Indonesia | Economics

Tuesday, June 21, 2005

John Kay: Only the poor can make poverty history

Economist John Kay on debt reduction of poorest countries in Africa and the Making Poverty History movement.

(Financial Times, 21 June 2005). People in rich countries are not rich because people in poor countries are poor, nor vice versa. Rich countries are rich mainly because they have benefited from two centuries of evolution of political, economic and social institutions. Poor countries are poor mainly because they have not.

If this is even partly true, the capacity of rich countries to “make poverty history” is very limited. Rich countries can damage poor countries, by destroying their social structures or looting their resources, and they once did. But they have largely ceased to do this and when de-colonisation occurred there was widespread optimism about what could be achieved. Modern technology was available, so poor countries could be spared the long, unpleasant process of development experienced by existing rich countries. With sufficient investment in infrastructure, plant and machinery and education they could progress rapidly towards higher standards of living. Aid could bridge their funding gap. In retrospect, this all seems naive. Some still argue that these measures failed because of insufficient resources, but there is general acceptance that the principal weakness of the programme was inadequate attention to institutions.

But the modern mantra that institutions matter became equally simplistic. The complexity of historical experience was discarded in favour of the belief that the necessary institutions could be described in a few phrases – free markets, limited government, private property and fiscal prudence. Most poor countries given this medicine spat it out before it had time to take effect, which enables those who administered it to continue to argue for its efficacy. It does not really matter whether the drug fails because it is ineffective or because the patient cannot accept it.

Since then analysis and policy have focused on small-scale issues that make a demonstrable difference, such as the provision of malaria nets and pure water, free elementary education and the prevention and treatment of HIV/Aids. It is daunting to discover how many other changes are needed to make even these measures effective – nets must be re-impregnated with insecticide, education needs committed parents and educated teachers, HIV treatment requires a public health infrastructure and water systems maintenance. Even if such measures do not lead to rapid economic growth, and mostly they will not, they will make impoverished lives better.

But while thoughtful observers of international development have moved from advocating broad political programmes to targeted intervention, Sir Bob Geldof, for whom the lines “full of sound and fury, signifying nothing” might have been coined, has moved in the opposite direction. The first Live Aid concert sought funds for famine relief and was profoundly moving, but the supposed purpose is now to raise consciousness, not money. What should we do when our consciousness has been raised? The UK’s Make Poverty History coalition offers advice: wear a white arm band, go to Edinburgh, send an e-mail to Tony Blair, the prime minister.

It is time to get serious. The good news about extreme poverty is that more people have been lifted out of it in the past 10 years than in any decade in world history; that this is mainly the result of rapid economic growth in China and India, which is in turn principally due to internal reform not external action; that the real contributions of rich countries have mainly been through trade and investment, not aid; and that world leaders have played only a minor though constructive role in that process. The lesson is that world poverty will be ended by the actions of poor people themselves.

We in rich countries can make a modest contribution but if the United Nations’ millennium development goals to eradicate poverty are met, which is unlikely, it will be the achievement of the poor, not the rich, and the achievement of individuals, not politicians. The idea that leaders have the power to “make poverty history” but have been insufficiently engaged to exercise that power is ludicrous. Suggesting that political action is the source of economic advance reinforces the mistakes that have made poverty all too prevalent.

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