent live in three regions, East Asia, South Asia, and Sub-Saharan Africa. Since 1981, the number has increased in case of Africa (almost half of the population already in extreme poverty), but has comparatively decreased in East Asia and South Asia (with an advancement of Information Technology and globalization).

However, the tragedy, Sachs says, is that one sixth of the world population is extremely poor and this portion lives mostly in regions where countries like Malawi, Bangladesh, India and China belong. Therefore, the biggest challenge is to get this one-sixth out of the poverty trap, ensure the one-sixth with basic needs, health, education and nutrition, and to lift them up to the ladder of development. Before this, it is necessary, Sachs says, to understand ‘how we got to where we are’.

Sachs portrays the historical overview of the spread of Economic prosperity with an aim to understand the vast inequality. Until 1800 A.D., poverty is seen among every one (universal poverty) except few rulers and landowners. But since 1800, the era of modern economic growth begins. Technological advancement accelerates the economic growth of Europe and US.  For instance: US per capita attain twenty-five-fold increase ($1200 to $30,000) at an annual growth rate of around 1.7 per cent per year. While the average per capita income of Africa increases by three-fold ($ 400 to $1300) during the time frame of 1820 to 2000 at an annual growth rate of 0.7 per cent per annum.

The primary reason behind uneven growth, according to Sachs, is “the richer countries were able to achieve two centuries of modern economic growth. The poorest did not even begin their economic growth until decades later, and then often under tremendous obstacles”. However, there are many other problems in the complex system of economic growth. Some of these are the Poverty trap, physical geography, fiscal trap, governance failures, cultural barriers, geopolitics, poor Economic policy framework, Lack of innovation and the demographic trap. Nonetheless, there are practical solutions to these problems which can be achieved, but Sachs suggests, it needs, ‘a good action plan with a good differential diagnosis of the specific factors that have shaped the economic conditions of a nation’. He emphasizes the failure of Structural Adjustment Policies-the narrow approach led by IMF and World Bank- is the main reason for putting the development practice in the wrong direction. Therefore, Sachs proposes ‘Clinical Economics’ as a new diagnostic method for development economics that check-lists the complex system of economic growth and find the solution.

Sachs develops his concept of Clinical Economics with learning he receives from his experience as an advisor to countries like Bolivia, Poland, Russia, China and India. Sachs response to Bolivian hyperinflation gives him insights into the economic alternative (the search for economic alternative to Coca production after US military interdicts Andean drug trade) and physical geography (complexity with high hills). Contrast to it, in Poland he learns that the same geography determines fate of the country (as Poland becomes route to trade and foreign exchanges between Germany in the West and Russia in the east). But when coming closer to Russia, he finds that the guiding principle plays a major role to determine a country’s economy. For instance: In case of Bolivia the guiding principle is democracy, end of hyperinflation, and the reinvention of the country, while Poland is looking for its return to Europe. But Russia never gets admitted to European community and does not receive external assistance when it looks for it desperately.

Similarly, Sachs has a different set of learning from China and India. First, Chinese style of Gradualism-means radicalism in rural reforms but a quick opening of the economy of trade- of the state enterprises is unique in itself. However, the fast growing economy of the China is because of the combination of low-cost laborers, modern technology, and a safe and sound business environment. Also, the large coastline (useful for export led growth) and overseas Chinese communities (who acted as foreign investors and role models) have a significant contribution to Chinese increasing economy. Second, India’s shift from self sufficient economy (strong state control, License Raj) to market liberalization has its foundation on fear against the global forces. Surprisingly, the IT revolution gives India a new impetus to break the fear and generate hope.

Sachs says that Clinical economics is the beginning, not the end, of the process. His confidence leads him to express about the problem of Africa, which he understands as difficult but still solvable. The disease burden of Africa (AIDS, malaria, TB, diarrheal disease, acute respiratory infection, vaccine-preventable disease, nutritional deficiencies, and unsafe childbirth) opens up debate on “Is disease a cause of poverty, a result of poverty, or both?” As a result, The WHO commission on Macroeconomics and Health (CMH), chaired by Sachs, concludes that the causation run towards both ends. However, the CMH realizes that donor aid is not just sufficient for Africa to fight such problems. Thus, a combination of investment targeted to local needs and condition is what required enabling Africa to break out the worst poverty trap. So, Sachs amplifies the idea of ‘global fund’ to fight the problems of Africa.  

With the convincing idea of ‘global fund’, Sachs now manages to suggest how investment can be made that is required to end poverty. According to him, the extreme poor lacks six major capitals- Human Capital, Business Capital, Infrastructure, Natural Capital, Public Institutional Capital and Knowledge Capital- therefore, investment on these capitals are essential. But the investment requires good economy which poor countries lack. In other words, the impoverished countries fail to achieve increased saving (in household level) and increased tax revenues (for government spending and investment), meaning- the country is in the poverty trap. Therefore, the role of Office development Assistance (ODA) is crucial in breaking the poverty trap because ODA supports the Public budget for investment on mentioned capitals. However, this also means that there is a need for scaling up of investment (foreign assistance), including a system of governance that empowers the poor while holding them accountable. This calls for the need of global partnership.

Sachs now draws the attention of the reader to the need of global partnership and cooperation, and also the role of the United Nations, donor communities (rich countries) including global financial institutions like IMF and World Bank. He reflects that the key to ending poverty it to create a global connections that reach from impoverished communities to the wealth of the world power and back again.

The effort of the United Nation in building global partnership is remarkable. The introduction of Millennium Development Goals (MDGs) brings the global leaders to a common place to think for the rights and responsibilities of people of the world. The MDGs (eight goals) demands a global plan for poverty reduction. But, as the world is expecting a global partnership and effort to achieve its eight goals, the 9/11 incident at US shatters this optimism. Bush Administration’s war on terrorism spends huge money over it that affects the Millennium Challenge account (US aid program). Despite all this, the main point, Sachs underlines here is that the MDGs can still be financed within the limits of the ODA that the donor countries have already promised in the Late Monterrey Consensus. The consensus urges all developed countries to make “concrete efforts” to 0.7 percent of each of their total GNP as the development assistance to poor countries.

Sachs’s allegations over IMF and World Bank, as ‘Split personalities’, call for the need of reshaping these institutions. He says that these institutions tell countries to continue their business without any hope of meeting the MDGs. For instance, despite knowing the fact that aid are insufficient for a country [Ethiopia] to achieve MDGs, IMF can’t stop boasting how well things are going in the country [Ethiopia]. In addition, rich countries have their strong influences on IMF and World Bank because in these systems ‘one dollar’ means ‘one vote’. Likewise, Sachs recommends change in the process of funding, for instance, instead of stating the amount of aid a country can receive, the first step should be understanding what actually the country needs in foreign assistance. After that, IMF and World Bank should arrange required amount from the donors.

The key proposal made by Sachs is the Millennium Development Goals based Poverty Reduction Strategy on the period until 2015. This strategy basically comprises of five major parts- differential diagnosis, investment plan, financial plan, donor plan and public management plan-which has to be achieved in the light of global cooperation. Therefore, Sachs says it a ‘global compact’ to end poverty. It means both of the parties (the recipient country and the international community) must be equally responsible. Rich countries should commit to help all poor countries but then poor countries must hold commitment to good governance and political stability.  

After taking too much of the role of rich countries, Sachs finally raises question as to whether the rich can afford to help the poor. He says having known that rich world have vast wealth the question isn’t whether the rich can afford to help the poor, but whether they can afford not to. As mentioned earlier, that poverty can be sufficiently fought within the limits of 0.7 percent of the GNP of the high-income world, therefore, rich counties must prove themselves. Asking US whether they can afford mere 7 cents out of every $10 in income is a ridiculous question, knowing the fact that top hundred taxpayers of US has a combined income of $69 billion which is almost equal to the combined income of four countries Bostwana, Nigeria, Senegal and Uganda.

In response to the allegations made by rich world over poor countries (especially Africa), Sachs has only one answer, “these assertions are incorrect”. For instance, rich countries repeat that despite their huge effort the situation of Africa is never going to change. They say Africans are corrupt, they lack modern values, they have absence of democracy because of which even if aid saves their children but these children are sure to become hungry adults. In reply, Sachs proves with evidences that there has been insufficient aid in Africa no matter how hard rich countries boast about their ‘huge efforts’. Similarly, another charge against Africa that it lacks modern values is pointless because virtually every society is lazy and unworthy until it gets richer. Another charge stating Africa as ‘a shortfall of morals’ (a common view that African have more sexual partners) is futile because the research (The Lancet, UK Medical Journal) says that African men typically do not have more sexual partners than men elsewhere. Moreover, Sachs says that the popular view like ‘A rising tide raises all boats’ by champions of globalization is also not contextual in every cases because the rising tide may have lifted the economies that lie at the water’s edge but it does not reach the mountaintops of the Andes or the interior of Asia and Africa.

Keeping these issues in mind, Sachs emphasizes that rich world should stop telling “Poverty is not our problem; it is theirs” because eliminating poverty at a global scenario is a global responsibility that yields global benefits. Rich world people feel, like in US, that why we should pay taxes for the problem [poverty] which is not ours. Sachs replies to it saying that the problem lies not in the public opposition to foreign assistance but in the lack of political leadership to inform their public about the importance of the safety of global society and the lives of millions of impoverished people.

Sachs ends the book discussing on the challenges of our generation. He confirms that we can realistically envision a world without extreme poverty by the year 2025. But the author guides this generation with certain steps to give an end to the extreme poverty. In totality, Sachs suggests that time has come to commit to end poverty by adopting a plan and by raising voices of the poor. The time has come to redeem the role of United States, rescue IMF and World Bank and strengthen the United Nations. With technology and science we need to promote sustainable development so that we can ensure a better world for our future generation. All in all, the time has come for every individuals to make personal commitments to make extreme poverty a past.

The book can be best described as the source of optimism for every one of us, especially for those who might have started considering poverty as an ever unsolvable problem of the world. It is an eye opener to development practitioners and economists who believe that simply theorizing economics would solve the problems of poverty. Also, it would be unfair to tag this book as something ‘quixotic’ because at the end the world must be put into the right direction, and Sachs ideas certainly provides meaningful direction. However, it is yet to see to what extent the world leaders react to the urges of Sachs towards making the poverty a history!

Thank you!