Rich nations can help end absolute poverty

Economics: Many people in this part of the world, I suspect, are sceptical about the Make Poverty History campaign, despite the high-profile involvement in it of their favourite rock stars.

There are several reasons for such scepticism. One is the widespread view that it is the poor themselves and not any external agency that can end poverty. Another is the view that poverty is an inevitable part of the human condition; that the poor will always be with us.

Critical to all of this is the type of poverty we are talking about. For example, if we're talking about relative poverty, the kind of poverty that tends to be the main focus of concern in Ireland, well then it's fair to say that it will always be with us: there will always be some proportion of the population whose income falls some significant distance below the median or average.

But the target of the Make Poverty History campaign is not relative poverty, it is absolute poverty, the kind of poverty under which people's living conditions are so awful as to be constantly life-threatening, the kind of poverty that probably last afflicted a significant proportion of the Irish population in the middle of the 19th century.

How many people in the world today endure living conditions of this type? According to Jeffrey Sachs, the intellectual dynamo of the campaign and author of a recently-published book, The End of Poverty: how we can make it happen in our lifetime, the answer is around one billion, roughly one sixth of the world's population. These people "enjoy" an income equivalent to less than a dollar a day, and exist at the very margins of survival because of dire standards of nutrition, sanitation and health care.

Central to the Make Poverty History campaign are two propositions about the plight of these people that address the sources of scepticism identified above.

First, it is not inevitable that they remain poor. The economic history of the human race is essentially the story of how the rest of humanity broke out of the extreme poverty currently being experienced by the one billion poor.

If it can happen for the rest of humanity, it can happen for them too. The key difference is that the poorest one billion, the majority of whom live in south and east Asia and sub-Saharan Africa, have to surmount bigger hurdles because of factors like climate and geography.

Second, the majority of today's one billion extremely poor people are unlikely to improve their condition without external help because they simply don't have the resources to do so. For the most part, they are mired in a "poverty trap" - their incomes are so low that they cannot fund the investment required to even maintain their current stock of human, physical and environmental capital.

The result is that, left to their own devices, their stock of capital would contract, productivity would decline and incomes, already below subsistence levels, would fall further. In other words, the one billion poor are not even able to get a first foothold on the ladder of economic development and so cannot begin to climb out of their poverty.

What actions are required to get them on to that ladder? At a minimum what is needed is a set of measures that will fulfil the most basic of educational, nutritional and infrastructural needs, including primary education for all children, safe drinking water and sanitation, and a critical minimum level of transport infrastructure.

The requirements are spelled out in detail in the Millennium Declaration and the Millennium Development Goals, adopted by the 191 member governments of the United Nations.

Jeffrey Sachs estimates that meeting the Millennium Development Goals would require flows of official development assistance (ODA) from the rich countries to the poor of $135-$195 billion (€112-€162 billion) per annum between 2005 and 2015. This sounds like a lot of money, but it amounts to only 0.44-0.54 per cent of rich world GDP, a good deal less than the 0.7 per cent that the donor countries have already promised.

So what's the problem? Well, the the donor countries are currently giving only 0.12 per cent and the proportion doesn't look like getting to 0.44 per cent (never mind 0.7 per cent) any time soon.

Of course, this is only the proximate problem. The much more fundamental problem is one of attitude. Among the donor community there seems to be a deep-seated scepticism about the efficacy of development aid.

Some of that scepticism has to do with the kind of attitudes touched on above. A good deal of it, I suspect, has to do with prejudice. This is especially the case in relation to Africa. Africans are perceived to be lazy, stupid and irrational, recklessly promiscuous and incapable of living peaceably with each other.

It is enough to put perceptions like these in their proper place to point out that an influential segment of British public opinion had almost exactly the same view of Irish people 150 years ago.

A much more politically-correct objection is that African governments are generally corrupt. This leads to the conclusion that development aid is siphoned off by crooked politicians, and is associated with the view that the elimination of corruption rather than development assistance is the key precondition for economic growth to take place.

One of the most thought-provoking chapters in Jeffrey Sachs' book is the one in which he addresses this issue. He acknowledges that the incidence of corruption is high in Africa, though no higher on average than in other parts of the world with comparable income levels.

However, he goes on to point out that the direction of causation runs as much from income levels to standards of governance as it does from governance to income levels.

According to Sachs: "Governance and higher incomes go hand in hand, not only because good governance raises incomes but also, and perhaps even more importantly, because higher income levels lead to improved governance."

One of the reasons for this is that more literate and affluent societies are better able to keep governments in check.

Another important point he makes is that even when allowance is made for the negative effect that high levels of corruption have on economic growth, countries in sub-Saharan Africa tend to significantly underperform comparable countries elsewhere.

Moreover, many African countries that have achieved and sustained high levels of governance continue to experience extreme poverty. This, Sachs argues, is mainly due to Africa's adverse climate and geography and its woefully deficient infrastructure, inhibiting factors that require development assistance to overcome.

Jim O'Leary is currently lecturing in economics at NUI-Maynooth. He can be contacted at jim.oleary@nuim.ie