Right, now that we’ve finished our run-through the Africa Commission Report, it’s time to get back to unfinished business: Jeffrey Sachs. You can track the summary of his book The End of Poverty from beginning, but if you’re in a hurry, here’s a quick catch-up.

Sachs out campaigning with Bono. He does that a lot.

Sach’s vision of development

  • The world currently breaks down into XX categories of development:
    • 1 billion rich people (e.g. me and, probably, you);
    • 2.5bn middle-income people, (e.g. Indian IT workers;
    • 1.5bn poor people, e.g. Bangladeshi garment workers; and
    • 1bn extremely poor people, e.g. Malawian villagers.
  • Prior to the industrial revolution of around 200 years ago, pretty much everyone – except tiny noble elites – was extremely poor: scraping buy on subsistence agriculture. It’s technological innovation since then that has generated the tremendous wealth in rich countries.
  • Poverty in poor countries stems from the rates of growth in Europe and America not being mirrored elsewhere. All countries have grown, but some faster than others, and over 200 years this compounds into vast differences in wealth.
  • Some of the factors that have allowed rich countries to grow faster include:
    • Political stability and openness
    • Education systems to breed innovation
    • Access to, and dominance of, the seas
    • Access to the markets of North America
  • In addition, industrialisation reached many parts of the world only through colonialism, which meant a form of development with minimal long-term benefits, which was severely damaged when colonialism ended.
  • Development is not a “zero-sum” game, with a certain amount of wealth to be shared out. Rich countries don’t have to get that way off the back of keeping poor countries poor; it’s possible for everyone to develop further, as the driver of growth -technological innovation – is unlimited.

Why some countries grow slower than others

  • Wealth is increased through four main mechanisms:
    • Saving and investment: for example, a farming family buys a cow, and sells milk as well as grain
    • Trade: instead of just growing to eat, the family sells some crops to a neighbour and buys others, increasing the range of their diet and making a profit
    • Technology: a simple new variety of tougher seed could mean more income
    • Resource increase: a good summer or change in the local environment increases income.
  • So when countries fail to grow, it’s often because these mechanisms are being blocked. If you can’t grow any spare crops to sell, you can’t trade, and you’re more susceptible if the crops fail. Technology not only needs investment to improve, but just to be maintained (machetes break and need repair). Most problematic of all, population growth will naturally reduce the amount of land available to fulfil the needs of each person. So a certain degree of growth is needed just to keep incomes even.
  • At a country level, several factors amount to obstacles of this sort for many poor countries:
    • Geography: landlocked countries have less access to sea trade; countries in areas prone to malaria have a higher disease burden
    • Fiscal trouble: i.e. skint governments who can’t invest to spur trade and growth. This can happen even if there is money around, for example if the government’s tax income all goes on paying debts.
    • Governance trouble: certain basic requirements for trade, like good property laws, can be absent when government is weak (or operates arbitrarily).
    • Cultural barriers: like traditions that prevent women from working
    • Geopolitical barriers: like trade barriers adopted by other countries, e.g. sanctions.
    • Lack of innovation: without developed education sectors poor countries must often make do with technology designed for rich countries.
  • Extreme poverty can create a “poverty trap” which makes it impossible to begin growth. For example, a country that cannot invest in education, research or infrastructure has little hope of developing. Therefore an international framework that is favourable to trade isn’t enough on its own to ensure growth.

Clinical economics

  • Economics, like bodies, are complex, and repairing them takes care and dedicated study
  • While working on one area, say trade, you must maintain other areas, like public services, at a steady level or the entire economy is at risk
  • There are many possible causes of problems, and often more than one will occur at once. Instead of having “flavour of the month” problems which are deemed to be the obstacle for all poor countries, economists should carry out a detailed assessment of each individual economy, including aspects like geography, demographics and culture.
  • Doctors constantly review their diagnoses and update them if the facts change. Economists tend to think they’re right and whatever results don’t fit are blamed on the country in question. Like doctors, they need to be more flexible and prepared to revise diagnoses.
  • Doctors have a well-known and serious ethical code. Economists have been flippant and arrogant in their handling of poor countries’ economies. It takes serious and long-term commitment.

That’s the bare bones of Sachsism. Next, the good doctor takes us on an autobiographical journey through the many economies he’s fiddled with and the lessons he learned. Quick summary of that, coming up next.