The End of Poverty Part 2 – Willis Ceramics

THE END OF POVERTY

HOW WE CAN MAKE IT HAPPEN IN OUR LIFE TIME

JEFFREY SACHS

PENGUIN BOOKS 2005

PART II

Chapter 1: A Global Family Portrait (Cont.)

Bangladesh: On the ladder of development

A few thousand miles away from this perfect storm is another scene of poverty. This is poverty in retreat, where the fight for survival is gradually being won, although still with horrendous risks and huge unmet needs.
This struggle is being waged in Bangladesh, one of the most populous countries in the world, with 140 million people living in the flood plains of the delta of the two great rivers, the Brahmaputra and the Ganges, that flow through Bangladesh on their way to the Indian Ocean.
Bangladesh was born in a war for independence against Pakistan in 1971, a year of massive famine, leading to the label of an “international basket case.”
Bangladesh today is far from a basket case. Per capita income has approximately doubled since independence. Life expectancy has risen from 44 years to 62 years. The infant mortality rate has declined from 145 in 1970 to 48 in 2002.
Bangladesh shows us that even in circumstances that seem the most hopeless thee are ways forward if the right strategies are applied, and if the right combination of investments is made.
Sweatshop jobs are the targets of public protest in developed countries; those protests have helped to improve the safety and quality of the working conditions.
The rich-world protesters, however, should support increased numbers of such jobs, albeit under safer working conditions, by protesting the trade protectionism in their own countries that keeps out garment exports from countries such a Bangladesh.
These young women already have a foothold in the modern economy that is a critical, measurable step up from the villages of Malawi – the first step out of extreme poverty.
What was most striking and unexpected about the stories was the repeated affirmation that this work was the greatest opportunity that these women could ever have imagined, and that their employment had changed their lives for the better.
The Bangladeshi women told how they were able to save some small surplus from their meager pay, manage their own income, have their own rooms, choose when and whom to date and marry, choose to have children when they felt ready, and use their savings to improve their living conditions and especially to go back to school to enhance their literacy and job-market skills.
As hard as it is, this life is a step on the way to economic opportunity that was unimaginable in the countryside in generations past.
Not only is the garment sector fueling Bangladesh’s economic growth of more than 5% per year in recent years, but it is also raising the consciousness and power of women in a society that was long brazenly biased against women’s chances in life.
We visited a village near Dhaka with one of the leaders of an inspiring nongovernmental organization, the Bangladeshi Rural Advancement Committee, now known universally as BRAC.
We met representatives from a village association, which BRAC had helped to organize, in which women living about an hour outside the city were engaged in small-scale commercial activities – food processing and trade – within the village and on the roads between the village and Dhaka itself.
These women presented a picture of change every bit as dramatic as that of the burgeoning apparel sector.
BRAC and its famed counterpart, Grameen Bank, pioneered this kind of group lending, in which impoverished recipients (usually women) are given small loans of a few hundred dollars as working capital for microbusiness activities.
Default rates are extremely low, and BRAC and Grameen have figured out how to keep transaction costs to a minimum.
The jobs for women in the cities and in rural off-farm microenterprises; a new spirit of women’s rights and independence and empowerment; dramatically reduced rates of child mortality; rising literacy of girls and young women; and, crucially, the availability of family planning and contraception have made all the difference for these women.
With fewer children, a poor household can invest more in the health and education of each child, thereby equipping the next generation with the health, nutrition, and education that can lift Bangaladesh’s living standards in future years.
Bangladesh has managed to place its foot on the first rung of the ladder of development, and has achieved economic growth and improvements to health and education partly through its own heroic efforts, partly through the ingenuity of NGOs like BRAC and Grameen bank, and partly through investments that have been made, often at significant scale, by various donor governments that rightly viewed Bangladesh not as a hopeless basket case but s a country worthy of attention, care, and development assistance.

India: center of an export services revolution

If Bangladesh has one foot on the ladder, India is already several steps up the ladder. Chennai is a center of India’s IT revolution, one that is beginning to fuel unprecedented economic growth in this vast country of one billion people.
The IT revolution is creating jobs that are unknown in Malawi and still largely unthinkable in Bangladesh, but that are becoming the norm for educated young women in India.
One company has a remarkable arrangement with a hospital in Chicago, where doctors dictate their charts and transmit them by satellite to India as voice files at the end of each work day in Chicago.
Dozens of young women who have taken a special course in medical data transcription earn about $250 to $500 a month, depending on their level of experience, between a tenth and a third of what a medical data transcriber might earn in the United States.
Their income is more than twice the earnings of a low-skilled industrial worker in India and perhaps eight times the earnings of an agricultural laborer.
The entrepreneur who started up this firm has close relatives in the United States who made the business connections on the U.S. side. It is moving from data transcription to financial record keeping, and soon into financial consulting and advising as well as back-office processing operations or BPO in the new jargon of the global economy.
They are women whose mothers, typically, were the first in the family to become literate and to gain a foothold in the urban economy (perhaps as seamstresses in the sweatshops), and whose grandmothers were almost without a doubt rural laborers in the overwhelmingly village economy of two generations before.
Many parts of India, particularly in the north, are still caught in the back-breaking rural poverty that grips Malawi and parts of Bangladesh. Much of urban India resembles Dhaka. Only a few leading “growth poles” share the cutting-edge feel of IT-driven Chennai.
Yet so powerful are the new trends in India, not only in IT but also in textiles and apparel, electronics, pharmaceuticals, automotive components, and other sectors, that the overall economic growth of India is reliably now 6% or more per year.
India is beginning to nip at the heels of China’s growth rates, and investors around the world are warming to the notion of establishing operations, from IT to manufacturing research and development, in the fast-growing economy.
One of the ironies of the recent success of India and China is the fear that has engulfed the United States that success in these two countries comes at the expense of the United States.
These fears are fundamentally wrong and, even worse, dangerous. They are wrong because the world is not a zero-sum struggle in which one country’s gain is another’s loss, but is rather a positive-sum opportunity in which improving technologies and skills can raise living standards around the world.
As India’s economy grows, its consumers opt for a growing array of U.S. and European goods and services for their homes and businesses.

China: The rise of affluence

Beijing has emerged not only as a major capital of the developing world, but also as one of the world’s economic capitals. It is now a booming city of 11 million. Annual income has surpassed $4,000 per capita, and the Chinese economy continues to soar at above 8% growth per annum.
My hosts showed me the new cell phones they had just purchased that were also digital cameras. This was a gadget that I had not yet seen back home.
Within a single generation, China has become one of the most important economies and trading powers of the world.
These young Chinese men and women have the chance to attain tremendous affluence, to travel the world, and to enjoy the other benefits of the high living standards available to them because of the powers of globalization.
Within two decades, China has gone from being a virtually closed society and economy to one of the great export powers of the world.
Its exports have been fueled by a vast inflow of foreign investment and technology, which brought the money to build modern factories together with the machinery and techniques to run them, in combination with relatively low-cost Chinese workers who are increasingly proficient in skills of all sorts.
The result has been the rise, in one industry after another, of highly competitive enterprises that have in-creased China’s exports from around $20 billion in 1980 to around $400 billion in 2004.

Ascending the ladder of development

The developing world falls into four broad categories. Malawi with 84% in rural areas, where men of working age have died of AIDS and the margin of survival is extraordinarily narrow but funding for one of the best conceived strategies was a fraction of that required – a perfect storm bringing together climatic disaster, impoverishment, AIDS, malaria, and schistosomiasis.
Bangladesh, with 76% in rural areas, the international basket case, not out of the grip of extreme poverty but where the fight for survival is gradually being won, with its foot on the first rung of the development ladder.
India, with 72% in rural areas, the center of an export services revolution and where overall economic growth is 6% per year.
China with 61% in rural areas, where economic development is speeding ahead at full throttle, economic growth is above 8% pa and annual income has surpassed $4,000 per capita.
If economic development is a ladder there are roughly one billion who live as the Malawians; a few rungs up there are 1.5 billion like those in Bangladesh; 2.5 billion another few rungs up like those in India; and still higher up the ladder one billion in the high income world.
The greatest tragedy of our time is that one sixth of humanity is not even on the development ladder, trapped by extreme poverty, disease, physical isolation, climate stress, environmental degradation.
Even though life-saving solutions exist to increase their chances for survival, these families and their governments simply lack the financial means to make these crucial investments.
The world’s poor know about the development ladder: they are tantalized by images from halfway around the world. But they are not able to get a first foothold on the ladder, and so cannot even begin the climb out of poverty.

Who and where are the poor?

There are many definitions, as well as intense debates, about the exact numbers of the poor, where they live, and how their numbers and economic conditions are changing over time.
Extreme poverty means that households cannot meet basic needs for survival. They are chronically hungry, unable to access health care, lack the amenities of safe drinking water and sanitation, cannot afford education for some or all of the children, and perhaps lack rudimentary shelter – a roof to keep rain out of the hut, a chimney to remove the smoke from the cook stove – and basic articles of clothing, such as shoes. Extreme poverty occurs only in developing countries.
Moderate poverty generally refers to conditions of life in which basic needs are met, but just barely.
Relative poverty is generally construed as a household income level below a given proportion of average national income.
The relatively poor, in high-income countries, lack access to cultural goods, entertainment, recreation, and to quality health care, education and other perquisites for upward mobility.
The World Bank has long used an income of $1 per day per person to determine the numbers of extreme poor around the world, and an income between $1 per day and $2 per day to measure moderate poverty.
It is estimated that roughly 1.1 billion people were living in extreme poverty in 2001, down from 1.5 billion in 1981.
The overwhelming share of the world’s extreme poor, 94% in 2001, live in three regions: East Asia, South Asia, and sub-Saharan Africa. Since 1981, the numbers of extreme poor have risen in sub-Saharan Africa, but have fallen in East Asia and South Asia.
Almost half of Africa’s population is deemed to live in extreme poverty, and that proportion has risen slightly over the period.
The proportion of the extreme poor in East Asia has plummeted, from 58% in 1981 to 15% in 2001. In South Asia progress is less dramatic, from 52% to 31%.
Latin America’s extreme poverty rate is stuck at around 10%. Eastern Europe’s rose from a negligible level in 1981 to 4% in 2001, the result of the upheavals of communist collapse and economic transition to a market economy.
East Asia, South Asia and sub-Saharan Africa dominate with 87% of the world’s 1.6 billion moderately poor.
The numbers of moderate poor in East Asia and South Asia have actually risen as the poorest households have improved their circumstances from extreme poverty to moderate poverty.
Some 15% of Latin Americans live in moderate poverty, a rate that has been fairly constant since 1981.
A country as a whole is deemed to suffer from extreme poverty if the proportion of the population in extreme poverty is at least 25% of the total.
Most of the countries of sub-Saharan Africa are in extreme poverty (and even more would be in this category but for lack of reliable data), as are the countries of South Asia.
East Asia and Latin America include many countries in moderate poverty, but also many that have risen beyond moderate poverty in recent decades.
The poorest of the poor are mainly in the rural areas, though with a growing proportion in the cities.
They face challenges almost unknown in the rich world today – malaria, massive droughts, lack of roads and motor vehicles, great distances to regional and world markets, lack of electricity and modern cooking fuels – challenges that are at first harrowing to contemplate, but on second thought encouraging, precisely because they also lend themselves to practical solution.

Our generation’s challenge

Our generation’s challenge is to help the poorest of the poor to escape the misery of extreme poverty so that they may begin their own ascent up the ladder of economic development.
When I speak of the ‘end of poverty’ I speak of two closely related objectives. The first is to end the plight of one sixth of humanity that lives in extreme poverty and struggles daily for survival. Everybody on Earth can and should enjoy basic standards of nutrition, health, water and sanitation, shelter, and other minimum needs for survival, well-being, and participation in society.
The second is to ensure that all of the world’s poor, including those in moderate poverty, have a chance to climb the ladder of development. As a global society, we should ensure that the international rules of the game in economic management do not advertently or inadvertently set snares along the lower rungs of the ladder in the form of inadequate development assistance, protectionist trade barriers, destabilizing global financial practices, poorly designed rules for intellectual property, and the like, that prevent the low-income world from climbing up the rungs of development.
These, then, are the economic possibilities of our time: To meet the Millennium Development Goals by 2015; To end extreme poverty by 2025; To ensure well before 2025 that all of the world’s poor countries can make reliable progress up the ladder of economic development; To accomplish all of this with modest financial help from the rich countries, more than is now provided, but within the bounds of what they have promised.
To meet these challenges, we first have to understand how we got to where we are, for in that understanding we will also find the way forward.

Chapter Two: The Spread of Economic Prosperity