Can poverty become history?
C. Rangarajan
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Sach's agenda of action — a unique informed vision of the keys to economic success in the world today and the steps necessary to achieve prosperity for all
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THE END OF POVERTY — Economic Possibilities for Our Time: Jeffrey D. Sachs; Penguin Books India Pvt. Ltd., 11, Community Centre, Panchsheel Enclave, New Delhi-110017.
$ 22.95.
Jeffrey Sachs brings impressive credentials to writing this book. A distinguished economist and a well-known economic advisor to several developing countries, he is currently adviser to the U.N. Secretary General on the Millennium Development Goals.
His words carry the weight of academic authority and the credibility of first-hand exposure. Passionately and persuasively written, the book is a stinging indictment of the inaction on the part of the rich countries to help the poor.
The picture Sachs paints is grim. Bulk of the poor countries which are in Africa are not only poor but are devastated by the burden of diseases which cripple their productivity and livelihoods. Nearly 10,000 Africans die every single day because of AIDS, TB and malaria. The tragedy is even greater as these deaths are preventable.
Poverty trap
Poor nations are caught in the classic poverty trap. Low income leads to low savings and investment, which in turn lead to low growth of income. They cannot fight their way out of this vicious cycle on their own without help from outside and that too on a massive scale. If aid falls below a threshold level, it does not have much impact. Sachs argues that the aid so far made available to Africa has been so negligible that one should not be surprised that it had made no impact on poverty.
This book is actually three books rolled into one. The first is a discourse on some core issues of economic development including the role of technology, geography and even climate. The second, largely autobiographical and dealing with the author's experiences and perceptions of five different countries in their process of transition from centralised planning to market orientation, hangs somewhat loose and is not related to the core theme of the book. The last nine chapters make up the third and contain Sachs' basic message.
Ending poverty
His core recipe for ending poverty is massive capital infusion into the poor countries to enable them to come out of the low equilibrium trap. He estimates that the poor countries need net aid flows in 2006 of $ 135 billion, increasing gradually to $ 195 billion by 2015. In comparison, the actual flow in 2002 was $ 65 billion. This would mean that aid as a proportion of the GNP of the rich countries will have to go up from the current level of 0.23 per cent to 0.44 per cent in 2006 and finally to 0.54 per cent in 2015. Sachs goes to great length to emphasise that this estimate is still short of the Lima target of 0.7 per cent of GNP promised by rich countries way back in the 1980s.
The first three decades after the Second World War witnessed an enormous growth of the literature on development economics, ushering in concepts such as "disguised unemployment", "balanced growth", "big push", "leading sector" and "take off". The basic question was how to initiate the process of self-sustaining growth in the poor countries. One leading development economist saw it in terms of raising the savings rate from 5 per cent of the GNP to 20 per cent. All economists recognise that for poor countries to grow, external assistance is important. Often a parallel is drawn to Marshal Aid. This is interesting but not quite appropriate.
The European countries that were the recipients of Marshal Aid were devastated by war but had the capabilities to grow fast. In the case of today's poor countries, the institutional infrastructure for facilitating growth is deficient. This needs to be built, if aid is to work, and Sachs factors this in while arriving at the aid requirements of poor countries.
Experience with aid
Aid on a massive scale is necessary but not sufficient. Experience with aid in the last five decades clearly shows that it has not uniformly been successful. Effectiveness has depended on action on the part of recipient countries. While Sachs acknowledges this, he somewhat underplays this aspect. Good governance in one way or another is an important issue.
Some of the poor countries have indulged in the luxury of armed conflicts. They have thrown up leaderships totally unconcerned with growth. These factors, nevertheless, do not take away the need for extending assistance and that too on a significant scale. They only reinforce the need for building the capabilities and the institutions of governance to utilise aid effectively. The latter should not be decried.
Aid flows to poor countries, particularly to Africa, must be broken into three parts — the first part, aimed at eradicating the killer diseases such as AIDS and TB, must be made available immediately and unconditionally. The second part that can be set aside for providing relief to those who suffer from acute hunger too must be provided immediately.
The third part aimed at accelerating growth could be released matching with the readiness of countries to take appropriate action in terms of policy framework and governance.
Enlightened globalisation
Externally imposed conditionalities are resented. But countries can be induced to make their own programmes consistent with their perceptions.
It is a sad fact that hard decisions are taken only in the shadow of a crisis. Every increase in aid must be welcome and must be integrated into a plan drawn up in a modular fashion. In this sense the G8 response at Gleneagles is a welcome step, even if it falls short of the desired level.
Jeffrey Sachs has done a commendable job in arousing our collective conscience to a tragic reality. The poor nations need aid — immediately and in a substantial measure.
The rich nations can afford to give it. "Enlightened globalisation", as Sachs calls it, can lead to eradication of poverty. For this to happen, there has to be an attitudinal change, primarily on the part of the rich countries and to some extent from the poor countries. Only then can poverty become history.
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