A World Free of Poverty; Economic Possibility of Our Time

“Silent Tsunami” happens in our daily life. More than 20,000 people die everyday because of extreme poverty. Most people are unaware of the daily struggles for survival, and the vast numbers of impoverished people around the world who lose that struggle. They die namelessly, without public comment. Such stories rarely get written.

Poverty is the greatest challenge of our age. More than one billion people live in the extreme poverty, it means one sixth of world population. Considering enormous problem, do we dare to dream a world free of poverty? Jeffrey Sachs bravely answers, yes we are. Not only dreaming, the Special Advisor to UN Secretary-General also gives concrete ways to reach the dream through his new book entitled The End of Poverty as a road map to a more prosperous and secure world.

Sachs’s experience is globally recognized. The New York Times calls him “probably the most important economist in the world”. Time elected him as one of “the people who influence our lives”. The Director of Earth Institute and Professor in Columbia University has traveled and worked over than 100 countries around the globe advising leaders on economic development and poverty reduction. Some dramatic experiences were in Bolivia and Poland.

In Bolivia, Sachs faced hyperinflation. A one dollar item costs almost 2 million pesos in 1985, up from 5,000 pesos just two years earlier. In two years, the young Harvard economics professor dramatically successful lowered 24,000 % inflation rate to 9 %. To get the result, he must hardly confront with IMF team which brought international bank interest.

In Poland, Sachs wrote a plan of economy transformation just in one night, from midnight until dawn. In this country, he was also successfully influencing the huge debt cancellation, roughly $ 15 billion (50% of all debt). By 2002, Poland was more than 50% richer in per capita terms than it had been in 1990, and it had logged the most successful growth record of any post-communist country in Eastern Europe or the former Soviet Union.

Sachs is also the Director of United Nations Millennium Project, an independent advisory body commissioned by the UN Secretary-General to propose the best strategies for meeting the Millennium Development Goals (MDGs). The MDGs are the world’s targets for dramatically reducing extreme poverty in its many dimensions by 2015. Directed by Sachs, the UN Millennium Project finished the report entitled Investing in Development; A Practical Plan to Achieve Millennium Development Goals.

The MDGs are too important to fail. For the billion-plus people still living in extreme poverty, the MDGs are life-and-death issue. Extreme poverty can be defined as “poverty that kills”, depriving individuals of the means to stay alive in the face of hunger, disease, and environmental hazards. If the MDGs can be achieved, then more than 500 million people will be lifted out of extreme poverty. More than 300 million will no longer desperately suffer from hunger.

Inspired by Keynes who wrote Economic Possibilities of Our Grandchildren in difficult times of Great Depression, Sachs used the same logic to declare that extreme poverty can be ended not in the time of our grandchildren, but in our time. Considering the wealth of the rich world, the power of today’s vast storehouses of knowledge, and declining fraction of the world, he strongly believes that ending poverty will be realistic in the year 2025. Through accumulation of his numerous experiences in the last twenty years, then he wrote The End of Poverty. This book is a story and reflection of his experiences and a framework to end poverty.

As Bono said in Time, Sachs is not academic who lives in ivory tower. He is a pioneer of the mud-hut school of thought. Through his experiences in visiting rural and remote areas, especially in Africa, he realized what mostly economists hardly found about poverty trap even through such sophisticated statistics. Why a country trapped below the ladder of development, so the climb does not even get started.

He believes the main objective of economic development for the poorest countries is to help these countries to gain a foothold on the ladder. To get it on the right track, it requires what he calls “clinical economics” which pays attention to the history, geography, ethnography, public health, education, and politics of individual countries, rather than imposing uniform policies. Sadly, economists have rarely those capabilities.

The IMF, the world’s money doctor, has focused on a very narrow range of issues. The main prescriptions are to cut budgets, liberalize trade, and privatize state-owned enterprises, almost without regarding the specific context. It has frequently led to riots, coups, and the collapse of public services. When it has happened, then the IMF simply chalked it up to the weak fortitude and ineptitude of the government.

When the preconditions of basic infrastructure (roads, power, and ports) and human capital (health and education) are in place, markets are powerful engines of development. Without those conditions, Sachs said, markets could cruelly bypass large parts of the world, leaving them impoverished and suffering without respite. To avoid this situation, the rich countries should invest enough to poor countries to get their foot on the ladder of development. Then, economic development works. It can be successful. It tends to build on itself. But, it must get started.

Sometimes, poverty itself is a cause of economic stagnation. When people are utterly destitute, they need their entire income, or more, just to survive. Aid and debt cancellation are urgently needed for such terrible condition, mostly in Africa. They are too poor to save for the future and thereby accumulate the capital per person that could pull them out of their current misery.

Now we go to big question, is it possible to finance the ambitious project ? Through this plenty world, according Sachs, it can be. At the Millennium Summit in September 2000, the largest gathering of world leaders in history adopted the UN Millennium Declaration. Soon after, world leaders met again at the March 2002 International Conference on Financing for Development in Monterrey, Mexico, establishing a landmark framework for global development partnership.

Through The Monterrey Consensus it was committed “Our goal is to eradicate poverty, achieve sustained economic growth and promote sustainable development as we advance to a fully inclusive and equitable global economic system.” Then, to achieve the goal the donor (developed) countries were also committed to provide additional resources, including the long-standing target of 0.7 percent of gross national product (GNP) as official development assistance (ODA) to developing countries.

Actually, that commitment is not new. It was begun 44 years ago, when the United Nations General Assembly adopted the objective that foreign assistance should increase significantly. At that time, foreign assistance was about 0.5 % of rich-country income. Despite the promises, aid continued decline. In the early 1990s, ODA was still around 0.33% of donor GNP, and now it is roughly 0.25 %.There are currently only five countries that have reached 0.7 % of GNP in aid : Denmark, Luxembourg, the Netherlands, Norway and Sweden. Six more countries, all in Europe, have recently set a timetable to reach 0.7 % of GNP by the year 2015. They are Belgium, Finland, France, Ireland, Spain, and United Kingdom. But ironically it happened in the super power and super rich country, namely United States of America.

United States’ ODA amounts up to just 0.15 % of America’s GNP, which less than one-fourth the global target. This is ironic. In Monterrey, including US President George W. Bush agreed to adopt Monterrey Consensus. In fact, it is contrast with 4 % of GNP that the US spends on its military, roughly US$ 500 billion this year. It is around thirty times of peaceful development aid for the poorest countries.

Sachs firmly opposed that policy. He said that what happened in Iraq, just made a devastation of US credibility around the world and global instability. Military force can not buy peace. Terrorism can not be solved by military, if the roots of the problems are not solved. Failed states, economic failure, extreme poverty, hunger, rapid population growth, unstable societies, and lack of hope would be fertilizers to become terrorism, (religion) fundamentalism, and extremism. As to make the world just, peace, secure, and prosperous, those problems must be accomplished. Ending poverty is the great opportunity of our time, Sachs said.

Economic development is not a zero-sum game in which the winnings of some are inevitably mirrored by the losses of others. If developing countries develop faster; this will in turn bring greater benefits to the developed countries as well. This game is one that everybody can win.

Despite some obstacles, the struggle must be continued. We must have a moral courage like Mohandas Karamchand Gandhi, Martin Luther King, Jr., and Nelson Mandela which believed to overcome the odds and to reach the dream. Our dream now is a world free of poverty, and Sachs has started.

Book reviewed by Setyo Budiantoro, Journal of Economic Democracy 2005

The End of Poverty
How We Can Make It Happen In Our Lifetime
By: Jeffrey Sachs
Penguin Press, 2005
xviii + 397 pages

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