Solving the World's Poverty Crisis

These can be deflating days for anybody excited by a good, big global-improvement project.

These can be deflating days for anybody excited by a good, big global-improvement project. Securing a post-Kyoto deal that stands any real chance of slowing CLIMATE CHANGE, let alone halting it, looks like a long shot at best. The post-9/11 dream of a unified effort to fight terrorism and fend off threats from unstable states evaporated years ago in the desert heat of Iraq. Even the push to win another round of global tariff reductions, the traditional stepping stone to economic growth, now looks hopelessly stalled after setbacks in the World Trade Organization's so-called Doha round.

But wait. What about the improbably utopian-sounding Millennium Development Goals? Not everybody remembers that back in 2000, amid all the hoopla about the dawning of the 21st century, the United Nations member states agreed to a framework for alleviating the worst misery in the world's poor countries. The UN set eight goals, or MDGs, in the abbreviation-rich argot of international bureaucrats. They range from providing every child with primary education to promoting equality for women. The most ambitious aim of all, though, was MDG No. 1: cut the proportion of people living in extreme POVERTY - defined as surviving on less than US$1 a day - in half by the year 2015.

The big surprise, at least for those skeptical of such undertakings, is that the poverty-eradication target looks very likely to be achieved. An interim report on the MDGs, released by the UN earlier this month to mark the halfway point in the process, said 19.2 per cent of people in developing countries lived in extreme poverty in 2004, down precipitously from 31.6 per cent in 1990, the baseline year chosen by the UN. That means hundreds of millions fewer at the bottom of the economic ladder - 980 million living on less than a buck a day in 2004, down from 1.25 billion in 1990.

Progress on other MDGs is proving harder. Trends suggest, for instance, that the UN's aim of halving the proportion of people living without adequate drinking water and sanitation by 2015 will be missed by 600 million people, and the goal of reducing the proportion of underweight babies born will be off by 30 million. Those grim figures are reminders that even dramatic reductions in extreme poverty will leave vast populations living in dire conditions. But there's still reason for optimism. As Jose Antonio Ocampo, the UN's undersecretary-general for economic and social affairs pointed out on the release of the interim report, "several developing countries are demonstrating that rapid and large-scale progress toward MDGs is possible."

Most of the historic upswing is, not surprisingly, coming in ascendant China and India, along with smaller fast-growing Asian economies. That leaves sub-Saharan Africa as the major challenge. Yet Africa is by no means the deeply bleak story it seemed only a few years ago, even if all those pleas from rock stars and Hollywood actors for more aid tend to convey a message that nothing could possibly be going right. From fast gains in agricultural production in Malawi, to rapidly rising school enrolment in Ghana, to successes combatting malaria in Zambia, upbeat examples abound wherever decent governments get reasonable levels of outside support.

Just as important is the fact that Africa's export economy - not a big focus of the celebrity set that showed up in those "I Am African" ads - has rarely looked stronger. Surging demand for commodities, including oil, has driven up annual economic growth in sub-Saharan Africa to over five per cent for the past three years, the best pace, according to the World Bank, in over three decades.

Beyond Africa, the economic good news just now is remarkably widespread, suggesting the world's appetite for all sorts of products could continue to buoy up the poorest places for years to come. According to the International Monetary Fund, the pace of world economic growth in the past five years exceeds any stretch other than perhaps the early 1970s. Today's expansion, however, is more broadly shared, driven more by emerging economies - not just China and India, but also the likes of Russia and Brazil - than by established ones.

Some aid advocates doubt the usefulness of such sweeping assessments of the global outlook. What does any of it mean to a particular slum or village? Of course, local, regional, and national conditions matter. But one of the benefits of the MDG program is the way its globe-spanning scope prompts interesting compare-and-contrast exercises. Although there can be no one-size-fits-all blueprint for development, there are surely lessons that can cross borders and even hopscotch across continents. Most economists and aid experts point to rather similar common denominators in a successful fight against poverty - access to markets, sound government, and sensible aid that supports pillars of long-term economic stability like education and infrastructure.

The obvious starting points in the search for more precise ideas that work are China and India. Economist Michael Kremer, Gates professor of developing societies at Harvard University, is one expert who isn't afraid to connect the dots between far-flung places on the map. He warns against imagining there is something about Africa that means what's happening to China and India could never occur there. That mistake was made before, when many assumed that Western-style economic dynamism was impossible in Asia. "Stories about how the Confucian cultures were inimical to economic growth were very popular, until Confucian cultures began to experience very rapid growth," Kremer says. "There was a phrase, 'the Hindu rate of growth,' which meant about two per cent a year, until India began to grow a lot faster than that."

In other words, the notion that African "culture" somehow stifles prosperity is wrong. "I'm not claiming that Africa is going to take off tomorrow," Kremer adds. "But the fact that Africa has had a terrible period doesn't mean it is going to be stuck there forever." In a recent paper, "Asian Growth and African Development," he argues that a sort of race is already on "between economic growth in China and India and population growth in lagging regions, particularly Africa." If China and India get rich fast enough, he contends, they will become huge consumer markets for the next region to benefit from export-driven growth based largely on an ample pool of low-income labour - likely Africa.

If that makes it sound like Kremer's advice to Africa is simply to wait its turn in the evolution of world supply-and-demand patterns, he doesn't mean it to. Although he does hold that the ultimate best hope for poor countries is to find their place in the global trading economy, he also favours sensible, and humane, aid spending and trade policy. "Partly it's a matter of supporting people in the short-run - I mean, people are dying of AIDS now." And Africa, with 34 of the world's 48 poorest countries, is far from poised for an export-driven new era. "These are very long-run forces we're talking about," Kremer says. "To begin producing things you need human capital, ports, railroads, telecommunications."

None of that will happen overnight. Neither, for that matter, did Asia's supposed economic "miracles." "Boom is a misleading term," says University of Toronto economist Loren Brandt, co-editor of forthcoming book China's Great Economic Transformation. "People think this enormous growth in Chinese exports has been happening for only the past five or six years. But if you go back you see the rate of growth over the past 30 years has been fairly constant. This has been coming for a long time."

Brandt traces several stages in China's economic transformation, starting a few years after Mao Zedong's death in 1976. The first decisive moves came in rural areas, where even limited reforms in the late '70s and early '80s - mainly allowing hundreds of millions to abandon collectives and return to family farming - spurred remarkable growth. The reversal was rapid and permanent. According to one estimate, 75.7 per cent of Chinese villagers were impoverished in 1980, only 12.5 per cent in 2001.

The even more startling advances in Chinese manufacturing came after Beijing cautiously introduced the first special economic zones in the 1980s, allowing some foreign investment and opening up new export potential. "It was," Brandt notes, "their way to open up China in a very controlled way." One measure of the new revolution: he estimates that 125 to 150 million former residents of China's interior have migrated to manufacturing centres in the coastal provinces. "If you go into a Chinese village these days, and I've spent a lot of time in Chinese villages, you do not see very many able, working people between the ages of 18 and 35," he says. "They've split."

That telling disparity between the interior and the coastal regions, the old countryside and the gleaming new cities, is evidence that the lessons of China are far from simple. Why are some regions lagging? Brandt tentatively points to deeply entrenched patterns that predate Communism. "You have to go back pre-1949," he says. "A province like Zhejiang, the one south of Shanghai, had a long history of entrepreneurship, and today Zhejiang is again the richest province in China."

Brandt's account dispels any simplistic notion that China's rise is the sudden, automatic result of flipping a few market-based, export-oriented policy switches. Instead, he sketches a decades-long process, begun in agriculture and accelerated in manufacturing. There's no reason to think lasting development in Africa's poorest countries and other very low-income nations, notably Afghanistan, will require anything less than a similar mix of innovation and patience.

Not that China is necessarily the best model. Indeed, other high-growth Asian economies might be even more worth watching. Brandt says Vietnam, another poverty-slashing country he studies closely and visits often, has been more successful than China lately in building high-value agricultural exports, like coffee and cashews, which might be a closer parallel with what some African countries must accomplish. Supporting rural entrepreneurs is a big component of Vietnam's current socio-economic development plan, which is supported by 14 donor nations, including Canada.

The very notion of such plans, though, is often scoffed at by critics of the way aid is sometimes tied up in such long-term exercises. Led by skeptics like New York University economist William Easterly, author of last year's The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good, they argue that grand designs for lifting up poor countries don't work any better than centralized economic planning in rich ones.

Sometimes the argument is cast as pitting cautious, market-oriented pragmatists like Easterly against dreamers like Jeffrey Sachs, the economist and bestselling author who has emerged as the undisputed guru of the global anti-poverty movement. In reality, though, the debate is far more nuanced. Sachs, the key architect of the MDGs, established his credentials as an advocate of free-market reforms when he was advising countries like Poland and Bolivia to cut government spending and adopt strict anti-inflation policies in the 1980s. Even the most ardent advocates of more aid don't claim assistance alone is somehow going to create Asian-style economic dynamism. "An absence of aid spending is not a cause of global poverty," says Gerry Barr, president of the Canadian Council for International Cooperation. "But aid is a critically important bridge to initiatives which may be incredibly valuable in the developing world."

No doubt aid has often been wasted or spent inefficiently. One acknowledged problem is the bewildering array of uncoordinated support programs in many poor countries - from bilateral aid, to niche programs sponsored by religious charities, to loans from the World Bank. Barr cites a country like Ghana, whose government must cope with "an infinitude" of non-governmental organizations, along with perhaps 15 significant donor countries with missions coming and going each year. All have their own priorities and standards for accountability. An effort to streamline the aid relationship was launched in 2005 with the so-called Paris Declaration. The aim is to funnel more aid toward the government budgets of developing countries, instead of separate aid-funded projects, track results, and improve accountability.

Another high-profile bid to find ways to improve the payoff from every aid dollar spent is Sachs's highly touted millennium villages project. Under the program, impoverished villages are given the basics - typically fertilizer and seeds, mosquito nets, a water supply, health care and schools - and then are monitored to see how they use these building blocks to improve their lot. Arguing that surprisingly little is needed to alleviate the worst suffering, Sachs calls extreme poverty a "stupid reason" for anyone to die. He estimates the developed world would have to roughly double aid budgets to more than US$200 billion a year to end poverty in a generation.

If that sounds like a lot, consider the fact that more generous aid would not be spent in a vacuum. The world economy is humming along nicely and, at least in theory, more assistance could help usher poor countries into that expanding global marketplace - if they were welcome. A point of shame for the rich North has to be the failure of the WTO's Doha talks to hammer out a deal to open their markets to exports from the poor South. The latest breakdown in talks last month was blamed by some on the refusal of developing countries to agree to cut their own tariffs on manufacturing imports in return for the U.S. and European Union reducing farm subsidies and tariffs on agricultural imports.

Canada can't hope to drive the Doha round, but Canadians have other reasons to question Ottawa's commitment to the poorest countries. The latest Organization for Economic Cooperation and Development tally of official development assistance puts Canada in a dismal 15th spot, allocating about 0.3 per cent of gross national income to helping poor countries. That's far below aid spending levels in the Scandinavian countries, like Sweden and Norway, but also well behind Britain and France. (The U.S. and Japan, however, trail Canada.) Canada spends less than half of the UN target for all developed countries of 0.7 per cent, established by former prime minister Lester B. Pearson in a 1969 report for the World Bank.

Rather than committing to meet the UN standard, successive federal governments have set more limited goals. Prime Minister Stephen HARPER is maintaining the policy put in place by the Liberals under Jean CHRÉTIEN of boosting aid spending by eight per cent a year. But there is no plan that would bring Canada up to the 0.7 per cent threshold, or even achieve a Tory election pledge to aim for the OECD average of 0.46 per cent. "Canada is an almost uniquely bad example," says Barr, "because we have in combination this robust economy, this capacity to meet our obligations, and have systematically failed to do so."

Not surprisingly, the emphasis among federal aid officials tends to be on improving the effectiveness of spending, not boosting it. The federal aid agency, the Canadian International Development Agency, has been stung by recent criticisms, particularly from Senate committees, of its programs in Africa and Afghanistan. CIDA has responded by vowing in its latest strategic plan to focus this year on getting out the message about how Canada is helping, especially in fragile countries like Afghanistan, Haiti and Sudan.

But new questions are swirling about how committed Harper's government is on the MDGs, especially when it comes to African poverty. The government has opposed a private member's bill that would specifically require CIDA to direct aid to alleviating poverty, and provide quicker and clearer accounting for how it spends money. As well, Harper's recent trip to Latin America and the Caribbean underscored his still somewhat vague preference for shifting some of Canada's focus to the western hemisphere.

International Cooperation Minister Josée Verner, who is responsible for CIDA, recently said she is "just starting the process" of deciding how to implement that policy, and she has been noncommittal about whether it could mean less money for Africa. The North-South Institute's Foster says more CIDA spending in, say, Haiti and Bolivia would be welcome - but not if it means less for Ghana and Mozambique. "There's a lot of concern at the moment among Canadian NGOs in Africa and their African partners," he said. "If we're shifting orientation of aid to Latin America from sub-Saharan Africa, that's most, most unfortunate."

Setting priorities is always a tricky business when it comes to limited taxpayer resources. But maybe if Canadians were persuaded that the worst sort of poverty really could be vanquished, they would be willing to bankroll more aid in Latin America without shortchanging Africa. The case can now be made. The UN's aim of halving extreme poverty by 2015 will in all likelihood be achieved, thanks mainly to Asia's economic rise. Serious economists believe Africa could be next, given fair new trade rules from a salvaged Doha round, a decade or two of patient, more effectively targetted aid, and continued progress toward less corruption and conflict. It won't be easy, but the fact that it now looks possible should surely be enough.

Maclean's August 6, 2007