Sunday, 18 September 2011

Book Review: The End of Poverty (Jeffrey Sachs)

Book: The End of Poverty - How can we make it happen in our lifetime
Author: Jeffrey Sachs (2005)

Jeffrey Sachs, the economic polymath, attempts in this tome of a book to outline how we can end poverty in our lifetime.  His diverse background, both as an academic and advisor, lends itself well for him to comment on the issue of poverty and in the 18 chapter book he provides a detailed analysis of the core issues – yet from the onset I think it is important to note that I felt a little disappointed with the end result or the ‘action plan’ so to speak – especially when considering in his opening page Sach’s states that “This book is about ending poverty in our time” (page 1).
His vision of the ‘economic possibilities of our time’ (p.25) is thus:

  • to meet the Millennium Development Goals by 2015
  •  to end poverty by 2025
  •   to ensure well before 2025 that all of world’s poor countries can make reliable progress up the ladder of economic development
  •  to accomplish all of this with modest financial help from the rich countries, more than is now provided, but within the bounds of what they have long promised.
Sach’s starts of by touching upon examples of success in Third World countries such as microcredit in Bangladesh and India’s export valorisation through the diffusion of technology. He defines poverty into 3 categories: extreme, moderate and relative. The former category is the primary objective to eradicate. The following chapter then assess the history of modern economic growth through Kuznet and Keynes as well as a bit of Rostow’s Modernisation theory. It looks at the post World War II landscape and how the world was divided into: First (The West), Second (Socialist) and the Third (Poor). Sach’s also is not shy in analysing whys some countries fail to thrive and akin to Collier’s book on ‘The Bottom Billion’ (see other book review or He goes onto to list 8 reasons, including: The Poverty trap (poverty itself causes economic stagnation); Physical Geography; Fiscal Trap (government lacking the financial capital to invest in public services); Governance failures; Cultural Barriers (barriers to women or ethnic minorities); Geopolitics (trade barriers & sanctions); and interestingly a lack of innovation (the huge difference between rich and poor & their tendency to innovate); and finally the Demographic trap (where impoverished families choose to have lots of children). As Sach’s states “Economic development works. It can be successful. It tends to build on itself. But it must get started” (page 73).

Sachs argues that the traditional top-down discourse of Western knowledge needs to change as he questions whether the rich world Ph.D. trained economists think correctly about the problems of the countries in which they operate. Sach’s then touches upon the importance of local geography and context and uses his experiences to suggest how Development economics should behave like Clinical medicine – the field and new discourse of Clinical Economics: by asking the right and most appropriate questions the outcome will be development strategies that are far more effective because the right questions are being asked in the first place.
I would like at this point to refer top another book review which I think sums up the heart of the book quite nicely (David Westlake @ Wordpress):

“As Sachs builds his argument for how and why the end of poverty can be attained, he outlines six major areas of capital that the extreme poor lack (human, business, infrastructure, natural, public institutional and knowledge) and carefully delineates which support should come from the public sector and which from the private (p. 251).  Sachs explains that governments should finance schools, clinics and roads to avoid private monopolies and because of the positive spillover into other parts of society; they should, however, generally not provide the capital for private businesses as ‘entrepreneurs do a much better job of running businesses than governments.’
Sachs makes a strong effort to build an evidence base of examples that bolster his theory.  The eradication of smallpox, the campaign against malaria and the mobile phone revolution in Bangladesh are cited as ‘dramatic examples that prove the naysayers wrong’ – particularly those who would say that projects successful on a small-scale will not be possible when played out at a national level. 
In one of the most interesting chapters in the book, Sachs attempts to dispel the myths that greatly hinder the aims of the economic development community (p.309):
Africa needs around $30 billion per year in aid in order to escape from poverty.  But if we actually gave that aid, where would it go? Right down the drain if the past is any guide.  Sad to say. Africa’s education levels are so low that even programs that work elsewhere would fail in Africa.  Africa is corrupt and riddled with authoritarianism.  It lacks modern values and the institutions of a free market economy needed to achieve success.  In fact, Africa’s morals are so broken down that it is no surprise AIDS has run out of control.  And here is the bleakest truth: Suppose that our aid saved Africa’s children.  What then?  There would be a population explosion, and a lot more hungry adults.  We would have solved nothing.
            If your head was nodding yes … The paragraph above repeats conventional rich-world wisdom about Africa, and to a lesser extent, other poor regions.  While common, these assertions are incorrect.
Contrary to the ‘money down the drain’ myth, Sachs contends that relative to the population and the need, there has been very little aid to Africa, and thus it is no surprise that no impact has been seen.  The deep pessimism about Africans’ ability to utilise aid must be addressed; the focus on corruption and governance is exaggerated; judgements on cultural values are usually based on prejudice rather than measurable evidence.  These are strong statements made against deep-seated ideas, and it is unsurprising that Sach’s claims are not universally accepted.”
In his final chapters Sach’s outlines the action plan or the global compact to end poverty by firstly offering a tailored MDG poverty reduction strategy for every country:

  1. A differential diagnosis (based on Clinical Economics)
  2. An Investment Plan
  3. A Financial Plan
  4. A Donor Plan
  5. A Public Management Plan.
However, he states that above domestic strategies, global concerns and imbalances must be addressed as well, namely (page 280):

-          The Debt Crisis
-          Global Trade Policy
-          Science for Development (asking the right & appropriate questions for those that need help)
-          Environmental Stewardship

Extreme poverty is a trap that can be released through targeted investment if the needed investments ate tested and proved and the investment program can be implemented, centred on the MDGs – he argues then that a 5% income tax surcharge on incomes above $200,000 directed towards the US contribution to end global poverty, if applied in 2004, would have yielded $40 billion” (page 307). The problem that I find with this argument though is that once again it depends on the US – a country and a nation so far unwilling to give, especially in an era of economic hardship and upheaval – even more so when it’s status as the hegemonic superpower is under threat from the BRICs and terrorism.

Therefore disappointingly  Sach’s great master plan falls back on the rhetoric we have already heard  - a dependence on current nations to provide 0.7% of their GDP, increase aid and and reduce or wipe out any poor country debt. As a quote from the guardian’s John Vidal states:

What he believes could change the world in 20 years, and eradicate all extreme poverty at a cost that everyone could bear, is simple: far more aid, far more debt forgiveness, far better trade terms and far more access to good technology. Sounds familiar? All this is now economic orthodoxy - what everyone from the anti-globalisers, to the very poor of Brazil, charities such as Oxfam and Christian Aid, and even politicians from Gordon Brown to the Tory party have been arguing for some time.”

Whether this action plan can be realised at a time of global recession and uncertainly is questionable…yet we can only be but optimistic and act because we promised.