The Hindu Business Line : Our generation can choose to end extreme poverty by 2025

CHECK today's headlines. Did it scream, "More than 20,000 people perished yesterday of extreme poverty"? No. Because it happens everyday, "such stories rarely get written," rues Jeffrey D. Sachs in his book The End of Poverty, from The Penguin Press (www.penguin.com).

"His voice is louder than any electric guitar, heavier than heavy metal," writes Bono in his foreword to the book. "He's not just animated; he's angry. Because he knows that a lot of the crisis in the developing world can be avoided." Angry because "more than eight million people around the world die each year because they are too poor to stay alive". But our generation can choose to end extreme poverty by 2025, is the hope that the book hinges upon.

To Sachs, economic development is a ladder, "with higher rungs representing steps up the path to economic well-being." The sad part is that one in six of the humanity is "too ill, hungry, or destitute even to get a foot on the first rung of the development ladder." At the top end again is one sixth of the world, "enjoying twenty-first century affluence."

The climb shows as rising personal incomes and acquisition of goods "such as cell phones, television sets, and scooters," apart from measures like life expectancy, educational attainment, access to water and so forth. "The very hardest part of economic development is getting the first foothold on the ladder." Equally hard it may be to think of any uniform ladder for everybody.

There are three degrees of poverty, you'd know if you looked around. As Sachs explains, extreme poverty means that households cannot meet basic needs for survival; moderate poverty means basic needs are met, but just barely; and relative poverty is where household income is below a given proportion of average national income.

Why are some countries are poor? In chapter 3 Sachs discards the common answer that it's all because of `the faults of the poor', and reasons, "Something as complex as a society's economic system has too many moving parts to presume that only one thing can go wrong. Problems can occur in different parts of the economic machine and can sometimes cascade, bringing the machine to a near halt." He then identifies `eight major categories of problems', viz. poverty trap, physical geography, fiscal trap, governance failures, cultural barriers, geopolitics, lack of innovation, and demographic trap. Statisticians may be aghast at Sachs' charge that the standard measures of domestic saving can overstate the saving of the poor because "the data do not account for the fact that the poor are depleting their natural capital by cutting down trees, exhausting soil of their nutrients, mining their mineral, energy, and metal deposits, and overfishing."

Thus, "when a tree is cut down and sold for fuelwood, and not replanted, the earnings to the logger are counted as income," but in the author's view, this must be counted as "conversion of one capital asset (tree) into a financial asset (money)." That makes eminent accounting sense.

If you thought it is only book-keepers who learn from doctors, the book springs a surprise by proposing a new method for development economics: `Clinical economics'. There are at least five lessons to draw from clinical medicine, you'd learn. One, `the human body is a complex system', so "one failure can lead to a cascade of additional failures." So too, "societies have distinct systems for transport, power, communications, law enforcement, national defence, taxation, and other systems that must operate properly for the entire economy to function appropriately."

Two, `complexity requires a differential diagnosis.' Fever, for example, is a symptom; if for a child you notice in addition that the neck is stiff, meningitis could be the underlying cause, so rush the child to the emergency room, writes Sachs, as the husband of a paediatrician. The principle is that diagnosis should not delay treatment, explains the author, and jibes that the IMF "sometimes studies problems to death while an economy collapses."

Standardised advice such as "cut budgets, liberalise trade, and privatise state-owned enterprises," may fail without factoring in the context.

Three, `all medicine is family medicine', because to treat successfully, you must understand the `social setting'. For individual countries, the whole world is the family, says Sachs, quite expansively. Thus, telling Ghana to open up trade, balance its budget, and attract foreign investment, may not help "if not combined with trade reforms in the rich countries, debt cancellation, increased foreign financial assistance for investments in basic infrastructure, and support to the West African region as a whole to maintain peace."

Four, `monitoring and evaluation are essential', so "hold each diagnosis not sacrosanct, but as the best-maintained hypothesis of the moment." In economic development too, look at outcomes and compare with goals, advises the author. When such a monitoring is not done, we'd only hear excuses for past advice. "Countries are judged on the basis of their policy inputs, not outputs," laments Jeff. "The result is a descent into formalistic debates on whether a particular policy has been carried out, not on whether the policy was the right one in the first place."

Lesson five, `medicine is a profession', so doctors must offer judgments `in the interests of the patient, not for personal gain', keep pace with new developments, and ensure `the highest quality care'. Ditto with development economists. They may not be corrupt or unethical, but Sachs finds them not taking on their work `with the sense of responsibility that the tasks require'. The discussion on India's market reforms notes that India is teaching the world "a lot about the richness of the international division of labour." On China, Sachs' prediction is that it may be "the first of the great poverty-stricken countries of the twentieth century to end poverty in the twenty-first century."

In Africa, he finds that "geography has conspired with economics" to create "the worst poverty trap in the world". The biggest question about Russia is whether it will become a democracy. "Though President Vladimir Putin rules with the trappings of constitutionalism and multiparty democracy, he has also successfully centralised power, tamed the media, and muzzled the independent opposition," comments the author.

The last chapter outlines `our generation's challenge' and lays down nine steps to end poverty. These include the strengthening of the UN's role. "Redeem the role of the US in the world," exhorts Sachs but I doubt if there would be any takers for the suggestion. "Harness global science", is yet another step; but weaning science from the pull of market forces isn't going to be easy. The author also wants to `rescue the IMF and the World Bank', and make them "champions of economic justice and enlightened globalisation," but that reads like fantasy. Plus a counsel to `commit to ending poverty', and `make a personal commitment', that only sound soft and too wishful.

"There is wildness to the rhetoric, but a rigour to the logic... God may have given him a voice with an amplifier built in, but it's the argument that carries the day," are lines from Bono's foreword, but I'd agree only with the first half of each. Gandhiji said, "Poverty is the worst form of violence." Perhaps, therefore, its end too may be violent. By the time you put down the book, it's remote that poverty would have ended; yet, Sachs' work is a rich read about the poor.

Economics@TheHindu.co.in

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Our generation can choose to end extreme poverty by 2025