Sachs reiterates a point he’s made before: that the very poor are stuck in a “poverty trap” that leaves them unable to benefit from trade. If you can grow barely enough food to feed your family, you can’t invest in the tools, improved fertilisers and other materials needed to improve yields so you can sell some of your produce. Indeed, if your plough breaks, you can’t even replace it, so your productivity actually declines.

But it’s not just physical capital such as tools that the poor lack. Sachs outlines six major types of capital the poor are short in:

1. Human capital: health, nutrition and skills
2. Business capital: machinery, tools, transport
3. Infrastructure: roads, power, telecoms
4. Natural capital: fertile soil, running water
5. Public institutional capital: rule of law, property rights, policing
6. Knowledge capital: scientific know-how for future development.

This last includes top-level investment, like India’s Institutes of Technology, which have helped it become a hugely successful IT services exporter; it also means training individuals at village level as community health workers, agricultural experts and so on.There are no shortage of ways such capital can be reduced. Simple wear and tear, such as overfarming, can lead to a decline in natural capital, business capital, and infrastructure. Moreover, population growth means that the share of natural capital available to each individual is always decreasing.

For capital to increase, on the other hand, requires investment. Either individuals must be able to save to invest in their personal capital; or, by paying taxes, must help the government invest. If this investment is possible, the capital growth enables economic growth, raising incomes.

Sachs gives a simple example of how the level of capital a household has determines whether or not they can get on the ladder of development. Watch out: there are numbers.

[scarynumbers]

Say that an economy needs $3 of capital for every $1 of goods it produces. And say that natural depreciation reduces the society’s capital by 2% a year. The economy has 1 million people, each with capital of $900. $900 produces $300 of production, or income. That’s less than $1/day, which classifies them as extremely poor. $300 a year is just enough for subsistence and not enough to save. And the population is growing at 2% a year, so in ten years there’ll be 1.2 million people. Ten years on, the capital stock has declined to $750 million; between 1.2 million people we’re down from $900 each to $628 each - generating income of only $209 per person. Simply through the passing of time, the very poor get poorer still.

If, on the other hand, you start with everyone having $1800 of capital, and therefore $600 annual income per person. Households manage to save $90 per person each year. That adds $90 million to the total capital stock, which outweighs the depreciation of $36 million (2% of 900 million). The next year’s capital stock totals $1854 million, which means income (divide by three) of $618 million. Even divided between the expanded population of 1.2 million, that’s still an improvement - $606 each.

[/scarynumbers]

Start with a high enough capital level, and you allow the cycle of economic growth to take place. But once you did below that critical level, that’s a poverty trap - and the only way is down. (p247-249)

In fact, investment in capital usually benefits more than the example illustrates, because of returns on investment. For example, if you have a vital road like that which leads to the Kenyan port Mombasa, repairing damage to that road could hugely reduce the costs of production in several landlocked countries, benefits far greater than the actual investment put in. On the other hand, some investments have to reach a certain point before they have any effect at all - there’s no point paving half a road. This is called a threshold effect.

Still with me? Sachs’ point with all this is that investment in the lives of the poor can repay itself by plugging them into economic growth - and, in so doing, weaning them back off external investment and into self-sufficiency. In practice, poor countries lack the capital to make such investments, and donors must step in and take countries to this level through aid. “Targeted investments backed by donor aid,” says Sachs, “lie at the heart of breaking the poverty trap.” (p250)

Private versus public

Of course, capital isn’t really as simple as pouring in a pile of money. In a previous chapter Sachs compared development to medicine and proposed a complex system of diagnosis to decide which exact combination of investments will lift each country out of the poverty trap. Now Sachs points out that only some of the investments required are best performed by the government: infrastructure, human capital, natural capital, public institutions and some aspects of knowledge capital, especially scientific research aimed at improving the previous categories of capital. These aspects can be led by the public sector and funded largely by aid at first.

They’re best done by government - and this is one of Prof. Sachs’ more controversial observations - for several reasons:

• First, if done by the private sector they would probably become monopolies, raising prices.
• Second, some are “nonrival”, which means that one person’s use doesn’t reduce another’s ability to use. A road, for example, is a nonrival good - there isn’t a limited number of cars that can use a road in a day. A scientific discovery is another example. Because it’s not easy to make money off these, investment has to come from the public sector (even in America, Sachs notes, there’s significant public finance of science).
• Third, they have “spillovers” from direct users to those around them. If you use an anti-malaria bed net, it also reduces my chance of infection by slowing the spread of the disease. Private enterprise tends to under-provide such goods, for example by charging more for bed-nets than people can afford.
• Fourth, these types of capital are not only good for economic growth but are classified as human rights in the Universal Declaration of Human Rights, which includes the clause “Everyone has a right to a standard of living adequate for the health and well-being of himself and his family”. They’re good results in and of themselves, so-called ‘merit goods.’ For certainty these should be provided by the public sector.

Other areas of capital - business capital - should not be provided by governments. This is where Sachs outlines that, contrary to the occasional accusation, he isn’t a communist. Government-run businesses, Sachs argues, tend to be inefficient and run for political reasons which get in the way of effective operation. For example, factories get built in a minister’s constituency, not where they can be best run. Having said that, the government might temporarily support private business to get things moving, but withdraw when businesses become self-sufficient. An example of this is providing farmers with free or subsidised fertiliser for a few years.

“Differential diagnosis”

Working out the precise checklist of interventions needed in each place is difficult. Urban areas have different needs to rural areas; climate, mineral and agricultural wealth, all make a difference. What’s clear nevertheless, Sachs argues, is that investments must come together. There’s no single ‘magic bullet’ which alone will make the difference, although economists like to think there is - for example, right now it’s public institutional capital, with constant talk about ‘governance’. Reducing child mortality, for example, obviously requires improved human capital and infrastructure through health spending. But it also needs natural capital, for protection against drought; public institutional capital, for the management and effective use of investment; and knowledge capital, for scientific research into future improvements in health and nutrition. Each country, and at a more local level each area, needs a targeted package of investments matched to its specific needs.

It can work, Sachs says

Sachs offers ten examples of scaling-up programs that have proved successful. I’ll quickly describe two:

• The ‘Green Revolution’ in Asia is Sachs’ primary example of how improved agricultural results can transform an entire economy, kick-starting economic growth. Investment by the Rockefeller Foundation, a once-mighty American money-pot, led to new high-yield types of staple crops in Mexico and then across Asia. For the first time, there was enough food to go round, thanks to rich-country scientific support.
• The spread of contraception in the poor world has been “an example of scaling up par excellence“. The UN Population Fund was established in 1969 to co-ordinate the spread of planned parenthood techniques, and helped raise the use of contraceptives by couples in developing countries from 10% in 1970 to 60% in 2000. This has helped bring about a reduction in the average children born to every woman from 5 in 1950 to 2.8 now. And as we’ve seen before, that has knock-on effects for child mortality, as families have no more children than they can feed.

Technologies that have been proven to work at local level can, and should, be expanded to national level and beyond, argues Sachs. But in Africa, proven technologies like anti-malaria bed nets remain available to tiny proportions of the population. The heart of Sachs’ plan is a process for scaling-up those technologies across poor countries. Next time, we’ll see how Sachs says this will work.

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The 21st Century, Sachs noted, started well for poor countries. The Millennium Assembly, in September 2000, was the largest gathering of world leaders in history. It produced the Millennium Development Goals, the framework that has shaped aid efforts ever since. You’ll probably have heard of the goals, but it’s worth quickly summarising them. All are to be achieved by 2015 and start (for some reason) from 1990 measurements.

• Halve the proportion of people whose income is less than one dollar a day, and the proportion of people who suffer from hunger
• Ensure that all children can complete primary school
• Eliminate gender inequalities in education
• Reduce child mortality by two-thirds
• Reduce deaths in childbirth by three-quarters
• Have halted and begun to reverse the spread of AIDS, malaria and other major diseases
• Halve the proportion of people without access to clean water
• Integrate principles of environmental sustainability into country policies
• Improve the conditions of at least 100 million slum dwellers (this is by 2020)

There’s also a selection of vaguer, less measurable goals, including: develop a fair and open trading system that includes a commitment to poverty reduction; address the special trade needs of developing countries; address the special needs of small island states and landlocked states; put developing country debt on a sustainable footing; provide access to essential drugs in developing countries; and - my favourite for vagueness - “develop and implement strategies for decent and productive work for youth.”

The MDGs have been criticised, a view I might look at later on, mostly for being psuedo-scientific and unmeasurable. Plus, as Sachs points out, the world had made grand pronunciations on poverty before and then done nothing. Nevertheless, he says, “there was a palpable sense that this time [the promises] might be fulfilled.” The goals were an improvement on previous plans, noting the multidimensional nature of poverty, the importance of gender, and other lessons (it’s this comprehensiveness that gives them their slightly shopping-list feel). The world was enjoying a long economic boom. The signs were positive.

Then two planes hit the World Trade Center.

The attacks, Sachs argued, only strengthened the case for global action on poverty. “Terrorism hasw complex and varying causes, and cannot be fought by military means alone,” he argues. “To fight terrorism, we will need to fight poverty and deprivation as well… if societies like Somalia, Afghanistan and Pakistan were healthier, terrorists could not operate so readily in their midst.”

And for a while, it looked like this message might have got through. An international development conference in March 2002 reiterated the importance of aid and called on countries to meet the longstanding goal of devoting 0.7% of their economies to aid. The US announced the Millennium Challenge Account, a $10 billion aid program. It only nudged the US towards the 0.7% goal (from 0.14% to 0.2%, roughly), but it was a start.

Sachs labels the Iraq war as the sign that the Bush administration had lost interest in fighting extreme poverty. He does acknowledge that in January 2003, Bush further increased aid, specifically to combat AIDS - an extra $3 billion a year for five years. But overall, he argues, it was clear its focus on the military response to terrorism (supposedly) was draining energy from a nonmilitary response. “Official Washington,” he argues, “was completely focused on war rather than on development, the environment, and other issues of pressing human concern around the globe.” And, of course, the war has eaten money that might have been challenged into further aid increases. Incredibly, the war in Iraq has cost about an average of $5 billion every single month since it began in 2003. One month’s Iraq war = nearly two years of US AIDS spending.

Meanwhile, Sachs took up the two posts which now occupy him: Chair of the UN Millennium Project, and Director of Columbia University’s Earth Institute. The MDP was set up by Kofi Annan to bring rigorous analytical analysis to measuring progress towards the Millennium Development Goals, and to finding new ways of speeding that progress. Its report is something we’ll look at in more detail later. The Earth Institute had a similar goal, but with more of an environmental layer in addition to the poverty focus. Both based in New York, they’ve worked closely together. Sachs indulges in a brief advertisement for the Earth Institute which, though self-serving, is worth summarising as it gives good examples of the kinds of new study which he believes are providing solutions to the problems of poverty. The Institute is doing everything from using GPS data to predict malaria epidemics, to designing low-cost, long-life batteries to power lightbulbs in villages without electricity. The key aspect - which seems central to Sachs’ philosophy - is interdisciplinarity. Science, economics and politics have all looked at the problems of development separately. Sachs believes passionately they must work together to see the interconnected problems. It’s part of the “clinical economics” approach he outlined earlier in the book.

Sachs’ portrayal of his career has been accused of arrogance, and he does have the tendency to portray himself as the key actor in all the major achievements in development in recent years. But then, he’s so well-connected and apparently wise, I suppose it’s possible he really is as influential as he suggests. Either way, this cathchup to 2004, when Sachs wrote the book, concludes the autobiographical section. The remaining nine chapters outline in detail Sachs’ plan for ending poverty by 2025. This, essentially, is where the good stuff starts. See you then.

All quotations and statistics drawn from The End of Poverty, UK Paperback edition, pp. 210-226
.

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The China section is more of an academic discussion than a memoir, because, unlike Russia, India and the rest, China’s government has never asked Sachs for advice. It hasn’t needed to. Since 1978, China’s economy has grown at an average of 8% per year - adjusted for its growing population - making it, as Sachs puts it, “the world’s most successful economy” (p155).

The average Chinese person’s income has increased eightfold since 1978. Sachs’ primary concern is to ask: why did it take so long for Chinese growth to take off, why has it been so fast, and what lessons can we learn for other countries?

To answer the first question, Sachs paints a picture of a China cut off for centuries from trade with the world around it. Historian’s estimates suggest average income in China in the first few hundred years of the last millennium was on a par with that of Europe. But in 1434, the emperor dismantled China’s trade fleet and cut it off from international trade. As Europe colonised the New World and flourished, China’s growth stagnated. The isolation wasn’t broken till 1839, and then by force: the British attacked China to force it to open up to British opium imports (yes, you heard right: we attacked them to force them into buying our smack). European powers then controlled the beginning of China’s industrialisation, later joined by Japanese investors. But the benefits flowed outwards. Political turmoil worsened the situation and, instead of growing, China’s economy actually shrank.

Then in 1949 out of the turmoil rose the Communist regime that - in name at least - still governs today. The next few decades saw further economic stagnation, worsened by the two great disasters of the rule of Mao Zedong, the Great Leap Forward (a botched scheme of forced mass industrialisation that caused mass starvation) and the Cultural Revolution (a period of political purges and suppression of the arts and learning that cost over a million lives and helped further damage the economy). Only Mao’s death in 1976 heralded the beginning of change.

But Sachs is careful to pay due to one great achievement of the Mao era: a revolution in public health. Campaigns to eliminate widespread diseases like malaria and smallpox were accompanied by the development of a network of “barefoot doctors”, basically-trained community health workers for rural areas. Along with improved irrigation and agriculture, these changes meant massive improvements in child mortality and life expectancy. Of all Mao’s legacies, this - a healthier, stronger workforce - counted for most once China began economic reforms in 1978.

Reforms began with the simple freedom to buy and sell agricultural goods, and developed to include Special Economic Zones, liberalised areas designed to attract foreign investment. China’s tremendous growth began almost immediately. Over 500 years after the emperor dismantled the fleet, China was again engaging with the world on its own terms. Sach’s message is clear: only trade can pull countries out of poverty - and it must be controlled by the countries themselves, not primarily by foreign governments or businesses.
But China’s reforms have been more successful and less painful than Russia’s. Why? The traditional view, Sachs argues, states that China’s gradual approach is preferable to Russia’s “shock therapy” approach of rapid reform; and that China’s one-party state is more suited to successful reform than democracy. Both sides of this view, Sachs argues, are wrong. Russia’s rapid reform only came after years of gradualism failed to improve the economy, and China’s supposed gradualism had moved very rapidly in some areas, such as agricultural reform. In fact, Sachs argues, “China’s meteoric rise is more the result of China’s very different geography, geopolitics and demography than a different set of policy choices.” (p147)

• China in 1978 was far more agricultural than Russia. Liberalising agriculture is far easier than liberalising state-run industry: you simply let farmers organise themselves. In fact, decollectivisation was led from below, by farmers themselves, prompting a huge increase in productivity - and freeing up thousands of people to work in new private enterprises. By contrast, Russia was the employer and wage-payer of thousands of industrial workers, and liberalising the sector involved the risks and challenges of mass unemployment. In fact, China didn’t privatise its state industries until the 1990s, and unemployment rose there too.
• This also meant that China could move into industrialisation almost from scratch in ways which were compatible with western technology, easing import and export. Russia, on the other hand, had incompatible industrial infrastructure that had to be abandoned.
• China’s growth benefited from its thousands of miles of coast, spurring exports, unlike Russia (which, OK, has a coast, but which leads to the Arctic).
• Unlike China, Russia was saddled with massive foreign debt.
• Russia was suffering declining oil production, China was not.

Let’s think a little about the implications of this for Africa. Africa now is a lot like China in 1980: its jobs are 80% agricultural. Theoretically, therefore, there is scope for a China-style growth spurt and rapid, organic industrialisation. But think about one of those other points: the long coastline. Many of Africa’s poorest countries are landlocked, and even in those countries with coasts, transport costs are prohibitively high. African countries, like Russia in the early 1990’s, are saddled with unpayable debt. And while China had a healthy agricultural population after those years of public-health improvements, Africa’s is malnourished and struggling with Malaria, Tuberculosis, and AIDS.

What’s more, Sachs notes, China faces its own severe challenges still. One is to spread growth more geographically: the Tibetan plateau in the West is growing far more slowly than the coastal East. Migration from Western China to Eastern, Sachs observes, is currently humanity’s biggest single migration flow. There’s a North-South divide too, primarily owing to water shortages in the North. These problems are reminiscent of problems both in individual countries in Africa such as Ethiopia, where some areas enjoy relative plenty while others starve; and of Africa as a whole. Also, China has dismantled that worldbeating public health system, with SARS, Avian Flu and a growing AIDS problem all the result. Third, China has to deal with the environmental devastation industrialisation is bringing. And fourth, China’s undemocratic and highly centralised state will almost certainly have to change for growth not to be stifled (though how it changes, and whether democracy results, is not yet clear). Nevertheless, Sachs believes, “China is likely to be the first of the great poverty-stricken countries of the twentieth century to end poverty in the twenty-first century.”*
Next stop, India.

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• Chair of Columbia University’s Earth Institute and of the UN Millennium Development Project, he was also the adopted economist and a key frontman of the Make Poverty History campaign, and the most visible non-celebrity advocate for increased aid and debt relief.
• The End of Poverty, along with the Africa Commission Report and the Make Poverty History manifesto, is one of the clearest detailed statements of the “2005 concensus” calling for more aid, debt relief, and fair trade rules.
• His basic thesis is that, with investment and support from rich countries and good governance and policies from poor countries, extreme poverty (living on less than $1/day) can be eradicated by 2025.

Sach’s vision of development

• The world currently breaks down into XX categories of development:
  • 1 billion rich people (e.g. me and, probably, you);
  • 2.5bn middle-income people, (e.g. Indian IT workers;
  • 1.5bn poor people, e.g. Bangladeshi garment workers; and
  • 1bn extremely poor people, e.g. Malawian villagers.
• Prior to the industrial revolution of around 200 years ago, pretty much everyone - except tiny noble elites - was extremely poor: scraping buy on subsistence agriculture. It’s technological innovation since then that has generated the tremendous wealth in rich countries.
• Poverty in poor countries stems from the rates of growth in Europe and America not being mirrored elsewhere. All countries have grown, but some faster than others, and over 200 years this compounds into vast differences in wealth.
• Some of the factors that have allowed rich countries to grow faster include:
  • Political stability and openness
  • Education systems to breed innovation
  • Access to, and dominance of, the seas
  • Access to the markets of North America
• In addition, industrialisation reached many parts of the world only through colonialism, which meant a form of development with minimal long-term benefits, which was severely damaged when colonialism ended.
• Development is not a “zero-sum” game, with a certain amount of wealth to be shared out. Rich countries don’t have to get that way off the back of keeping poor countries poor; it’s possible for everyone to develop further, as the driver of growth -technological innovation - is unlimited.

Why some countries grow slower than others

• Wealth is increased through four main mechanisms:
  • Saving and investment: for example, a farming family buys a cow, and sells milk as well as grain
  • Trade: instead of just growing to eat, the family sells some crops to a neighbour and buys others, increasing the range of their diet and making a profit
  • Technology: a simple new variety of tougher seed could mean more income
  • Resource increase: a good summer or change in the local environment increases income.
• So when countries fail to grow, it’s often because these mechanisms are being blocked. If you can’t grow any spare crops to sell, you can’t trade, and you’re more susceptible if the crops fail. Technology not only needs investment to improve, but just to be maintained (machetes break and need repair). Most problematic of all, population growth will naturally reduce the amount of land available to fulfil the needs of each person. So a certain degree of growth is needed just to keep incomes even.
• At a country level, several factors amount to obstacles of this sort for many poor countries:
  • Geography: landlocked countries have less access to sea trade; countries in areas prone to malaria have a higher disease burden
  • Fiscal trouble: i.e. skint governments who can’t invest to spur trade and growth. This can happen even if there is money around, for example if the government’s tax income all goes on paying debts.
  • Governance trouble: certain basic requirements for trade, like good property laws, can be absent when government is weak (or operates arbitrarily).
  • Cultural barriers: like traditions that prevent women from working
  • Geopolitical barriers: like trade barriers adopted by other countries, e.g. sanctions.
  • Lack of innovation: without developed education sectors poor countries must often make do with technology designed for rich countries.
• Extreme poverty can create a “poverty trap” which makes it impossible to begin growth. For example, a country that cannot invest in education, research or infrastructure has little hope of developing. Therefore an international framework that is favourable to trade isn’t enough on its own to ensure growth.

Clinical economics

• Economics, like bodies, are complex, and repairing them takes care and dedicated study
• While working on one area, say trade, you must maintain other areas, like public services, at a steady level or the entire economy is at risk
• There are many possible causes of problems, and often more than one will occur at once. Instead of having “flavour of the month” problems which are deemed to be the obstacle for all poor countries, economists should carry out a detailed assessment of each individual economy, including aspects like geography, demographics and culture.
• Doctors constantly review their diagnoses and update them if the facts change. Economists tend to think they’re right and whatever results don’t fit are blamed on the country in question. Like doctors, they need to be more flexible and prepared to revise diagnoses.
• Doctors have a well-known and serious ethical code. Economists have been flippant and arrogant in their handling of poor countries’ economies. It takes serious and long-term commitment.

That’s the bare bones of Sachsism. Next, the good doctor takes us on an autobiographical journey through the many economies he’s fiddled with and the lessons he learned. Quick summary of that, coming up next.

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As Sachs point out, 4.9bn people live in countries where average income increased between 1980 and 2000. So growth is not limited to the rich world, but large chunks of the developing world have failed to benefit from it in recent years. But if the forces of capitalist development are so strong, how could some countries be left behind? To do that, we first have to understand the ways in which growth can occur:

1. Saving: Instead of eating all its grain, a family saves some and sells it, and buys a cow with the proceeds. The next year, they benefit from milk sales, and manure improves their grain yield.
2. Trade: A family swaps grain for a cash crop such as vanilla beans, sells them, and has enough to buy grain and some left over.
3. Technology: Not necessarily machinery; even a new farming method or special seeds could raise yields substantially, leaving the family something to sell.
4. Resource boom: A government success in controlling nearby infectious insects, for example, could open up more farmland.

GDP per capita growth - that is, economic growth that outpaces growth in population - basically happens as a combination of these four processes, on a larger scale. So what could cause “negative growth” - economics-ese for recession?

1. Lack of saving, coupled with resource failure: So if you’ve eaten all this year’s crop, and next year’s falls short of what you need, you go hungry.
2. Obstacles to trade: A family may wish to switch to cash-crop farming, but be prevented by lack of access to trading places, or lack of the start-up capital required (e.g. the cost of the first set of seeds and equipment).
3. Technological reversal: This could be as simple as a broken piece of machinery, or even that a parent dies before training their children in farming techniques (for economists, practical ideas and skills count as technology).
4. Natural resource decline: for example, part of the family’s land becomes unproductive, through a phenomenon like nitrogen depletion
5. Adverse productivity shock: for example, a whole year’s crop wiped out by floods or drought.
6. Population growth: this is one of the most damaging, because it is least avoidable: as parents die, and divide their land between two sons; who then die and divide their land between their two sons each, the end result is ever-shrinking land to support each person.

What’s strikingly clear from such a list is how inevitable many of these conditions are: hoes and machetes break, soil gets depleted, and families grow and estates shrink. Far from seeming like an unfortunate occasional event, income decline should be considered the norm unless it is increased by the processes described in the first least. Staying still isn’t an option - if trade and technology don’t push incomes up, they will inevitably decline. Thinking about it, it was surely those very pressures that caused Man to start trading and developing technology in the first place!

Of course, such ideas are easy to illustrate at a one-household level. Sachs goes on to explain at country level why growth might be prevented:

1. Physical geography: landlocked, river-free and mountainous countries have much higher transport costs, making trade far less viable. Indeed, economic growth tends to begin at coasts and along rivers and spread slowly inland - just think of the location of the world’s major cities. Physical geography can also increase the burden of disease - for example, Africa’s climate makes it perfectly suited to malaria. These factors can be overcome, but it requires extra investment.
2. Fiscal trap: Even if there is a reasonable amount of money around in the economy, Governments may still be impoverished and unable to provide health care, roads, ports and so on. Corruption or ineptitude might prevent tax collection, or crushing debt commitments might eat up all revenue.
3. Governance failure: Government must support growth in other ways besides spending money: it must create a stable, peaceful environment, with clear rule of law and minimal bribery and corruption, in order to create an environment in which business can thrive.
4. Cultural barriers: Norms that block access to education and work for women, or certain religious or ethnic minorities out of the economy, slow growth.
5. Geopolitics: For example, trade barriers erected by other countries.
6. Lack of innovation: Even those in poor countries with the education and will to innovate lack the resources to do so, and a strong market in which to sell their ideas. Poor countries are forced to deal with imported innovations that are designed with rich countries in mind and may be completely inappropriate for their needs.
7. Demographics: Where infant mortality is high, families have many children to ensure some survive; but can ill-afford to feed them all, in fact making it inevitable that most will die. In such an environment educating and nourishing children is much harder. Educated working women must take time off for each child, so the “cost” of each child increases, speeding the transition to a low-birth, low-mortality economy.

Not all of the over 1bn people whose countries failed to achieve growth between 1980 and 2000 fit this picture. 15 countries of the former USSR, for example, experienced economic decline as a result of the shocks of the end of the Soviet regime and the difficult transition to capitalism. Other middle-income countries shrank owing to fluctuating oil prices or political upheaval. And, as Sachs points out, extreme poverty can persist even in the midst of a wealthy economy. In Latin America, for example, income is sharply divided between the European and indigenous or mixed populations. And if a country’s government does not take steps to bring its poor into the fold of development - most notably through education - they will feel none of the benefits of growth.

Nor did all poor countries fail to grow: above all, Sachs pinpoints food productivity as the key factor deciding poor countries’ fate: the better your cereal yields were in 1980, the more you grew in the 20 years that followed. Crucially, this explains much of the difference between Africa and Asia.¹ A core majority of those countries, however, started out poor in 1980 and just got poorer, largely as a result of the factors outlined above. The crucial thing to note is that many of these factors are themselves caused or reinforced by the very poverty they exacerbate. For example, a poor population wields no taxes, so the government can’t invest in infrastructure and services to build trade. This is what Sachs calls “The Poverty Trap” - that the very fact of poverty makes it impossible for poor countries to climb out of it. These obstacles, Sachs argues, are why it isn’t enough to spread global free trade, as many economists suggest - the poorest countries will be unable to take advantage of it. Investment and guidance is needed to put the poorest countries onto the bottom rung of the ladder. How economics should respond to that challenge is the topic of his next chapter.

1. Sachs here rebuts the claims of many free-market economists, such as Martin Wolf, that the main reason for Asia’s ascent over Africa is its lack of trade barriers.

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• 1 billion rich people;
• 2.5bn middle-income people, epitomised by the Indian IT workers;
• 1.5bn poor people, exemplified by the Bangladeshi garment workers; and
• 1bn extremely poor people, as represented by the Malawian villagers.¹

Sach’s definition of extreme poverty here involves more than simply an income level (although the $1/day standard is one he uses elsewhere). It refers to those who “too ill, hungry, or destitute even to get a foot on the first rung of the development ladder;” that cannot even begin to enjoy the benefits of trade or industry. The goal of ending poverty by 2025, he then argues, can be broken down into two related tasks:

1. To place the bottom 1bn onto the ladder of economic development; and
2. To ensure those on the bottom rungs of the ladder are not prevented from climbing it.²

So chapter 1 is audacious in its scope, neatly summarising the current state of development through three simple illustrations. For the second chapter, though, Sachs has an even more whistle-stop tour in mind. The title - which could easily be the title for a 1000-page tome - gives a clue: “The Spread of Economic Prosperity.” I won’t even attempt to summarise what is already an incredibly compressed summary of, well, just about all of human history. Newton, the Renaissance, the steam engine - it’s all here. None of it new, of course - it’s A-level History stuff - but it’s an elegant summary, and crucially, Sachs ties it in strongly with the story of development. A few key points:

• The “great rupture” of modern economics - the gap between the richest and the poorest countries - is not some great historical truth. Indeed, during the European “dark ages” of the fifth-fifteenth centuries, it was China that could claim to be the world’s wealthiest and most technologically advanced civilisation. Overall, though, the gaps between nations were almost insignificant until very recently - at the start of the nineteenth century, everyone was very poor by our modern understanding, with high birth and mortality rates and low life expectancy.
• It’s the coming of the Industrial Revolution in Europe, in around 1800, that first sees the gap between countries grow. All countries and areas of the world have grown since then - not only in population and income, but in income per capita - but the wildly differing rates of growth, exacerbated by some areas’ lower starting point, leads us to the massive divides we see today. The difference between 1% and 2% average growth, over 200 years, amounts to a great deal.
• Several key advantages enabled England to lead the Industrial Revolution - relative political stability and openness; freedom from threat of invasion; access to and dominance of the seas; abundant coal; a strong showing of scientific genius, from Newton to steam engine pioneers James Watt and Matthew Boulton; and access to the near-limitless markets of North America. Industrialisation brought with it specific changes, amongst which were changing gender roles and the demographic transition - so even as population rocketed, birth and infant mortality rates dropped. Above all, the Industrial Revolution brought with it immediate rises in living standards.³
• Industrialisation spread across Europe through a mixture of trade and plagiarism. However, it reached much of the rest of the world through colonialism. Contrary to the resurgent view that colonialism benefited the colonised, it gave them a twisted version of modern economic growth that worked primarily to the benefit of the colonisers, and left them without the educated classes or infrastructure to develop proper economies on independence.
• The incredible growth of per capita income - even with massive population growth - in the two hundred years since the Industrial Revolution shows it is the correct path to development. The poverty of the poorest countries stems from their failure to fully undergo this process at the same pace that the rich world has. But it is possible for every country to achieve this transformation, because the primary factor fuelling it - technology, and therefore, scientific knowledge and innovation - is “nonrival,” economics-ese for “able to be shared widely without any one holder’s share being reduced.”

It’s striking from this chapter that, for all the ire he’s attracted amongst the more free-market economist community, Sachs is clearly in favour of globalisation and of markets. He doesn’t explicitly attempt to rebut the various theories that argue capitalist development is not the best route towards development - but he puts forward a convincing case that the poor countries of Asia, Africa and South America, far from representing the downside or “losers” of capitalist development, are in fact simply suffering from a lack of it. But that doesn’t mean that Sachs accepts the argument, common amongst economists, that all development requires is to remove barriers to international trade. The thrust of the book is that some countries need assistance to plug into that system. It’s clear that he wishes to occupy a middle ground between the evangelists of free trade and those who strongly oppose it. Of course, such an argument requires a detailed examination of what it is that has prevented poor countries progressing at full speed up the development ladder so far. It is this issue he tackles in chapter three. More on that tomorrow.

1. UPDATE: James Wolfensohn, former President of the World Bank, uses a similar but slightly different division.
2. On that latter point, Sachs explicitly refers to the risk that “the rules of the game” may prevent such progress. He’s clearly attempting with this two-fold mission to bridge the issues of aid/debt and trade rules, much as Make Poverty History and co. have done. In doing so, he also attempts to pre-empt those who argue that the poor state of progress made by those on the lower rung of the ladder shows trade is the wrong route to development - a view I’ll look at in more detail later.
3. Sachs doesn’t feel the need to qualify or explain this point, though it’s been pointed out that the conditions of industrial workers in the first few decades of the Industrial Revolution were in fact substantially worse than in agriculture at time. But like most economists, Sachs is concerned with averages and aggregates, and factoring in reduced child mortality and so on, he’s probably right. Certainly, in the long run, it’s accurate.

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So when the time came to start looking in detail at the main proposals on Africa, his book The End of Poverty seemed like as good a place as any to start. The book was published in early 2005, as the GCAP campaigns swung into action, and in the UK and US it became a central part of the media onslaught (Just in case Sachs wasn’t indelibly linked to the MPH campaign in people’s heads, they let Bono write the foreword). It was well reviewed, although some objected to its biographical sections and others took issue with Sach’s actual prescriptions (William Easterley appears to be a bit of a thorn in Mr. Sachs’ side, a dispute I’ll look at in a couple of weeks. Or possibly months, the way my reading schedule is going).

The book’s eye-catching title is, surprisingly, not just exaggeration for effect. Sachs says, quite clearly and in the first chapter, that extreme poverty can be ended by 2025; the “End of Poverty” he describes means the fulfilment of this goal, and an additional improvement in the development chances of the moderately poor (as far as definitions go, he’s broadly comfortable with the $1 and $2 standards described - and critiqued - in Counting The Poor). Beyond that introduction, the book progresses in three sections: a further three chapters that lay out the basic principles of Sach’s economic ideas; six chapters of autobiography, detailing his work on the economies of Bolivia, Poland, Africa and elsewhere; and eight chapters of what could be called “The Plan,” with the basic details of how he sees the 2025 goal being attained. That gives us three neat sections in which to write about it. So tomorrow, part 1.

¹The New York Times

*Sorry. Trying to lighten the tone.

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