Jeffry Sachs in ‘The End of Poverty’ (2005) makes the case for increasing spending on aid to developing countries. 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
- Power, transport and communications infrastructure
- 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:
- High infant mortality rates (which indicate low levels of material well-being)
- Openeness of the economy – the more open, the less stable
- 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%.