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Monday, February 16, 2015 @ 09:02 AM
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A preview of the unpublished book A CIVILIZATION WITHOUT A VISION WILL PERISH: AN INDEPENDENT SEARCH FOR THE TRUTH by David Willis.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 51). 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

WHERE ECONOMIC DEVELOPMENT PRACTICE HAS GONE WRONG
Clinical economics is needed to replace the past 20 years of development practice, known widely as the structural adjustment era. This era, ushered in by the conservative turn in the United States under President Ronald Reagan and in the United Kingdom under Prime Minister Margaret Thatcher, was based on a simplistic, even simpleminded, view of the challenge of poverty. The rich countries told the poor countries: “Poverty is your own fault. Be like us (or what we imagine ourselves to be – free market oriented, entrepreneurial, fiscally responsible) and you too, can enjoy the riches of private-sector-led economic development.”

Designed to address four maladies
The IMF-World Bank programs of the structural adjustment era were designed to address the four maladies assumed to underlie all economic ills: poor governance, excessive government intervention in the markets, excessive government spending, and too much state ownership. Belt tightening, privatization, liberalization, and good governance became the order of the day.

Foreign aid per person in the poor countries plummeted
There were some truths in the structural adjustment agenda. But the policy and governance problems in the poorest countries were only part of the story, and in many places not the central part. Sadly, there were self-serving and ideological aspects of the structural adjustment era’s failures of advice and insufficient help. Foreign aid per person in the poor countries plummeted during the 1980s and 1990s. Aid per person in sub-Saharan Africa expressed in constant 1992 dollars, fell from $32 per African in 1980 to just $22 per African, during a period in which Africa’s pandemic diseases ran rampant, and needs for increased public spending were stark.

DIFFERENTIAL DIAGNOSIS FOR POVERTY REDUCTION
The Millennium Development Goals (MDGs) offer the world a chance to do better vis-à-vis the poorest countries after 20 years of failed structural adjustment policies. The MDGs state real goals that provide not only benchmarks for aid but also milestones for assessing the advice of the international agencies as well. The failures to meet the MDGs are failures of the rich countries as well as the poor, since both are responsible for their success.

Many governments have shown boldness, integrity, and intelligence
The fact that the MDGs are not being met throughout Africa, the Andean region, and Central Asia tells us that the problems are more than simply those of governance. Many governments in these regions have shown boldness, integrity, and intelligence. Yet development continues to fail. A clinical economics approach will point the way to a better strategy.

A seven-part diagnostic checklist
The key to clinical economics is a thorough differential diagnosis, followed by an appropriate treatment regimen. In the course of a physical exam, the doctor runs through pages of questions. The clinical economist must do the same. In table 1, I describe a seven-part diagnostic checklist that should be part of the “physical exam” of any impoverished country: The extent of extreme poverty; Economic policy; The fiscal framework; Physical Geography and human ecology; Patterns of Governance; Cultural barriers to economic development; Geopolitics.

EDUCATION OF AN ECONOMIST
A differential diagnosis is the beginning, not the end, of the process. The next steps, of course, are to design programs and institutions to address the critical barriers to poverty reduction that are identified through the differential diagnosis. These were issues that, much to my surprise, I had not been truly trained to address.

Wednesday, February 11, 2015 @ 06:02 AM
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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 46). 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

The cascade of technological change
Living standards began to rise in many parts of the world, even with the brutality and suffering in places where colonial masters grabbed much of the economic output. The single most important reason why prosperity spread, and why it continues to spread, is the transmission of technologies and the ideas underlying them.

The Great rupture
WW I ended the era of European-led globalization. It’s death toll was staggering; it destabilized the Russian czarist regime; created prolonged financial instability in Europe; left a mountain of debt incurred; dismembered the Ottoman and Hapsburg empires; created small, unstable, and feuding successor states; and paved the way for Hitler’s rise to power. The economic instability that followed WW I led to the Great Depression of the 1930s and then to WW II. The Great Depression triggered a calamitous spread of trade protectionism and the rise of Nazism in Germany and military rule in Japan.

The age of European imperialism was coming to an end
By the end of WW II, the pre-1914 global system had gone to pieces. The age of European imperialism was coming to an end, although it would takes decades and many wars for it to end decisively. Standing on the ruins of WW II, the benefits of a global marketplace – with a global division of labor, a peaceful spread of technology, and open international trade – looked long gone, buried under the rubble of two world wars and a great depression.

Restructuring a global economy
Between the end of World War II and the end of the Soviet Union in 1991, Europe, the United States and Japan constructed a new international trading system under U.S. political leadership. The socialist world, forged by Lenin and Stalin, remained cut off economically from the first world until the fall of the Berlin Wall in 1989 and the end of the Soviet Union in 19991. The third world included the rapidly rising numbers of postcolonial countries.

They collapsed under a pile of foreign debt
The post-WW II world evolved on three tracks. The fundamental problem, however, was that the second world and third world approaches did not make economic sense, and they both collapsed under a pile of foreign debt. By the early 1990s, the overwhelming majority of countries of the second and third world were saying, “We need to be part of the global economy; we want our sovereignty; we want our self-determination; economic isolation makes no sense.”

Three big questions
One of my roles from the mid-1980s was to help countries to become sovereign members of a new international system, dealing with three big questions: What is the best way back to international trade? How do we escape from the barnacles of bad debts and inefficient industry? How do we negotiate new rules of the game to ensure that the emerging global economy truly serves the needs of all of the countries of the world, not only the richest and most powerful?

Two hundred years of modern economic growth
This era of modern economic growth has brought higher living standards, a spread of modern technology, and a scientific and technological revolution that still gains strength, but phenomenal gaps between the richest and poorest. Why does a vast gulf divide one sixth of humanity today in the richest countries from the one sixth of the world barely able to sustain life?

Differential diagnosis
The richest countries were able to achieve two centuries of modern economic growth while the poorest didn’t begin till decades later, in some cases facing the brutal exploitation of dominant colonial powers. The poorest faced barriers related to geography, climate, food production, disease, energy resources, topography and proximity to world markets that had not burdened the early industrial economies. They made disastrous choices in their national policies. There are practical solutions to almost all of their problems. But as there is no single explanation for why certain parts of the world remain poor, there is also no single remedy. A good plan of action starts with a good differential diagnosis of the specific factors that have shaped the economic conditions of a nation.

Tuesday, February 10, 2015 @ 06:02 AM
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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 45). 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

Chapter Two: The Spread of Economic Prosperity
The move from universal poverty to varying degrees of prosperity has happened rapidly in the span of human history. Life was as difficult in much of Europe as it was in India or China.
The average income per person in Western Europe in 1820 was about 90% of the average income of Africa today. Life expectancy in Western Europe and Japan as of 1800 was about 40 years.
A few centuries ago, vast divides in wealth and poverty around the world did not exist. China, India, Europe, and Japan all had similar income levels at the time of European discoveries of the sea routes to Asia, Africa and the Americas.

The novelty of modern economic growth
Before 1800 there had been virtually no sustained economic growth. There was no discernible rise in living standards on a global scale during the first millennium and perhaps a 50% increase in per capita income in the 800-year period from A.D. 1000 to A.D. 1800.
In the period of modern economic growth, the global population rose sixfold in two centuries, reaching 6.1 billion at the start of the third millennium, with plenty of momentum for rapid population growth still ahead.
US per capita income rose twenty-five-fold. Total worldwide food production more than kept up with the booming world population (though large numbers of chronically hungry people remain until today).
Gross world product or GWP rose 49 times during the past 180 years. In 1820 the gap between the world’s rich and poor countries was a ratio of four to one in per capita income; in 1998 it was 20:1.
Technology has been the main force behind the long-term increases in income in the rich world, not exploitation of the poor. Economic development is not a zero-sum game in which the winnings of some are inevitably mirrored by the losses of others. This game is one that everybody can win.

On the eve of takeoff
Until the mid-1700s, the world was remarkably poor by any of today’s standards. Life expectancy was extremely low; children died in vast numbers in the now rich countries as well as poor countries.
Many waves of disease and epidemics, from the black death of Europe to smallpox and measles, regularly washed through society and killed mass numbers of people. Episodes of hunger and extreme weather and climate fluctuations sent societies crashing.
What changed was the onset of the Industrial Revolution – with the combination of new technologies, coal power and market forces – supported by a rise in agricultural productivity and food yields in northwestern Europe through improved agronomic practice.
Britain’s advantages were a combination of social, political and geographical factors. Scientific thinking was dynamic. Other parts of the world were not as fortunate and their entry into modern economic growth would be delayed – in some cases until today.

The great transformation
Suddenly economies could grow beyond long-accustomed bounds without hitting the biological constraints of food and timber production. The power of economic growth spilled out from Great Britain to all parts of the world, changing the way people lived in every fundamental sense.

The spread of modern economic growth
Britain’s industrialization spread to other markets by stimulating the demand for exports from Britain’s trading partners, supplying capital to make investments, and by spreading technologies first pioneered in Britain.
The confrontation between rich and poor was stark because the gap of wealth also meant the gap of power, and power could be used for exploitation.
Imperial powers forced Africans to grow cash crops, imposed taxes, compelled Africans to work in mines and on plantations, commandeered natural resources, and maintained private armies to ensure compliance.

Saturday, January 24, 2015 @ 02:01 PM
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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 (Part 28). This blog is a continuation of the review of The Inner Limits of Mankind by Ervin Laszlo, written in 1989.

The Third World’s goals and expectations
The great regions of the Third World are Latin America, Black Africa, the Middle East, and South and Southeast Asia. Jointly these regions account for about 75% of the human population, and their share may grow as high as 90% by the middle of the next century. The great masses of Latin America conduct an intense love-affair with Western-style industrialization and economic growth, hoping to duplicate the miracles of West Germany and Japan. The upper 1% of the population controls about 30% of the wealth, while the lower 69% control merely about 20%.

Extremes of wealth and poverty
In January 2015 Oxfam published its report based on statistics provided by Credit Suisse showing that the share of the world’s wealth owned by the richest 1% increased from 44% in 2009 to 48% in 2014 while the least well-off 80% currently own just 5.5% of the world’s wealth. There has been a $600 billion increase in wealth for the top 80 billionaires in four years while there was a $750 billion drop in wealth for the poorest 50% of the world. On present trends the day is not far away when 1% of the world’s population will own more than the remaining 99% combined.

The economic miracle remains but a dream
Some 40% of the population are still engaged in relatively primitive forms of agriculture, and for them, and for those in the shanty towns around the big cities, the economic miracle remains but a dream. Coping with global problems is said to be the responsibility of the superpowers and their developed allies, who created them in the first place. Africa, south of the Sahara is a continent still torn by ethnic struggles and the fight for freedom from all vestiges of colonialism. The first leaders of the independent African states have concentrated on creating some sense of national unity and integrity in their countries, the borders of which were arbitrarily drawn by the European colonial powers.

Development and growth are still the key words
Well-meaning attempts failed for lack of support, and military governments often took their place. Only a few countries, mainly in Western Africa, are experimenting with the implementation of multi-party democracies. The sights of African leaders have shifted several times. After independence they moved from goals of national unity to those of economic growth through the diversification of agriculture and the creation of an industrial base. Now they embrace aims such as a better distribution of the (as yet meager) benefits of development, the revitalization of the indigenous cultures, and the improvement of the educational systems. Development and growth are still the key words, but they have come to mean qualitative socio-economic growth, and the progressive elimination of gaps and injustices.

Searching for a better life in the cities
Internecine struggles among ethnic and power groups, between countries opting for different (Western or socialist) modes of organization, and between the elites and the intellectuals, confuse the picture and obstruct the implementation of effective polices. The overwhelming majority of Black Africans – some 80% – 90% – live a marginal and largely traditional existence. Their imagination, however, has been captured by the miracles of life in the cities and centers of the rich world. It makes the more adventurous and the more desperate among the rural masses leave their roots and search for a better life in the cities. For the most part, like their counterparts in the rest of the developing world, they end up in the outskirts and slums, leading a life that is at least as miserable as the one they left behind.