The End of Poverty

Jeffrey Sachs
Director, UN Millennium Project
 Portrait of 4 Countries
• Malawi
– The perfect storm
• Bangladesh
– On the ladder of improvement
• India
– Center of an export services
revolution
• China
– The rise of affluence

Malawi
http://www.terradaily.com/images/epidemics-aids-malawi-malnourished-afp-bg.jpg
 Malawi
A perfect storm
• Villages devastated by AIDS
– Only children and grandmothers left
• Poor soils, poor yields
– No one to work the fields
• Little food to eat
• Malaria, but no medicines
– No nearby clinics
• In cities, are clinics
– No AIDS medicine
– Patients come to die.
• $1 a day could save them

Grandmother with 15 orphaned

children
 Bangladesh
On the ladder to development
• Per capita income doubled since
independence (1971)
– Infant mortality 1/3
• Sweat shops in Dhaka
– Women walk 2 hours to work
– First step out of extreme poverty
• Microcredit more available
• Health care more available
– And birth control
• Women now more empowered
– Want education
– Want fewer children
Rice milling
http://courses.dce.harvard.edu/~phils4/3406.JPEG
 India
Center of an Export Services Revolution
• Several steps up the
ladder of development
• Information Technology
companies
– College grads earn $250-
500/month
– Service U.S. companies
– Buy U.S. computers
• Northern India still
IT workers in Bangalore, India
largely rural and poor
http://newsimg.bbc.co.uk/media/images/41089000/jpg/_41089458_indiaintel203.jpg
 China
The rise of affluence
• Beijing: one of the world’s
economic capitals.
– Average Annual income
> $4,000 per capita
• Urban professionals
– Affluence, travel, trendy
• Foreign investment
– And technology
• Competitive enterprises
Beijing – Exported $400 billion in 2004

http://i1.trekearth.com/photos/32961/beijing1.jpg
 Ascending the ladder of
economic development
• Rural Population
– Malawi: 84%
– Bangladesh 76%
– India 72%
– China 61%
– USA 20%
• Employment in Services
– Malawi 25%
Rural India
– USA 75%

http://filer.case.edu/org/uisa/images/index/comingtomeeting.jpg
 Ascending the ladder of
economic development
• 5 billion people are on the ladder of
economic progress
– Poor, low, middle, & high income
– Rising incomes, education, sanitation,
health, possessions
• 1 billion people are not on the ladder
of economic progress
– Extreme poor
– Unable to escape from extreme material
deprivation
– Trapped by disease, physical isolation,
climate stress, environmental
degradation, extreme poverty
Mexico: on the ladder
http://www.loscabosguide.com/tequila/cabowabo.htm
 Our generation’s challenge
• The end of poverty
– Help the poorest escape
extreme poverty
• To get a foothold on the ladder
of development
– Ensure that the moderately
poor have a chance to climb
the ladder
• Give development assistance
• Eliminate trade barriers
World Bank water project, S. Africa
http://web.worldbank.org/WBSITE/EXTERNAL/OPPORTUNITIES/GRANTS/DEVMAR
KETPLACE/0,,contentMDK:20200526~pagePK:180686~piPK:180184~theSitePK:205098,
00.html
Effect of the Industrial Revolution
 Effect of Industrialization
• Urbanization
– Due to improved agriculture
• Food prices fall
• Employment in cities
• Social Mobility
– Hierarchies unravel
• Market based economy
– Gender roles change
• Employment rather than child-
rearing for women
• Division of Labor
Urban worker, Brazil – Specialization increases
– Efficiency goes up
 How does prosperity spread?
• Transmission of
technologies
• Science-based methods to
organize production
• Historical examples:
– Steam engine
– Factory machinery
– Railroads
– Global steamers
• Suez, Panama canals
– Electrification
– Internal Combustion engine
– Nitrogen-based fertilizer
http://indiana-transit-museum.visit-indianapolis.com/
Why some countries fail to thrive
• Poverty trap
– Poor rural villages lack
• Trucks
• Paved roads
• Power generators
• Irrigation channels
– Human capital is low
• Hunger
• Disease
• Illiteracy
– Natural capital is depleted
• Trees cut down
Rural village, Sierra Leone • Soil exhausted
– Need more capital, but unable
to save for future
http://imageevent.com/dyet/october;jsessionid=vzm4aori21.lion_s
 Why some countries fail to thrive
• Physical geography
– Landlocked
• high mountains
• No coast, navigable rivers, or
harbors
– Ex: Bolivia, Ethiopia, Tibet
– Arid
– Tropical diseases
• Malaria
– Problems can be overcome
Sahara desert • But it costs more

http://www.curious-software.com/images/desert.jpg
Why Some countries fail to thrive
• Fiscal Trap
– Government cannot pay
for infrastructure
• Population poor
– taxation not feasible
• Government corrupt, or
incapacitated
– cannot collect tax
• Debt load too high
– Revenue goes to interest
– Debt cancellation may
http://www.worldvision.com.au/seekjustice/readmore.asp?sectionid=7&articleid=117
be only solution
Why Some countries fail to thrive
• Governance Failures
– Governments should:
• Promote infrastructure
• Create an environment
conducive to investment
– Crime free
– Bribery free
– Protect property
• Defend borders
– Poor governance results in
• State Failure
– War, revolution, anarchy
– Economic failure

Singapore
http://www.asiatravel.com/singapore/panpac/index.html
Why Some countries fail to thrive
• Cultural Barriers
– Religions that block the role of
women
• Deny economic or political rights
• Deny education
• Result:
– Undermines half the population’s
contribution to development
– Slows demographic transition
– Blocking religious or ethnic
minorities
• Prevented from jobs, schooling
http://politicalhumor.about.com/library/images/bltalibanwomen.htm
• Extreme: ethnic cleansing
 Why some countries fail to thrive
• Geopolitics
– Trade barriers erected by
North foreign countries
Korea • Impede economic development
• May target a despicable regime
– Often ends up impoverishing
population
– Without toppling the regime
South
Korea

http://www.rotten.com/library/history/countries/north-korea/
 Why some countries fail to thrive
• Lack of innovation
– Small market for new inventions
• No profits = no inventions
– Endogenous growth cycle:
• Big markets encourage invention
• Inventions promote big markets
– Low income countries:
• 37% population
• 11% GDP
• 1% patents
– Need foreign investment to bring
technology
Sweat Shop in Dhaka, Bangladesh • Key to East Asian economies
• Sweat shops are first step
• Starts at port cities
http://www.siu.edu/~perspect/05_fall/images/sweatshop.jpg
 Why some countries fail to thrive
• The demographic trap
– High fertility rates in the
poorest countries
– Poor families choosing to have
many children
• Disastrous
– Cannot invest in each child
– High fertility next generation
– Demographic transition can
occur fast
• Ex. Iran
– 1980 fertility = 6.7
Iran – 2000 fertility = 2.6
• Education for girls is key
http://www.middle-east-online.com/pictures/big/_10613_iran-women-13-7-2004.jpg
 Five Development Interventions
1. Boost Agriculture
– Fertilizers
– Cover crops
– Irrigation
– Improved seeds
– Storage facilities
Kg fertilizer/Ha of cropland
119 to 4,800
63 to 118
26 to 62
5.00 to 25
0 to 4.99
http://www.overpopulation.com/faq/Natural_Resources/Food/fertilizer_per_hectare/maps/africa.html
Five Development Interventions
2. Improve basic health
– Village clinics:
• One doctor for 5,000
– Free anti-malarial bed nets
– Effective medicines
• Malaria
• Aids
– Birth attendants
– Reproductive health
services
Sierra Leone Hospital
http://www.kambiahospital.org.uk/
 Five Development Interventions
3. Invest in Education
– Meals for all children at primary
school
• Improve quality of education
• Improve attendance
– Vocational training
• Modern farming
• Computers
• Electrical wiring
• Diesel mechanics
• Carpentry
School meal, Ghana – Adult Education
• Hygiene,
• HIV/AIDS
http://newsimg.bbc.co.uk/media/images/41111000/jpg/_41111190_10_schoolhildyghana.jpg
Five Development Interventions
4. Power, Transport and
Communications
– Electricity in villages
• Lights, computers, pumps,
refrigeration, food processing
– Trucks, roads
• Bring fertilizers, fuels
• Transport harvest to market
• Transport people to hospital
– Mobile phone
Kenya village • Connect with outside world
Five Development Interventions
5. Safe drinking water
and sanitation
– Health benefits
– Save hours of toil for
women and children

Carrying water, Zimbabwe

http://www.bobjanet.demon.co.uk/urchin/4life/zim.htm
 Five Development Interventions
• Total cost to village:
– $70 per person/year
• Benefits
– Double or triple food yields
– Reduction of chronic hunger
– Improved school attendance
– Reduction of water-borne disease
– Rise in cash incomes
• Sales of grain and cash crops
• Food processing, carpentry, small
manufacturing, horticulture,
Bumper crops, Malawi aquaculture, animal husbandry
– Reduction in AIDS deaths

http://news.scotsman.com/topics.cfm?tid=503&id=1434172002
 The giving gap
• The U.S. is far behind
– on its pledge of 0.7% GNP
• Usual excuses
– Corruption and misrule
• Thus money down the drain
• Bush (2004)
– “…the greatest power on the face of
the earth, we have an obligation to help
the spread of freedom. We have an
obligation to feed the hungry.”
• U.S. aid to sub-Saharan Africa:
– $3 per African (2002)
• 6 cents per African received after
http://www.hebdo.bf/actualite2/hebdo304/george-bush.gif
expenses and emergency aid