Jeffrey Sachs: The End of Poverty

Context  What are conditions like in a developing country? What do extreme and moderate poverty look like?  No time in class, but you need to watch this: 40

Why Some Countries Fail to Thrive  Poverty Trap  Geography  Fiscal Trap  Government Failures  Geopolitics  Lack of Innovation  Demographic Trap

Solutions  Boosting Agriculture - nitrogen-fixing trees, fertilizers, irrigation, etc.  Improving Basic Health - clinics, bed nets  Invest in Education - school meals  Bringing Power  Providing Clean Drinking Water and Sanitation

UN Millennium Development Goals 1. Eradicate extreme poverty and hunger 2. Achieve universal primary education 3. Promote gender equality and empower women 4. Reduce childhood mortality 5. Improve maternal health 6. Combat HIV/AIDS, malaria, and other diseases 7. Ensure environmental sustainability 8. Develop a global partnership for development

How To Do It  “Getting from here to there is a matter of routine planning, not heroics.”  Currently:  International Monetary Fund, World Bank, Donor Agencies help write Poverty Reduction Strategies that align with how much the donor community will contribute  Should be:  The donor community should contribute however much each Poverty Reduction Strategy/Country says it needs

Plans  A Differential Diagnosis - PRS  Investment Plan - Size, Timing, Cost  Donor Plan - Donor commitments  Financial Plan - How to fill funding gap  Public Management Plan - Governance

How To Pay For It  The US is spending 30 times more on the military than on foreign assistance in 2004, $450 billion compared with $15 billion. This is a significantly larger ratio than any other developed country (Closest: Greece, 23%; Italy, 11%)  The US should contribute 0.7% of GNP to aid for the next twenty years (at 0.5% at time of publishing). Bush promised 0.7% in 2002 but it never happened.  Sachs suggests most of this come from military spending, and the rest from the richest of the rich. 

Assumption 1: The poorest countries are stuck in a poverty trap from which they cannot emerge without an aid-financed BIG PUSH  “When people are…utterly destitute, they need their entire income, or more, just to survive. There is no margin of income above survival that can be invested for the future. This is the main reason why the poorest of the poor are most prone to becoming trapped with low or negative economic growth rates. They are too poor to save for the future and thereby accumulate the capital that could pull them out of their current misery.”

Assumption 2: Whenever poor countries have lousy growth, it is because of a poverty trap rather than bad government  “The claim that Africa’s corruption is the basic source of the problem (the poverty trap) does not withstand practical experience or serious scrutiny.”

Assumption 3: Foreign Aid gives a BIG PUSH to countries to achieve a takeoff into self-sustained growth  “This is the solution to end the poverty trap and get poor people on the ladder to development.