A preview of the unpublished book A CIVILIZATION WITHOUT A VISION WILL PERISH: AN INDEPENDENT SEARCH FOR THE TRUTH by David Willis. CHAPTER 1: INDIFFERENCE TO POVERTY (Part 49). This blog is a continuation of the review of The End of Poverty: How We Can Make it Happen in Our Life Time, by Jeffrey Sachs, published in 2005
Why Latin America’s middle-income countries failed to thrive
The poverty trap of the poorest countries is less puzzling, in some ways, than the stagnation that gripped a number of countries in Central and South America during the 1980s and 1990s. Table 2 shows that countries like Ecuador, Guatemala, Paraguay, and Peru experienced outright economic declines. These are not, in general, destitute countries, though they have destitute populations within them. How can we account for their development failures?
Three characteristics of these economies
I take up that question in more detail later. It will suffice here to note three characteristics of these economies. First, all of these economies face particular geographical difficulties. Ecuador and Peru are Andean countries, with populations divided between a lowland tropical environment and a mountainous highland environment. Transport conditions are hazardous and expensive. Paraguay, of course, is landlocked. Guatemala is a mix of mountains and low-lying tropical rainforests.
Sharp social divisions
Second, the Central American and Andean societies suffer from sharp social divisions, typically along ethnic lines. The European-descended population tends to be much richer than the indigenous and mestizo (mixed) populations. Europeans conquered the native populations, repressed them in many ways, and were generally uninterested in investing in their human capital until very recently. Politics have therefore been highly conflict laden and often violent.
Vulnerable to extreme external shocks
Third, these countries are all vulnerable to extreme external shocks, both natural and economic. Natural hazards include earthquakes, droughts, floods, and landslides. Economic hazards include the huge instabilities in international prices for the leading commodity exports of these countries, such as copper, fish meal, coffee, bananas, and other agricultural and mining products.
Continuing extreme poverty in the midst of economic growth
Even among the poor countries in Asia that experienced marked economic growth, extreme poverty often continues to afflict significant parts of the population. Economic growth is rarely uniformly distributed across a country. China’s coastal provinces, linked to world trade and investment, have grown much more rapidly than the hinterland to the west of the country. India’s southern states, also deeply integrated in world trade, have experienced much faster economic development than in the northern regions in the Ganges valley. Thus, even when average economic growth is high, parts of a country may be bypassed for years or decades.
The failure of government
Another reason for persistent poverty is the failure of government. Growth may enrich households linked to good market opportunities, but it may bypass the poorest of the poor even within the same community. The very poor are often disconnected from market forces because they lack the requisite human capital – good nutrition and health, and an adequate education. It is vital that social expenditures directed at human capital accumulation reach the poorest of the poor, yet governments often fail to make such investments. Economic growth enriches households, but it is not taxed sufficiently to enable governments to increase social spending commensurately. Or even when governments have the revenue, they may neglect the poorest of the poor if the destitute groups are part of the ethnic or religious minorities.
A third reason is cultural
A third possible reason for continued poverty in the midst of growth is cultural. In many countries, women face extreme cultural discrimination, whether or not those biases are embedded in the legal and political systems. In south Asia, for example, there are an overwhelming number of case studies and media reports of young women facing extreme undernutrition within the household even when there is enough to go round. The women, often illiterate, are poorly treated by in-laws and lack the social standing and perhaps legal protections to ensure their own basic health and well-being.
There are myriad possibilities for the persistence of poverty
In short, there are myriad possibilities for the persistence of poverty even in the midst of economic growth. Only a close diagnosis of particular circumstances will allow an accurate understanding. Policy makers and analysts should be sensitive, however, to geographical, political, and cultural conditions that may each play a role.
The greatest challenge: Overcoming the poverty trap
When countries get their foot on the ladder of development, they are generally able to continue the upward climb. All good things tend to move together at each rising rung: higher capital stock, greater specialization, more advanced technology, and lower fertility. If a country is trapped below the ladder, with the first rung too high off the ground, the climb does not even get started. The main objective of economic development for the poorest countries is to help these countries to gain a foothold on the ladder. The rich countries do not have to invest enough in the poorest countries to make them rich; they need to invest enough so that these countries can get their foot on the ladder. After that, the tremendous dynamism of self-sustaining economic growth can take hold. Economic development works. It can be successful. It tends to build on itself. But it must get started.