transportation impacts poverty
Transportation impacts global poverty in ways that are both obvious and subtle. If the job market is centered in an urban area and potential workers live in a distant, rural area, their immediate survival depends on access to transportation. On a larger scale, the ability for a developing country to transcend poverty and become productive and prosperous depends a great deal on the transportation systems that are implemented with the help of foreign aid. This article analyzes five ways transportation impacts global poverty.

Five Ways Transportation Impacts Global Poverty

  1. Rural isolation arguably deserves its own list of ways transportation impacts global poverty because it has so many consequences that perpetuate continued destitution. For example, farmers in isolated rural environments often fail to reach their economic potential because they cannot easily access marketplaces that offer seeds, fertilizers and other tools for agricultural success.
  2. Other casualties of rural isolation are the elderly or otherwise infirm. Healthcare services are usually in centralized urban locations. Even if the poor and sick or even the old, pregnant or injured can afford the costs associated with health services, they are often unable to get to where the providers are if they live in rural communities. World Bank has helped to address this in developing regions of India, Georgia and Vietnam by subsidizing travel costs and making health professionals available in more remote areas.
  3. Investing in basic infrastructure is often one of the most significant ways in which transportation impacts global poverty. The building of roads, trails and bridges creates greater accessibility even for those who can only travel on foot. Jobs are created to facilitate these developments, and there are often new modes of public transportation implemented to make use of newly created roads or railroad tracks. This helps to minimize the travel time between rural and urban regions. Bill Gates asserts that while domestic resources can and should be utilized for infrastructure investment, global aid is a critical component as well. An investment in a developing country ultimately benefits the entire world, including the wealthiest nations.
  4. It stands to reason that the more easily a population can access educational facilities, the more educated that population is likely to be. People living more than an hour’s walk from the main road in Papua New Guinea were shown to be experiencing twice as much poverty as those living closer to the road. Building new roads and providing greater access to transportation resulted in an increase in education enrollment and literacy as well as an overall decrease in poverty.
  5. A theory known as “spatial mismatch” describes a phenomenon in which those who can easily pay for transportation, whether by automobile or public means, move away from congested urban regions. This creates a problem for the poor because the market often follows the wealthy as do the jobs. In developing countries, this is especially problematic since it feeds a cycle of poverty in which cheap housing options are only available in areas where there are few amenities, poor transportation options and limited jobs.

Writer Wilfred Owen asserts, “Continuing global prosperity is contingent on the very large volume of trade with developing countries and on the foreign investment opportunities they provide.” This will not be feasible without a short-term investment in the infrastructure and transportation systems of those developing countries. While the governments of the developing nations play a vital role in upgrading transportation options in their countries, foreign aid must also play a part. As this article shows, transportation impacts global poverty; therefore, it is not a simple matter of charity but rather a wise investment in our global future.

Raquel Ramos
Photo: Flickr

investing in Zimbabwe
Zimbabwe, a landlocked country located in Southern Africa, is becoming an interesting area for foreign investments. China is planning on investing more than $3 billion in the country this year. Some of the projects include investments in the hospitality, steel, mining and manufacturing sectors. China has been a major investor in Zimbabwe, accounting for more than 70 percent out of total Foreign Direct Investment (FDI).

Current Economic Climate

Acting Chinese Ambassador Zhao Baogang, stated that China has strong confidence in Zimbabwe. After the efforts made by the Government of Zimbabwe, China believes that more investments will be attracting, the economy will go back to normal and the country will become prosperous and strong. Baogang is referring to the past government corruption under dictator Robert Mugabe and the hyperinflation that caused many inhabitants to struggle to afford food.

With a per capita GDP of $1,000, many Zimbabweans struggle, finding it hard to afford even the essentials. One such indirect solution has been provided by external companies and nations investing in Zimbabwe, creating jobs and bringing the country out from poor economic conditions. Zimbabwean politician Patrick Chinamasa stated that he believes working with China is necessary and wise because they have been able to take almost 300 million people out of poverty. Chinamasa is the Finance Minister and trusts China to help the poverty-stricken nation grow financially. He believes that more jobs and less government corruption will help renew business interests in Zimbabwe.

China’s Past Investing Success

China has had previous success with investing in Africa. This year is not the first time China has partnered with an African country in a business venture. Shoemaker Huajian Group had a huge financial success in Ethiopia thanks to Chinese investment. The shoemaker is set to expand to Zimbabwe, opening a $2 billion shoe factory in the country. It will be Huajian Group’s second-largest shoe factory, second to their largest facility built in Addis Ababa, Ethiopia. If the deal is followed through, over 15,000 jobs will be created.

Future of Investing in Zimbabwe

According to Baogang, 2019 is an important year, as many international companies have discussed or already began their projects in Zimbabwe. Jinan Sinotruck Co. is a Chinese light truck maker that is collaborating with Quest Motors, a struggling vehicle manufacturer based in Mutare, to help them succeed again. More outside investors are seeing future financial prospects in steel, a basic component in building automobiles.

Investing in Zimbabwe is one opportunity external investors view as crucial for lithium mining. The Bikita and Kamatavi mines are seen as viable investments as the world turns to electric cars, which, such as the Tesla Model S and Chevy Volt, utilizes power from lithium-ion batteries. Pacemakers and other battery-utilized medical equipment make use of lithium batteries as well. With the future automobile industry appearing battery-powered, more companies are becoming interested in lithium mining. Zimbabwe’s ambassador to China Paul Chikawa has echoed Baogang’s optimistic statements, stating that Chinese investors are interested in projects involving tourism, manufacturing and mining.

Other International Investors

The outside involvement in the country’s lithium mining is good news for Zimbabwe. Various companies, such as Prospect Resources, founded in Australia and listed on the Australian Securities Exchange, invested more than $165 million in Zimbabwe’s lithium mining industry through the Arcadia Lithium Project. The company stated that $3 billion in export revenue is feasible. Baogang mentioned that two other companies are interested in lithium mining in the Kamativi mine in Matabeleland North province and that some progress has already been achieved.

According to diplomats from Australia and China, several more investors are interested in investing in Zimbabwe. They are keen on expanding to a nation with many prospects in the mining, hospitality, steel, agriculture, rail and timber industries. With many investors interested in Zimbabwe, the nation is set to create new jobs and grow financially, providing its citizens with better living conditions along the way.

– Lucas Schmidt

Photo: Flickr

Ethiopian PM Turns to Privatization to Further Economic Growth

In a move atypical of his political alignment with the Ethiopian People’s Revolutionary Democratic Front (EPRDF), Prime Minister Abiy Ahmed announced in June 2018 that the government will begin procedures to implement privatization in Ethiopia of various state-owned enterprises (SOEs) in telecommunications, energy and transportation.

Already one of the fastest growing economies in the world, Ethiopia hopes to continue this trend by selling shares in some of the country’s most profitable and promising industries. In this announcement, Ahmed proposed that privatization of these booming enterprises will aim to increase foreign direct investment (FDI), lessen the unemployment rate and reduce poverty.

Ethiopia’s Recent Improvements

The second largest country in Africa and home to more than 100 million people, Ethiopia has been experiencing tremendous economic growth in recent years. Unemployment has dropped from more than 26 percent in 1999 to less than 17 percent in 2015. The poverty rate has decreased from nearly 46 percent in 1995 to less than 30 percent in 2010.

While Ahmed has only been in office since April of 2018, his vows to reform Ethiopia economically and socially have surprised many. Since their coming to power in 1991, the EPRDF’s has had a history of complete state-ownership of the majority of the industry. The state, however, will remain in control of the majority of shares in the industries being opened up to foreign investment.

His promises of calming social tension and revamping the economy have been met with some skepticism, but Ahmed fervently retains that his intentions are to restore Ethiopia to a place of social stability, economic prosperity and peace. Ahmed has even gone as far as to reach out to Ethiopia’s long-term enemy, Eritrea, to find common ground.

The Prime Minister’s Plans

Although the government has yet to release detailed plans as to how they intend to implement privatization in Ethiopia, they have been working with consulting agencies abroad such as PwC and McKinsey to determine a practical and sustainable way to carry out an economic overhaul of such magnitude.

Among the SOEs the government plans to privatize, the introduction of Ethiopian Airlines to the private sector, in particular, represents a key component in Ahmed’s economic plan; Ethiopia will experience a shift from an agrarian society to a modern, competitive, industrial society. As the country’s national flag carrier and a symbol of state pride, Ethiopian Airlines has garnered an intake of hard currency (currency unlikely to be affected by inflation) three times that of coffee, a long-standing staple of Ethiopia’s economy.

Increasing Foreign Investment

The privatization of Ethiopian Airlines also indicates Ahmed’s desire to transform Ethiopia into a major air travel hub, similar to Emirates’ position in the United Arab Emirates. This will serve as a way to bring in foreign investors and to present Ethiopia as a modern contender in the world economy. By selling shares of Ethiopian Airlines and other rapidly-growing SOEs such as Ethio Telecom, Ethiopian Electric Power and Railway Corporation, Ahmed hopes to draw foreign investment since Ethiopia has experienced an alarming shortage of foreign exchange in recent years.

While privatization in Ethiopia is sure to be a slow transition, and the government will most likely remain majority shareholders in the enterprises they are selling, the country appears to be heading in a positive direction. Between 2004 and 2014, Ethiopia averaged annual economic growth of 10.9 percent and is projected to grow another 8.7 percent in the next two years.

With a goal of reaching lower-middle income national status by 2025 and a government promising major social and economic reform, Ethiopia has established itself as a nation in the midst of a true revival. Hopefully, Ahmed’s plan of privatization in Ethiopia will prove to be a positive step for the country’s future economic growth.

Rob Lee

Photo: Flickr

The 7 Virtues and Afghanistan's Opium EpidemicIn the war-torn country of Afganistan, groups such as the Taliban enlist the help of opium farmers to finance their terrorist operations. Since opium crops are the most effective way to make a profit, farmers living in poverty have little to no reasons to resist contributing to the drug trade.

However, farmers in Afganistan can defeat terrorism with this unexpected strategy- selling oranges and roses. A perfume company called The 7 Virtues pays a generous amount for these ingredients which are used in the perfumes so that families can have a sustainable livelihood. Their philanthropy benefits the people of Afghanistan, the United States, and the world in general.

Opium Production in Afganistan

There is a huge demand for opium in Afghanistan, but the consequences of this illegal drug extend far beyond the country’s borders. Afghanistan farmers produce between 70 and 80 percent of the world’s supply of opium, and the drug industry spurring on their production is responsible for opium-related deaths throughout the world. In addition to funding terrorist operations, growing opium encourages other illegal behaviors and contributes to Afghanistan’s violent atmosphere.

It is no coincidence that some of the poorest farmers in the world are producing opium in Afghanistan. To survive, families must resort to a form of employment they might abstain from under less desperate circumstances. However, selling legal crops is not very profitable. Experts concerned about the economic development of Afghanistan have warned against stifling the opium trade because they don’t want more than three million farming families to lose their main source of income. Renting land is expensive for shareholders, so they need to sell crops in high demand. Compared to legal crops, opium brings in the most revenue.

The 7 Virtues

Barb Stegemann, the founder of The 7 Virtues, is determined to address violence and economic instability in Afghanistan with economic power. Many businesses in the fashion industry exploit cheap labor without giving the workers sustainable wages, so the company hopes to set a good example for others to follow. It lifts more than 1,000 families in Afganistan out of poverty by paying twice as much for essential oils to the farmers as they would get by selling opium. By selling legal crops for a generous price, this simultaneously limits financial support for terrorist groups. The company does business with other countries affected by violence and conflict such as Haiti, Rwanda and countries in the Middle East.

Legal crop production benefits more people than just farmers in the country. Reduced activity from terrorist groups is good for U.S. national security and saves people from opium addiction all over the world. Stegemann’s motto is: “Good for the world. Good for your skin.” Not only that perfumes made by The 7 Virtues are phthalate and paraben free, but they are also not tested on animals. Due to their rising popularity, the perfumes will be sold in Sephora outlets. Partnering with a mainstream beauty store helps maximize their visibility among consumers and makes the perfume easily accessible for supporters of Stegemann’s company.

Other Methods for Opium Reduction

The elected government in Afghanistan has introduced several other methods for interrupting the opium trade. They’re currently testing the effectiveness of aircraft that spray herbicides over poppy fields. This practice is announced prior to the harvest season that gives opium farmers a chance to make the decision of planting legal crops. The government is also confiscating the property of landlords who encourage shareholders to grow opium poppy plants. Future plans include research on types of crops grown in provinces controlled by terrorist groups. This will provide information about where they collect revenue and allow the government to focus their opium eradication efforts.

Barb Stegemann began a legacy to demonstrate the power of investment for alleviating poverty. Instead of fighting terrorism with more violence, she proves that Afghanistan’s problems can be solved with a bottle of fragrance.

Sabrina Dubbert
Photo: Flickr

Upaya Invests in India to Create JobsAccording to the World Poverty Clock, five percent of India’s total population (1.3 billion people) face extreme poverty, with each person living on at most $1.90 per day. With such huge numbers, Upaya invests in India to provide stable jobs and steady income to the poor.

Upaya Investing in India

Derived from a Sanskrit word, Upaya means “Skillful means” or “method,” meaning any activity, skill, experience or practice that helps one toward the realization of a goal. With similar intentions, Upaya is tirelessly providing long-term solutions for people living in extremely poor conditions across India.

Seattle-based Upaya invests in India to create employment for the poorest of the poor through its accelerator program and investments in partner enterprises across regions that face extreme poverty. The firm supports early stage enterprises that ensure people in extreme poverty have a stable job and steady income, making them more self-reliant. So far, its 14 partner enterprises have already created over 8,500 sustainable jobs, effectively lifting many job seekers out of extreme poverty.

An Interview Between The Borgen Project and Upaya

The Borgen Project spoke to Upaya CEO, Kate Cochran, to get deeper insights into the firm’s accelerator program and how Upaya invests in India:

The Borgen Project (TBP): Tell us something about Upaya and how it all started?

Kate Cochran (KC): Upaya was originally inspired by a research project which was led by our co-founder Sachi Shenoy to answer the question – how do you scalably serve the extreme poor? We use the World Bank definition of people living on $1.90 or less a day. Our model is to invest in social entrepreneurs who are creating businesses that can create the jobs that employ the poor.

TBP: Can you talk a little about Upaya’s accelerator program?

KC: In 2017, we took our learnings from our first five years and created a program which allowed us to work with more companies at one time and more companies that we can afford to invest in. We bring them together for workshops. We connect them with mentors and experts in the field. We get to know them and we do field visits and at end of the period. We select one to three of those companies for equity investments from Upaya.

TBP: Is there a different focus sector every year that Upaya invests in India?

KC: It is a different theme each year. We select segments in industries that we focus on because we find that by grouping companies, probably in the same industry but not so narrowly that they feel competitive with each other, we can put together a curriculum that is more valuable to them. This is not only because each industry has its particular needs but also it’s easier for us to compare the companies. In 2017, it was the skills gap, this year it is agribusiness and we are in the middle of that accelerator. Next year, our accelerator will be in rural manufacturing.

TBP: Which countries are currently benefitting from Upaya’s accelerator program?

KC: India currently is our main focus, but we will be moving to other countries in the future.

TBP: What kind of jobs are generated when Upaya invests in India?

KC: We have made 14 investments that have created just under 9000 jobs. The jobs are quite varied across our portfolio.

For example, we have an investment in a waste management company in Bangalore that has built a model of forming teams to separate recycled old material from landfill waste in a very efficient way. These teams are located on corporate campuses, and so people who are employed in doing this have a full time 40-hour week, traditional wage jobs. At the same time, the company also provides reliable income for rag pickers, who have worked highly exploitative and dangerous environments in the past. The firm provides reliable, formal employment and also trains them on how to collect this material in a safe way. Such jobs are reliable jobs and help in creating a reliable living.

And this is just one company. There is a lot of diversity in the jobs created. But what we look at to be called a job – we want to know that the individual who is doing this is able to earn an income, at least a minimum of six months a year, that is high enough to move them beyond extreme poverty.

TBP: How do you measure the success of your partner enterprises at ground level?

KC: Sachi Shenoy, our co-founder, leads a practice to get to the job holder level and conduct surveys to see whether their income level is changing. We track household income, living standards, quality of their house, whether their children are going to school and other things.

TBP: What are the challenges that you face in countries like India that has a large population living in poverty?

KC: We face the same challenges really that our partners face since we are very invested in their success. Challenges would be like the changes in the central government policies, like when the GST came out or the demonetization happened. But even with the challenges, the good part of working in India is that it remains a huge market that can grow very quickly.

Deena Zaidi

Photo: Flickr

capital flows support economic growthEconomic growth is one of the most powerful tools for reducing poverty, and a key driver of economic growth is investment. Argentina and Saudi Arabia, two countries that have committed to political and economic reforms in recent years, are hoping to spur investment from abroad. The announcement by MSCI, an equity index provider, to classify them as emerging markets has attracted sizable foreign investments to the two countries. But whether the capital flows support economic growth is still up for debate.

MSCI

MSCI created its Emerging Markets Index in 1998 and since then it has become a benchmark for investment in emerging markets. Many investment funds track the index by buying a similar composition of stocks. Therefore, when stocks are added to the index it inevitably prompts investment flows to increase in certain countries.

In late June, MSCI decided to add Argentina and Saudi Arabia to its emerging markets index. The decision is a result of the reform efforts in both countries. The Crown Prince of Saudi Arabia, Mohammad bin Salman, is trying to shift the country from its oil dependency and increase social liberalization, including allowing women to drive while President Mauricio Macri of Argentina has sought to end disputes with international investors and remove barriers to capital entering and leaving the country.

The effects of their addition to the index may be profound. Some estimates predict approximately $3.5 billion and $40 billion of capital inflows into Argentina and Saudi Arabia respectively in the coming year. The inflows could lead to businesses in these two countries giving them cheaper access to credit that will further lead to more investments; thus boosting economic growth and productivity.

Poverty in Saudi Arabia and Argentina

The two countries are seeking to boost economic growth and stability by any means possible. Saudi Arabia’s economy contracted 0.7 percent in 2017, driven by lower oil prices. Argentina also had to turn to the International Monetary Fund for a $50 million line of credit after capital flight weakened its currency.

Given these countries’ extensive poverty, economic growth is needed for their governments to maintain its credibility. Argentina’s poverty rate is over 25 percent, and while there are no exact figures for poverty in Saudi Arabia, it is believed that almost four million people or approximately 12 percent of the population, live on less than $17 a day.

Do Capital Flows Support Economic Growth?

Do capital flows support economic growth in emerging markets? The answer to that is vague. Take Africa for instance. An economic study concerning private capital inflows found that capital flows had a detrimental effect on Africa’s economic growth in the absence of well-developed financial markets. Conversely, a research paper by the World Bank in 2015 found that capital inflows into Sub-Saharan Africa would have a positive effect on its economic growth. This study found, however, that the most effective type of capital inflow in boosting growth wasn’t private capital flows but aid.

The economic literature debating whether capital flows support economic growth is expansive and divisive. Therefore, increasing private capital flows to Argentina and Saudi Arabia may or may not be the answer to the economic instability plaguing the two countries. But both aid and private capital will continue to play an important role in the economic growth and futures of emerging markets.

– Mark Fitzpatrick
Photo: Pixabay

US Investments Strengthening Education in TunisiaThe United States has invested $100 million in strengthening education in Tunisia, Africa. The project, known as Strengthening Foundations for Learning, is designed to support the government in addressing major challenges in primary education.

What Will the Project Do?

The main goal is to direct resources toward key areas for a transformative impact on student learning. The project will focus on expanding access to quality early childhood education, strengthening literacy and numeracy in the early grades, improving teacher skills and improving school management, accountability and student assessment.

Investment in high-quality early childhood education is one of the most cost-efficient investments in human capital. These investments have been linked to significant improvement in primary education grade promotion, reduction in repetition and dropout rates.

“By investing in education, Tunisia is investing in the future,” says Marie Francoise Marie-Nelly, World Bank Country Director for the Maghreb. “Quality basic education is a way of giving children the opportunity to become active participants in the transformation of the societies in which they live, and to contribute to future growth and prosperity.”

Who Will the Project Benefit?

The Strengthening Foundations for Learning Project will improve learning conditions in public preschools and primary schools. Increasing access to public preschool education in selected districts will be a main focus as well as strengthening management practices in education. The project aims to empower school leaders and instructional staff to work collaboratively to raise student achievement by strengthening education in Tunisia.

The direct project beneficiaries include an estimated 1,144,000 students attending public preschools and primary schools. Another 64,000 primary school teachers will benefit from improved opportunities for professional development. Furthermore, 5,360 primary school directors and deputy directors, 615 pedagogical inspectors and 850 pedagogical counselors will benefit from this project.

“Tunisia has successfully addressed issues of access to schooling, having achieved universal primary education and gender parity more than two decades ago, but the quality of education has suffered and students need to be supported in developing strong foundational skills,” says Michael Drabble, World Bank Senior Education Specialist and co-Task Team Leader.

What Does Strengthening Education in Tunisia Mean?

There are four core components attached to this project investment for strengthening education in Tunisia:

  1. Improving quality and increasing supply of public preschool education at an estimated total cost of $19.6 million.
  2. Improving learning conditions in public primary schools at an estimated total cost of $46.6 million.
  3. Strengthening management practices in the education sector at an estimated total cost of $32.5 million.
  4. Project Management Support at an estimated total cost of $1.3 million.

“Teachers need access to relevant and well-designed professional development programs to help them adapt new instructional methods to boost learning in the classroom. Well-prepared and committed school leaders are needed to turn around poor performing schools,” says Samira Halabi, World Bank Senior Education Specialist and co-Task Team Leader of the project.

This type of investment will provide unprecedented strengthening of education in Tunisia benefiting thousands of primary education students. Tunisia has a total of 2,199,000 students enrolled in primary and secondary education. Of these students, about 1,047,000, or 48 percent, are enrolled in primary education.

In Tunisia, the primary net enrollment rate is 99 percent and the primary completion rate is 102 percent. Both of these indicators provide a sense of the progress the country is making toward universal primary education.

The United States investment in Strengthening Foundations for Learning is a generous one with only beneficial outcomes. Continuously strengthening education in Tunisia is only going to provide better education and more access so that the country can grow and improve.

– Richard Zarrilli
Photo: Flickr

Why US Businesses Should Invest in AfricaThe continent of Africa is home to seven of the fastest growing economies in the world. Seen as the “final frontier” for investors, Europe and China have pioneered these investments. Consequently, China has become Africa’s number one trading partner and job creator. American businesses, on the other hand, have been slow to invest in Africa and lag behind. As Josh Becker, the CEO of Impele Consulting Group, said, “We are seeing tremendous growth in interest in Africa [from the U.S.], but not the same growth in action”.

Africa is in a position that many envy. Different from the rest of the world, Africa is a frontier with the capability to build on lessons learned from other countries. Without the fuss of resistance and a lengthy trial-and-error period, they can establish institutions and infrastructure with the most effective methods that have been tested by others.

Africa is a clean slate. It has the capacity to lead sustainability continent-wide without having to change an existing framework. American businesses specializing in these areas have the opportunity to invest in Africa to assist in its development.

  • Agriculture
    Much of Africa’s landmass has been largely untouched agriculturally and has the potential to become a big name in world food production, and possibly a sustainable one.
  • Transportation
    Much of sub-Saharan Africa lacks well-built airports, railroads and highways. Africa can implement efficient, modern and sustainable transportation methods that other countries wish they could execute on a mass-scale. Once transportation hubs are built, markets will be connected and Africa can expect impressive gains in production.
  • Electricity
    Sub-Saharan Africa faces repetitive power outages, leaving households and businesses without electricity. This curbs production and ultimately threatens economic growth. If this problem is fixed, a higher standard of living and economic gains will result.
  • Mobile Connectivity
    Currently, Africa is the leader in mobile adoption. Cell phones have linked African countries to each other and with the outside world. In a 2014 pilot program in Ethiopia, a telephone hotline was established, allowing farmers to discuss agricultural techniques with agronomists. In the first couple months of the program, 30 million calls were made. Communication flow is so vital in production, and investors can encourage this elsewhere by building telephone lines and bringing mobile companies to Africa.

The World Bank predicts that Africa has just started growing, and will only flourish more with investment. However, current Chinese investment is damaging and will eventually stunt Africa’s growth. The George W. Bush Presidential Institute stated that China does not help Africa fight corruption, encourage gender inclusion, promote sustainability or connect its regions. The United States needs to step in and be the source of positive encouragement Africa needs. By competing with China, American businesses can ensure they will benefit from investment and Africa will exceed its potential.

In 2017, President Trump expressed desires to enhance trade and partnership with Africa. One can hope these desires will be implemented and inspire businesses to invest in Africa. If so, vast economic advancements await Africa and lucky American businesses.

– Mary McCarthy

Photo: Flickr

Causes of Poverty in CongoDespite its vast material wealth, the Democratic Republic of the Congo has long been a very poor nation. Beneath its surface lies about $24 trillion in minerals, but this treasure has so far done nothing to alleviate poverty in this country. Half of the country’s population lives below the poverty line, living on less than $1 a day, especially those in rural communities. There is no single reason, but there are several causes of poverty in Congo that can be identified.

In rural areas, there has often been a lack of investment in basic infrastructure, such as roads, making transportation costs high. Farming methods are often antiquated and inefficient. Finally, there is a general lack of investment on the part of the government and the private sector in rural Congo.

Disease has always been one of the biggest causes of poverty in Congo. There were about 6.7 million reported cases of malaria in 2009, which is especially deadly to children. Cholera outbreaks are frequent. HIV/AIDS affects 5.3 percent of Congolese. Congo’s healthcare system is anemic, with hospitals often understaffed and underequipped.

The mining industry in Congo is particularly corrupt and is one of the largest causes of poverty in Congo. The precious metals mined in the Congo are necessary for a lot of technology taken for granted in the west: smartphones, computers, etc. Many foreign investors in the mining sector end up signing billion-dollar contracts with parties funding armed paramilitary groups, who siphoned some $185 million in 2008 from mining deals. The Congolese army is also dependent on funding from valuable minerals.

There has been some recent pushback against corruption in the Congolese mining industry. #Standwithcongo was launched by activist JD Steir with Robin Wright of House of Cards fame to get mining companies to disclose owners of the offshore shell companies involved with these mining deals.

Additionally, the Congolese army has been successful in pushing back the rebel M23 faction, creating peace in the region and eliminating at least one of the factions that profits from the corrupt mining industry.
The United States has not been silent on the matter either  The U.S. Financial Reform Act, also known as Dodd-Frank, requires companies whose products contain certain minerals to disclose whether or not those minerals came from the Congo, and show what steps they took to ensure such trade was not financing armed groups.  The Department of State has cooperated with Congo’s government and mining sector to establish supply chains for conflict-free minerals being mined in the eastern part of the country.
The causes of poverty in Congo are myriad, but there have been signs of improvement, thanks in part to the actions of the United States, unlikely activists and Congo’s own desire to see a new day.

Andrew Revord
Photo: Flickr

Investment in New Markets70 years ago, President Harry Truman’s Secretary of State, George C. Marshall, gave a speech to announce the Marshall Plan, an initiative giving $13 billion in foreign aid to help rebuild Western European economies after World War II. The administration knew it would be a heavy lift, convincing Americans to accept the probability of higher taxes in place of tax cuts they had been promised. Now, it is just as important for leaders to make their case for foreign aid and investment in new markets to the American people, highlighting the twin benefits of security and sustainability for all parties involved.

The Pitch

So how did Secretary Marshall sell his plan?

“Your Eighty Dollars” is one of many short videos designed to explain how the funds spent on the plan, equaling $80 per American taxpayer, would bring positive returns to taxpayers themselves. Marshall had the political savvy to appeal to the self-interest of his countrymen, recognizing that a nation weary from the costs of war would not automatically be eager to shell out more money. The administration also understood the value in emphasizing the relatively small sum—$80—each individual taxpayer would be paying, rather than the much larger $13 billion ($132 billion in 2017 dollars) the United States would spend in total.

The video emphasizes the United States’ myriad strategic advantages in helping rebuild Europe as well as the dire consequences of failing to do so. It asserts the debt of cultural heritage the U.S. owed to Europe, the benefit of having allies in the most populated and pivotal theatre when it came to waging war and the danger of debtor democracies in the West becoming easy prey for dictators and demagogues, both foreign and home-grown.

“Your Eighty Dollars” succeeded in part because it showcased results, not just fuzzy goals, far off in the distance. The narrator introduces the video’s purpose as “presenting documentary evidence of the progress the free world is making toward strength through mutual security,” and evidence of what U.S. dollars had already accomplished would prove to be a powerful motivator.

The video included scenes of the United States helping clear Sardinia, an Italian island in the Mediterranean Sea, of malaria so its fields could be ready for farming. Other scenes which showed Europeans rebuilding and improving their factories with U.S. assistance and techniques, helped make the humanitarian and economic case.

Europe’s Gains — America’s Returns

The Marshall Plan’s greatest success was its stimulation of private investment in new markets. The plan itself was not large in scope: the $13 billion spread across Western Europe did not amount to a huge investment in new markets. Much of that money was spent on imports of American industrial materials, semi-finished products and agricultural goods. American investment had started to pay dividends.

More importantly for Europe, the plan encouraged European governments and privately-held companies to invest more. Research by De Long and Eichengreen shows that countries receiving aid under the Marshall Plan saw more national investment and grew far faster than other wealthy economies (e.g., Argentina) that benefitted from the new post-war economic order under Bretton Woods but did not receive aid. Those examples of powerhouse growth became even more reliable markets for American products—as well as American allies. These countries avoided the fate of much of Europe after the First World War: plagued by crushing debt without relief and, thus, vulnerable to voices of prejudice and division.

Global Poverty and the Road Ahead

In the quest for security and sustainability in the developing world, many themes from post-World War II repeat themselves. As was true in the 1940s and 50s, other world powers—some of which do not share the U.S.’ values of freedom, democracy and open markets—are looking to assert their influence and control over poverty-stricken countries in the developing world.

Chuck Hasenauer

Photo: Flickr