Sunday, March 27, 2005

Poverty reduction and global economic development principles

A principal area of work for me beyond the laws of war and just war theory is international development and development finance. As part of that work, I have been thinking about general principles of poverty reduction and economic development. This list is not complete, but I began thinking about these in the course of reading the not-very-useful discussion in Kofi Annan's UN reform proposals, the core of which is a grand bargain between rich and poor countries, facilitated by the UN itself. I criticize it a couple of posts back. Here I want to start sketching out a list - and I emphasize that it is not complete:

(1) Who should be targeted for global poverty reduction? Ans.: bottom 20% of income in the world, with special attention to particular regions where this is most concentrated, ie, subsaharan Africa. This should not mean the bottom 20% in each country, but instead the bottom quintile of the world taken as a whole.

(2) The issue of poverty is largely (although by no means completely) an issue of governance. Poverty cannot be solved by governance reform alone, and there are investments in public infrastructure that must be made in such matters as public health, education, etc. - but poverty cannot be solved in the absence of long term improvements in governance of societies and countries where poverty is most entrenched.

(3) We need for purposes of both analysis and action to divide societies mired in poverty as between those in war or war’s immediate aftermath, and those that are not.

(4) In the case of war, frankly little can be done on the long and even medium term issues – the issue has to be how best to deliver necessary humanitarian assistance, understood as being a band-aid and nothing more. It must also be done with a clear understanding, as has been seen in Sudan and elsewhere, how (disastrously) humanitarian assistance itself can be integrated into the economy of civil war.

(5) In cases not involving immediate war or its aftermath, then the focus needs to be on the right combination of public investments in such things as public health and education with governance reform and the building of infrastructure favorable to private investment.

(6) In the medium to long term, meaningful poverty reduction for large numbers of people comes through expansion of the private sector and private sector investment, and the creation of private incomes. Public infrastructure investments need to be conceived in terms of supporting that larger goal – such public investments are critical, but they must be a part of a larger and longer program of governance reform that will give the stability to make possible private investment and finally private incomes.

(7) The issue of poverty reduction is not, with respect to the world’s very poorest people, that they are exploited for their labor or, really, anything else. Secretary General Anan is right when he says that the problem is how to draw these people up into the process of market globalization. Put bluntly, if the poorest 20% of the world’s population somehow disappeared one day off the face of the earth, the world economy would not only not notice, a large number of people in the richest parts of the world would say privately, hooray, now we can turn Africa into a game preserve for animals. The real tragedy of the world’s poorest today is not that they are exploited - it is that they are too poor even to be worth exploiting.

(8) Concepts of “sustainable development” are used in two very different ways – one is that development has to be in such a way that war, drought, coup, corruption, and so on will not simply wipe it out. This is clearly sound. Sustainable development is also used to mean, however, programs in which it is assumed that economic development can be made compatible with the priorities of rich-country environmentalism. Sometimes this is true, but sometimes it isn’t. Sometimes – really, almost all of the time – economic development requires a willingness to make tradeoffs between such values as development and poverty reduction and environmental protection. The priorities of rich countries are sometimes – often - different with respect to those goals from those of poor countries, but if, in circumstances where they clash, rich countries want their goals to prevail, they should be willing to pay for them.

(9) Infectious disease - malaria and AIDS - are two of the very greatest poverty issues facing even that part of the developing world not overtaken by war. It is a moral imperative both to come up with new technological and biotechnological solutions to these diseases and, further, to use the necessary pesticide spraying to cut malaria. This is a clear cut case where the environmental priorities of the rich world - having already sprayed away its own mosquitoes - are in absolute conflict with the necessities of the world's poorest. Current waffling on this issue is simply unconscionable.

(10) Microenterprise works - provided that it is integrated into a program that includes necessary public investments in education, health care, transportation, communications and so on. Private investments in telecom infrastructure show special promise in contributing to economic activity.

(11) The Bush administration is absolutely right to focus on rewarding those countries which most respond with governance reform - it is critical to reward success and not reward failure.

(12) The Annan proposals for UN reform emphasize the .7% of GDP aid target for rich countries. This target has no basis in the reality either what the developing world needs or what it can actually use. It is, rather, an artefact of a long failed development strategy that assumed that the issue in development was income transfer from wealthy to poor states, based on Western European welfare state models ramped up to the whole world. Even in a development strategy based around rewarding improved governance and so on, considerable funds would be needed for public infrastructure, including mass projects such as innoculations, mosquito spraying, elementary education, etc. Whether this amounts to more or less than .7% GDP is not known - however, .7% GDP is an immense amount of money from the rich world, and it is inconceivable, following the oil for food scandal and all the rest, that any significant part of it should flow into UN coffers. Moreover, large-scale poverty reduction comes about through private investment, and to the extent that such public investment aid has the effect of substituting for private investment, rather than complementing it, then it is a mistake. The Annan proposals should be dismissed as simply a bid for the UN to play the role of gate-keeper and rent-seeker with respect to the .7% income transfer - a bid to play the role of transaction cost on the .7%.

I will add other things. The Copenhagen Consensus is a useful place to look, and there are other things, too. Of course, the Jeffrey Sachs book is worth reading - despite his irritating self-righteousness, his fanatical belief that if it's not his program it is obviously wicked and stupid, and his endlessly tiresome anti-Bush biases - much of what he says is right, despite Jeffrey Sachs.

As for this list, I am not speaking systematically, but just brainstorming. You can read more of my views on development here, in a 2002 paper on microcredit and development in the Yale Journal of Human Rights and Development.


Blue Cross of California said...

Great blog I hope we can work to build a better health care system. Health insurance is a major aspect to many.

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