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July 06, 2005

Pro-Bono Economics: The End of Poverty - Jeffrey Sachs

Posted by Richard D. North

The End of Poverty: How We Can Make It Happen in Our Lifetime
by Jeffrey Sachs
Pp. 288. London: Penguin, 2005
Paperback, 8.99

Richard D. North - the author of Rich is Beautiful: A Very Personal Defence of Mass Affluence - considers Jeffrey Sachs' plan for ending global poverty.

This book by a bumptious economic missionary is more than an account of how its author has saved large bits of the world and quoted lots of Keynes. Still, much of it does seem irrelevant to his central theme: how to solve extreme poverty in a generation. His proposed solution to this is actually a rehash of what has been conventional wisdom for at least a decade. Only, like Freddy Mercury, he wants it all, and he wants it now. So far, so pro-Bono.

Professor Sachs has spent much of his time on a rather different issue: the macro-economics of middle income countries. Then for a while he was the darling of the likes of The Economist, with his very valuable chairmanship of a UN commission on real-world solutions to the AIDS crisis, during which he helped do the diplomacy which has produced new deals to put antiretrovirals within reach of the third world.

That sort of work matters very much to the very poor, and for that Sachs could have been a hero. Still, the book's aim is to justify the classy end of Make Poverty History's arguments. Quite a lot of this writing seems unpleasantly hubristic, but it has at least one merit: one can perhaps see how flattering Professor Sachs found his contacts with his new best friends, Bono, Madeleine Albright, and Kofi Annan. He seems to have had something of an epiphany in the last few years. Meeting rock stars, world leaders and African villagers will do that to people.

The difficulty is, he may well have over-reached himself. He seems to want to be consistent to his economic hard-headedness whilst being a guru to the rock-savants and The People. The result seems to be roughly what people just to the left of the World Bank have been saying for several years. The argument runs thus-wise.

The very poor, especially in Africa, can be helped into subsistence. We know that the very poor inhabitants of rural Africa and elsewhere have sometimes responded to projects which help their subsistence agriculture, especially if these are connected with an element of education, health-care, sanitation, decent access to local markets and a moderately benign local government. So far, these projects have been under-funded, too localised, and too short-term. The answer, according to Sachs, is to scale up aid, so that the poorest billion people on the planet get about 10 times the aid they currently get. Don't worry, he points out, this transference of wealth is roughly what we have already promised: one way or another, 0.7 percent of the West's GDP will be about right. All we need is to deliver existing, easy, promises and spend our money with the kind of care which Sachs outlines as entirely possible, and the job should be done.

So far as I understand it, this sort approach means that that we would apportion almost all our aid to helping the extremely poor, rather than helping to build a mainstream economy and a micro-middle class in countries with large numbers of extremely poor people. This risks offending those of us who are fans of helping the extremely poor not least by helping those a rung above them. It seems to us free-market types that Sachs' party risks condemning the extremely poor to become just very poor or poor, but within their current micro-peasant scale agriculture. It may also risk leaving the middling poor to stagnate. In short, we can say, it isn't the way the Asian Tigers did it.

But suppose one forswears a dogged determination that it's access to industrial capitalism which alone in the end abolishes poverty. Then one might at least theoretically allow that Sachs's is perhaps a sensible additional approach: it may be ripe in promise, if it could be delivered. Even so, its being achievable is not widely accepted.

The tax-payers of the West have always faced the problem that they hear very competing voices about what the very poor need. I don't mean to say that Westerners would be generous if they ever did come to believe that aid works. But right now, they can comfortably shelter their wallets behind the belief that their newspapers are full of comment which says that it doesn't. Sachs tries to suggest - as does Bob Geldof - that this is just cynicism. But it isn't.

Many intelligent observers with much longer and closer experience of these problems than Sachs (and perhaps even than Geldof) are reluctant to agree that Africa would make good use of much increased aid aimed at the very poor. They say, for instance, that there is very little evidence that humanitarian aid toward education, health and so on have actually succeeded in lifting the very poor out of poverty. It's a good and plausible move of Sachs to say that we've never tried enough of this stuff, or done it for long enough. But it is also a sound and hard-nosed response to that move to say that the minimalist past cannot be a very good predictor of what will happen in a hypothetically more generous future.

If we were persuaded that giving a lot more in aid would be risk-free, even if expensively wasted, still we perhaps ought to have a go. Sachs says that transferring even very large flows of money can be done without damaging the recipient economy. That's not what I've heard, but let it pass. Our bigger problem is to see whether recipient governments can receive hugely increased sums of money without being bolstered in their bad behaviour. Several African countries have combined (in NEPAD) to propose themselves as prepared to invest in decency. Mr Bush says proving it would be the main condition of his country increasing aid flows.

This may be an agreeable way through our problem. If African governments, Sachs, NEPAD, the World Bank and Make Poverty History can prove that their methods work, then presumably aid flows could quickly increase, in a virtuous spiral. Their propositions are likely to be put to the test but in a more gradual way than Sachs' enthusiasm for his own fast-fix demands.

So Sachs' large claim that he knows how to fix extreme poverty in our lifetimes is not likely to be tested. What is very probable however is that we are about to see a larger, more sustained, and more directed aid effort.

Neither "side" need lose in this argument. Sachs could say his approach is vindicated. But so could the sceptics. The sceptics are inclined to argue that if countries had good government, they would have much less extreme poverty. But most of them could willingly accept that aid might well work if only recipient governments were a bit better at their job. If Africa were transformed into a nicer place, aid would be both less necessary and much more effective.

I repeat a major question which is not addressed properly by Professor Sachs. Dollar for dollar, and supposing your aim was to end extreme poverty, would you be wise to direct aid to the extremely poor, or to whatever levers would help the economy around them grow? It may be that the answer is: do both.

But who will pay? President Bush says he wants to do more on aid. We'll see if Congress agrees: it seldom likes these sorts of promises. In any case, the better off of the world do not need government in order to help the extremely poor, or any other sort of poor.

Professors Sachs clearly feels that the better-off of our Western societies ought to relish the chance to put a little extra taxation toward the poor. He says that it is their leaders' reluctance to busy themselves with aid issues, and not voters' own meanness, which keeps aid budgets low. Leave aside for a moment that this is a funny way to think about democracy's working. The fact is, US governments are unlikely to come up with the country's "fair" share of aid, so the rest of the West's governments - more kindly, guilt-ridden and outward looking - might have to play a larger part.

But suppose we really did privatise this effort. This approach might be thought just: in the degree to which taxation is not highly redistributive, large aid budgets would tax even the West's poorer people to help the extremely poor in the Third World. It really might be right that helping the extremely poor is the voluntary job of the rich - or the Mass Affluent - of the world.

A huge expansion of voluntary action would be entirely possible. Voluntary aid agencies are already familiar with working with donor and recipient governments, and those relationships could be greatly expanded. If one billion of the world's better-off would come up with $100 a year each in well-directed aid, Sachs' plan could be funded. Double it, and one might help the wider economies of poor people too. It would be attractive to trump the campaigners' arguments that The People care: let both of them prove it. The point is: if it could be proved that aid can be made to work, a vast range of voices from campaigners to rock stars would have legitimacy as they pressed for a commitment to Africa. What's more, it would be for very rich moralisers to prove they were playing their part before they lectured the rest of us about doing ours.

Professor Sachs' is not a conventional soft-left liberal MPH mindset. He accepts that open economies are better than closed ones. He goes out of his way to suggest that capitalist firms are a good thing. Sachs even has a good word to say about the private delivery of "public" services to poor people, provided they are given cheap or free access to the basic minimum of supplies. He doesn't hate the Bretton Woods organisations (the IMF, World Bank and so on), just wants them to do better. And he does see that rich new coalitions of firms, governments and NGOs might do a lot for the very poor.

Of course, we don't know what will happen when Africa is better governed. We know - it is a tautology - that there will be more politicians, firms, charities and campaigners all competing and sometimes co-operating to produce whatever modern Africa turns out to be. How its economies and cultures will fit into the future world can't be known.

We don't know whether Africa is development-proof. We couldn't in good conscience assume that it is. But we can't look at its recent history and be confident either. Professor Sachs is as conflicted as everyone else on this matter. He outlines the continent's difficulties of climate and geography. He dismisses (rather boldly) the notions that Africa has a culture (many cultures) which are not progressive.

It would be lovely if Professor Sachs was right. A tiny bit more generosity, a few more shoves, and we'd quickly banish extreme poverty. But this book tells us rather little which is new about what to do, except in proposing great speed. In affecting to have a simple solution, Professor Sachs may embolden the hard-hearted to consider a more charitable approach. Good. But the upshot will - I hope - be accelerated gradualism. Those who want to suggest an alternative to caution - the Sachs party - will have to explain how high-speed, high-spend solutions can avoid doing greater harm than good.

Richard D. North is the author of Rich is Beautiful: A Very Personal Defence of Mass Affluence. To read Richard D. North's own take on G8, Live8 and Africa see G8 Gleneagles Fiasco: How Bob, Tony and Gordon didn't help Make Poverty History - and why that's good.

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