I recently had the pleasure of attending a presentation made by one of today’s greatest economists, Jeffrey Sachs, at the University of Chicago. You may know the thick-haired, placid tie-wearing economic superstar from his best-selling book, The End of Poverty, or perhaps from his awkwardly-posed pictures with U2 lead singer Bono, whom he engaged to write the book’s foreword. In short, the man has made himself stunningly famous these past several years by summarizing a solution to eradicating extreme poverty from this planet by 2025. As a wide-eyed economist hopeful who went in clutching my notebook ready to record every word this great man spoke about solving this devastating global condition, imagine my disappointment walking out without having heard a solution.

This was a bold emotion, as it is hard to deny that this guy has an army of believers following him. He holds a top-notch professorship at Columbia University, was U.N. General Secretary-General Kofi Annan’s right-wing man, and was on Time Magazine’s list of 100 most influential people.

And it is impossible to ignore the motivational powers of his words. Listening to his well-articulated facts - how 20,000 people die every day from poverty, that over 2.8 billion people are fighting for their lives on less than $2 per day, that millions are suffering from horrific, yet treatable, diseases, - strains every heart in the room.

Certainly, on first glance his approach sounds reasonable. Bed nets cost only $5 each and can completely eliminate malaria outbreaks from villages. Fertilizer can triple crop growth and free a family from subsistence farming. Irrigation systems can bring water to villages that are now forced to drink from polluted streams. Train systems can allow people to travel to marketplaces and hospitals.

It is easy to draw the lines – buy bed nets, fix disease so people can work and earn money, eliminate poverty. Buy fertilizer, fix farming so people can sell their crops and earn money, eliminate poverty. Buy irrigation systems, fix water supplies so people can work and earn money, eliminate poverty. Buy train systems, fix transportation so people can use functional marketplaces, eliminate poverty. Sachs packages a list of these instructions and others into a “Big Plan” that becomes a comprehensive operations manual for solving the poverty trap.

The above logical ties aren’t a solution because they don’t answer the question, “Who’s going to buy?” Sachs’ response is “foreign aid” and “UN spending”. But foreigners and the U.N. have already been dumping billions – no, trillions -- into impoverished areas for decades. Sachs’ instructions aren’t rocket science. It didn’t take a genius to figure out that fertilizer would help people eat more.

These instructions and the hype surrounding them are a hollow distraction from the problem that has been plaguing the good intentions of foreign donors for the last century:

The money just doesn’t get there.

Sachs proposed during his speech that for “one day’s Pentagon spending” (which he equated to $1.5 billion based on the most recent military budget), we could cover all of Africa’s impoverished areas with bed nets for five years and eradicate malaria. Well, over $2.3 trillion has been spent on foreign aid since the 1950s (measured in today’s dollars), which means that we (the better-off nations) have already spent 1,500 times Sachs’ proposed price tag, and malaria is still there. What happened to all that money?

William Easterly, a known opponent to Sachs’ Big Plan, says that the money we keep spending never gets to the bed nets (or the fertilizer, or the water, etc.) because of the minefield of obstacles that line these countries’ political and socio-economic environments. Some of the obstacles that are well known by established researchers of foreign aid include: “…[T]oxic politics, bad history (including exploitative or inept colonialism), ethnic and regional conflicts, elites' manipulation of politics and institutions, official corruption, dysfunctional public services, malevolent police forces and armies, the difficulty of honoring contracts and property rights, [and] unaccountable and excessively bureaucratic donors.”

Unless we know that money from the outside can get through these obstacles, knowing what to spend it on won’t do any good.

I enjoyed Sachs’ speech, and am glad that he is motivating people to care about the issue and contribute to finding a solution. But focusing on the aid side of the equation will only lead to future disillusionment from the citizens of wealthier countries if their money continues to be wasted. There must be some way that economists can attack this fundamental problem. Certainly with talent such as Sachs’, if properly guided, this generation should have a good shot.

Posted by Michelle Smith on February 22, 2007 10:50 PM

Posted by: Bruno at March 12, 2007 07:29 PM