Beware of the man with the Big Plan

William Easterly
 Guardian Weekly, April 22nd to 28th 2005

In this review of Jeffrey Sachs's book The End of Poverty: Economic Possibilities for Our Time (Penguin Press, 2005) William Easterly a veteran development economist welcomes Sachs's description of poverty but disagrees with its top-down Big Plan solution.

Jeffery D Sachs's guided tour to the poorest regions of the world is both enthralling and maddening - enthralling, because his eloquence and compassion make you care about some very desperate people; maddening, because he offers solutions that range all the way from the practical to the absurd. It is a shame that Sachs's prescriptions are unconvincing because he is resoundingly right about the tragedy of world poverty. As he puts it, newspapers should (but don't) report every morning, "More than 20,000 people perished yesterday of extreme poverty."

That appalling toll has given Sachs his life's mission. Two themes recur in his long career of advising heads of state in poor nations, which he chronicles in fascinating detail in his book. First is his favoured approach of "shock therapy" (a term he dislikes but has found impossible to shake off): a comprehensive package of economic reforms that attempts to fix all problems simultaneously and quickly. Second is his conviction that the West should always give a lot of money to support these packages. These two themes unify a book that sometimes seems like a disparate collection of Sachs's adventures in Bolivia, Poland, Russia and Africa on issues ranging from stopping high inflation, leaping from communism to capitalism, cancelling third world debt, curing malaria and Aids, and now eliminating poverty in Africa and everywhere else.

Over the past two decades Sachs has been the world's greatest economic reformer. It is perhaps fitting that he has enlisted Bono, the lead singer of U2 and development activist, to pen an introduction: the rock star as economist meets the economist as rock star. Perhaps someone so gifted and hardworking can be forgiven if his narrative is a little self-serving - for instance when he portrays his plans as responsible for early successes in Bolivia and Poland. At the same time he prefers a more complicated analysis for the failure in Russia, later stagnation in Bolivia and Africa's perpetual crisis (their geography was bad, they didn't follow his advice, the West didn't give them enough aid, etc).

The climax of The End of Poverty is Sachs's plan to end world poverty - a sort of Great Leap Forward. His characteristically comprehensive approach to eliminating world poverty derives from his conviction that everything depends on everything else - that, for instance, you cannot cure poverty in Africa without beating Aids, which requires infrastructure, which requires stable government, and so forth. He offers a detailed Big Plan that covers just about everything, from planting nitrogen-fixing trees to replenishing soil fertility, to antiretroviral therapy for Aids, to programmed cell phones to provide real-time data to health planners, to rain-water harvesting, to battery-charging stations and so on. Sachs proposes that the UN secretary general personally run the overall plan, coordinating the actions of thousands of officials in six UN agencies, UN country teams, the World Bank and the International Monetary Fund.

Sachs's Big Plan would launch poor countries out of the "poverty trap" and end world poverty by 2025, as the book's title advertises. The world's rich countries would pay for a large share of the Big Plan - somehow doing an exact financial "Needs Assessment", seeing how much poor governments can pay and then having rich donors pay the rest. The donors will double donor-nation foreign aid in 2006, then nearly doubling it again by 2015.

What's the evidence on how well this approach would work? Sachs pays surprisingly little attention to the history of aid approaches and results. He seems unaware that his Big Plan is strikingly similar to the ideas that inspired foreign aid in the 1950s and 60s. Just like Sachs, development planners then identified countries caught in the "poverty trap", did an assessment of how much they would need to make a "big push" into growth, and called upon foreign aid to fill the "financing gap" between the countries' own resources and needs. This legacy has influenced the bureaucratic approach to economic development that has been followed since - albeit with some lip service to free markets - by the World Bank, regional development banks, national aid agencies and the UN development agencies. Spending $2.3 trillion (measured in today's dollars) in aid over the past five decades has left most aid-intensive regions wallowing in continued stagnation; it is fair to say this approach has not been a great success.

Meanwhile some piecemeal interventions have brought success. Vaccination campaigns, oral re-hydration therapy and other aid-financed health programmes are likely to have contributed to a fall in infant mortality everywhere. Aid projects have probably helped increase access to primary and secondary education, clean water and sanitation. Perhaps it is also easier to hold aid agencies accountable for results in these tangible areas. Moreover the West itself achieved success through piecemeal reforms over many centuries, not through Big Plans offered by outsiders. Do we try out shock therapy only on the powerless poor?

"Success in ending the poverty trap," Sachs writes, "will be much easier than it appears." Really? If it's so easy, why haven't five decades of effort got the job done? Sachs should redirect some of his outrage to the question of why the previous $2.3 trillion dollars didn't reach the poor so that the next $2.3 trillion dollars does. In fact ending poverty is not easy at all.

Perhaps we can excuse these allegedly easy-to-achieve dreams as the tactics of a fundraiser for the poor. The danger is that when the utopian dreams fail, the rich-country public will get even more disillusioned about foreign aid. Sachs rightly notes that we need not worry whether the pathetic amount of current US foreign aid - little more than a 10th of a penny for every dollar of US income - is wasted. Foreign aid's prospects will brighten only if aid agencies become more accountable for results, and demonstrate to the public that some piecemeal interventions improve lives. So yes, do read Sachs's eloquent descriptions of poverty and his compelling ethical case for the rich to help the poor.

Just say no to the Big Plan.

© The Guardian 2005 www.guardian.co.uk

Further Information

William Easterly is a senior fellow at the Center for Global Development and the Institute of International Economics in Washington DC. He is also a member of the economics faculty at New York University. In 2001 he published the widely acclaimed The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics (MIT Press).

He can be e-mailed at: weasterly@cgdev.org  or visit the website at: www.cgdev.org

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