News Archive

posted 09/09/04

Less Than 0.7 Percent of Rich-country GNP Could Spring Africa from Poverty Trap
Brookings report discusses cause of African poverty and calculates costs to address it

a woman carrying wood in ethiopia

A woman carries wood north of Addis-Ababa, Ethiopia. Sub-Saharan Africa’s alarming poverty trap — falling incomes, growing health crises, and deteriorating natural environments — is usually blamed solely on poor governance. The Brookings paper argues that extreme poverty is due to a host of factors, including geography and disease ecology. Photo Credit: WHO/P. Virot

The United States and other rich countries have not delivered the promised foreign aid necessary to help many African countries escape grinding poverty, according to the Brookings Papers on Economic Activity (August 2004.) The authors calculate the necessary amount to be less than 0.7 percent of the rich world's GNP.

Sub-Saharan Africa’s alarming poverty trap — falling incomes, growing health crises, and deteriorating natural environments — is usually blamed solely on poor governance. The Brookings paper argues that extreme poverty is due to a host of factors, including geography and disease ecology. The paper’s analysis leads to a holistic set of interventions that will help those countries achieve the prerequisites to sustained economic growth, such as health and education facilities, transportation infrastructure, and improved agricultural techniques.

“Even if well-governed countries stuck in a poverty trap mobilize domestic resources to pay for the interventions, they will not be able to afford the entire cost, and the difference must be borne by the developing world,” says lead author Jeffrey D. Sachs, director of The Earth Institute at Columbia University and of the United Nations Millennium Project. “Surprisingly, less than one percent of the rich world GNP, which developed countries have been promising for decades, could provide developing countries with the public investment in health, education, agriculture and infrastructure necessary to achieve sustained economic growth.”

Professor Sachs and his colleagues from the Millennium Project studied why some countries, even when well governed, can fail to grow, and what role foreign assistance can have. They present a theory that tropical Africa is stuck in a poverty trap, too poor to achieve robust, high levels of economic growth. Their paper, “Ending Africa’s Poverty Trap,” is an in-depth study of the physical and social factors facilitating this trap followed by a recommended action plan and economic analysis for providing the “big push” required for Africa to escape. The study outlines:

  • The authors’ theory on types of poverty traps, including capital thresholds, saving traps, and demographic traps
  • Why Africa’s history and conditions make it more vulnerable to such traps
  • Popular and mistaken theories about Africa’s stagnation, including corruption and poor governance
  • The importance of the Millennium Development Goals (MDGs) as achievable poverty reduction targets. The Millennium Project suggests practical and proven interventions that can help meet the MDGs.
  • Financial analysis of the necessary investments show that the “financial gap” between the cost of the interventions and what poor countries can afford must be bridged by foreign assistance (and can be accomplished for no more than rich countries have already promised to give)

"Ending Africa’s Poverty Trap" focuses on thirty-three tropical sub-Saharan countries that had populations of at least two million people in 2001. The United Nations classifies 26 of the 33 countries studied as among the least developed countries in the world, with an average annual income of 74 cents per day per person in 2001. In each of these countries, more than 100 out of every 1000 babies born die before the age of five, and overall life expectancy is less than 60 years.

“Because the world has waited so long to help Africa break free of its structural constraints, the situation is vastly more complicated today than even a generation ago, due to AIDS, rapid population growth, and the resulting environmental degradation,” said Sachs. “Yet it is within the rich world’s grasp to provide the necessary aid to help meet the Millennium Development Goals in the well-governed countries of Africa, thus helping those countries get on a path of sustained economic growth and eventually break free of the dependency on aid.”

Sachs et. al. examined different governance ranking systems based on World Bank governance indicators, the Corruption Perceptions Index of Transparency International, and the Freedom House Ratings that rank governments as “free” or “partly free.” They show that there is no evidence that Africa’s governance is worse than other parts of the world at comparable levels of income. Data also shows that the relatively well-governed African countries have been unable to increase the material well-being of their populations, indicating that governance alone cannot explain Africa’s poverty trap.

They argue that meeting the MDGs would help to extricate Africa from the current development trap. This will require a comprehensive strategy for public investment in conjunction with improved governance. The paper lays out such an investment strategy focusing on interventions – defined broadly as the provision of goods, services and infrastructure –grouped into seven intervention areas: Agricultural Productivity and Rural Infrastructure; Health, Nutrition and Family Planning; Education; Slum Upgrading and Urban Management; Science, Technology and Innovation; Gender Equality; and Cross-National Infrastructure, Trade Integration and Government Cooperation.

The authors make a rough estimate that the global increase in official development assistance (ODA) needed for all countries to meet the MDGs might be an additional $50-75 billion of ODA each year. In the Monterrey Consensus, and on many occasions both before and since, the rich world has committed to official development assistance of 0.7 percent of donor GNP, but currently gives around 0.23 percent. An additional $75 billion per year would put the donor countries at around $135 billion per year, or 0.5 percent of current GNP, far below the long-standing commitment.

Sachs et. al. warn that large-scale aid is not sufficient for ending the poverty trap, nor even warranted, when domestic governance is poor. They are advocating large-scale help only for countries that can help themselves. They do not pick ODA numbers out of the air, but argue for true needs assessments on a country-by-country basis. The situation in much of Africa is sufficiently desperate and the potential benefits of increased donor-financed investments is sufficiently high, that the world community should start immediately in partnership with well-governed African countries to help them to end their poverty trap once and for all.

“Ending Africa’s Poverty Trap” was authored by Jeffrey D. Sachs, director of the Earth Institute at Columbia University and director of the UN Millennium Project, and John W. McArthur, Guido Schmidt-Traub, Margaret Kruk, Chandrika Bahadur, Michael Faye, and Gordon McCord of the UN Millennium Project. download pdf of Brookings report

The Earth Institute at Columbia University is among the world’s leading academic centers for the integrated study of Earth, its environment, and society. The Earth Institute builds upon excellence in the core disciplines—earth sciences, biological sciences, engineering sciences, social sciences and health sciences—and stresses cross-disciplinary approaches to complex problems. Through its research, training and global partnerships, it mobilizes science and technology to advance sustainable development, while placing special emphasis on the needs of the world’s poor.

Commissioned in 2002 by UN Secretary-General Kofi Annan, the Millennium Project is developing a concrete action plan for the world to reverse the grinding poverty, hunger, disease and marginalization that plague billions of people. An independent advisory body, the Project will present its final recommendations, “A Business Plan for Meeting the Millennium Development Goals,” to the Secretary-General in January 2005. The business plan proposes straightforward, concrete solutions for meeting the Goals, which were born of the 2000 UN Millennium Summit and endorsed by 189 world leaders. Housed at UNDP headquarters in New York, the Project is directed by Professor Jeffrey Sachs of Columbia University.