# Can we end poverty for $US175 billion per year? A recent question brought up the claim that poverty can be eliminated for 175 billion a year. I found this claim To end extreme poverty worldwide in 20 years, Sachs calculated that the total cost per year would be about$175 billion. This represents less than one percent of the combined income of the richest countries in the world.

I understand this is just extreme poverty but I am skeptical that this expense would actually be enough to take care of the extremely poor.

• The way poverty is defined it can never actually be ended, as the conditions of those in poverty move so does the bar declaring them in poverty. – Ryathal Jul 31 '12 at 21:30
• @Ryathal is correct in general; many studies have shown that poverty is experienced in relation to the wealth of others. Nethertheless extreme poverty is defined in absolute parameters such as the absence of basic needs like food, clean water, shelter, sanitation, security and health care. – Jan Beck Jul 31 '12 at 22:55
• @Ryathal: In the context of the Millenium goals in which Sachs speaks poverty is a clearly defined term. – Christian Jul 31 '12 at 23:14
• Given this has come from one economist's models, what sort of evidence would you accept as proving or disproving the claim? Agreement from another economist? Disagreement? Controlled experiment :-) ? – Oddthinking Aug 1 '12 at 1:39
• You could end my poverty for US$175 billion/year. Surely that is a start. – Paul Aug 6 '12 at 5:08 ## 4 Answers No, we cannot. Sachs poses it as purely economical problem, while in fact the most poverty stricken regions are either at war with neighboring countries, having a civil war or both (and it's actually hard to tell, as country borders don't coincide with ethnic regions). The poorest region of the world is Congo and it's neighbors including Uganda, Rwanda. That region is at constant turmoil, with numerous belligerents ranging from ethnic, religious or plain crazy (eg. Joseph Kony's Lord's Resistance Army). Just in that region you have: • FDLR (Democratic Forces for the Liberation of Rwanda) • Mai-Mai • CNDP (National Congress for the Defence of the People) • LRA (Lord's Resistance Army) • AFDL (Alliance of Democratic Forces for the Liberation of Congo) ... and the list goes on and on. This is just one small part of central Africa. Another extremely poor region is Somalia. Currently the most violent region in the world. It's at constant civil war since 1991, with numerous belligerents. Currently coalition of these loyal to government fighting against coalition of Islamist insurgents. UN tried to intervene there in 1992, which led to US military fiasco known as Battle of Mogadishu in 1993 (later depicted in a movie). Whole UN intervention proved to be a fiasco and was terminated in 1995. The cost on US side was estimated to be$7bn ($11.2bn inflation adjusted), and has allegedl saved lives of 10,000 Somalis. Which gives cost of$700,000 ($1,120,000 inflation adjusted) per Somali allegedly saved (source). Afghanistan is another of the poorest regions in the world. The cost of US intervention in Afghanistan alone already exceeds$550bn.

Overall, to solve problem of poverty in Africa, you'd need military peacekeeping action on unprecedented scale. As previous attempts in Somalia show, it's neither cheap nor easy. As runaway costs of Iraq and Afghanistan wars show, the military costs can easily reach trillions of dollars. And that's not even starting to count the humanitarian help, the restoration of infrastructure, education etc.

And besides all that, the author of the article mentioned as source of the claim, suggest getting the money from... reduced military spending.

Update, to answer Oddthinking's question from comments. Sachs proposal (source) is as follows:

• Agricultural imports like fertilizers will greatly improve crop yields in many poor countries and improved crops are the first step out of poverty.
• Investments in basic health such as anti-malarial nets and effective anti-malarial medication for areas with mosquito problems.
• Treatments for AIDs/HIV and its attendant opportunistic infections.
• Anti-retroviral medications for late-stage AIDs.
• Skilled birth attendants and sexual and reproductive health services.
• Investments in education including food for school-aged children.
• Electricity could be made available via power lines or an off-grid diesel generator and could power lights and perhaps a computer for schools, pumps for safe well water, milling grain and other food processing, refrigeration and cooking.
• Safe drinking water and sanitation facilities must be made available to everyone and having water sources near villages would save hours of carting water daily.

In other words, he does not address the issue of war and violence at all.

Nor is it included as the condition preventing a country from economical advance:

Countries that move backwards can normally be characterized by some or all of the following conditions:

1. They lack savings and, therefore, the flexibility to adapt to changing the market.
2. There is a lack of trade with other countries to bring in hard currency. Usually, trade is reduced or blocked by unreliable trade routes, monetary chaos, price controls or other forms of government intervention that impede specialization and trade.
3. Technological reversal occurs because imperative techniques fail to be passed on from one generation to another.
4. Natural resource declines, such as a reduction in arable land or lowered production of other sorts of resources.
5. There is a change to a different solution for the problem the country’s natural resource had previously solved.
6. Adverse productivity shock for unanticipated reasons such as floods, droughts, heat waves and diseases can wipe out income.
7. Population growth causes the amount of resources to be divided among more and more people.
• There is an assumption in this answer that military peacekeeping is a necessary part of the solution. I haven't any alternatives to offer, but I should ask: Does Sachs offer any? – Oddthinking Aug 1 '12 at 13:34
• Good effort but I'm going to -1 because your quotes are all about specific facts which do not contribute to your conclusion directly; the conclusion is entirely your own. Specifically, the conclusion that war is the cause and not the result of poverty is not supported by your sources. For all we know, perhaps giving $10,000 to every single Somalian might end the war instantly. – RomanSt Aug 15 '12 at 8:28 • @romkyns: how is the cause of war relevant? the question isn't "what is the cause?", but "can it be fixed for$175bn?". " For all we know, perhaps giving $10,000 to every single Somalian might end the war instantly" No, for all we know giving$10,000 to every single Somalian will cause hyperinflation in Somalia. Economics 101. – vartec Aug 22 '12 at 9:17
• @vartec That is a theoretical prediction which has never been tested. It is based on assumptions that we know are false (such as that humans are rational actors or maximize their personal benefit). So no, I am not convinced that US dollars will become near worthless within Somalia as a result of everyone having $10K. – RomanSt Aug 22 '12 at 9:24 • I strongly suspect that war causes poverty, and therefore mere financial aid won't solve everything (though that doesn't rule out poverty causing war as well) but I'm downvoting because there doesn't seem to be any citations supporting that position. – Andrew Grimm Oct 29 '12 at 3:49 It is not the money and it is not the societal relationships. The primary issues in the poorest parts of the world are casteism, tribalism and corruption. Consider this article from the BBC, discussing tribalism in Kenya with some implications for the continent as a whole. Or consider this article about poverty in Nigeria; an oil state. India is working hard to breakdown the relics of the caste system - much to the chagrin of some upper caste Indians I met who did not get the educational preferences granted to untouchables. And the entities through which the$175 billion per year would flow are hopelessly corrupt.

It is not the money, and it is not the guns - it is the ability and willingness of the society to change. The breakthrough will be in social science. We need to figure out a way to help the poor societies learn how stop killing and stealing from each other. If they would learn to cooperate with integrity, they would not need any of our money - they would create wealth on their own.

• Welcome to Skeptics, this is actually a pretty good answer. To improve it further I would suggest quoting important parts from your links. – Wertilq Jul 6 '13 at 19:30
• There's little in the hyperlinks to support the question. The first BBC link is about politics, not the economy or poverty. The second says there's poverty and violence in Nigeria. They talk about the status quo, and not about whether an extra $175bn/year (a change in the status quo) might be "enough". – ChrisW Jul 7 '13 at 3:29 • There is a book "Why Nations Fail" by Acemoglu and Robinson which covers exactly this. – RedSonja Mar 6 '15 at 14:14 • Not social science. Political science. Western democracy (even with real elections) does very little to stop corruption, ascend ethnic or ideological differences, and generally get a country's shit together. – Aleksandr Dubinsky Jan 13 '16 at 5:51 In contrast to vartec's answer, and the comment to that answer which reads: But anyway,$10,000 to every single Somalian is more than $100bn. Doesn't look good for claim that$175bn can eliminate poverty everywhere, if you'd need $100bn for one small country. The world's poorest have approximately$400/year/person:

Quote:

Instead, a new international poverty line of $1.25 a day is proposed for 2005 (equivalent to$1.00 a day in 1996 U.S. prices), which is the mean of the lines in the poorest 15 countries in consumption per capita, based on the new compilation of national poverty lines. This new poverty line is fairly robust to different estimation methods.

The definition of "extreme poverty" which is used in the OP is slightly smaller than that:

Extreme Poverty

People in extreme poverty are the poorest people in the world. They have a total income that is calculated to be less than around $1 United States Dollars (USD) per day2. The actual meaning of this number and term is that these are people who can at best barely meet their minimal needs for survival. These people often have the ability to feed themselves minimally and have some chance of surviving from year to year. This is termed subsistence living. Those people that earn more than$1 a day are generally able to meet their basic needs and are considered to be in moderate poverty, not extreme poverty.

A mere $2000 (equivalent to 5 year's income) might arguably/plausibly be enough to give everyone food security, and therefore other security: less desperation/need for theft and war. A problem though is that: Using the new international poverty line proposed in this article, Chen and Ravallion (2008b) ﬁnd that 1.4 billion people in 2005—25 percent of the population of the developing world—lived in poverty. That share was 52 percent 25 years earlier (in 1981) and 42 percent in 1990. It is good that the number has halved, from 52% to 25%: but naively dividing$175 billion between 1.4 billion people means only $100 per person -- not apparently enough just from figures, i.e. it would have to be spent cleverly. Noting that the amount is$175 billion per year (not just once), it would (theoretically) increase the amount of money available to the world's poorest by 25%.

I find it plausible that a 25% increase/input might be significant or 'sufficient':

• It allows for some investment where there was none before (potentially, huge gains)
• It could hire a huge amount of local labour (a significant percentage of the national workforce)

In other news, India is hoping to "make food a legal right", which may cost them $23 billion/year: The bill - which was passed by ordinance but needs to be ratified by parliament - proposes to make food a legal right. It seeks to cover two-thirds of the country's population and provide 5kg of subsidised food grain per person per month. For one, some critics argue that the scheme could upset the budget with subsidies on food doubling to a whopping$23bn (£15.5bn). This will not help India, they say, to cut its fiscal deficit to 4.1% of GDP by 2012-2013 from an uncomfortable 5.5% expected this fiscal year.

The plans for spending the money are very different -- but the amounts of money, i.e. $23bn for India versus$175bn for the whole world, are the same (given how large the population of India is).

The total assets of the Bill & Melinda Gates Foundation is said to be $32bn total. Compare that with$175bn/year over perhaps 20 years: it amounts to $3500bn, or 100 times of the amount of money in the Gates Foundation -- which already has a budget comparable to the UN WHO. This seems to me more evidence is$175bn/year is a relatively large amount of money.

$3500bn divided by 1.4bn people is in fact the$2000/person or the "5 times an annual income in savings" which I guessed might seem enough for food security.

The OP says,

I understand this is just extreme poverty but I am skeptical that this expense would actually be enough to take care of the extremely poor.

To summarize/conclude: there are many confounding factors (changes in money and climate and population and trade), and many ways in which this or any plan could fail -- but the amount of money being talked about seems useful, and if the plan did fail it might not be for lack of money.

• the thing is there are 1.4 billion people in india a good portion of which live in poverty. Not to mention China, most of the mid-East, Africa, and SE Asia. Even if its just 1 billion then you are talking 175 per person not the 400 you mentioned. I suspect we the claimant is saying 175b now and then will come back with hand out for more when that is gone... I do not see any evidence that 175b would even put a dent in global poverty. – Chad Jul 7 '13 at 2:28
• @Chad Even if its just 1 billion then you are talking 175 per person not the 400 you mentioned. -- $400/year is what the poorests' income is now/already. An extra$175bn implies an extra $100 to$175 per person, i.e. a 25% increase in the status quo. I suspect we the claimant is saying 175b now and then will come back with hand out for more when that is gone` -- The topic is $175bn per year for the next 20 years:$3500bn. The question is whether that might be "enough": which presumably means enough for now and/or enough over the next 20 years. – ChrisW Jul 7 '13 at 3:36
• $3500bn is roughly the US Federal government buget for one year. FYI. – hunter2 Jul 9 '13 at 10:38 For a summary of opposing economists' views see John, Arielle and Storr, Virgil Henry, Can the West Help the Rest? A Review Essay of Sachs’ the End of Poverty and Easterly’s the White Man’s Burden (January 1, 2009). The Journal of Private Enterprise, Vol. 25, No. 1, pp. 125-140, 2009. As most the most extensive opposition comes from Easterly's book, I'll quote some passages summarizing that: Sachs argues that 1.1 billion people continue to live on less than$1 per day because foreign aid to poor countries has been alarmingly small. Easterly (2006, p.4), on the other hand, underscores what he deems “the other tragedy of the world’ poor,” which is that the rich world has squandered $2.3 trillion over the past sixty years trying to alleviate poverty, while 1.1 billion people still live in extreme poverty. Easterly argues that foreign aid has failed thus far because of the paternalistic (p.24) as well as unintelligent and dangerous “delusions” (p.24) that people in rich countries have concerning the possibility of economic development. If the past is any guide, Easterly suggests, then the Millennium Development Goals are simply “beautiful goals” that are doomed to failure (p.11) [...] [Easterly] is not as eager as Sachs to dismiss the impact of bad governance on the mismanagement of foreign aid and the tragedy of the world’s poor. Easterly (p.130) states plainly: “Badly governed countries are poor.” And despite the fact that Sachs says corrupt governments will not be granted aid, Easterly (p.133) notes that that “the top fifteen recipients of aid in 2002, who each got more than$1 billion each, have a median ranking as the worst fourth of all governments everywhere in 2002.” He cites studies which found that, in four corrupt sub-Saharan African countries, “30 to 70 percent of drugs disappeared before reaching the patients” (p.261). Finally, he argues that countries can and have developed without needing foreign assistance. “Most of the recent success stories [meaning China or India],” Easterly (p.345) writes, “are countries that did not get a lot of foreign aid and did not spend a lot of time in IMF programs.”

An additional problem identified by Easterly with aid and planning is that Planners have no way of knowing if and where their investments in poor countries will have success. “The argument for more aid money,” Easterly (p. 332) articulates, “presumes that there is some all-knowing Planner who can get the right technical fix to the right place.” While Sachs wants the IMF focus on, in addition to its current mandate, items such climate, disease and agronomy, Easterly retorts that it is ridiculous for any one group, be it the IMF or the UN, to endeavor to manage all of the problems of the poor. In fact, Easterly (p.212) laments that the IMF’s mission statement “has grown more and more bloated.”

And some don't fully agree with either viewpoint.

For example, Ero (2008, p.17) chides those proponents of increased Western aid, claiming that they ignore the role of strategic self-interest in the United States’ development agenda. Yet Ero (p.16) simultaneously warns that “Easterly and his fellows are [too] quick to dismiss the utility of aid or other development assistance” due to a “lack of a nuanced understanding of particular African states and the improvement some have made at establishing good government.”

And from Ero's concluding paragraphs (p. 22), contain slightly stronger criticism:

Sachs and his proponents cannot provide significant evidence, either historical or empirical, that aid will work differently when issued on more stringent conditions. Moreover they do not seem to differentiate between their agenda and colonialism – an issue that remains sensitive in the development field, and indeed in sub-Saharan States as well (Chigodo 2002).

The latter charge seems a bit dubious to me in view of Sachs' later articles e.g. this 2016 one in The Nation clearly denoucing American imperialism. (Perhaps Ero was mistaken or perhaps his criticism struck a note, I'm not sure.)

Ero notes in his opening paragraphs (p. 5) that Sachs has switched to this aid-centered view from his previous one that endorsed the IMF's Structural Adjustment Programs (SAPs)... after the "collapse and abysmal outcomes of the World Bank and IMF’s SAPs for development in Africa". Also, Ero points out that Sach's change in view coincides somewhat with the post-9/11 change in policy in Washington, which massively emphasized aid to Africa as being in America's own best interest in terms of fighting terrorism. It's perhaps this issue that caused Ero to assign a bit more callous motives to Sachs.

If you expected something else, alas that's how political economy is practiced. Also, I've left out Easterly's (or other's) alternative solutions and criticisms thereof because those didn't fall squarely under this question... as well making a potential answer far too long.