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How to End Poverty by Improving Economic Governance

How to End Poverty
How to end poverty? In Paul Collier’s thought-provoking TED talk presentation, he hypothesizes the best ways to improve the lives of the most economically deprived billion people of the world. A majority of these people live in commodity-rich countries in Africa.

He believes in mobilizing the international community by creating an alliance between compassion and enlightened self-interest. Hoping that one’s compassion for people gets you started and one’s enlightened self-interest helps you get serious about helping the world’s poor.

He talks about how foreign aid is being trumped right now by the recent influxes in commodity prices. This is bringing unprecedented wealth to countries that have never experienced such things. He states that the problem with short-term economic growth tied to one commodity is that it is often short-lived. And in most scenarios, the country is worse off once the price of that commodity declines to previous levels.

Collier is not the only one to identify this problem. Larry Diamond of Stanford University has said that “there are twenty-three countries in the world that derive 60 percent of their exports from oil and gas and not a single one is a real democracy.” He observes that there is a strong correlation between energy dependence and authoritarianism. Authoritarian governments will use their profits from commodities to enrich those close to power and not spread the wealth amongst the entire country.

Collier believes that the only way to sustain the gains of short term commodity-driven economic growth is by developing international standards of economic governance. By establishing procedures and requirements for governments to enact when they are experiencing a boom, they have a much better chance of improving the quality of life in their country.

One example he provides is establishing public auctions for drilling rights. Most commodity deals right now are agreed upon behind closed doors between a representative from a large private sector western firm and a local magistrate. More often than not the western firm gets a far better deal than that of the magistrate because the magistrate is not aware of the actual value of the commodity he is selling rights to. By creating public auctions, you are allowing market forces to drive up the price of the contract which allows the country in which the commodity resides to gain more wealth from the deal.

This is just one aspect of the international economic governance reforms he would be interested in enacting. But such a small tweak in the way business is currently done could pay huge dividends in the effort to end poverty.

The international norms he would establish would be adopted on a voluntary basis. The ultimate goal would be measured on two fronts.

One, to improve the lives of the indigenous people by establishing funding requirements with commodity profits for clean water, healthcare, and education. This would lay the foundation for non-commodity fueled sustained economic growth and answer the “how to end poverty” question.

Second, to remind the Western democracies of our enlightened self-interest. A potential billion more people in the marketplace will create an increase in global demand that will be realized amongst all economic sectors.

To the question of how to end poverty, Collier believes the countries that are home to the world’s poorest billion have all of the resources at their fingertips. They just need guidance from the international community on how to improve the economic conditions of their people.

– Brian Faust

Photo: Flickr

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Top Books About Global Poverty

books about poverty
Despite tremendous progress over the past few decades in eradicating global poverty, nearly a fifth of the world still lives on less than $1.25 a day. In recent years, a number of economists, academics, and political analysts have published books providing insight into the causes, effects, and solutions to global poverty. Here are some top books about global poverty that particularly stand out:

The Bottom Billion: Why the Poorest Countries are Failing and What Can Be Done About It (2007)

By Paul Collier

“Economist and Africa expert Collier analyzes why a group of 50 nations, home to the poorest one billion people, are failing. Considering issues such as civil war, dependence on extractive industries, and bad governance, he argues that the strongest industrialized countries must enact a plan to help with international policies and standards.” – Amy Lockwood, Stanford Social Innovation Review

Creating a World Without Poverty (2007)

By Muhammad Yunus

“As founder of Grameen Bank, Yunus pioneered microcredit, the innovative banking program that provides poor people mainly women with small loans they use to launch businesses and lift their families out of poverty. Now, in Creating a World Without Poverty, Yunus goes beyond microcredit to pioneer the idea of social business – a completely new way to use the creative vibrancy of business to tackle social problems from poverty and pollution to inadequate health care and lack of education.” – Yunus Centre

The Beautiful Tree: A Personal Journey into How the World’s Poorest People Are Educating Themselves (2009)

By James Tooley

The Beautiful Tree “tells the remarkable story of author James Tooley’s travels travels from Africa to Asia, and of the children, parents, teachers, and others who showed him how the poor are building their own schools and learning to save themselves.” –The Cato Institute

The End of Poverty: Economic Possibilities for Our Time (2006)

By Jeffrey Sachs

“Sachs outlines a detailed plan to help the poorest of the poor reach the first rung on the ladder of economic development. By increasing aid significantly to provide the basic infrastructure and human capital for markets to work effectively, Sachs argues such investment is not only economically sound but a moral imperative.” – Amy Lockwood, Stanford Social Innovation Review

The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good (2006)

By William Easterly

“Easterly, a celebrated economist, presents one side in what has become an ongoing debate with fellow star-economist Jeffrey Sachs about the role of international aid in global poverty. Easterly argues that existing aid strategies have not and will not reduce poverty, because they don’t seriously take into account feedback from those who need the aid and because they perpetuate western colonial tendencies.” – Amy Lockwood, Stanford Social Innovation Review

The Wealth and Poverty of Nations (1998)

By David Landes

“The Wealth and Poverty of Nations is David S. Landes’s acclaimed, best-selling exploration of one of the most contentious and hotly debated questions of our time: Why do some nations achieve economic success while others remain mired in poverty? The answer, as Landes definitively illustrates, is a complex interplay of cultural mores and historical circumstance.” – W.W. Norton & Company, Inc

Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (2006)

By C.K Pralahad

“Explaining that the world’s five billion poor make up the the fastest growing market in the world, Prahalad shows how this segment has vast untapped buying power, and represents an enormous potential for companies who learn how to serve this market by providing the poor with that they need.” – Amazon

Out of Poverty: What Works When Traditional Approaches Fail (2009)

By Paul Polak

“Polak, a psychiatrist, has applied a behavioral and anthropological approach to alleviating poverty, developed by studying people in their natural surroundings. He argues that there are three mythic solutions to poverty eradication: donations, national economic growth, and big businesses. Instead, he advocates helping the poor earn money through their own efforts of developing low-cost tools that are effective and profitable.” – Amy Lockwood, Stanford Social Innovation Review

Dead Aid: Why Aid is Not Working and How There Is a Better Way for Africa (2009)

By Dambisa Moyo

“Moyo, a Zambia-born economist, asserts that aid is not only ineffective—it’s harmful. Her argument packs a strong punch because she was born and raised in Africa. Moyo believes aid money promotes the corruption of governments and the dependence of citizens, and advocates that an investment approach will do more to help reduce poverty than aid ever could.” – Amy Lockwood, Stanford Social Innovation Review

– Katrina Beedy

Sources: Stanford Social Innovation Review, Flavor Wire, Muhammad Yunus, WW Norton, Amazon
Photo: Cheryl Ann Skolnicki

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Countries Receiving America’s Foreign Assistance

foreign assistance
In 2013, the average American taxpayer shelled out $11,715 in federal income taxes. Out of that amount, the U.S. government spent $104 on development and humanitarian assistance, $46 on security assistance internationally, $63 on foreign affairs, embassies, and additional international affairs—according to a federal taxpayer receipt provided by The White House.

Compared with $11,715, that $213 for foreign assistance might seem too paltry to even bother to track abroad, but for the sake of holding government accountable, let us bother.Right away one hits a barrier: USAID has not yet made foreign aid spending data available for 2013. One has to extrapolate from 2012’s spending results to 2013. Whether this is reasonable depends on the consistency of the federal budget and of aid allocation since 2001.

Federal spending on international assistance has been relatively consistent during the past decade. Therefore, the portion of $11,715 used for foreign aid in 2012 would be close to the 2013 figure of $213.Aid allocation has been relatively consistent as well.

After Sept. 11, 2001, the United States directed most foreign assistance toward the Middle East. Economic assistance to Jordan increased 357 percent from 2001 to 2012. In that same timeframe, economic assistance to Afghanistan, the top recipient of U.S. foreign aid in 2012, increased from roughly 98.8 million in 2001 to 3.3 billion in 2012, a difference of about 3264 percent. Israel and Egypt have received billions in military assistance since 1995. Iraq received $1.9 billion in 2012 as part of ongoing reconstruction efforts. Pakistan has also ranked toward the top as a recipient.

If one focuses on USAID (ignoring especially the Agriculture and State Departments’ foreign spending), then the top five recipients list looks slightly less Middle Eastern: (1) Afghanistan; (2) Pakistan; (3) Jordan; (4) Ethiopia; and (5) Haiti. But while the example of Haiti, a country that had its aid amount skyrocket in 2010 after the earthquake, shows that some change does occur in these rankings, in general the United States has focused on assisting the Middle East. Why focus there?One idea that economist Paul Collier has argued in his book “The Bottom Billion” is that commercial lobbies manipulated USAID into directing spending where American exporters might benefit.

For USAID’s part, the organization maintains that “U.S. foreign assistance has always had the twofold purpose of furthering America’s interests while improving lives in the developing world.” USAID sees assistance as a foreign policy strategy that the U.S.’s heavy involvement in the Middle East requires the country divert there.However, a discrepancy might exist between USAID’s belief and American taxpayers’ beliefs concerning foreign aid.

The Program on International Policy Attitudes found that 69 percent of Americans agreed the United States has a “moral responsibility” to “reduce hunger in the world.” Few of the Middle Eastern countries receiving the most U.S. aid have a high Global Hunger Index score though. Africa and South Asia have many more countries with higher GHI scores than the Middle East.The issue of where U.S. foreign assistance should go is complicated. Some tough questions need answering, and getting answers requires debate. Should aid remain primarily strategic? Should countries like Jordan, which the World Bank classifies as an upper-middle-income economy, continue to receive the bulk of assistance? Should the United States be doing more with economic assistance to end global hunger? One thing is certain: since American taxpayers have money invested in this issue, their voices should factor in the debate.

– Ryan Yanke

Sources: USAID 1, USAID 2, USAID 3, USAID 4, USAID 5, USAID 6, USAID 7, Central Intelligence Agency, The World Bank, National Priorities Project, National Priorities Project, The White House, Center for Global Development, Federation of American Scientists, World Hunger, International Food Policy Research Institute, The Bottom Billion
Photo: BET

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Who Are the Bottom Billion?

The_Starving_Billions
One billion of the poorest people on the planet embody an enormous obstacle for nations today. Countries suffering from extreme poverty, overlooked and undervalued, are examined thoroughly in Paul Collier’s book, The Bottom Billion. As a professor of economics at Oxford University, Mr. Collier is well versed in the financial implications of poverty on the world as whole. Everyone who has read a history book or seen the television show Game of Thrones knows that when societies lack a leader and structured laws, chaos ensues as the fight for ultimate power begins. This situation is mirrored in the corruption consuming countries all over the world, and they are highlighted in Collier’s book.

According to Paul Collier, the 8 industrialized nations, known as the G8, will have to make a priority out of developing laws to help these ‘bottom billion’ populations. This group consists of the United States, Germany, the United Kingdom, Italy, Japan, Canada, France, and Russia. Protecting endangered states against corruption, greed, power struggles, trade resources, and more will have to become a main focus for stabilized nations in order to help eradicate global poverty.

Claiming that there are four traps countries fall into that lead to a spot in the ‘bottom billion,’ Collier lists the culprits as natural resources, corrupt neighboring nations, negative governing, and violent conflicts. No country has the ability to generate more natural resources than it already has, so creating laws that govern trade policies is one of the only ways to help states in that situation.

One suggestion offered by the author to reverse the destitute situations of poor countries is military interference. He claims that foreign financial aid is not enough to help on its own. Military force and strict legislation on corrupt leaders and factions are required to pull countries out of expensive civil wars and violent day to day lives.

Main goals of the book include debunking popular myths about global poverty and explaining why the U.S. and other stable countries need to make aggressive changes to prevent unstable nations from ‘backsliding’, or getting deeper into a state of distress than they presently are. China and other societies are doing so well on reducing global poverty that more aid is offered because they seem like a more appealing investment that is likely to succeed. Less stable countries do not look like a good fit for aid and are shortchanged by potential donors.

Simultaneously educational and inspiring, Paul Collier’s book was first published in 2007. Collier has spoken at local and national forums about the importance of forming a solution to these ‘bottom billion’ people that is as complex as the problem. Spreading awareness and correcting misconceptions the general public may have about poverty is the first step in attempting to fix it. Outlining how these countries become part of the ‘bottom’ in the first place helps clarify the intricate situation that has been created and how the way to save these people must be equally intricate. The Bottom Billion can be purchased from Amazon.com, Barnes and Noble, or wherever books are sold.

– Kaitlin Sutherby

Sources: TED, Amazon, The Guardian, Oxford University Press, AusAID
Photo: Bahai Forums

5 Books on Poverty That Will Inspire Readers

books_on_poverty
Books are very powerful tools that can get people thinking about issues happening around the world today. Books can inspire change by encouraging their readers to step outside of their comfort zones, and books can help us empathize with the struggles of people we might never know. Below are five must-read books on poverty that will leave readers stunned, motivated, and ready to act.

1. Three Cups of Tea: One Man’s Mission to Promote Peace One School at a Time by Greg Mortenson and David Olivier Relin

This book details the expedition of homeless mountaineer, Greg Mortenson, through the rural communities of Pakistan. After being cared for by impoverished Pakistani villagers, Mortenson promises to build a school in the region. The book follows his journey as he builds 55 schools throughout Afghanistan and Pakistan.

2.  The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It by Paul Collier

Author Paul Collier dives into “the fifty failed states” that house the poorest billion people on the planet. He explores why these countries are so impoverished,  and how their poverty inhibits forward progression in the developing world. Collier also discusses why some strategies to help these countries have failed, and introduces plans that are better suited to raise the “failed states” above the poverty line.

3. Behind the Beautiful Forevers: Life, Death, and Hope in a Mumbai Undercity by Katherine Boo

Set in the impoverished neighborhood of Annawadi, this book describes the lives of several families and various individuals living in the overcrowded slum. Bordered by the luxurious buildings of Mumbai, Annawadi is the exact antithesis of the opulence showcased beyond the walls of the city. Boo follows families living in Annawadi, and describes the politics of slum-life, along with the hidden treasures that arrive in the form of trash. This book echoes the real lives of people living in Annawadi, their struggles, their happiness and their losses.

4. The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World by Jacqueline Novogratz

In this autobiographical account, Novogratz describes her incredible story as a woman who quits her corporate banking job to pursue an expedition through the heart of Africa in order to better understand global poverty. A journey that starts with a simple blue sweater leads her to invest in people living throughout the impoverished regions of Africa. The book describes some of Novogratz’s vivid and poignant encounters with people living in poverty, and explains how she tries to help African communities.

5. The End of Poverty by Jeffrey D. Sachs

Author and renowned economist, Jeffrey Sachs, draws an economic map of the world, dividing countries into rich and poor sections. He goes on to explain why wealth has taken the route it has across the world, and why poverty has settled into certain areas and cultivated there.  Sachs allows readers to follow along as he journeys through poor countries, trying to better understand the issues those nations face. Sach’s approach equips his readers with the knowledge and the awareness needed to go out into the world and solve its problems.

– Chante Owens

Sources: Good Reads, Amazon
Photo: 123 RF