Arrested development

The End of Poverty: economic possibilities for our time

Jeffrey Sachs; with a foreword by Bono <em

Jeffrey Sachs has the mind of an economist but the temperament of a missionary. His thought and striving are in the service of his passion to make humans materially better off. Like most economists, he is an unconscious Marxist. He believes in the materialist interpretation of history, with institutions and culture as products of material conditions. Thus he writes: "Africa's government is poor because Africa is poor."

This book (with a foreword by his fellow evangelist Bono, the rock star) is about how to end poverty. According to World Bank estimates, there are 1.1 billion extremely poor people out of a world population of 6.3 billion, extremely poor being defined as living on less than US$1 a day. They are scattered around the developing world, but are concentrated in sub-Saharan Africa.

Sachs claims that, with the correct development policies, this mass of destitution can be entirely eliminated in the next 20 years. Some of these policies are already in place. Although most extremely poor people live in Asia, rapid economic growth since the 1980s has been swiftly shrinking extreme poverty in China and India. Sub-Saharan Africa has fewer people, but many more of them are extremely poor - 50 per cent, as against 17 per cent in China and 35 per cent in India. Moreover, the proportion has been rising, not falling, as many African countries have experienced economic decline since 1980, though they have been doing better in the past couple of years.

Sachs concentrates on the steps that need to be taken to get the 1.1 billion on to the first rung of the development ladder. He proposes a "clinical economics", based on "a thorough differential diagnosis, followed by an appropriate treatment regimen". "Differential analysis" must take into account the topography and climate of the particular country or region to be treated.

The treatment consists of setting and implementing development goals and targets. Best-known are the UN's Millennium Development Goals of 2000, which commit the 191 United Nations member states to halving extreme poverty worldwide by 2015. As special adviser to the UN secretary general, Kofi Annan, Sachs himself headed ten expert task forces that came up with a millennium development goals-based Poverty Reduction Strategy. The implementation plan is based on decentralisation, training, information technologies, measurable benchmarks, audits, monitoring and evaluation. Implementation, Sachs says, needs to be harmonised and supervised by the UN.

All this will cost money, a lot of it. Net foreign aid will need to increase from $65bn in 2002 to $195bn a year by 2015 to bridge the millennium development goals financing gap. This level of aid would constitute roughly 20 to 30 per cent of GDP of the poorest countries, though it would still be within the 0.7 per cent of national income pledged by the rich countries, but never delivered, for development aid. Sachs fails to consider whether the poor countries can absorb so much extra foreign aid so quickly without succumbing to the "Dutch disease" - so named when export earnings from newly discovered gas fields drove up the Dutch exchange rate in the 1970s, making the Netherlands' other exports more expensive.

Sachs's enthusiasm and hopefulness are infectious, as is his willingness to learn from experience. The liveliest sections of the book deal with his own extensive labours as the world's chief economic doctor. By contrast, the last third of the book is written in the acronym-strewn prose inseparable from technocratic schemes of world improvement.

However, the reader should be aware that he is reading a piece of advocacy with scientific underpinnings, rather than a piece of science with policy conclusions. I remember chairing a debate between Sachs and John Gray in 1995, when Sachs, fresh from his efforts to shock the collapsed communist economies of Poland and Russia into capitalist life (he hates the term "shock therapy", but it will always be associated with him), asserted that all that was needed was an imported tool kit of western institutions; whereas Gray argued that a country's economic institutions are deeply embedded in its culture, and can be changed only slowly. Sachs won the debate by sheer chutzpah, but now I think Gray was nearer the mark.

Sachs reinstates geography as a fundamental determinant of economic performance - an idea familiar to Adam Smith, but left out of Sachs's own training. Land-locked populations living in disease-prone tropical environments, such as most of those in sub-Saharan Africa, are the most likely to stay poor. Yet even their problems are perfectly soluble. "Diseases," he writes briskly, "can be controlled, crop yields can be sharply increased, and basic infrastructure such as paved roads and electricity can be extended to the villages."

This is a useful corrective to the racist view that Africans are incapable of governing themselves. It has its own danger, however, which is to underplay the role of bad government in causing Africa's persistent poverty. Sachs admits: "By the start of the 21st-century Africa was poorer than during the late 1960s . . . with disease, population growth and environmental degradation spiralling out of control." This retrogression has occurred since the colonial powers left. It cannot be ascribed to "geographic and ecological factors". Africa's destitution has one overwhelming cause: endemic political violence. It is simply no use pouring in development aid if basic conditions of peace cannot be secured.

Sachs displays the typical, and annoying, American prejudice against European colonialism. He suggests that the former colonies would have been better off materially had they not been subjected to colonial rule. For example, he repeats the hoary myth that it was Britain's "aggressive industrial policy" that destroyed India's textile industry. In fact, it was killed off by the industrial revolution, not by the British Raj. Attacking Niall Ferguson's view that the British empire spread technology and knowledge, he writes: "Without empire the same technologies could have diffused in many other ways . . ." Yes, of course, as a matter of pure hypothesis.

The author ignores Ferguson's main point, which is that, by "borrowing" the credibility of western governments, the colonies were able to get access to west-ern capital on terms and conditions they would not otherwise have had. The same imbalance shows through in his discussion of aid. He is surely right to argue that the recipients of aid must have a sense of "owning" aid projects if they are to do good. But he neglects the equally obvious point that donors are much more likely to donate if they themselves control the projects. How to reconcile these two requirements is the unsolved problem of development policy.

So while there is much in this book to applaud, Sachs's overemphasis on geography and his bias against colonialism are, in fact, diversions from the urgent quest for a successful system of rule in Africa - one that goes beyond the stereotypes of empire and national sovereignty. Perhaps that is what all those multilateral targets, agencies and acronyms point to. But they point so feebly that one cannot be sure the lesson is being learned.

Lord Skidelsky is professor of political economy at Warwick University