books development economics environment globalisation poverty

Commonwealth: Economics for a Crowded Planet, by Jeffrey Sachs

Jeffrey Sachs is an interesting character. He was instrumental in shaping the Make Poverty History campaign. He was also the principle advocate of ‘shock therapy’, the overnight market liberalization that torpedoed a series of emerging economies in the 90s. To some he’s a hero, while others are deeply sceptical about about his transformation into a champion for the poor. Norwegian economist Erik Reinert goes so far as to say “we have in a sense put Attila the Hun in charge of the reconstruction of Rome, with the predictable result that there is no discussion of the damage caused and how it could have been avoided.”

But, comparisons to Attila the Hun aside, there’s no doubt that Jeffrey Sachs is a highly influential economist. As an advisor to the UN secretary general, he has the ear of some very powerful people. His most useful contribution at the moment is to put a price on the change he wishes to see, with clear calculations showing what it would cost to stop biodiversity loss, solve African poverty, halt AIDS or bring population growth under control. He is great at making things look possible, at fostering optimism. It’s a shame then, that pessimism serves the world so well.

Commonwealth: Economics for a Crowded Planet, is Sach’s follow-up to The End of Poverty, an important book that showed how poverty could be realistically ended by 2025. In his new book he addresses one of the main weaknesses of The End of Poverty, that the environmental crisis was barely factored into his thinking. Commonwealth dedicates a whole section to environmental sustainability, alongside sections on demographics, poverty alleviation, and global cooperation.

Unfortunately, it’s still the environment where Sachs falls down. The sections on water and conservation are useful, but climate change is summarily cured with the hope that “powerful technologies will likely be available to enable us to mitigate the climate shocks at very modest cost”. That’s a difficult hope to back up, especially once you realise that he is talking about Carbon Capture and Sequestration (CCS), a technology that he himself refers to as only “close-to-proved”. “If CCS works, then we can combine continued large-scale fossil fuel use with reduced emmissions” he states frustratingly, pinning hope on a currently non-existent technology and a rapidly declining natural resource.

Oh well, on to population, where Commonwealth is much more useful. It’s a strange thing, the population boom. People tip-toe around it as if all efforts to control population involve Chinese-style one-child family planning. In fact, the things that would make the biggest difference to population growth are education, the emancipation of women, and an end to grinding poverty. Nobody is going to argue against those, surely. Well, actually, they might. Sachs singles out the Bush administration for some stinging criticism on its policies here. By drastically cutting its contributions to the UN Population Fund, and favouring projects that only teach abstinence, the US has taken a path that is not only counterproductive, but “directly against American interests in the reduction of conflict and terror, as well as the support of economic development and environmental sustainability more generally.” In fact, says Sachs, considering Iran has dramatically curbed its growth rates through the use of contraception, “the Bush administration’s attitudes toward family planning are in many ways more fundamentalist than Iran’s.”

I’m going to need to come back to population in a separate post, because there is a lot to talk about.

‘Prosperity for All’ is the title of the book’s section on poverty, and here again, my defences go up a little – many of the world’s problems are caused by economic growth, rather than solved by economic growth. Sachs himself has a lot to answer for in railroading through hasty policies in the past. But maybe Sachs has mellowed. He’s willing to admit that “if core infrastructure is left to the private market, there will tend to be under-provision, monopoly prices, and exclusion of the poor”, something you’ll never hear from the IMF, for whom the markets can do no wrong. Sachs is happy to recommend localized solutions too, through the Millennium Villages project, which takes on communities in 5-year plans, providing infrastructure, health, education, and improved agriculture, for no more than $110 per person per year. Scaled up worldwide, this programme would cost around 0.7% of the rich world’s income, which is what we have already promised in aid.

Which brings me to the conclusion, that “the main problem… is not the absence of reasonable and low-cost solutions, but the difficulty of implementing global cooperation to put those solutions in place.” Here again the US gets a kicking, for being “ready to launch a war in Iraq but not ready to honor even the most basic commitments to the world’s poorest and dying people,” for over-investing in the military, for giving more in aid to Israel than to the whole of Africa, for the fact that you could eliminate malaria in sub-Saharan Africa with two days Pentagon spending.

Instead, what we need is increased cooperation, more diplomacy, specific funding bodies, and money for R+D, and as the world’s leading economy, the US needs to lead on those things. Because whatever the differences in opinion on exactly how, we can afford to solve our biggest problems. And if you’re interested in those prices, here are a few of them:

  • Stopping runaway population growth in the developing world – “less than one tenth of 1% of the annual income of the rich countries.”
  • The end of poverty – “less than 1% of the income of the rich world to finance the crucial investments in the poorest countries.”
  • Climate change – “well under 1% of annual world income.”
  • The Millenium Goals – 0.7%, which is what we already promised. (the ‘rich world’ income quoted is roughly £35 trillion, and current aid is around $100 billion a year. 0.7% would be over double that, at $145 billion)

In total, 2.4% of the rich world’s income, to solve all it’s major problems. In other words, perfectly possible. Except that we’re not listening. If you don’t believe it’s possible, you’ll never try, and that kind of pessimism serves the rich world very well.

7 comments

  1. The problem preventing an end to poverty is, as you say, not the absence of solutions, but the inability to agree on what the best solution is. For sixty years the “rich” countries and the large international organizations have poured trillions of dollars of aid into Africa alone with no discernible benefit. The elites who adminster aid have been of one mind–to adminster their centralized and theoretical programs from the top down. This is because as professional government “planners” they do not recognize that all economic progress comes from the bottom up. Jeffrey Sachs has muddied the waters , being half right and half wrong: He has wisely called for empowering the masses at the bottom of these Third World countries to allow them to participate in their economies, own and transfer property, save and invest, without the oppressive bureacratic controls and restrictions that presently hamper their actions. Sachs wrote, “When the end of poverty arrives, as it can and should in our own generation, it will be citizens in a million communities in rich and poor countries alike, rather than a handful of political leaders who will have turned the tide.” This is right from Hernando deSoto’s prescription: No amount of central planning, government investment, or financial aid can ever match the unfettered energy and activity that can come from the efforts of the multitudes at the bottom. But they must be granted full and easy access to commercial activity and must be assured the safe and ready transferability of their assets. Those necessary legal and financial systems that allow Americans to freely participate in our economy are what is lacking in the LDC’s, and their absence is what holds the masses in those nations in poverty. It is not the lack of “money” or assets that retards these people– De Soto writes, “If the United States were to hike its foreign-aid budget to the level recommended by the United Nations–0.7% of national income–it would take the richest country on earth more than 150 years to transfer to the world’s poor resources equal to those they already possess.” Obviously, if they can’t work and multiply what they already have, how will giving them more money for 150 years help? The only help these gifts can accomplish is o sustain the marginal existence of whoever receives a bag of foodstuffs. Pulitzer Prizes have gone to the photos of pot-bellied children in Africa for decades–but my grandmother saw them and cried 60 years ago. The children that survived begot the starving pot-bellied kids we saw pictures of in the 1970’s, and those who survived then are now producing the suffering children who are depicted today. One of the typical characteristics of the over-educated elites who run the government programs is that they are so sure the programs they devise are correct, that they do not recognize failure, alter course, or admit defeat–instead they double the size of their ineffective programs. Theirs is a perversion of Churchill’s admonition to “never, ever, ever, ever, give up.” Aside from the burden imposed on logic by their inflated egos, the foreign aid elites are hindered by their dislike of free economic activity, capitalism, private property, and limited government. Of course, many of them would be without jobs if we reduced the size of government and central administrative and regulatory agencies. But it those government “hurdles” to business that are the problem! De Soto determined that for a Peruvian resident to start a small business, a hair dresser, say or a shoe repair shop, he or she would have to spend two years, making over a hundred trips into the capitol city, filling in hundreds of forms, and meeting dozens of licensing requirements just to open shop. And even then, he would have limited protection of his property, and could not readily transfer the business to others. Until these nations develop the mechanics to allow their people to engage in business any money spent will provide no lasting help. The Millennium Goal should never be enacted because it will throw good money after bad, postpone the institutional reforms needed to attack the underlying problem, end up largely in the bank accounts of corrupt political leaders, strengthen the power of established autocrats so that it is more difficult to depose them, and constitute a wasted drain on our taxpayers.

  2. Thanks for your detailed and insightful comments Bill. I’m actually reading a book by Erik Reinert (the man responsible for the Attila the Hun quote at the top of this post) at the moment, called ‘How Rich Countries got Rich, and why Poor Countries stay Poor’ which reaches similar conclusions. There’s a chapter called ‘why the millennium goals are a bad idea’ which is an interesting counter-point to Sach’s flag waving for them.
    The case, as you say, is that they fail yet again to recognise the key problems. All the goals address symptoms, rather than the underlying inequalities and insufficient institutional foundations for real development.
    De Soto’s Peruvian example rings true too. I’ve seen that kind of inefficient bureaucracy first-hand in Madagascar in the 90s, with the corruption that often accompanies it.

  3. RE: “pinning hope on a currently non-existent technology and a rapidly declining natural resource.”

    The problem is that fossil resources in total are not rapidly declining. There are about 18,000 gigatons of CO2 equivalent of conventional oil, natural gas, and coal (not counting methane hydrates) in the surface of the earth, of which we have burnt about 1,100 gigatons since the beginning of the industrial revolution, raising atmospheric CO2 from 280 ppm to 384 ppm.

    Of course, most of it is coal, but above $50/b oil, we can make any liquid fuel out of coal.

    So there is 70% fossil fuels in the primary energy balance now, and the about the same in 2030 in most projection. There will be significant fossil primary energy in the balance for centuries. CCS is not just one alternative, it is a necessity. But its costs and difficulties require bringing in conservation behavior, efficiency in the production of energy services, and alternative primary energies as well.

  4. Yes, there is a huge amount of coal left and a number of countries, including China and the US, are investing in coal-to-oil plants. Unfortunately this is a hugely polluting fuel, as there are considerable emissions in producing it as well as burning it at the point of use.
    As for CCS, it’s interesting that of the 30 coal-to-oil plants being hastily built at the moment, only one (in Australia) is bothering to trial CCS. Using coal is a solution that’s a snap reaction to rising oil prices, with little regard for the environmental consequences.

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