Posted by Realsociology on January 22, 2012
A Brief Summary of Jeffrey Sach’s End of Poverty – Chapters 1-4
It would be useful for students of Global Development to develop a critical understanding of this book because Sachs has been one the most influential economic advisors to both Nation States and global financial institutions such as the IMF over the last three decades. Jeffrey Sachs is well known popularly because of his links with Bono and his championing of the role of Western Aid and Philanthropy in helping to solve development problems.
Sachs is critical of ‘grand theories of development’- such as ’70s Dependency Theory and the Neo-Liberal approach of the World Bank/ IMF in the 80s and 90s – but he is still optimistic that if we can engage in what he calls ‘clinical economics’ and uncover the country specific barriers there are to development in individual countries, we can develop effective strategies to end poverty- both the extreme poverty faced by the world’s billion poorest, and also the moderate poverty faced by another 1.6 billion.
While development strategies need to be specific to each country, Sachs sees international co-operation crucial to ending extreme poverty and so Western Official Development Aid, good governance on the part of developing nation states, Transnational Corporations, and The United Nations all have a crucial role to play in bringing about development. Technological innovation, and Trade (including changing the rules of trade so they don’t unfairly benefit developed nations) are seen as key universal strategies to be adopted to bring about development.
Sachs is also a champion of the United Nation’s 8 Millennium Development Goals – not as ends in themselves but because lack of development in each of the 8 areas other than economic well being can be a barrier to economic development, which in Sach’s mind is correlated with all other development goals, and economic growth, measured by rising GDP per capita, to be achieved through the integration of countries into the global economy through trade remains the ultimate goal of development according to Sachs.
Students can use Sachs to all the popular theories of development from the preceding six decades – Modernisation Theory, Dependency Theory and Neo-liberalism. Below is a summary of selected chapters of Sach’s The End of Poverty, with some criticisms.
Chapter 1: A Global Family Portrait
Sachs outlines elements of life in four countries – Malawi, Bangladesh, India and China which broadly correspond to four ‘stages’ of development –
- Malawi – caught in ‘the perfect storm’ is portrayed as a Malaria and AIDS infested rural backwater, largely cut off from international trade – represents the four billion people trapped in extreme poverty – living on less than $1 a day
- Bangladesh – ‘on the ladder of development is ‘ integrated into the international economy but at the bottom end of it, and characterized by ‘sweatshop’ labour but also increasing amounts of micro-financed businesses which offer hope for more independent economic development – represents the poor – or the 1.5 billion people living on between $1-$2/ day
- India – at the centre of an export services revolution – is provided as an example of a country that is increasingly populated with people on ‘middle incomes’ – with increasing numbers of city dwellers working for Transnational Companies and related home-grown business earning $250 -$400 a month – although India is a country of extremes – with many in rural areas living on $1-2 a day
- China – is characterized by rising affluence – again like India there are millions who live in poverty, but parts of China are increasingly coming to resemble the West. Sachs in fact tells of how he first saw cell phones with cameras in Beijing, not America.
Who are the poor?
Poverty is not uniformly distributed across the globe – i.e. there are rich and poor people in every country, although most of the poor live in three regions – South and East Asia and Sub Saharan Africa. Where extreme poverty was concerned Sach’s notes that the figures were as follows – (NB these are 2001 figures!) – (Updates to follow)
- South Asia – 400 million (30% of the population)
- East Asia – 250 million (15% of the population)
- Sub Sharan Africa – 300 million (40% of the population )
Sachs also notes that there is hope – because the numbers of those in extreme poverty in East and South Asia have fallen by 2/5ths and 1/3rd respectively since 1981, although numbers grew slightly in Africa.He then goes on to state what should be the four development goals of our age –
- To meet the MDGs by 2015
- To end extreme poverty by 2025
- To ensure that by 2025 all the worlds poor have an opportunity to climb the ladder of economic development
- To accomplish this with modest financial help from the rich countries.
Chapter 2 – The Spread of Economic Prosperity
According to the economic historian Angus Maddison, 1820 was the year when ‘The Great Transformation’ began. 1820 was the year when the Modern World Economy ‘took off’. The previous 800 years had seen no significant increase in world population growth or income, but from 1820, population and economic growth began to grow rapidly. Referring to this rapid period of post 1820s growth, Sachs notes that -
- All regions on earth experience economic growth
- Some regions grew much more rapidly than others.
To illustrate this, in 1820, the income of the average European was only 90% that of the average African and the average life expectancy was very similar, around 40 years of age. Focusing on GDP/capita, the UK was only four times richer than Africa, by 1998 this had rise to 20 times greater (factoring in PPP). We can roughly break down this inequality as follows –
- 1/6th of the world’s population lives in extreme poverty
- 2/3rds experience middle income lifestyles
- 1/6th experience high income
Why did some countries grow so rapidly from the 1820s?
Sachs now looks at the United Kingdom as the country that, from 1820, developed more rapidly than any other and asks – why? – He points to the following features -
- British Society was relatively open- there was scope for social mobility and hierarchies were less rigid than in most of the rest of Europe
- Britain guaranteed certain individual freedoms (individualism) – it had a tradition of free speech and protection of private property
- 3. (and critically) It was one of the leading centres of scientific revolution. In particular, Newton laid the groundings for the industrial revolution. NB Sach’s argues that technological innovation is the critical element in bringing about development
- Geographical advantages – It was an Island close to Europe with inland navigable waterways
- Britain faced less risk of invasion compared with its neighbours in Europe
- Britain had coal – the energy source that fuelled the great industrial revolution.
The Combination of new industrial technologies, coal power and market forces created the industrial revolution – and this meant that economies could grow beyond long-accustomed bounds without hitting the biological constraints of food and timber production. The industrial revolution in turn lead to economic growth and these two things changed the way people lived in Britain in every fundamental sense. They lead to what Sachs calls the Great Transformation – in which British society and culture were transformed, laying the foundations for yet more growth and prosperity
Sachs also mentions that Colonialism was key to Britain, and Europe’s development – which involved the use of military force to press-gang Asia and Africa to the service of Western Development – Although Sach’s argues that its not as simple as the West’s development coming at the expense of India and Africa, in the long run, the West’s expansion into these regions helped bring about some, albeit extremely limited, economic growth. Colonialism and exploitation of the developing world did occur, but these are not sufficient reasons to explain why certain countries, and indeed most of Sub Saharan Africa failed to develop – which is the topic Sachs turns to in chapter 3.
Chapter 3 – Why some countries fail to achieve economic growth
In this chapter Sachs suggests eight things that can prevent a country developing
- The Poverty Trap – Poverty itself as a cause of economic stagnation – The key problem for the poorest countries is that poverty itself can be a trap. When poverty is very extreme, the poor do not have the ability – by themselves – to get out of the mess. This is because, when people are utterly destitute, all energy goes into survival and there is no capacity to save anything for the future.
- Physical geography – Being landlocked or ‘hemmed in’ by mountainous terrain can prevent access to trade networks that bring about development – this is the case with Bolivia (mountains) and Ethiopia (landlocked and poor transport networks). Also Sub-Saharan Africa has an ideal climate that allows malarial mosquitoes to breed, which has decimated much of the population in recent decades.
- Fiscal trap – the government may lack the resources to pay for the infrastructure, on which economic growth depends – such as health care, roads, ports, education. There are three reasons for this – firstly, the population may be too poor to tax, secondly it may be inept or corrupt and finally it may be debt burdened.
- Governance failures – governments have a crucial role to play in development – not only through developing infrastructure but also through resolving conflicts and ensuring peace and stability. At the extremes, poor governance can result in failed states which can often lead to economic deterioration.
- Cultural Barriers – The two main ones are patriarchal countries which deny women equal rights with men – not only does this bar half the population from the opportunity of being economically active, keeping women in a child-rearing role is linked to higher fertility rates, and greater poverty, and also religious and ethnic differences can lead to tensions and even genocide.
- Trade Barriers – Some countries economies are crippled by unfair trade rules, for example The Four West African countries whose primary export is cotton are held back economically because of the USA’s subsidies to its own domestic cotton farmers.
- Lack of Innovation – The ‘innovation cycle’ (aka endogenous growth) is one of the main factors responsible for the West’s and now Asia’s rapid economic growth – New products being produced and consumed lead to more innovations as people develop more products related to them – (E.G. Now we have Smart Phones – people innovate and develop new applications) – Where people are so poor they have nothing, there is no scope for innovation!
- The demographic trap – Poverty leads to higher fertility rates (families choosing to have more children) Economic growth leads to fewer children. Women in the poorest countries have on average 4-6 children – simply put it is harder to feed so many children, and impossible to send all of them to school – resulting in a cycle of poor health, low education and yet more poverty.
Why some poor countries grew and others declined
To cut a medium length section short – the most important factor Sachs points to not covered above is food productivity – quite simply, the reason why Asia has grown more rapidly than Sub Saharan Africa in the last 30 years is that they have experience a ‘green revolution’ – they are capable of producing twice as much food per hectare because of better irrigation and selection of more modern species of crop. He also mentions the fact that ‘natural shocks’ have prevented some countries from developing. He then gives a few examples of different countries that have experienced a selection of the problems above in the years since WW2.
The greatest challenge: overcoming the poverty trap
The end of chapter 3 (P73) is where Sachs outlines his classic statement of development – to quote
“The main object of economic development is for the poorest countries is to help these countries gain a foothold on the ladder: The rich countries do not have to invest enough in the poorest countries to make them rich: they need to invest enough so that these countries can get their foot on the ladder. After that, the tremendous dynamism of self-sustaining economic growth can take hold.”
Chapter 4 – Clinical Economics
Sachs has developed a new sub-discipline called clinical economics. Each failed conomy is unique and its ailments must be carefully diagnosed before a prescription suited to the condition can be written. Sachs includes helpful checklists to diagnose the causes of economic decline and formulate a cure for the malady. We need to look at the following aspects of a country, and its relationship to the wider world in order to assess what assistance is needed to enable it to progress further up the ladder of development:
- The Nature and distribution of poverty and its ultimate causes/ potential risk factors – including commodity price fluctuations and ‘climate shocks’
- Government policies and capacity to invest in infrastructure
- Physical Geography – including transport conditions, agronomy, population density and the disease landscape
- Governance Patterns and failures – civil rights, corruption
- Cultural Barriers – Gender and ethnic divisions
- Geopolitics – Cross boarder threats (wars/ refugees) and also trade relations.
So, at the end of the day, by 2005, this was the bottom line of development theory – it maybe flippant to say this about one man’s life work – but it don’t sound like rocket science to me! Of course I am aware of the fact that doing the analysis and implantation is an extremely time consuming task.
If I get time I may post the rest of the summary laters! (No promises)
Criticisms of the End of Poverty
Firstly a few of my own –
- He puts too much emphasis on economic growth as a goal in itself – It is quite clear that economic growth does not yield uniform increases in quality of life across all countries – take Saudia Arabia, and possibly Nigeria as examples of countries you probably don’t want to live – but they have either a high GDP or a rapidly growing economy.
- I have a problem with idea of economic growth being ‘self sustaining’ – although you might say I’m saying this with the hindsight of the 2008 financial crash, this is actually coming from basic Marxist economics – a system cannot keep on growing at the rate of 2-3%, let alone at 7-8% for ever – because the bigger you get, the harder the harder it is to maintain economic growth rates. (8% of $500 billion output is much more than 8% of $50 billion!)
- He hardly mentions sustainable development, or the idea of “limits to growth’’
- ‘Clinical Economics’ maybe just sounds like an excuse to employ thousands of more ‘development experts’ to diagnose developing countries specific problems.
And criticisms from others
This is a brilliantly scathing critique! – among the criticisms
- He is not critical enough of Corporations and their role in pulling the strings of Western Governments – who create trade policies that benefit Western Corporations rather than developing countries
- Even though he is critical of the IMF and neoliberalisation – he still argues that ‘Trade’ is ultimately the solution to developing world problems
- Related to the above point – this is still a Eurocentric theory – it is up to us to help them
- Sachs also fails to acknowledge the work of developing world economists who came up with many of the ideas he seems to present as his own in The End of Poverty.
This post by John Vidal is also pretty scathing - among his point he argues that ‘Sachs seems to be suffering a dose of advanced consultivitis – symptoms include a swollen ego and a fervent belief that you can change the world. In a work littered with tales of meetings with presidents and global dignitaries, he plays the moral economist who goes from country to country handing out pills and mopping the fevered brows of administrations in economic crisis’.
- He puts too much faith in the power of economic growth to solve all social problems – citing the example Saudi Arabia as a country that has a high GDP per capita but still a massive birth rate (and thus an eventual tendency to overpopulation
- Another problem of econmic growth is that labour is mobile – so if you invest in education as part of a growth strategy, once people are educated – they tend to leave for more developed countries where they are better paid (known as the ‘brain drain’)
- Even though he suggests (eventually) that aid can be an effective means of lifting a country out of poverty – he fails to give any examples of where aid has actually been effective at helping a poor country ‘take off’ successfully.
 – The list of changes that Industrialisation and economic growth lead to is eerily evocative of Modernisation Theory from the 1940s… Sachs notes 5 aspects of the ‘Great Transformation’
- First and foremost Urbanisation
- A revolution in social mobility
- Changing gender roles
- New family structures (lower birth rates)
- An increasingly complex Division of labour with people getting more skilled