Should Jeffrey Sachs get $150 billion per year?

Time‘s cover story this week (alas, subscribers only — Aha! I found a way to access it for free; Sachs also has an excerpt in the March/April issue of Foreign Affairs) is a lengthy excerpt from Jeffrey Sachs’ forthcoming book, The End of Poverty: Economic Possibilities for Our Time. Sachs is the director of Columbia University’s Earth Earth Institute and for the past two decades has been a macroeconomist to the stars. The quick precis of Sachs’ argument is that for roughly $150 billion in aid a year, it would be possible to end extreme poverty (i.e., living on only a dollar a day) across the globe. For those of you who aren’t Time subscribers, check out The End of Poverty web site, which includes a copious collection of Sachs’ prior work. Or, you could read this New York Times magazine story on Sachs from a few months ago by Daphne Eviatar. The key graf from that story:

Sachs is nothing if not a big thinker. And in July, the renowned macroeconomist and special adviser to United Nations Secretary General Kofi Annan was in Ethiopia on a world tour advancing his most ambitious project yet: the elimination of global poverty. While others tinker with incremental steps, Sachs has no patience for the small scale. Ethiopia and sub-Saharan Africa have slid deeper into poverty in the last 20 years, and whereas many economists stress the failures of local leadership, Sachs is telling a different story. In his version, Africa, through no fault of its own, is trapped. Held back by geographical impediments like climate, disease and isolation, it cannot lift itself out of poverty. What Africa needs, then, is not more scolding from the West. It needs a ”big push” — a flood of foreign aid — to boost its prospects and carry it into the developed world.

Time‘s sidebar story profiles Sachs in glowing terms:

In the halls of politics and power, most economists are like wallpaper— full of intricate details but ultimately decoration. Jeffrey Sachs, however, is a brand name. A player. There’s Jeff with the Pope. There’s Jeff with U.N. chief Kofi Annan. There’s Jeff with his save- the- world sidekick, U2’s Bono. Sachs, 50, has been around the planet more times than a space station to promote the U.N.’s Millennium Development Goals, to raise annual aid to 0.7 percent of gnp of the donor countries (starting with an extra $70 billion per year as of 2006), in order to halve poverty by 2015. He’s a special adviser to Annan while pursuing a day job as head of Columbia University’s Earth Institute, which reflects his philosophy as an economist: that sustainable development can be achieved only through an approach that considers everything from geography to infrastructure to family structure.

I’m curious what readers think about Sachs’ proposal, as it’s something I’ll be mulling over this weekend. My initial response is threefold:

1) I very, very much want Sachs to be correct. If $150 billion in rich country donations a year is all it takes to eradicate global poverty, that’s a fantastic rate of return using either an economic or an ethical calcuator; 2) I have a hunch that Sachs is not completely correct. Reading papers like this one makes me wonder just how much of Sachs’ proposal is built on wishful thinking. 3) What I’m still undecided about is whether the investment is worth it even if Sachs is only, say, 50% correct. Would there be any other way of spending $150 billion a year that reduced extreme poverty by more than that amount?

Two final metanotes: First, I’m somewhat surprised that Time ran the excerpt, a heartbreaking photo essay, and a glowing sidebar on Sachs himself without any critical take on the meat of Sachs’ proposals. I’m not saying Time should have done a hatchet job on him or anything — but there are critiques out there for why Sachs’ proposal might not work, and Time does a disservice to their readers if these aren’t mentioned somewhere. If this is an examplar of Time‘s “Journalism with a Conscience,” count me out. Second, at the same time, I’m somewhat surprised and mildly appalled that this story hasn’t generated a lot of buzz in the blogosphere. Sachs could be mostly or partially wrong, but he’s neither is a lightweight nor making vague proposals. He’s got some serious proposals about channeling money towards anti-malaria medication, transportation infrastructure, clean water wells and the like. Unfortunately, this lack of attention would seem to be consistent with Ethan Zuckerman’s hypothesis that the blogosphere echoes the mediasphere in paying a disproportionate amount of attention to the advanced industrialized world. UPDATE: Thanks to Glenn Reynolds for the link. And given some of the comments, let’s try to head off a few objections at the pass. The following are not valid reasons for rejecting Sachs’ plan

1) Sachs ignores the importance of free market capitalism in economic development. No, Sachs is quite adamant about the benefits of free trade and market capitalism. His argument is rather that in some sections of the globe, the abject level of poverty is so low that it’s impossible for people to generate any surplus value — what Sachs refers to as a “poverty trap.” In these areas, a boost of aid would permit some initial savings — after which economic development along market lines can begin to take place. 2) Sachs was responsible for Russia’s failed reform effort, so why trust him now? I’m pretty sure the Russians bear the primary responsibility for the failure of Russian reform, but for the moment let’s take this critique as fact. Sachs was also responsible for successful reform efforts in Bolivia and Poland. A 2-1 record in development economics ain’t too shabby. 3) Sachs just wants to give this money to corrupt governments. No, he’s explicit in saying that countries with spectacularly bad governance — i.e., Zimbabwe — don’t get a dime. The corruption critique still has some validity, but Sachs also has some minimum threshhold conditions on this front. 4) Sachs’ plan has no details, just a nice round number. Click on the UN Millennium Project — and, more specifically, the page containing links to the full text — to get a sense of the details.

To repeat, there are ways to criticize Sachs’ plan — but these arguments don’t hold water. ANOTHE UPDATE: Tony Blair has stepped into this debate as well with his Commission for Africa report. Reviewing the report, the Economist observes:

Extra aid would probably ease Africa’s poverty. Although past aid has largely been wasted, the report gives sound pointers as to how in future it could be made to work. Aid should be “untied”: that is, the recipient should not be obliged to buy goods from the donor. It should be predictable, to help the recipient plan for the long term. It should mostly be in the form of grants, not loans, to avoid future debt traps. It should “support the national priorities of African governments rather than [donors’] special enthusiasms”. Most important, aid should be lavished on the countries that can use it—ie, poor but fairly well-governed ones—and denied to corrupt and incompetent regimes that will steal or squander it. The trouble is, there are not enough well-governed countries in Africa. “Without progress in governance,” admits the report, “all other reforms will have limited impact.” ….Africa will not prosper until corruption is checked and governance improves. And that task, as the report says, is “first and foremost the responsibility of African countries and people”.