The End of Poverty
by Jeffrey Sachs
Penguin

Economics stands alone among the social sciences. That's not only because so many economists think they're practicing mathematics. It's also because so many advanced students of economics go on to actually apply the theories and models they learn in the academy. Sure, the occasional political scientist or sociologist advises a government or political party. But you rarely see a Ph.D. in political science working in the West Wing. In contrast, economics Ph.D.'s control many of the world's central banks, economic ministries, and almost all the top positions in international institutions like the World Bank and the International Monetary Fund.

Meanwhile, economics at the university is still taught like a social science: the object is the pursuit of knowledge, not a recipe for a better economy. Students spend five or six years studying theories and counter-theories, statistics and mathematical models. Then, after receiving their degrees and going to work for an international organization, they're suddenly required to make policy. The problem is that you can't take a theory and just apply it across the board like a medical doctor treating a sick patient (a favorite metaphor among development economists). Human societies are not as homogeneous and predictable as molecules.

Jeffrey Sachs, an accomplished academic now at Columbia University, is the economics professor-cum-practitioner par excellence. In his latest book, "The End of Poverty," Sachs admits his academic training did not prepare him to design economic policies specific to particular countries' needs. But during much of the '80s and '90s, Sachs nevertheless became the go-to guy for the developing world's economic ills, from Bolivia's hyperinflation to Russia's shift to a market economy.

In the book, Sachs attempts to piece these variegated experiences into a silver-bullet policy for economic development: more aid. Yes, it really is almost that simple an argument, despite the 368 pages. In fact, a vast portion of the book is Sachs' travelogue in the developing world, taking credit where his prescriptions succeeded (Bolivia: "My basic insights about how to end hyperinflation and how to overcome a debt crisis still worked") and blaming others where they didn't (Russia: "Most reforms were implemented only as pale shadows of what had been planned"). Sachs' full prescription for ending poverty by 2025 is this:

The poor countries must take ending poverty seriously, and will have to devote a greater share of their national resources to cutting poverty rather than to war, corruption and political infighting. The rich countries will need to move beyond platitudes of helping the poor and follow through on their repeated promises to deliver more help.

If that sounds naively utopian, it is. Not only is Sachs' vision fairly undemocratic, it fails to understand the politics of aid in both rich and poor countries. Let's begin by assuming rich countries agreed to give the sums Sachs requests, 0.7 percent of their gross national product. Let's assume — more unrealistically — that the money goes to Sachs' preferred institution (and sometime employer), the United Nations. First, the UN is hardly a bastion of rational and pragmatic spending. The oil-for-food scandal aside, the UN is infamously bureaucratic and its agencies have been known to squander funds.

Second, experience has shown that development programs designed by outsiders can often be way off base. In his discussion of Bolivia's successes, Sachs cites the so-called "alternative development" programs implemented in the '80s to provide poor farmers with viable alternatives to growing coca, the leaf used in making cocaine. The UN and US both funded these programs, which were seen as a more level-headed way to deal with the drug boom of that time. But nearly all of the alternative development programs failed because of poor planning by the donor agencies. In one program farmers were given coffee seeds with which to replace coca plants. Hundreds did so. But the donor agencies had given farmers coffee varieties that grew well in Brazil's humid hills, not in Bolivia's arid mountains. The varieties also frequently suffered from a particular pest previously unknown in Bolivia. And while Brazil's large agro-industries depended heavily on pesticide, poor Bolivian farmers could hardly afford it. Within a couple of years, nearly 90 percent of the coffee plants were dead. Bolivia's poor farmers went back to growing coca and the rich world's aid money was down the drain.

Despite his optimism about the UN, Sachs does admit that paternalistic efforts from outside agencies have failed in the past. His vision therefore also depends on the governments of poor countries spending more money and more political capital on eradicating poverty. That's certainly a worthy goal, but the reality of any government is that priorities have to be made. Sure, we would all like to see African countries spend less on military expansion and more on poverty reduction. But military spending is often quite popular in poor countries. There is something rather undemocratic about asking a country to reprioritize when its own citizens favor guns over butter. More importantly, such an objective is politically unrealistic. Politicians in democracies — and to some extent also in non-democracies — make policies on the basis of public support. When the public supports a military buildup, no "global compact" will keep its government from purchasing arms. When voters become highly polarized, governments will waste resources on political infighting.

The same logic holds for the governments of rich countries, and this is where Sachs' aid policy is certain to fail. Even if governments made a commitment to eradicate poverty by increasing aid, there is no guarantee that the money will keep flowing through 2025. Public support today is no promise of public support tomorrow. Priorities will change with new situations, and aid budgets have to be approved annually. If history is any guide, aid budgets will therefore fluctuate tremendously. And that can be even worse than no aid at all.

There is tremendous merit in Sachs' relentless efforts — not only in "The End of Poverty" but also in his work for the UN Millennium Project and elsewhere — to eradicate poverty. Sachs' book also does a commendable job at dispelling some pernicious myths about poverty reduction: that economic development will trickle down to the poor (the oft-cited "a rising tide lifts all boats"), or that individuals are poor by their own fault. Still, Sachs is a typical academic economist moonlighting as a clinician. His prescriptions, which envision the world through grand theories and models based on very specific assumptions, miss the nuances. Aid sounds like a great idea and appeals to our values of charity. In fact, we should probably give more of it than we do. On the ground, though, it is often paternalistic and misdirected. Politically, it is enormously unstable. No amount of aid alone will end poverty. It's time for development economists like Sachs to take a dose of humility and recognize they have no silver bullet for ending poverty.

— Noam Lupu (noam at flakmag dot com)