Tag Archives: End of Poverty

Jeffry Sachs – The Case for International Development Aid

This is a brief summary of the case Jeffry Sachs made for International Development Aid in his 2005 book ‘The End of Poverty’. Taken mainly from chapters 12-16

(1) Why is Aid needed?

Sachs argues that injections of aid are needed to break the poverty trap –because there is no where else money is going to come from when there is insufficient income to tax or save.

Sachs uses a description of a visit to Sauri village in Western Kenya to describe the poverty trap – the villagers face a range of poverty related problems including poor food yields due to lack of fertilisers and nitrogen-fixing trees, the fallout from diseases such as AIDS and malaria and the fact that children cannot concentrate in school because of malnutrition. All energies and money are basically spent on combating disease and staying alive.

As a result of the poverty trap the village faces under investment in the following five areas

  1. Agriculture
  2. Health
  3. Education
  4. Power, transport and communications infrastructure
  5. Sanitation and water.

 

Aid needs to be spent boosting whichever of these areas are undeveloped (and all of them, all at once, if necessary) because a weakness in one can mean money is wasted on another (it’s pointless spending billions on education if disease means kids can’t concentrate in school, or lack of roads means they can’t get to school.). This should be based on what Sachs calls a ‘clinical diagnoses‘ of a countries requirements.

(2) How much aid is needed?

There’s a number of ways of looking at this>

$70 per person per year for at least 5 years would being sufficient to provide suitable investment in these five areas for the poorest regions on earth (basically the bottom billion who are stuck in the poverty trap). After an initial 5 year period, Sachs believes that this figure should reduce considerably and that 10 years should be sufficient for a country to be self-sustaining financially.

Looked at globally The World Bank estimates that meeting basic needs costs $1.08 per person per day – 1.1 billion people lived below this with an average income of 77 cents. Making up the short fall would mean $124bn/ year, or 0.7% of rich world GNP.

(3) Arguements for providing International Development Aid

Firstly, using aid to eradicate poverty will make the world a more secure place

The US spends 30 times as much on its military as it does on aid (for the UK it’s about 8 times as much, 2002 figures), but spending money on military solutions is not going to make an insecure world more secure.

A CIA task force examined 113 cases of state failure between 1957 and 1994 and found that three explanatory variables are the most common:

  1. High infant mortality rates (which indicate low levels of material well-being)
  2. Openeness of the economy – the more open, the less stable
  3. Democracy – the more democratic, the more stable.

Sachs rounds off by listing 25 countries which America has intervened in following State Failure since 1962. His point is that state failure typically leads to US intervention, which is more costly than the price of providing aid which would prevent such interventions.

Secondly, Official Development Aid  is crucial to provide health, education and infrastructure, and because it makes up a significant part of the total income of many countries.

Thirdly,The  public will support a massive increase in aid if there’s leadership on the issue – nearly 90% of the US public support food aid (it depends how you frame the question). Also, broad support was garnered for The Marshall Plan, The Jubilee Drop the Debt Campaign and The Emergency AIDS campaign.

Fourthly – There is evidence that Aid can work:

Besides the usual green revolution and eradication of smallpox examples Sachs also cites…

  • The Global Alliance for Vaccines and Immunisation
  • The Campaign against Malaria
  • The Eradication of Polio
  • The spread of family planning
  • Export Processing Zones in East Asia
  • The Mobile Phone Revolution in Bangladesh

Five – the West can easily afford it 

Sachs points out that the richest 400 individuals incomes stand at just under $70 billion dollars, and the first two years of the Iraq War, which was an unexpected cost, was $60 bn a year, so basically yes. He also recommends a 10% additional tax on the richest for the purposes of development.

(4) Sach’s view of why Aid Doesn’t Always Work – Poor Countries Aren’t Getting Enough Aid! (**This can be used to criticise Dambisa Moyo”s views on aid. )

Poor countries are receiving no where need enough aid to make a difference to development – To demonstrate this he uses the West African Water initiative as an example – Worth $4.4 million over 3 years, but this only worked out at less than a penny per person per year, no where near enough to make a difference.

He also cites the case of Ethiopia – in 2003 it would have needed approx $70 billion to kick start development – half for health and most of the rest split between food productivity and infrastructure. It was then receiving $14 per head per year which was well short of the money needed. At the time the IMF acknowledged in private that this was not sufficient but in public made no mention of this.

Another way of outlining how limited current ODA is lies in the following:

in 2002 of $76 billion total assistance….only $12 billion amounted to what might be called development support to the poorest countries (most of the rest was emergency aid, with $6 billion being debt relief and $16 billion going to middle income countries.

As a result of this countries often don’t get anywhere near what they need – Sachs cites Ghana as an example – it requested $8 billion over 5 years in 2002 and got $2 billion. His point is that $2 billion is no where near enough to kick-start development.

(5)) Myths about why aid doesn’t work (**these could be used to criticise Dambisa Moyo)

He actually lists 10, but I’ve only included the first three!

Myth One – Giving aid is ‘money down the drain’

It is common to hear Americans bemoaning the fact that there is nothing to show for the amount of aid given to Africa. This is, however, unsurprising. The total amount of aid per Africa works out at $30 per head, but of this $5 goes to consultants, $4 was for food aid, $4 went to servicing debts and $5 for debt relief, leaving $12 per African.

Of the $3 of US aid to Africa, approximately 6 cents makes it on the ground African projects.

Myth Two – Aid programmes would fail in Africa because of backward cultural norms

Sachs points out that he frequently encounters prejudiced views based on African stereotypes even among those in senior positions in the aid industry – Such as the idea that Africans don’t understand western concepts of time. He dispels this by simply drawing on his own experiences telling him different things.

Myth 3 – Aid won’t work because of corruption

Nearly all low income level countries have poor levels of governance. However, corruption is not a reason to not invest in a country because the causal relationship runs in the direction of wealth reduces corruption. This is because when incomes increase people have more of an interest in keeping governments in check and there is more money to invest in good governance through better communication systems and a more educated civil service for example.

Looking at cross national comparisons reveals two things – Firstly that African countries governance levels are similar to similarly poor countries. That is to say that governance is not especially poor in Africa, and secondly there must be something else going which results in poverty other than poor governance – there are still some very poor countries in Africa with good governance yet high poverty, he cites Ghana as one such example.

Statistical indicators reveal that African countries grew at 3% percentage points slower than countries with similar levels of governance and income between 1980 and 2000. The reason for their low growth is geography and poorly developed infrastructure.

(6) A more ambitious approach to Development Aid

Ultimately Sachs believes we should be spending more on aid rather than less!

Sachs outlines ‘a needs assessment approach’ to development which basically involves identifying a package of basic needs, figuring out the investments required,, figuring out what poor countries can pay and then working out the finance gap which is what rich countries should meet. The list of basic needs includes such things as:

  • Primary education for all children, including teacher pupil ratios
  • universal access to antimalarial bednets
  • I kilometre of paved road per person
  • nutrition programmes for all vulnerable populations
  • access to modern cooking fuels
  • Access to clean water and sanitation.

To establish these poor countries would need $110 per person per year for 10 years (calculated by the UN for five countries – Bangladesh, Ghana, Cambodia, Tanzania and Uganda.

Of this Sachs believes that households and poor country governments could pay $10 and $35 dollars respectively meaning that $65 per person per year is the finance gap

Who should pay? Basically it breaks down like this…

USA – 50%
Japan – 20%
UK, Germany, France, Italy – 20%.

Related Posts (contains criticisms at the end )

Summary of chapters 1-4 of Sach’s End of Poverty

A summary of The End of Poverty Chapter Eight – The Voiceless Dying: Africa and Disease

A summary of The End of Poverty Chapter Eight – The Voiceless Dying: Africa and Disease

I’ve just finished re-reading this – It mainly focusses on how Malaria and AIDs have prevented development in Sub-Saharan Africa and what can be done about it – basically a precursor to the establishment of the Millennium Development Goals. It’s 10 years old now, but fascinating nonethless, especially if you read it along with current progress reports on efforts to combat these two diseases I’ll add in a few updates on the later l8r.

The chapter begins by reminding us that corruption alone is not enough to explain Africa’s poor economic growth in the post-colonial period. In fact, charging Africa with corruption is hypocritical – little surpasses the cruelty and depredations that the West has long imposed on Africa, firstly in the form of Colonialism itself which left Africa bereft of educated leaders and infrastructure, and with arbitrary boarder lines which divided ethnic groups, water courses and mineral deposits in arbitrary ways.

On top of this, as soon as the cold war ended, Africa became a pawn in the Cold War. Assistance was refused to governments who were seen to be pro-communist and some terribly oppressive regimes were actually supported if they were seen to be anti-communist….The most obvious example provided is the installation of Mobutu Sese Seko in the now DRC following the murder of the first Primeminister of the Congo – Patrice Lumumba by CIA and Belgian Operatives, with a similar process happening in at least Angola, Ghana, South Africa (US support for Apartheid), Mozambique and Somalia.

Sachs now cites a 1965 CIA report which summed up the potential for economic growth in Africa as minimal, and stated the view that Africa was unlikely to receive signficant enough investment from the US to make a difference – basically what Africa needed was a Marshall Plan level of investment, but the US was not prepared to invest this money in Africa.

Instead, what Africa got (during the 1980s and 1990s) was Structural Readjustment Policies which encouraged ‘budgetary belt tightening’ which left many African countries poorer by 2000 than they were in the 1960s immediately after the end of colonial rule. Sachs says that these policies had little scientific merit and produced little results

Deeper Causes of African Poverty

Sach’s starts of this section by pointing out that the corruption levels between 1980 – 2000, as measured by Transparency International, were higher in various Asian countries (for example Pakistan, India and Bangladesh) compared to various African countries (for example Malawi and Mali), and yet Asian countries grew at around 3% a year, while Africa stalled. NB – it’s worth noting as a quick aside that a 3% year on year growth rate might not sound like a lot, but over 20 years this compounds signficantly.

Sachs draws on his visits to Sub-Saharan Africa (the first in 1995) to explain the factors which have hindered economic growth…..

Environmental factors hinder attempts towards economic growth – Disease, Drought and distance from world markets are all features of the African environment – Adam Smith, in fact, noted in 1776 that Africa lacked the kind of navigable rivers which gave Europe an advantage in world trade.

To emphasise this Sachs also talks about just how dispersed the rural populations of Africa are, which, combined with poor soil fertility, hinder their ability to produce sufficient food for themselves, let alone producing enough to export.

Then he gets onto the prevalence of disease – AIDS was already rampant by the mid 90s, but he also cites Malaria – he states that all of his Africa Colleages lost a few days a year to boughts of Malaria, some of the boughts being serious and leading to hospitalisation. He says that nowhere on earth had he experienced so much illness and death as in Sub-Saharan Africa – in the year 2000, SSA’s LE stood at 47, a good 20 years below Asia’s and 30 years below Europes.

According to the historian Angus Maddison, SSA had experienced the lowest levels of economic growth in the world even before colonial times, which leads Sachs to theorise that the disease burden may be able to explain both this long-term historical low economic growth rate and the more recent low growth rate.

There are some other factors which might explain low growth – Firstly poor leadership is sufficient to explain this in the case of Zimbabwe.

Next Sachs asks why there is such a lack of Free Trade Zones for exporting in Africa, given that these were the path to growth which Asian countries used form the late 1960s onwards, which grew mainly through exporting garments. There is one African country which did the same – Mauritius in 1968 – Here one ethnic-Chinese academic on the island happened to visit his brother in Taiwan . The brother was playing a lead role in the new export processing zones which were then being established in Taiwan, and his brother took the concept back to Mauritious, and the rest is history….

He then points out that free market reforms would not work in African countries which were caught in a poverty trap, especially those which are landlocked (15 countries are in Africa) – even those which had generally good governance.

 
The Malaria Mystery

Malaria is an entirely treatable disease, and yet it still claims 3 million lives a year, 90% of which are in Africa. After pointing to the correlation between low GDP and Malaria and then asks four questions….

Is it Malaria that causes poverty, or vice-versa? Or both?

Why was the Malaria problem so much worse in Africa

What was being done about the Malaria problem?

What more could be done?

 

Is it Malaria that causes poverty, or vice, versa, or both….?

Both –

Poor countries cannot afford Malarial prevention strategies – such as spraying with insecticide or putting up treated mosiquito nets, or even houses with doors and windows which keep the mosquitos out.

Malaria also prevents econommic growth – not only because of work days lost, but also because mass illness can stop infrastructure development projects in their tracks – Sachs reminds us that the building of the Panama canal was hindered because of Malaria.

Malaria also means high birth rates – when children die, parents overcompensate and have more children…. then large numbers of children and poverty means the family can only afford to educate one child, so large numbers of children enter adulthood with no education.

It also means those children who do get an education taking time of school because of sickness and poor education.

In short (p199) ‘Malaria sets the perfect trap: it impoverishes a country, making it too expensive to prevent and treat the disease. Thus malaria continues and poverty deepens in a truly vicious cycle.

Why is Africa more vulnerable than other regions?

Basically because of the disease ecology – a combination of high temperatures (the parasite develops faster), moist breeding grounds, and a variety of mosquito which prefers bighting humans rather than cattle means the transmission rate is higher in SSA than Europe and Asia (with the exception of Papua New Guinea). This all leads to the transmission rate being 9 times faster in Africa than it is in Asia.

However, Malaria is treatable and a combination of spraying, bed nets, and anti-malarial drugs means that no child at least needs to die from the disease.

What was being done (in 1995) to combat Malaria?

Hardly anything – tens of millions were being spent in aid, when $2-3 billion was required ($5billion a year in today’s money)…. The world bank was too busy arging for budget cuts and privatisation to even notice Malaria.

Africa’s AIDS cataclysm

Why is AIDs more of a problem in Africa?

No one’s really sure – the common assumption is that people have more sexual partners in Africa, although data puts this in doubt – So it might be that the patterns of copulation are different (more older men with younger women), it might be more concurrent relationships (faster turn over), it might be less use of condoms.

What are economic costs of AIDs?

This is possibly worse than Malaria, at the time 10s of millions of deaths – and many adults dying – teachers/ doctors/ civil servants, not to mention the strain on the health services, the heads of households being ill and the orphaned children. Also businesses don’t invest out of fear.

What was being done?

By the late 1990s, Anti-retroviral therapy in the West was giving people with AIDS hope – which meant more people were coming forwards to be tested for the disease, but only $70 million was being spent on combatting the disease in SSA. Apparantly the World Bank did not make one single loan specifically for combatting AIDs in the Africa from between 1995-2000.

Eventally Sachs ended up charing a WHO commission on macroeconomics and health which made the case for economic investment in health to improve economic development. They found eight major causes of disease in Africa – of which AIDs and Malaria were the top two.

The commission also suggested that $27 billion of aid focussed on health a year could save 8 million lives – equivalent to 1/000 of the combined annual income of all donor countries.

The birth of the global fund to fight AIDs, TB and Malaria

This was established in 2001, following agreement from drugs companies to provide AIDs drugs for the $500 cost price (for low income countries) rather than the $10000 market price in high income countries.However, there is still an ongoing battle to secure funding and encourage low income countries to implement the necessary procedures to make all this worthwhile.

Lessons learned

In the final section of this chapter Sachs reminds us that Africa faces other barriers to growth rather than just disease – he notes that a combination of environment and poverty creates a poverty trap – He comes back again to the point that intermittent rain fall doesn not help crop fertility, but also the fact that the most heavily populated areas are the most fertile regions in Africa – which is Rwanda (and DRC I thought) – basically inland areas furthest away from the coast.

However, he notes that there are many things which could be done to assist Africa – Poor soil can be improved by organic and artificial fertilisers, irrigation schemes could help – (Africa, basically, needs its own Green Revolution), and infrastructure improvement could connect inland rural populations.

At the end of the day – if a combined effort of the International Community and African Countries can combat Malaria and AIDs, then the same can be done to improve farming and develop roads and electric infrastructure.

I’m reminded about one quote from near the beginning of the book – What does Africa need to focus on most urgently – health/ education/ infrastructure or what – the truth is, everything at once.

The chapter rounds off by mentioning that this was about to be put in place big time by the introduction of the Millennium Development Goals in 2015 – Which Sachs played a central role in….