Jeffrey Sachs on the high price of ignoring poverty

Euronews recently published an interview that they conducted with economist Jeffrey Sachs. Dr. Sachs is a world-renowned economist, having spent twenty-two years as a Harvard professor. He is also the author of the book The End of Poverty and is one of the chief proponents of greater rich-world involvement in actively ending poverty in our world.

The Millenium Development Goals

The Millennium Development Goals (MDGs) are a set of eight world development targets. They were created in the year 2000, and are intended to be met by 2015. Progress on most of them has been extremely slow because the rich world governments have not delivered on their promises for funding. In The End of Poverty, Sachs says that rich world funding would need to be about 0.7% of GDP in order to end extreme poverty in our world completely in less than two decades.

In this interview, Sachs was asked about the costs of achieving the MDGs. In response he said that the three health goals would cost about $40 billion per year. This can be compared to the GDP of the rich world which is about $40 trillion per year. One thousandth of our income would be sufficient to meet the MGD health targets of:

1. Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate.
2. Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio.
3. Have halted by 2015 and begun to reverse the spread of HIV/AIDS.¹

These are the areas in which humanitarian efforts have been substantial. It is possible to meet these goals with only about 0.1% of rich world income. We are not on track to meet these goals, so an additional push needs to be made by the citizens of the rich world. We can easily afford to do this, and we should push our governments to commit to action.

You may have noticed the discrepancy between the figure cited in Sachs’ book and in this interview. There are a number of reasons for the difference. Firstly, we aren’t even talking about the same things. In the interview, Sachs is talking about meeting only three of the eight MGDs that were agreed upon by the countries of the UN. These three goals are very important, but they are not the entire picture. Addressing poverty means consideration of a number of local factors as well as cultural and national issues.

The End of Poverty was published in 2005. The world has been developing and changing for five years. Even if Sachs had been extremely careful about the facts cited in his book, the world has changed slightly since then.

AIDS has reached steady state

Some progress has been made on these three health goals since Sachs wrote the End of Poverty. In the last few years we have reached an approximate steady-state with regards to AIDS, with about 1% of the world adult population infected. Hans Rosling, in his excellent talk about AIDS at the TED conference, elaborates on these issues.

A detail that Rosling points out is that the more wealthy countries in Africa such as Botswana ended up with about 26% of their people infected in the year 2000. I have reproduced the graph for HIV in Botswana that Rosling demonstrates in his talk. In interesting fact is that since Botswana is rather wealthy, it can afford to treat people. This causes the number of people living with HIV to go down slowly, since people are living longer. In poorer countries the number of people living with HIV can go down much more quickly because they are dying rather than being treated.

Please note that this is very different than HIV infection rate. The infection rate is how many people are being infected with HIV in a given amount of time. In Botswana for instance they hit a peak in the number of people living with HIV, and now they are on their way down. This means that their infection rate dropped dramatically to below the death rate for people living with HIV.

Education, sexual education, and access to condoms are all important factors in curbing the transmission of HIV. What is very interesting is that it seems that wealth is not a strong contributing factor to the reduction in HIV transmission. In his talk, Rosling shows that there is actually a correlation between wealth and increased incidence of HIV infection. This runs counter to most expectations, and is an interesting datum to consider.

Rosling also points out that it is inaccurate to say that AIDS is a large problem in Africa, because some African countries have HIV rates as low as the United States. Africa all too often is lumped together and treated in common discourse as one place.

Financial crisis wasn’t the main problem

Sachs says that we weren’t on track to meet the MDGs even before the financial crisis hit. He argues that we could have constructively stimulated our economies and helped with poverty at the same time.

We could have paid our people to help construct infrastructure and deliver aid to impoverished places. This would benefit both parties substantially. We would employ our people, and poor countries would get critical infrastructure and development aid that they desperately need.

Sachs argues that we should be investing rather than going back towards consumption booms and bubbles like we had before. We can invest in our long-term prosperity as a planet by investing in renewable energy at home and in long-term development in Africa.

Military spending 25 times aid spending

Later in the interview, Sachs was asked how MDG expenditures compare with military expenditures in the United States. He said that military is currently 5% of GDP while aid is currently about 0.2% of GDP. This means that the U.S. spends about 25 times as much on war as on aid.

Peace through prosperity

Sachs argues that it would be in the long term best interests of the rich nations to help alleviate poverty in the world. Why?

1. Most of us care. Humanitarian efforts make us happier, and the world a happier, more prosperous place.
2. Leaving people to suffer can create long-term resentment. This is especially the fact when it is clear that even a tiny portion of rich-world wealth could raise a billion people out of extreme poverty.
3. Long term resentment can turn into violence, terrorism, and global instability. In The End of Poverty, Sachs looks in detail at what he calls the “deeper causes of global instability”. Wars are around a hundred times as expensive as humanitarian missions. It is important to note that these efforts have a common goal in mind: a prosperous, stable and peaceful world.
4. Leaving people to suffer with pandemic disease is very dangerous. Migration of peoples and the interconnected world today means that diseases can travel very quickly. Even though the rich world for instance has done away with polio, rubella, measles and some other diseases, the fact that they exist in the poorer areas of the world means that there is a chance that they can be transmitted back to the rich world. It is in our best interests to pursue global health measures that can directly address these concerns. We can create a healthier future for all of us by doing so.
5. Once people rise out of extreme poverty, they have a chance to participate in the global economy. They become trading partners. More humans will be producing value for the global market, increasing its size and diversity. Once countries are involved in the global economy, the tendency is for them to achieve economic growth that is higher than that of the rich countries per capita. This is known as economic convergence. Our whole world will be wealthier as a result of more people trading value with each other.

Our short-sightedness may strangle us

Sachs says that we in the rich world are misusing our wealth. We have been on a consumption binge for a long time, often paid for through pathological tax cuts and the creation of huge deficits. As personal and national debt racks up and our long term investments degrade, we must question the wisdom of our actions.

1. Wikipedia: Millennium Development Goals. Accessed October 28th, 2010. [↩]