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Saving The World For $150 Billion Per Year

I read over at Dan Drezner's site that Jeffrey Sachs thinks we could eliminate severe poverty around the world for $150 billion per year in donations from rich countries. Obviously, not just any old set of $150 billion per year donations would do the trick, but there are specific proposals on the table. You can read about them here (PDF) or on the UN Millenium Project site.

By severe poverty we mean here the conditions experienced by those who live on less than $1 per day. There are quite a lot of people like that on the earth, and I think it should be clear that if we really do have a workable plan on the table to eliminate severe poverty around the world for $150 billion per year that we probably ought to pony up the $150 billion. Indeed, we probably ought to pony up something like $200 billion to give ourselves some margin of error. The moral benefits should be obvious. There would also, I think, be security and economic benefits. In practice, people suffering from the sort of dire poverty Sachs is concerned with here simply can't participate in anything we would recognize as modern political or economic life. Lifting people out of the sinkhole of dire poverty would set them up to lift themselves further up the ladder, building a better world for us all.

But can we really do what Sachs says we can do? Well, one of the tragedies of life is that I sure as hell can't say for sure. But as Dan says, Sachs certainly has a large degree of credibility on the subject -- he's not a lightweight who can be easily dismissed. Dan also knocks down four obvious objections one might have to the Sachs proposal. I would add one further thing which is that there's a bit of a myth out there to the effect that research shows that "foreign aid doesn't work." What the research actually shows is that most of the aid projects undertaken during the heyday of foreign development assistance didn't work. It also shows that some projects have worked. And in more recent years as aid budgets have gotten less generous, but more information has become available, the world has found ways of making development assistance work. Not everything works, but some things works. These are proposals that try and take the skeptical research into account and put ideas on the table that will work. It's important to keep in mind that the goals here are rather modest, while many of the 1960s-vintage aid projects were rather grandiose and based on some over-optimism about the possibilities.

Dan says that "What I'm still undecided about is whether the investment is worth it even if Sachs is only, say, 50% correct. Would there be any other way of spending $150 billion a year that reduced extreme poverty by more than that amount?" These are both worthwhile questions, but they're actually different questions, and I don't think Dan should run them together. Obviously, continuing to do research on whether we can't come up with better ideas is something we should do. And if seemingly better ideas get put on the table, we ought to take them.

Nevertheless, a proposal that promises to cut extreme poverty to zero and that may, in fact, "merely" reduce it in half is a proposal that's well-worth supporting on its own terms. I could say something about the perfect being the enemy of the good here. I don't see any other similarly elaborate proposals on the table, nor would it be easy to generate the political will necessary to implement any plan on this scale, so it seems to me that it would be a good idea for people to put their support behind this idea and do what they can to get it implemented. If something better comes along down the road, then so much the better. Is the Sachs Plan worth doing even if it's "only" 50 percent right? Sure. If we had a plan on the table to eliminate global poverty for $300 billion a year, that would be worth doing. Instead, we have a plan to do it for $150 billion a year that may not actually achieve 100 percent of its goals. A huge number of people (including Dan) have supported the proposition that one ought to support an undertaking in Iraq that, when all the bills are done, will have cost the United States far more than $150 billion for essentially humanitarian reasons. And a commitment by the broader community of rich countries to pony up $150 billion in anti-poverty spending per year would require considerably less than $150 billion per year from the United States.

Roughly, I think a fair division would be about $59 billion from the USA, $59 billion more from the EU, $20 billion from Japan, about $5.3 billion each from South Korea and Canada, and about $3 billion from Australia. That's actually a bit high since thanks to rounding error it adds up to $151.6 billion and leaves out small contributions one would hope for from non-EU Europe (Norway, Switzerland), New Zealand, and maybe a few other places like Taiwan and the Gulf monarchies. It's about 0.5 percent of GDP for all the countries in question, assuming the inherent collective action problem could be resolved. Getting behind such an initiative, I note, would be an excellent way for the United States to demonstrate the sincerity of its idealistic presentation of our current security policy and our genuine desire to use our hegemonic status to serve the broad interests of humanity. Alternatively, it would be an excellent way for the European Union to demonstrate that its different brand of internationalism represents something other than self-absorption.

March 12, 2005 | Permalink

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» Doing things with rightwing democracy promotion from Lawyers, Guns and Money
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» http://www.washingtonmonthly.com/archives/individual/2005_03/005828.php from Political Animal
ELIMINATING POVERTY?....Via Matt Yglesias (who has, as usual, great things to say), Dan Drezner is touting the UN Millenium Development, which aims to eradicate world poverty for a mere $150 billion a year. As Dan says, it's a proposal certainly... [Read More]

Tracked on Mar 12, 2005 5:37:26 PM

» http://www.washingtonmonthly.com/archives/individual/2005_03/005828.php from Political Animal
ELIMINATING POVERTY?....Via Matt Yglesias (who has, as usual, great things to say), Dan Drezner is touting the UN Millenium Development, which aims to eradicate world poverty for a mere $150 billion a year. As Dan says, it's a proposal certainly... [Read More]

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» Yglesias on Ending World Wide Poverty from Deinonychus antirrhopus
By severe poverty we mean here the conditions experienced by those who live on less than $1 per day. There are quite a lot of people like that on the earth, and I think it should be clear that if we really do have a workable plan on the table to elimin... [Read More]

Tracked on Mar 13, 2005 6:36:06 PM

» More on Ending World Poverty from Deinonychus antirrhopus
Matthew Yglesias also points to this post by Dan Drezner that has more information on this. In an update there is this from Dan, 1) Sachs ignores the importance of free market capitalism in economic development. No, Sachs is quite adamant about the ben... [Read More]

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» More on Ending World Poverty from Deinonychus antirrhopus
Matthew Yglesias also points to this post by Dan Drezner that has more information on this. In an update there is this from Dan, 1) Sachs ignores the importance of free market capitalism in economic development. No, Sachs is quite adamant about the ben... [Read More]

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» Blogospheric reaction to the Jeffrey Sachs article in Time magazine from The Glittering Eye
I've compiled a little run-down of blogospheric reaction to the Time magazine cover story on Jeffrey Sachs's plan for ending severe poverty in the world. Unfortunately, it's pretty meagre. I posted my own reactions to the article here. Steve Verdon... [Read More]

Tracked on Mar 14, 2005 9:31:40 AM

Comments

Well, without severe poverty - who is going to produce all that cheap crap you want to buy? You should lobby for $150 billion per year to maintain severe poverty. Luckily you don't have to - they'll do it anyway.

Posted by: abb1 | Mar 12, 2005 3:17:31 PM

"Well, without severe poverty - who is going to produce all that cheap crap you want to buy? You should lobby for $150 billion per year to maintain severe poverty. Luckily you don't have to - they'll do it anyway."

I don't necessarily support the proposal, but this argument is even dumber than the four that Drezner debunked. The extreme poverty countries that we're talking about aren't really involved at all in the global economy. This is sub-Saharan Africa, not China. If anything, this proposal would bring poor countries to a level of wealth and stability where they could become a source of cheap labor for the rest of the world.

The whole "the West keeps the Third World in poverty so it can be a source of cheap labor" argument is always moronic, but this is perhaps the dumbest invocation of that argument I've ever seen.

Posted by: Xavier | Mar 12, 2005 3:48:02 PM

How is it moronic?

Thanks.

Posted by: abb1 | Mar 12, 2005 3:55:55 PM

It's moronic because these are not people working in Nike factories or something like that, abb1. These are the people sitting on the side of the road selling tissues that they picked out of a trash dump. These are the people who starve every time there's a bad harvest.

Posted by: praktike | Mar 12, 2005 4:29:36 PM

...this argument is even dumber than the four that Drezner debunked...

Actually this argument is number 1 of those that Drezner debunked.

Posted by: abb1 | Mar 12, 2005 4:31:18 PM

How is it moronic?

The idea is that a worker earning $5 a day making shoes who isn't suffering from quite as sever malnutrition will end up making you more money than one making only a dollar a day.

While I'm in no way an expert on third world poverty, I can tell you from personal experience that if Nigeria, for instance, ever became a cheap labour source for Europe and the U.S. the standard of living of the vast majority of Nigerians would increase astronomically.

Posted by: WillieStyle | Mar 12, 2005 4:33:34 PM

Praktike, these people constitute the pool of those who will agree to work for 17c/hour, 16 hours/day, 365 days/year for you to be able to buy your t-shirt for $7.

You wouldn't agree to take this job, would you? Why would anyone, unless the other option is 'severe poverty'?

Posted by: abb1 | Mar 12, 2005 4:36:10 PM

without my demand for cheap t-shirts, what are those people going to do?

Posted by: praktike | Mar 12, 2005 5:38:27 PM

abb1, pay attention to what people are saying. I'm going to repeat basically the exact same thing other people have said here.

My understanding is that this proposal basically has nothing to do with people who are providing cheap labor. We're talking about people here in areas with basically non-existent economies. This proposal doesn't claim to end poverty. It claims to end the most severe poverty. Essentially I would imagine that it would raise the standard of living of those currently living basically on nothing to the point where they could actually function as cheap labor. Whatever one happens to think about the argument that the developed world intentially keeps the third world poor, that argument doesn't apply here. (As a side note, I don't think that argument itself is entirely off base, but it is completely off base in this context).

Posted by: sarahliz | Mar 12, 2005 6:18:22 PM

I posted about this today, too. Wouldn't removing damaging policies of the rich countries e.g. agricultural subsidies go a lot farther to eliminating this kind of poverty?

Posted by: Dave Schuler | Mar 12, 2005 6:43:46 PM

If Camodians and Haitians (and all the other poor folks of the globe) some day reach the same level of wealth as Swedes or Australians, we won't have to worry about paying $100 for a pair of socks, because we'll all be tremendously wealthier than we are now (one also suspects that in such a world, labor saving technology will necessarily be far more advanced than in today's world, which means that pair of socks might not quite be so expensive after all). Conversely, if, say, the Japanese or Germans or Koreans were as poor today as they were at the end of WWII, the citizens of the globe -- and that means Americans, too -- would be poorer today as a result.

Nodody truly gains a net benefit --not over the long term at least -- from global poverty.

Posted by: P. B. Almeida | Mar 12, 2005 7:06:20 PM

The question is: do the countries that have such severe poverty have the institutions needed to properly administer aid or protect those who do? One of the cruel ironies is that giving aid to, say, Botswana would probably get most of that aid through to the right people, but Botswana doesn't have a high proportion of desperately poor people who need such aid. There are a lot of desperately poor people in the Democratic Republic of Congo, but if you were an aid worker, you wouldn't want to work there, would you?

Posted by: Julian Elson | Mar 12, 2005 7:49:02 PM

I suppose this critique is a variant of Drezner critique #3. My concern is that if we exclude all the corrupt governments from aid because they'll waste it, and exclude all the middle-income countries from aid because they don't need it, then we'll end up with a fairly small-ish subset of the world from which we can end the scourge of severe poverty.

Posted by: Julian Elson | Mar 12, 2005 7:55:03 PM

The thing is, the main root cause of poverty is tyranny. I don't see how money alleviates that. What has foreign aid done for Zimbabwe? What would another $10 billion do? Probably just end up in Mugabe's Swiss bank account.

Posted by: Adam Herman | Mar 13, 2005 1:45:19 AM

Praktike,
without your demand these people might've done just fine, certainly much better than they're doing now.

Had they been left alone, they might've end up with a government concerned more about their welfare and less about your demand for t-shirs. This (hypothetical) government would've never followed neo-liberal economic policies that create severe poverty; instead this (hypothetical) government might've pursued nationalist economic policies for the benefit of their citizens. And yours and Mr. Sachs' kindness wouldn't be necessary.

Posted by: abb1 | Mar 13, 2005 2:23:36 AM

We're talking about people here in areas with basically non-existent economies.

Areas with non-existent economies. So . . . how did that happen, exactly?

Posted by: SqueakyRat | Mar 13, 2005 2:37:32 AM

We're talking about people here in areas with basically non-existent economies.

Areas with non-existent economies. So . . . how did that happen, exactly?

Posted by: SqueakyRat | Mar 13, 2005 2:37:32 AM

Sarahliz,
Essentially I would imagine that it would raise the standard of living of those currently living basically on nothing to the point where they could actually function as cheap labor.

In places you mention the only reason these people don't function as cheap labor is that there is no stable authority, security infrastructure to protect investment and control the population. And that's the only reason; the lower standard of living the better, obviously.

So, since yours, Praktikes and Mr. Sachs' goal is, apparently, to be able to use these people for cheap labor, what you need to do is to build some nice, strong and stable authoritarian regimes (that you can control, preferably) there. But that's rather obvious, isn't it?

Posted by: abb1 | Mar 13, 2005 2:48:19 AM

It came out a few World Cups ago that the soccer balls were being manufactured by young girls in a sweatshop. International outrage ensued, and they shut the place down. A magazine went back a few months later, and many of the girls had turned to prostitution.

Posted by: Jeff | Mar 13, 2005 3:59:14 AM

SqueakyRat: "Areas with non-existent economies. So . . . how did that happen, exactly?"

It didn't happen. Your question seems to be implying that they once had such an economy, and it was lost in some way. The better question would be 'why hasn't this economy been connected when so many others have?.'

abb1: "In places you mention the only reason these people don't function as cheap labor is that there is no stable authority, security infrastructure to protect investment and control the population. And that's the only reason; the lower standard of living the better, obviously."

The first part of that is absolutely correct; if there is no stable government, capital will not flow in. So, of course, we should be doing what we can to help stabilize their governments, for their sake and ours.

The second part is not true at all. The cheapness of the labor is often less important than other considerations -- the availablitily of natural resources, the productivity of the workers (the better educated often make better workers than the poor and uneducated, unless the work involved is truely no-skill), transportation costs, and the like. In other words, the value of labor is more important than the cost of labor. This is why we still have some factories in the US.

Also, what else could be done to increase their standard of living? Getting rid of agricultural subsidies in the West (US and EU) would certainly help, of course, but that won't happen anytime soon. Besides, that would only bring the other aspects of globalization faster, which seems to be what you're against. Overall, the incoming factories offer far higher wages than the people could possibly get by working for local businesses , if any such opportunities even existed.

Nations can't enter the global economy at the top. They must work their way up just like every other country did. First agriculture, then low-wage manufacturing, ect., up the chain. Poor nations can only build wealth by receiving capital from the outside. Opposing foreign investment only makes the poverty worse.

Posted by: Mario | Mar 13, 2005 4:23:11 AM

Mario,
...The cheapness of the labor is often less important than other considerations -- the availablitily of natural resources, the productivity of the workers...

This is irrelevant. For people living in severe poverty, their availablitily of natural resources, productivity, etc. is a constant; the level of wages they are willing to accept is how they compete with other people living in severe poverty - if the neo-liberal dogma is accepted, of course. It's a race to the bottom.

Fortunately this dogma is being rejected more and more often now, look what's happening in Venezuela, for example. With sane national governments in charge, Mr. Sachs' help would not be needed. Unfortunately it takes an extraordinary person (like Chavez), a lot of courage and, perhaps, special circumstances (like the US being bogged down in Iraq) to create such a government.

Posted by: abb1 | Mar 13, 2005 4:45:29 AM

Oh, and also I completely disagree that agricultural subsidies in the West (or anywhere else for that matter) is a problem. It's only prudent to protect your national food production.

Rather it's that every country on the planet should do it - subsidize its own agriculture, impose tariffs on agricultural imports or block them altogether. And not just the agriculture, everything else too. And fuck the IMF and all the rest of them.

Posted by: abb1 | Mar 13, 2005 5:06:50 AM

Those factors aren't a constant at all. Deep water ports, for instance, will do more for a country's ability to generate foreign investment than cheap labor will. The health of the citizens is also a major factor in productivity; one I should have included above. In this regard, extreme poverty would only limit a nation's ability to entice FDI.

Also, contarary to most people who are pro-globalization, I will agree that governments need a certain amount of protectionism to advance sustainably. The amount is difficult to figure out, unfortunately, and will vary from country to country. Most pro-globilizationists (I really don't think that's the best word) seem to want full, unfettered free trade with third-world countries, but I think long-term growth requires that the leaders of each country look out for their country's best interests (to a point). Chavez, however, is not such a leader. He will never leave power willingly, and by all indications is leading his country down a road of fear and dictatorial rule, albeit slowly. He can only get away with such a government at the moment because of Venezuela's oil-wealth. Please don't fool youself into thinking he's a good leader because your sentiments and his words bear some resemblence; you will only be disappointed when the curtain is pulled back.

As far as agricultual subsidies go, there's not much I can say if we will inevitably disagree, although I will point out that cotton is not food, and dropping American subsidies in that industry would do wonders for the economies of countries in West Africa, particularly Benin, Mali, and Burkina Faso. Not every nation has enough wealth to subsidize their farms to the the point the US does. A report from Oxfam points out "America’s cotton farmers receive more in subsidies than the entire GDP of Burkina Faso." Local agricultural subsidies wouldn't help them at all.

Posted by: Mario | Mar 13, 2005 5:22:03 AM

Subsidizing everything is tantamount to subsidizing nothing.

Posted by: Julian Elson | Mar 13, 2005 5:29:11 AM

Mario,
first of all, what pro-globilizationists call 'trade' has little or nothing to do with trade. It's just US-based corporations using cheap labor. Assembling Ford Taurus in Mexico to sell it in the US does not constitute a trade transaction with Mexico.

This is little more than direct exploitation of people living under 'severe poverty', your example with 'deep water ports' notwithstanding. It's not too difficult to build a port. And clearly no one cares about 'the health of the citizens' as such, there's always enough healthy individuals to staff a factory. And in a couple of years you throw them out and get a new group. This is, in fact, standard MO of the globalization.

As far as the subsidies go, I still don't see any reason why the US government wouldn't want to protect its industry, cotton or anything else - US government should represent US citizens, not multi-national corporations. And it's up to the Burkina Faso government to protect their citizens' interests. They should just block imports from the US. At least they'll be using their own cotton inside their own country.

Posted by: abb1 | Mar 13, 2005 6:02:02 AM

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