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Live 8 - G8: doing what we can in an imperfect world

By Nicholas Gruen - posted Thursday, 7 July 2005


Last September over 77,000 people watched Port Adelaide beat Brisbane in the AFL Grand Final. In the four days after the game or the four days before (take your pick) more people died in the Third World of extreme poverty than there were people attending that game.

As ex-Harvard economist Jeffrey Sachs says, each day newspapers should report on page one “More than 20,000 people perished yesterday of extreme poverty”. But it’s not news.

However, for a short space of time, it is news. A tsunami of hype (and hope) crashed upon us last weekend. Millions attended concerts. Billions more watched them on television. The G8 leaders have met at Gleneagles for their summit on Third World poverty and climate change (no-one could accuse them of picking easy topics). And another 20,000 people will die each day.

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I’ve been reading Professor Sachs’ hubristically titled new book The End of Poverty: How we can make it happen in our lifetime. It’s as close as you’ll get to “the book of the concerts” complete with a preface by Bono. Sachs wants us to dramatically lift aid from its current paltry level, make it smarter, reduce trade barriers and fight corruption.

Likening himself to a doctor making “house calls” in economic crises, Sachs calls for a new kind of “clinical economics” more attuned to countries’ specific circumstances than the “one size fits all” advice economists often dish out.

He explains how little attention has been given to African countries’ land-locked geography and their susceptibility to disease and how much it explains Africa’s plight. As Sachs points out, all the way back to Adam Smith economists have observed how beneficial access to the sea is - with the access it provides to global markets. The land-locked countries of Africa must access the global market though the ramshackle transport infrastructure of their neighbours.

Sachs’ sub-Saharan Africa is the malarial “perfect storm”. Elsewhere mosquitoes sup on both humans and cattle. For technical reasons this dietary dilettantism dramatically reduces their efficiency at spreading infection. Africa is hot, humid, and home - to the world’s choosiest mosquitoes dining exclusively on humans.

Sachs argues, that a syndrome of unpropitious circumstances enchain the poorest countries in a hand to mouth existence that prevents them investing in their future. To take just one compelling example, a lot of Africans would be richer if their communities could escape the scourge of malaria. But many can’t afford anti-malarial mosquito nets.

Obviously in such circumstances aid can transform the vicious circle of poverty into a virtuous one of growth. That’s the logic we use when we forgive bankrupts their debts - just as we’re intending to forgive the poorest countries theirs. Just considering our own self-interest, we won’t gain much by holding them to debts they can’t sustain. Freed of their debts they have a chance to invest and grow and benefit their trade and investment partners as they benefit themselves.

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Sachs’ plan involves more than doubling aid to 0.7 per cent of developed economies’ income. Developed countries signed on to lift our aid to this level decades ago. And the Marshall Plan - which restored post-war Europe and so prevented the slide into economic misery that followed the previous world war - cost the US 1 per cent of its economy. (Right now it spends a little more than one tenth of this.) Aid would be invested in agricultural inputs, basic health, education, power, transport and communications infrastructure and safe drinking water and sanitation.

Though criticising economists’ past disregard for empirical detail, Sachs pays surprisingly little attention to the previous disappointments of similar schemes. As major development authority William Easterly notes, Sachs is pretty light on about all these things:

… bad history (including exploitative or inept colonialism), ethnic and regional conflicts, elites' manipulation of politics and institutions, official corruption, dysfunctional public services, malevolent police forces and armies, the difficulty of honoring contracts and property rights, unaccountable and excessively bureaucratic donors and many other issues.

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First published in The Courier-Mail on June 29, 2005.



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About the Author

Dr Nicholas Gruen is CEO of Lateral Economics and Chairman of Peach Refund Mortgage Broker. He is working on a book entitled Reimagining Economic Reform.

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