The End of Poverty

Jeffrey Sachs

Director, UN Millennium Project

Portrait of 4 Countries

• Malawi– The perfect storm

• Bangladesh– On the ladder of improvement

• India – Center of an export services

revolution

• China – The rise of affluence

http://www.terradaily.com/images/epidemics-aids-malawi-malnourished-afp-bg.jpg

Malawi

MalawiA perfect storm

• Villages devastated by AIDS– Only children and grandmothers left

• Poor soils, poor yields– No one to work the fields

• Little food to eat• Malaria, but no medicines

– No nearby clinics

• In cities, are clinics– No AIDS medicine– Patients come to die.

• $1 a day could save them

Grandmother with 15 orphaned children

BangladeshOn the ladder to development

• Per capita income doubled since independence (1971)– Infant mortality 1/3

• Sweat shops in Dhaka– Women walk 2 hours to work– First step out of extreme poverty

• Microcredit more available• Health care more available

– And birth control

• Women now more empowered– Want education– Want fewer children

Rice millinghttp://courses.dce.harvard.edu/~phils4/3406.JPEG

IndiaCenter of an Export Services Revolution

• Several steps up the ladder of development

• Information Technology companies– College grads earn $250-

500/month– Service U.S. companies– Buy U.S. computers

• Northern India still largely rural and poorIT workers in Bangalore, India

http://newsimg.bbc.co.uk/media/images/41089000/jpg/_41089458_indiaintel203.jpg

ChinaThe rise of affluence

• Beijing: one of the world’s economic capitals.– Average Annual income

> $4,000 per capita

• Urban professionals– Affluence, travel, trendy

• Foreign investment – And technology

• Competitive enterprises– Exported $400 billion in 2004

http://i1.trekearth.com/photos/32961/beijing1.jpg

Beijing

Ascending the ladder of economic development

• Rural Population– Malawi: 84%

– Bangladesh 76%

– India 72%

– China 61%

– USA 20%

• Employment in Services– Malawi 25%

– USA 75%Rural India

http://filer.case.edu/org/uisa/images/index/comingtomeeting.jpg

Ascending the ladder of economic development

• 5 billion people are on the ladder of economic progress– Poor, low, middle, & high income– Rising incomes, education, sanitation,

health, possessions

• 1 billion people are not on the ladder of economic progress– Extreme poor– Unable to escape from extreme material

deprivation– Trapped by disease, physical isolation,

climate stress, environmental degradation, extreme poverty

Mexico: on the ladderhttp://www.loscabosguide.com/tequila/cabowabo.htm

Global poverty is declining

http://www.economist.com/images/20070428/CFN282.gif

Poverty has increased in Africa

Our generation’s challenge

• The end of poverty– Help the poorest escape

extreme poverty• To get a foothold on the ladder

of development

– Ensure that the moderately poor have a chance to climb the ladder

• Give development assistance

• Eliminate trade barriers

                                                                                                                                                                                                                                                                                                                   

                                                           

World Bank water project, S. Africa

http://web.worldbank.org/WBSITE/EXTERNAL/OPPORTUNITIES/GRANTS/DEVMARKETPLACE/0,,contentMDK:20200526~pagePK:180686~piPK:180184~theSitePK:205098,00.html

Effect of the Industrial Revolution

http://www.unmillenniumproject.org/documents/TimeMagazineMar142005-TheEndofPovertysmall1.pdf

Effect of Industrialization

• Urbanization– Due to improved agriculture

• Food prices fall• Employment in cities

• Social Mobility– Hierarchies unravel

• Market based economy

– Gender roles change• Employment rather than child-

rearing for women

• Division of Labor– Specialization increases– Efficiency goes up

Urban workers, Brazil

http://wwwimage.cbsnews.com/images/2003/09/25/image575166x.jpg

How does prosperity spread?

• Transmission of technologies

• Science-based methods to organize production

• Historical examples:– Steam engine– Factory machinery– Railroads– Global steamers

• Suez, Panama canals

– Electrification– Internal Combustion engine– Nitrogen-based fertilizer

http://indiana-transit-museum.visit-indianapolis.com/

Why some countries fail to thrive• Poverty trap

– Poor rural villages lack• Trucks• Paved roads• Power generators• Irrigation channels

– Human capital is low• Hunger• Disease• Illiteracy

– Natural capital is depleted• Trees cut down• Soil exhausted

– Need more capital, but unable to save for future

Rural village, Sierra Leone

http://imageevent.com/dyet/october;jsessionid=vzm4aori21.lion_s

Why some countries fail to thrive

• Physical geography– Landlocked

• high mountains• No coast, navigable rivers, or

harbors– Ex: Bolivia, Ethiopia, Tibet

– Arid– Tropical diseases

• Malaria

– Problems can be overcome• But it costs moreSahara desert

http://www.curious-software.com/images/desert.jpg

Why Some countries fail to thrive

• Fiscal Trap– Government cannot pay

for infrastructure• Population poor

– taxation not feasible

• Government corrupt, or incapacitated

– cannot collect tax

• Debt load too high– Revenue goes to interest

– Debt cancellation may be only solution

http://www.worldvision.com.au/seekjustice/readmore.asp?sectionid=7&articleid=117

http://www.pridesoaring.com/index.6.gif

Why Some countries fail to thrive

• Governance Failures– Governments should:

• Promote infrastructure• Create an environment

conducive to investment– Crime free– Bribery free– Protect property

• Defend borders

– Poor governance results in• State Failure

– War, revolution, anarchy– Economic failure

Singaporehttp://www.asiatravel.com/singapore/panpac/index.html

Why Some countries fail to thrive

• Cultural Barriers– Religions that block the role of

women• Deny economic or political rights• Deny education• Result:

– Undermines half the population’s contribution to development

– Slows demographic transition

– Blocking religious or ethnic minorities

• Prevented from jobs, schooling• Extreme: ethnic cleansing

http://politicalhumor.about.com/library/images/bltalibanwomen.htm

U.S. Civil Rights

• Slaves freed after Civil War– Did not have civil rights for

another 100 years in South• Employment• Voting• Protection under the law

• Equality in public places• Equal education

– Legislation blocked in U.S. Senate by southern states

– Lynching common• 3,446 lynchings: 1882-1968

http://www.worldsfamousphotos.com/wp-content/uploads/2007/03/1930-lynching.jpg

U.S. Women’s Rights

• Women in 1800s did not have– Inheritance or property rights

• Women were the property of their husbands

– Custody rights

– Voting rights

– Higher Education opportunity

• Women’s right to Vote– Susan B. Anthony and Elizabeth Cady Stanton

• Worked tirelessly for women’s vote

• Began in 1851 lobbying state legislatures

• Formed women’s suffrage movement

– 1920: 19th amendment passed

• Equal Rights Amendment– still has not passed

Susan B. Anthony & Elizabeth Cady Stanton

http://z.about.com/d/womenshistory/1/0/w/L/2/anthonystantonseated1.jpg

Why some countries fail to thrive

• Geopolitics– Trade barriers erected by

foreign countries• Impede economic development

• May target a despicable regime– Often ends up impoverishing

population

– Without toppling the regime

• N. Korea, Cuba

North Korea

http://www.rotten.com/library/history/countries/north-korea/

South Korea

Why some countries fail to thrive• Lack of innovation

– Small market for new inventions• No profits = no inventions

– Endogenous growth cycle:• Big markets encourage invention• Inventions promote big markets

– Low income countries:• 37% population• 11% GDP• 1% patents

– Need foreign investment to bring technology

• Key to East Asian economies• Sweat shops are first step• Starts at port cities

Sweat Shop in Dhaka, Bangladesh

http://www.siu.edu/~perspect/05_fall/images/sweatshop.jpg

Why some countries fail to thrive

• The demographic trap– High fertility rates in the

poorest countries– Poor families choosing to have

many children• Disastrous

– Cannot invest in each child– High fertility next generation

– Demographic transition can occur fast

• Ex. Iran– 1980 fertility = 6.7– 2000 fertility = 2.6

• Education for girls is keyIran

http://www.middle-east-online.com/pictures/big/_10613_iran-women-13-7-2004.jpg

Five Development Interventions

1. Boost Agriculture– Fertilizers

– Cover crops

– Irrigation

– Improved seeds

– Storage facilities

      119 to 4,800

       63 to 118      

 26 to 62      

 5.00 to 25      

 0 to 4.99

Kg fertilizer/Ha of cropland

http://www.overpopulation.com/faq/Natural_Resources/Food/fertilizer_per_hectare/maps/africa.html

Five Development Interventions

2. Improve basic health– Village clinics:

• One doctor for 5,000

– Free anti-malarial bed nets– Effective medicines

• Malaria• Aids

– Birth attendants– Reproductive health

services

Sierra Leone Hospitalhttp://www.kambiahospital.org.uk/

Five Development Interventions

3. Invest in Education– Meals for all children at primary

school• Improve quality of education• Improve attendance

– Vocational training• Modern farming • Computers• Electrical wiring• Diesel mechanics• Carpentry

– Adult Education• Hygiene, • HIV/AIDS

School meal, Ghana

http://newsimg.bbc.co.uk/media/images/41111000/jpg/_41111190_10_schoolhildyghana.jpg

Five Development Interventions

4. Power, Transport and Communications– Electricity in villages

• Lights, computers, pumps, refrigeration, food processing

– Trucks, roads• Bring fertilizers, fuels

• Transport harvest to market

• Transport people to hospital

– Mobile phone• Connect with outside worldKenya village

http://upload.wikimedia.org/wikipedia/commons/thumb/b/b8/Orma_Village_Kenya.jpg/800px-Orma_Village_Kenya.jpg

Five Development Interventions

5. Safe drinking water and sanitation– Health benefits

– Save hours of toil for women and children

Carrying water, Zimbabwe

http://www.bobjanet.demon.co.uk/urchin/4life/zim.htm

Five Development Interventions

• Total cost to village: – $70 per person/year

• Benefits– Double or triple food yields– Reduction of chronic hunger– Improved school attendance– Reduction of water-borne disease– Rise in cash incomes

• Sales of grain and cash crops• Food processing, carpentry, small

manufacturing, horticulture, aquaculture, animal husbandry

– Reduction in AIDS deathsBumper crops, Malawi

http://news.scotsman.com/topics.cfm?tid=503&id=1434172002

The giving gap

• The U.S. is far behind – on its pledge of 0.7% GNP

• Usual excuses– Corruption and misrule

• Thus money down the drain

• Bush (2004)– “…the greatest power on the face of the

earth, we have an obligation to help the spread of freedom. We have an obligation to feed the hungry.”

• U.S. aid to sub-Saharan Africa:– $3 per African (2002)

• 6 cents per African received after expenses and emergency aid

http://home.comcast.net/~markthoma/Graphics/poverty2.jpg