Defeating Global Poverty

I recently finished reading an interesting new book by William Easterly called The White Man's Burden: Why the West's Efforts to Aid the Rest have done so Much Ill and so Little Good. This book has a wide range of strong responses and even an oped piece in the New York Times. Easterly is an Economics professor at NYU and previously an "insider" to the international aid community as an economist at the World Bank.

Easterly argues that our Big Push approach to jumpstart poor country economies has no historical foundation for how countries have escaped poverty in the past. In fact, he argues that our current top-down approaches (much like colonial activities before) are doomed to failure and worse they will likely delay the emergence of sustainable long-term economic growth in these countries.

Read my full book review

Labels: book reviews, international aid, poverty

Some people have given me a bad time about my "over abundance" of posts on Jeffrey Sachs approach to defeating poverty and my quotes from not-so-centrist New York Times. As I state upfront, I'm not taking a liberal or conservative philosophy to defeating poverty. Rather I'm looking for what works and what scales up to sustainably lift people out of poverty. This is about trying to round-up the facts which can help me (and hopefully, you) make smarter decisions about where to invest your time and resources.

This past week, the Wall Street Journal posted an interesting op-ed piece called American Generosity. They quote research from the Hudson Institute which seeks to quantify the true level of international giving to poor nations by Americans from all sources. They note the often quote official development aid of $19.7 billion from USA government in 2004 is about 25% of the total of at least $90 billion given to the developing world by Americans. The difference is $71 billion donated through schools, religious institutions, companies, foundations and families.

The largest single item is at least $47 billion in remittances "sent home" by immigrants and temporary workers. This remittances have very little or no overhead and generally go directly to the poor to help with basic needs.

This is by no means a reason for US aid to be decreased or not increased appropriately. But it does indicate that transfer of wealth can and will happen on multiple levels and that the government is increasingly a smaller player in actual wealth transfer. I don't think this is a surprising story in an increasingly global financial world. Many of my posts are about how you can directly invest in defeating poverty.

Labels: international aid, poverty

Bono posted a transcription of his remarks (or watch video) at the recent National Prayer Breakfast. OK. Hold it there a second. Bono was speaking at the NPB? President Bush was there along with lots of members of Congress, other political leaders and, of course, religious leaders. So, what the heck was Bono doing at this event let alone speaking?

Then I read his speech. I was inspired. Now I understand why. Bono is very self-deprecating about this privileged lifestyle and he uses humor to set people at ease. Bono demonstrates the ability to connect with people from lots of backgrounds. He reminds us that he grew up with a Protestant mother and a Catholic father ... in Ireland. He smiles out loud about the diverse group of people who are turning their hearts and attention to the "least of them."

He calls us beyond charity to justice and equality. He reminds us about how equality is such a hard thing for us to address as the job is never done.

He praises the President for his increases in support for defeating poverty in Africa. And then he reminds us that the job is far from done. Then he focuses on a very simple ask ... 1% more of government budget to be spent on defeating poverty ... a tithe of a tithe.

I continue to learn from Bono on how to approach the complex challenge of defeating poverty.

Labels: bono, international aid, poverty, u2

The New York Times reported today that the G8 finance ministers have come to an implementation agreement on eliminating up to $55B in multi-lateral debt owed by 18 poor countries. Essentially the G8 have contractually committed to cover the World Bank's dollar-for-dollar cost of this in ADDITION to their regular contributions. In reality this is worth closer to $18B in near-term dollars ... significant nonetheless. This also sets a model where additional countries (up to 35 in total) can qualify to participate for even more debt cancellation.

This debt cancellation has been connected with requirements that "sound" economic policies and meet reasonable standards for good governance [details still tbd.] This is the [amazingly relatively new] concept that aid [in this case, debt cancellation] is contingent upon governments investing funds in ways that help alleviate poverty. Obviously, the devil is in the details on whether these requirements are "reasonable" [historically, some requirements have not been] and, more importantly, helpful in ensuring accountability for spending.

This is an amazing breakthrough and, frankly, a grand experiment in a new approach to aid proposed by a number of economists and anti-poverty activists including Jeffrey Sachs. Why a grand experiment? Because it hasn't been proven that these kind of monies will be directed to help the poor. There is so much pressure (and historical precedent) for poor incumbent governments to take windfall monies and invest them ineffectively. It is understandable (although not excusable) that governments are tempted to spend money on short-term, non-sustainable activities (e.g. welfare, high-profile pet projects) which are politically popular but which are not building up the long-term infrastructure (human and physical.) And then there's the unfortunately not-too-uncommon cronyism which favors the wealthy over long-term public interest.

In the spirit of Bono, though, I won't succumb to being a skeptic. This is a needed experiment which we should all watch closely to ensure it is successful.

Labels: debt forgiveness, international aid, poverty

It is interesting how many anti-poverty supporters were against Wolfowitz (former US deputy secretary of defense) being placed as president of the World Bank. The New York Times reported that Wolfowitz is already pressing the US publicly to step up and commit more specific budget $ long-term to anti-poverty goals including the Millenium Development Goals. He is also promoting an approach to modernizing agricultural practices in Africa (to benefit from the rest of the world's so-called "green revolution" -- basically using better seeds and modern ag techniques.) He is also advocating for infrastructure projects like Jeff Sachs recommended in The End of Poverty.

Frankly, I think having someone who has the tenaciousness to run a military war may have what it takes to drive a war on poverty. The jury is still out on Wolf #2, but there's some interesting early promise in his priorities.

Labels: international aid, poverty

Probably the best chapter in Jeffrey Sachs’ book, The End of Poverty, is Chapter 16: Myths and Magic Bullets describing the myths which perpetuate our apathy towards aid to Africa. Here’s his intro:

“Everything up to this point [in the book] is fine and good, except for one matter: it ignores the human factor. Take the case of Africa. Africa needs around $30 billion per year in aid in order to escape from poverty. But if we actually gave that aid, where would it go? Right down the drain if the past is any guide. Sad to say, Africa’s education levels are so low that even programs that work elsewhere would fail in Africa. Africa is corrupt and riddled with authoritarianism. It lacks modern values and the institutions of a free market economy needed to achieve success. In fact, Africa’s morals are so broken down that it is no surprise AIDS has run out of control. And here is the bleakest truth: Suppose that our aid saved Africa’s children. What then? There would be a population explosion, and a lot more hungry adults. We would have solved nothing.”

“If your head was just nodding yes, please read this chapter with special care. The paragraph above repeats conventional rich-world wisdom about Africa, and to a lesser extent, other poor regions. While common, these assertions are incorrect. Yet they have been repeatedly publicly for so long, or whispered in private, that they have become accepted as truth by the broad public as well as much of the development community, particularly by people who have never worked in Africa.” (p. 309, bold is mine)

Sachs goes on to challenge each of these assertions with a fair-minded and fact-based response. He proposes the truth as follows:

• Money spent in Africa is not all “down the drain”
• Well-designed aid programs are not destined to fail in Africa
• Corruption is not the main culprit/enemy of aid effectiveness
• Lack of full democracy does not necessarily prevent aid from being effective (think: China)
• Africa doesn’t have core values that are much different than the rest of the world
• Fully free markets are not the panacea for poverty elimination
• Mature property rights and laws are not a pre-requisite for economic development (in South America, it has been documented that property rights improvements only became a priority after wealth had increased)
• Africa’s sexual morals are not statistically that much different than other regions
• Reducing poverty reduces population growth through accompanying lower fertility rates
• A “rising tide” of economic development doesn’t automatically reach all citizens
• Unregulated “survival of the fittest” has not been the history of successful economic development

I think this chapter is worth the price of the book for those who want to be able to make decisions based on the facts.

Labels: africa, international aid, poverty, sachs

Jeffrey Sachs, in his book, The End of Poverty, argues that the UN (specifically the UN Development Program) is the most capable and best suited to effectively operate the distribution of aid for eliminating poverty in developing countries. He argues that having this done on a coordinated basis by one dedicated UN entity vs. the typical large number of bilaterals and NGO’s all dealing directly with the various national and local governments is much more efficient. He says that the effort to negotiate and administrate all of these agreements with various agencies is a huge resource drain on the recipient countries as well as a factor in delaying implementation. He notes that the UN needs to make organizational and mandate changes in order to do this more effectively coordinating IMF, World Bank, UNICEF, WHO, CMH and others.

I know that many people have critiqued the UN for its lack of efficiency. Most recently there have been headlines of bribes/fraud in the food-for-oil program and sexual misconduct on the part of UN peacekeepers. The question is not whether there is corruption, ineptitude or mismanagement in the UN (as there is in every governmental organization of their size), but whether the mission can be achieved by the UN despite its inherent weaknesses with a reasonable level of accountability.

Some people have suggested that NGOs should have a large role in aid distribution. I think that many of the kinds of investments which Sachs is recommending are infrastructure projects vs. survival/relief-type projects. My observation is that NGOs are generally more skilled at relief and less about significant public works projects and other projects of very large size which are best run and managed by expert for-profit entities (think: Bectel). So, while NGOs should be considered as sub-contractors for some activities, I’m not convinced that they are suited for a major role in developing human and physical capital. Remember that the goal here is create enough capital infrastructure to enable ongoing sustainable economic growth.

By nature, I have a lot of skepticism in big governmental bureaucracies especially when the leadership is appointed vs. directly elected. While I don't fully have confidence in the UN, I remember someone who once challenged me "what better alternative do you have?" I do believe that perfection is the enemy of good enough. And inaction results in no progress which has a severe moral cost of justice. So, until someone proposes an alternative, I’m supportive of Sachs’ general approach.

Labels: international aid, poverty, sachs

The US government has argued recently that NGO charities and philanthropists are already substantially making up the "gap" in the USA's aid commitment. The Development Assistance Committee of the OECD has compiled data to show that only about $3B is coming from this source. This raises US aid from 0.15% of GNP to 0.18% of GNP ... hardly near the commitment of 0.7% of GNP (= increase of about $38B).

Overall, Americans greatly overestimate the amount of federal funds spent on foreign aid. In a 2001 survey, the Program on International Policy Attitudes (PIPA) at the University of Maryland reported that Americans, on average, believed that foreign aid accounts for 20% of the federal budget, roughly 24-times the actual figure!! Essentially the same result was found in a mid-1990's survey.

So, we (Americans) think that our federal government is providing substantial aid to the poor and the government thinks that the citizens are using non-governmental channels to provide aid to the poor. What confusion! And who loses? We all do.

Labels: international aid, poverty

The Global Fund to fight AIDS, Tuberculosis and Malaria is a multi-billion dollar international financing mechanism intended to combat these scourges by dramatically increasing the availability of funding for practical health initiatives. Unlike much international development aid, Global Fund support will be available only to programs that developing countries design and implement themselves. This novel approach means that the ability to continue raising funds from the international community depends on successful results from these country-led programs.

The issue is that most countries which need access to this fund the most don't have the skillsets to apply for access to this fund in a timely and professional manner. So, in 2003, Jeffrey Sachs (Columbia University professor and author of The End of Poverty) & Glaser Foundation (Rob Glaser who founded RealNetworks) founded The Access Project for the Global Fund -- press release and overview.

The initiative offers hands-on strategic planning to governments of developing countries and organizations applying for funding, helping to evaluate existing programs, identify the most successful models and monitor implementation of new programs when those are funded.

I think this is a very interesting investment approach which directs funds to help planning for ultimately better use of larger implementation projects. We all know that good planning is a smart investment.

Labels: global fund, international aid, poverty

I found the UK web site for Make Poverty History does a much better job of articulating the mission and message of what in the USA is called the ONE Campaign. They define three items that they are advocating for:

(1) Trade Justice
(2) Drop (Forgive) Debt
(3) More & Better Aid

Read about the details behind each of these asks. I am much supportive of this more holistic approach than the ONE Campaign's approach of being cute with lots of celebrities around the word "one" and focusing on 1% of GDP as aid.

Jim Wallis of Sojourners provides an interesting summary of what was and wasn't accomplished at G8 meeting in the latest SoJoMail e-zine.

Labels: international aid, poverty

The July 2nd-8th issue of The Economist has this as the headline as the world turns interest towards "making poverty history" in Africa. A few interesting quotes from the introductory article:

"Some [critics] say aid [to Africa] is useless. Some say it is worse than that. Economists worry that it crowds out export industries, by, for example, bidding up the price of skilled workers. And aid may make governments dependent on their paymasters in the rich world, not their taxpayers at home. For every extra dollar of aid they are given, governments raise 28 cents less in tax, says Sanjeev Gupta, of the IMF."

"The claims for aid should not be inflated. Grand, global targets, such as the UN Millennium Development Goals, might helf the international bureaucracies fill their coffers and justify their existence. But they also invite disappointment and disillusionment when the goals are missed."

"But neither should the demands be exaggerated. The sums (the Commission for Africa calls for an extra $25 billion a year over the next three to five years) amount to just 0.08% of the 22 richest donors' combined GDP. And besides, what else would the money be spent on? The European Union alone wasted $55 billion last year on a common agricultural policy designed to keep food expensive for its consumers."

"To benefit Afrcia the money need not even be spent in Africa itself. It is sometimes said that 90% of the $75 billion spent each year on medical research is devoted to the concerns of just 10% of the world's population."

"No one should be naive about aid. It cannot make poverty history, and it can do harm. But to say that nothing works is wrong. Cynicism is only the most common form of naivety."

Labels: africa, economist, international aid, poverty