In chapters one and two of The End of Poverty, Jeffrey Sachs outlines the ladder of economic development that poor countries must climb in order to bring their people out of poverty. As elegant as his summary is, it’s nothing that you couldn’t find in an economics textbook. In chapter three, he details the obstacles that can prevent poor countries moving up the ladder, or even getting onto it; here, he departs more from the conventional wisdom, emphasising physical geography and infrastructure over recently-targeted factors such as governance and government intervention in the economy. In chapter four, he moves from describing problems to considering solutions, and it’s here that what could be called “Sachsism” really begins to take shape.

Perhaps I should say he moves from “diagnosis” to “treatment,” because the thrust of chapter four - “Clinical Economics” - is that the medical model holds lessons for development economists. To fix a broken economy, Sachs argues, is not unlike repairing a damaged human body. The same lessons apply:

  1. Economies, like bodies, are complex. When operating on an organ, surgeons are aware they must maintain blood flow to other organs, breathing, and other systems at the same time. Similarly, economists must work on target areas, like corruption, while keeping other systems, such as social services, functioning at at least a minimum level.
  2. There are many different causes of problems. Development economics has tended to place certain problems in the spotlight at certain times - recently, for example, corruption, excessive government spending, and so on - and assume them to be at the heart of any broken economy’s problems. In fact, obstacles to economic growth vary enormously - from physical geography or disease, through to over-reliance on one export commodity. Economists must conduct a “differential diagnosis” - that is, a checklist - of possible causes before taking action. And they must think about the most likely problems first - transport costs in a mountain country, disease in a malarial zone.
  3. Understand the social setting. OK, this one is a little contrived. But as Sachs points out, doctors need to consider the patient’s wider circumstances - are poor conditions at home causing relapses? Is the environment encouraging of exercise? Will the patient be reminded to take their medication? Similarly, economists much look beyond the country in question. Is there instability nearby? Are neighbouring countries trading partners?
  4. All diagnoses are provisional, and all treatments must be constantly assessed. Economists have tended to assess treatments by whether they’re actually provided - so aid is measured by how much is given, and the effectiveness of budget cuts isn’t measured, just whether the cuts are carried out. Where a policy fails, there’s a tendency, Sachs argues, to blame the country in question for not having implemented the policy properly. Instead, we should question the treatment, and the diagnosis that led to it.
  5. Ethics are everything. Everyone expects doctors to make a deep commitment to their work, to keep fully up to date with the latest knowledge, and to apply all treatments with seriousness and thought. This, Sachs argues, hasn’t happened with development economics much of the time.1 One example of this is that development economists must be as prepared to be strict and critical with rich-world governments as with poor ones.

Many of Sach’s criticisms could be applied to development economics going back decades. In the 40’s and 50’s, for example, infrastructure was the “fashionable” problem, and every aid programme focussed on giant building projects; in the 60’s and 70’s, the big concern was over-reliance on imports. But Sachs makes it explicit that his real target is the “structural adjustment” era of economics of the 80s and 90s, which put almost exclusive emphasis on poor governance on excessive government interference in the economy. While Sachs recognised there were issues to be addressed in these areas in many countries, he says they were “in many places not the central part of the problem.” He goes further, calling structural adjustment “self-serving and ideological,” arguing, “conservative governments of the United States, United Kingdom, and elsewhere used international advising to push programs that found no support at home.”2 We’ll get into the debate about structural adjustment further down the road, but it’s worth noting the strength of Sach’s criticisms here, as a reminder that this view is highly controversial.

The positive part of the story, Sachs notes, is that these lessons are starting to be learned. The Millennium Development Goals, the set of international commitments that form the backdrop for all the current interest in Africa and poverty, are designed in line with point 4 above. Rather than set a target for policies, such as quantities of aid, it sets targets for outcomes: “Reduce by half the proportion of people living on less than a dollar a day,” to give one example.

Sachs concludes the chapter by describing a detailed checklist of problems for diagnosing damaged economy. It looks a little daunting, but it can be broken down pretty simply:

  1. Assess, with a range of measures, the extent of extreme poverty, and where, and amongst who, it’s most prevalent;
  2. Assess the government’s economic and fiscal policies, and the general stability and quality of governance;
  3. Assess geographical, agricultural, and disease-related barriers to growth;
  4. Assess cultural barriers, such as racial or gender divisions;
  5. Assess the geopolitical situation, trading partners, nearby conflicts and instability, etc.

Sachs mentions, but doesn’t elaborate on, systems by which the IMF and World Bank, who currently carry out much of the economic analysis that decides development policy, should share responsibility for this process with relevant UN groups such as the World Health Organisation.

I’m finding it hard to come to a clear conclusion on Sach’s concept of clinical economics. On one level, it’s a significant break from the practise of the last few years; in other ways, though, it’s simply common sense, and it’s hard to believe economists haven’t been practising this approach till now. Theorists behind structural adjustment would, I’m sure, object to being described at having assumed everything boiled down to governance and state intervention in the economy; rather, they argue, there’s an evidence base to support that conclusion. But some aspects of Sach’s method - the recognition that every country is different, and the commitment to evaluating the success of policies in detail - seem genuinely challenging. I’ll be discussing some of the reaction to Sach’s ideas in a post soon.

Having set out his methodology, Sachs is all ready to begin laying out the detail of his plans for poverty reduction. But he doesn’t - at least, not for another six chapters. Instead, he takes us on a whistle-stop tour of his career advising poor countries, in an attempt to lay out how the ideas he now puts forward developed. At least, that’s why he says he’s doing it; it’s also a rather long-winded way of outlining his credentials. Anyway, I’ll talk a little about that next time.

1. Some of the stories in Joseph Stiglitz’s Globalization and its Discontents support this argument; for example, he describes IMF staff copying the details of countries’ poverty reduction plans directly from other countries’ without serious analysis. I’m not aware of any formal rebuttal of this charge from the IMF, or anyone else; but I’m sure many development economists would disagree.

2. Jeffrey Sachs, The End Of Poverty. London: Penguin, 2005, p.81