The End of Poverty?
A critical review to Jeffrey Sachs concept of how to end the poverty
Author: Tomas Freitas
Introduction
Generally speaking by mainstream economist has claimed that the causes of the poverty are corruption and less of accountability in the government. Jeffrey Sachs is one of them, which taking position in this view, however, he does not only blamed government as the key factor for responsible of the poverty, but he pointed the finger at several factors that has surrounding and integrated with the poverty which he believed become traps to the poverty, and those kind of factors are; ‘Physical geographic, fiscal trap, governances failures, demographic trap, cultural barriers, geopolitics and lack of innovations,’ (Sachs, 2005, 57-61). Sachs has argued that with one action can solve all the problems, and he called that action is “A big Push”, which he believes that with the help of Official Development Aid (ODA) in provide grant for three to four years in advance; it will help the poor farmers to be release from the trap.
This essay wills analysis the idea of “a big push” in comparable to the film of the end of poverty? Think Again, this paper also will try to capture the fundamental reason that has engaged the poverty.
Poverty Trap
Sachs has argued that people stuck in the poverty because their income is under subsistence, which is left no money for saving. He complains about population growth, climate change, environmental degradation, poor governance and conflict, which he thinks are leading to further decline (Sachs, 2005). However, Sachs has proposal for the solution, which he proposed five crucial point of intervention such as; Food Production, which means provide fertilizer, seeds, irrigation to the agriculture, Free meal and School for the children, access to Health Care such as medical supplies, upgrading hospitals and provide mosquito nets to the family, investment in Infrastructure such as; build the roads, power, water and sanitation, telephone and internet, and Business development (Sachs, 2005, 256). Sachs believed that to pass the threshold the poorest need “a big push”.
Let’s discuss the idea of “a big push” which is he provided an example in the agriculture sector for one of Millennium villages ; if a farmer wants to leave in subsistence agriculture the farmer needs $300 per person per year, but the farmer income is only $200 per year, no saving because it’s under subsistence, and if the farmer wants to improve their inputs by buying seeds and fertilizer he or she can invested in $1 dollar and in the return they will get $2.50 back as output (Sachs, 2010). On this scenario Sachs believed that if the farmer get help with three or four years investment in advance from the ODA, he certainly sure that the farmer will be able to buy seeds and fertilizer for the next following years, without any more help.
Mechanism of Distribution
The illustration above supposedly easy to say but the reality might talk differently. Let’s assumed before the money get into the farmer hands, we have to discuss the mechanism of distribution, who will decide which farmer will get how much? Let’s say if donors from the north will provide $30.000 US dollar to one hundred farmers in one of villages in Kenya, if the money divided equally, yes, each farmer will get $300, the question is who will decide? For instance, if the donors transfer the money through local microfinance NGOs, normally 10% of that amount of money will stay with the NGO as ‘institutional fee’ to pay the salary of staff for doing the jobs of re-distribution the money. The 10% is about $3000 US Dollar, which is spouse to give to ten farmers. There are few possibilities could happen with that 10%, the money could go to the pocket of the director, either could be also use for paying the salary of ten members of local staff which each member might received $300 per month.
High Fees
The amount of money above is only 10% of $30 000 US Dollar, if donors provide $3 million US dollar as a grant for the project which will benefits 10 000 farmers, who could possibly manage the money? With that big amount of money, probably the local staff will not working along by themselves, the project might require international advisors with the salary around $85.000-$120.000 per/annum, that salary only for one advisor, for example if the requirement says 10 advisors for ten NGOs which is running the same project, 10 x $120.000, it will be $1.2 million just for the international advisors and that is not including wages for 100 local staff from ten NGOs. Let’s assumed total of the running cost for the projects is about $1.3 million, the initial plan was $3 million US dollar grant for 10 000 farmers, but because $1.3 million has been used, it will affect 4333 farmer’s life’s which will receive nothing. High salaries for international advisors are not something new in Aid industry, for example in Sub-Saharan African in the late 1980s the official development aid has spent almost 35% just for the salaries for international advisors, (Cohen, 1992), there is another similar argument that has been stated by John Christensen in the film of The End of Poverty? Think Again, which he has emphasises that the fees for paying international consultancy, is very high, (Diaz, 2008). This type of example is out of the picture when Sachs calculated how to ending the poverty in the Millennium Villages program.
Local Structure
After $1.3 million has been used for the running cost, it does not guarantee that the rest of money $1.7 million will distributed equally to the farmers. The reason why, because nowadays, the members of the NGOs preferred engaged directly to community or farmers, which is good from donors perspective, however, without involvement of local structure such as chief of villages or local kings, the possibility of corruption could exist in between the members of NGOs and the farmers. Without the knowledge of chief villages or local kings, the members of NGOs could possibly priorities their family and close friend as the first priority for receive the funding. This typical attitude is reflected free market orientation which avoiding the engagement of local structures, (Stilwell, 2002).
The involvement of local structure are very crucial because places like in Africa have their own traditional class of structure which they have their own local king or chief of villages for taking care their rule of lives, in this case the kingship or chief of villages play a very important rule in the African society, which can minimise unequal distribution. According to one of the African sociologist, that African society in pre-colonial stage already exist chief of villages which ruling their community with the advice by their own council of elders, (Sangmpam, 1995).
Without the involvement of local structure, what does could happen? The first scenario; without the involvement of local structure, the chance of miss-management are high. For example, if some of the farmers do not want to buy fertilizer, but they preferred to spend the money for something else, and they could do it behind you. The second scenario; if the NGOs might decide to buy the fertilizer and re-distribute to the farmers instead than given money. Well, the same thing could happen, some of the farmers might just use a half of the fertilizer and sell the rest, they could also sell the whole fertilizer so they can get money to buy something else. Those two scenarios above are tricky but that normally exist in aid industry in developing countries. According to one of the empirical research that has been done in Kenya, stated that re-selling the fertilizer has satisfy the farmer for doing so, which also possibly to minimise the farmers for using it, (Duflo, et all, 2009).
The examples above is not only highlighted the problem of mechanism distribution but also tell us that social and cultural in the villages are very important to understand. Sachs approach of “a big push of Aid” it seems does not really touch the reality of complexity of social life in the African society, which has been stagnated generation by generation. As stated by professor Michael Watts, in one of the interviews on the film The End of Poverty? Think Again, he has declared that, the fundamental reasons of poverty in the South, start in the early 16 centuries, the capitalism system has been benefits the North from free labour by slavery and monopoly power of strategic natural resources from the South, which have left countries in the South, still fighting against; Hunger, Malaria, Tuberculosis, and AIDS diseases from centuries, (Diaz, 2008).
The fundamental reasons above, according to Author and Historian, Clifford Cobb, in one of the interview, can be minimise by stop paying debt from South to North, and if the North forgiving the debt, it would be automatically the government from the South will have some saving, therefore the South government could possibly eliminate or reduce the taxes to the poor people, and the South government also can invested more in Health, Education and Infrastructure, if the transnational companies from North release their monopoly of power to natural resources which belongs to people in the South, (Diaz, 2008).
Conclusion
Sachs ideas of ending the poverty with his prescription of “a big push” it’s hard to measure the result because the mechanism of distribution is complex and tricky. Ending the poverty in the context of aid industry, just will benefits the international advisors, which the bigger proportion for paying the salary and small proportion for peoples. Involving the local structure is not only for delivery aid and guarantee the distribution, but also pays respect to social and culture of the local community. People from South will survive together as long as, the North forgiving the debt, and hands off their natural resources which belongs to the South.
References
Cohen, M, J., 1992. ‘Foreign advisors and capacity building: the case of Kenya’, Public Administration and Development, Vol 12, Pp 493-510. Available from http://onlinelibrary.wiley.com.ezproxy2.library.usyd.edu.au/doi/10.1002/pad.4230120506/pdf
Diaz, P., 2008. ‘The End of Poverty? Think Again’, Cinema Libre Studio, Available from http://www.youtube.com/watch?v=pktOXJr1vOQ&feature=watch-now-button&wide=1
Duflo, E., Kremer, M., and Robinson, J.,2009. ‘Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence From Kenya’, National Bureau Of Economic Research. Working Paper No 15131, Available from http://www.nber.org.ezproxy2.library.usyd.edu.au/papers/w15131.pdf?new_window=1
Sachs, J., 2005. ‘The End of Poverty: How We Can Make It Happen In Our Lifetime’, Penguin Books Ltd, London.
Sachs, J., 2010. ‘Ending Poverty In Our Generation: Still Time if We Try’, Rockefeller Center, Available from http://www.youtube.com/watch?v=3k67RoMi73I
Sangmpam, S, N., 1995. “ Sociology of "Primitive Societies," Evolutionism, and Africa”, Sociological Forum, Vol, 10, No 4, Pp 609-632. Available from http://www.springerlink.com.ezproxy2.library.usyd.edu.au/content/m8k4335q285t640w/fulltext.pdf
Stilwell, F., 2002. ‘Political Economy: The Contest of Economic Ideas’, Oxford University Press, Singapore.
A critical review to Jeffrey Sachs concept of how to end the poverty
Author: Tomas Freitas
Introduction
Generally speaking by mainstream economist has claimed that the causes of the poverty are corruption and less of accountability in the government. Jeffrey Sachs is one of them, which taking position in this view, however, he does not only blamed government as the key factor for responsible of the poverty, but he pointed the finger at several factors that has surrounding and integrated with the poverty which he believed become traps to the poverty, and those kind of factors are; ‘Physical geographic, fiscal trap, governances failures, demographic trap, cultural barriers, geopolitics and lack of innovations,’ (Sachs, 2005, 57-61). Sachs has argued that with one action can solve all the problems, and he called that action is “A big Push”, which he believes that with the help of Official Development Aid (ODA) in provide grant for three to four years in advance; it will help the poor farmers to be release from the trap.
This essay wills analysis the idea of “a big push” in comparable to the film of the end of poverty? Think Again, this paper also will try to capture the fundamental reason that has engaged the poverty.
Poverty Trap
Sachs has argued that people stuck in the poverty because their income is under subsistence, which is left no money for saving. He complains about population growth, climate change, environmental degradation, poor governance and conflict, which he thinks are leading to further decline (Sachs, 2005). However, Sachs has proposal for the solution, which he proposed five crucial point of intervention such as; Food Production, which means provide fertilizer, seeds, irrigation to the agriculture, Free meal and School for the children, access to Health Care such as medical supplies, upgrading hospitals and provide mosquito nets to the family, investment in Infrastructure such as; build the roads, power, water and sanitation, telephone and internet, and Business development (Sachs, 2005, 256). Sachs believed that to pass the threshold the poorest need “a big push”.
Let’s discuss the idea of “a big push” which is he provided an example in the agriculture sector for one of Millennium villages ; if a farmer wants to leave in subsistence agriculture the farmer needs $300 per person per year, but the farmer income is only $200 per year, no saving because it’s under subsistence, and if the farmer wants to improve their inputs by buying seeds and fertilizer he or she can invested in $1 dollar and in the return they will get $2.50 back as output (Sachs, 2010). On this scenario Sachs believed that if the farmer get help with three or four years investment in advance from the ODA, he certainly sure that the farmer will be able to buy seeds and fertilizer for the next following years, without any more help.
Mechanism of Distribution
The illustration above supposedly easy to say but the reality might talk differently. Let’s assumed before the money get into the farmer hands, we have to discuss the mechanism of distribution, who will decide which farmer will get how much? Let’s say if donors from the north will provide $30.000 US dollar to one hundred farmers in one of villages in Kenya, if the money divided equally, yes, each farmer will get $300, the question is who will decide? For instance, if the donors transfer the money through local microfinance NGOs, normally 10% of that amount of money will stay with the NGO as ‘institutional fee’ to pay the salary of staff for doing the jobs of re-distribution the money. The 10% is about $3000 US Dollar, which is spouse to give to ten farmers. There are few possibilities could happen with that 10%, the money could go to the pocket of the director, either could be also use for paying the salary of ten members of local staff which each member might received $300 per month.
High Fees
The amount of money above is only 10% of $30 000 US Dollar, if donors provide $3 million US dollar as a grant for the project which will benefits 10 000 farmers, who could possibly manage the money? With that big amount of money, probably the local staff will not working along by themselves, the project might require international advisors with the salary around $85.000-$120.000 per/annum, that salary only for one advisor, for example if the requirement says 10 advisors for ten NGOs which is running the same project, 10 x $120.000, it will be $1.2 million just for the international advisors and that is not including wages for 100 local staff from ten NGOs. Let’s assumed total of the running cost for the projects is about $1.3 million, the initial plan was $3 million US dollar grant for 10 000 farmers, but because $1.3 million has been used, it will affect 4333 farmer’s life’s which will receive nothing. High salaries for international advisors are not something new in Aid industry, for example in Sub-Saharan African in the late 1980s the official development aid has spent almost 35% just for the salaries for international advisors, (Cohen, 1992), there is another similar argument that has been stated by John Christensen in the film of The End of Poverty? Think Again, which he has emphasises that the fees for paying international consultancy, is very high, (Diaz, 2008). This type of example is out of the picture when Sachs calculated how to ending the poverty in the Millennium Villages program.
Local Structure
After $1.3 million has been used for the running cost, it does not guarantee that the rest of money $1.7 million will distributed equally to the farmers. The reason why, because nowadays, the members of the NGOs preferred engaged directly to community or farmers, which is good from donors perspective, however, without involvement of local structure such as chief of villages or local kings, the possibility of corruption could exist in between the members of NGOs and the farmers. Without the knowledge of chief villages or local kings, the members of NGOs could possibly priorities their family and close friend as the first priority for receive the funding. This typical attitude is reflected free market orientation which avoiding the engagement of local structures, (Stilwell, 2002).
The involvement of local structure are very crucial because places like in Africa have their own traditional class of structure which they have their own local king or chief of villages for taking care their rule of lives, in this case the kingship or chief of villages play a very important rule in the African society, which can minimise unequal distribution. According to one of the African sociologist, that African society in pre-colonial stage already exist chief of villages which ruling their community with the advice by their own council of elders, (Sangmpam, 1995).
Without the involvement of local structure, what does could happen? The first scenario; without the involvement of local structure, the chance of miss-management are high. For example, if some of the farmers do not want to buy fertilizer, but they preferred to spend the money for something else, and they could do it behind you. The second scenario; if the NGOs might decide to buy the fertilizer and re-distribute to the farmers instead than given money. Well, the same thing could happen, some of the farmers might just use a half of the fertilizer and sell the rest, they could also sell the whole fertilizer so they can get money to buy something else. Those two scenarios above are tricky but that normally exist in aid industry in developing countries. According to one of the empirical research that has been done in Kenya, stated that re-selling the fertilizer has satisfy the farmer for doing so, which also possibly to minimise the farmers for using it, (Duflo, et all, 2009).
The examples above is not only highlighted the problem of mechanism distribution but also tell us that social and cultural in the villages are very important to understand. Sachs approach of “a big push of Aid” it seems does not really touch the reality of complexity of social life in the African society, which has been stagnated generation by generation. As stated by professor Michael Watts, in one of the interviews on the film The End of Poverty? Think Again, he has declared that, the fundamental reasons of poverty in the South, start in the early 16 centuries, the capitalism system has been benefits the North from free labour by slavery and monopoly power of strategic natural resources from the South, which have left countries in the South, still fighting against; Hunger, Malaria, Tuberculosis, and AIDS diseases from centuries, (Diaz, 2008).
The fundamental reasons above, according to Author and Historian, Clifford Cobb, in one of the interview, can be minimise by stop paying debt from South to North, and if the North forgiving the debt, it would be automatically the government from the South will have some saving, therefore the South government could possibly eliminate or reduce the taxes to the poor people, and the South government also can invested more in Health, Education and Infrastructure, if the transnational companies from North release their monopoly of power to natural resources which belongs to people in the South, (Diaz, 2008).
Conclusion
Sachs ideas of ending the poverty with his prescription of “a big push” it’s hard to measure the result because the mechanism of distribution is complex and tricky. Ending the poverty in the context of aid industry, just will benefits the international advisors, which the bigger proportion for paying the salary and small proportion for peoples. Involving the local structure is not only for delivery aid and guarantee the distribution, but also pays respect to social and culture of the local community. People from South will survive together as long as, the North forgiving the debt, and hands off their natural resources which belongs to the South.
References
Cohen, M, J., 1992. ‘Foreign advisors and capacity building: the case of Kenya’, Public Administration and Development, Vol 12, Pp 493-510. Available from http://onlinelibrary.wiley.com.ezproxy2.library.usyd.edu.au/doi/10.1002/pad.4230120506/pdf
Diaz, P., 2008. ‘The End of Poverty? Think Again’, Cinema Libre Studio, Available from http://www.youtube.com/watch?v=pktOXJr1vOQ&feature=watch-now-button&wide=1
Duflo, E., Kremer, M., and Robinson, J.,2009. ‘Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence From Kenya’, National Bureau Of Economic Research. Working Paper No 15131, Available from http://www.nber.org.ezproxy2.library.usyd.edu.au/papers/w15131.pdf?new_window=1
Sachs, J., 2005. ‘The End of Poverty: How We Can Make It Happen In Our Lifetime’, Penguin Books Ltd, London.
Sachs, J., 2010. ‘Ending Poverty In Our Generation: Still Time if We Try’, Rockefeller Center, Available from http://www.youtube.com/watch?v=3k67RoMi73I
Sangmpam, S, N., 1995. “ Sociology of "Primitive Societies," Evolutionism, and Africa”, Sociological Forum, Vol, 10, No 4, Pp 609-632. Available from http://www.springerlink.com.ezproxy2.library.usyd.edu.au/content/m8k4335q285t640w/fulltext.pdf
Stilwell, F., 2002. ‘Political Economy: The Contest of Economic Ideas’, Oxford University Press, Singapore.