The End of Poverty

A few weekends ago, I spent a few hours in one of the latest of those malls that seem to be crowding the Bangalore cityscapes. I actually went there with my sister and friend to watch a movie, but the Landmark bookstore there drew me like a bee to a flower. I ended up ditching them for the movie, and instead bought a couple of books and spent the next couple of hours in a blissful state just reading by myself. I started reading The End of Poverty by Jeffrey Sachs. The place did get awfully crowded by noon with swarms of people all over the place, but it was a nice Saturday morning for sure. Since I moved back from the US, I dont think I had spent quality time like that by myself reading at a bookstore.

If you havent heard about the book, there are a whole bunch of web resources on this, including some great NPR radio stories on Talk of the Nation, Science Friday, etc. with Prof. Jeffrey Sachs. Here is the official website on the project at the Earth Institute of Columbia University. Prof. Sachs is Professor of Sustainable Development at Columbia University; professor of health policy and management; and special advisor to UN Secretary-General Kofi Annan. He headed the United Nations' Millenium Development Goals project recently, has spent over two decades working with economists and leaders of developing nations, helping and advising them on economic policies, steps to tackle basic problems of hunger, health policies, etc.

My first thoughts on the book (I havent completed it yet) - it is a great read for anyone who wants to understand how some of the world's economies have fared, how economics of a nation effects the common man, hurdles to eliminating poverty, disease, etc. Sachs has the experience to talk about this, and nothing in the book so far seems to be spun out of yarn.

An excerpt from the first chapter:

The path from poverty to development has come incredibly fast in the span of human history. Two hundred years ago, the idea that we could potentially achieve the end of poverty would have been unimaginable. Just about everybody was poor with the exception of a very small minority of royals and landed gentry. Life was as difficult in much of Europe as it was in India or China. With very few exceptions, your great-great-grandparents were poor and most likely living on the farm. One leading economic historian, Angus Maddison, puts the average income per person in Western Europe in 1820 at around 90 percent of the average income of sub-Saharan Africa today. Life expectancy in Western Europe and Japan as of 1800 was probably about 40 years.

If we are to understand why vast gaps between rich and poor exist today, we need therefore to understand a very recent period of human history during which these vast gaps opened. The past two centuries, since around 1800, constitute a unique era in economic history, a period that the great economic historian Simon Kuznets famously termed the period of Modern Economic Growth, or MEG for short. Before the era of MEG, indeed for thousands of years, there had been virtually no sustained economic growth in the world and only gradual increases in the human population...

Ok, so now onto some of the interesting facts, at least things I found interesting.

1. On the idea that the rich (here we mean Western Europe and the USA) have gotten richer because the poor have gotten poor, he says "this interpretation would be plausible if gross world production had remained roughly constant, with a rising share going to the powerful regions and a declining share going to the poorer regions. However, GWP (Gross World Product) rose nearly fifty-fold, with every region of the world experiencing some economic growth, but some regions experienced much more growth than the others. The key fact here is not the transfer of income from one region to another, by force or otherwise, but rather the overall increase in world income, but at a different rate in different regions."
2. There is a very interesting analysis of the effects of the two World Wars on world economies, the Great Depression, political (in)stability across the world and the rise of the world democracies. Most of the time between WWII and the end of the Soviet Union in 1991 went into reconstructing a new global economy. It seems to me from this part of the book, that the countries that were already industrialized (and some of them were the colonial powers) - USA, Europe, Japan had the biggest advantage here in terms of definining the new world order, the new global economy and international trade. Agencies like GATT (General Agreement on Trades and Tariffs) made it easier for international trading, helping boost these countries. In my opinion, this is one place where countries that were still struggling to find a foothold in the post-colonial era lost out since they had no say in the matter, and worse still, the long colonial era had left them in deep suspicion of some of these international powers.
3. Why are we called Third World countries? The First World countries were the truly capitalistic ones - Europe, USA, Japan that grew tremendously since WWII. The Second World was the socialist world, that created by Lenin and Stalin in the wake of WWI. The second world remained cut off economically from the rest of the world until the fall of the Berlin Wall and the end of the USSR in 1991. The main characteristics of the Second World were state-owned production, planning of production, one-party rule by communist parties, etc. The Third World included the rapidly rising number of postcolonial countries. Today, the word Third World is used simply to mean poor. In actuality, the term came about with these countries emerging from imperial domination that chose neither to be part of the capitalistic first world or the socialist second world. The main ideas in these countries were, in general, "we will develop on our own, we will nurture industry, some through state ownership, sometimes through private enterprises, but we will do it without foreign investments by multinationals. No open international trade. We do not trust both the First World or the Soviet Union."

I am about half way through the book. Will post more soon, I hope. I did jump across into the chapter devoted to the rise of the Indian economy, Indian economic reforms by Dr. Manmohan Singh, P. Chidambaram, advised by Prof. Jagdish Bhagawati, & Jeffrey Sachs himself.

Have a good weekend, all!