The Evolution of Jeffrey Sachs

By Robert Cole, AlterNet. Posted May 18, 2005.

President Bush's favorite philosopher Jesus Christ once declared, "The poor we will always have with us." Jeffrey Sachs is a man on a mission to prove him wrong.

The End of Poverty: Economic Possibilities for Our Time is an autobiography, a moral call to arms, and a technical blueprint all rolled up into one massive book dedicated to eradicating extreme global poverty by 2025. Here is what extreme poverty looks like today: over a billion people struggle to survive on less than a dollar a day, while another 1.5 billion exist on less than two dollars per day. Some 114 million children are denied any education whatsoever, even as six million children die of malnutrition before the age of five each year.

Sachs' book is a natural extension of his present tenure as director of both the UN Millennium Project and Columbia University's Earth Institute. In the former position he serves as special advisor to UN Secretary-General Kofi Annan, guiding the pursuit of that project's Millennium Development Goals. These eight MDGs, which are now formally supported by all of UN member states, range from eradicating extreme poverty -- defined as living on less than one dollar per day -- to creating a global partnership for development, with concurrent plans to ensure universal primary education and promote gender equality. (These targets were originally set for 2015, though the eradication of severe poverty has since been pushed back to 2025.)

Miracle Worker or Reckless Visionary?

The high-profile guru of global development, recently included on Time magazine's current list of the world's 100 most influential people, has a long and controversial track record in curing the world's economic woes. Sachs received his Ph.D. from Harvard University when he was barely 26. Within two years, he had already received tenure at Harvard's economics department, where he established his reputation as an expert on international finance and inflation.

Sachs soon became famous as a macroeconomic miracle worker when Bolivia hired him to cure the nation's rampant inflation. Within seven weeks, the good doctor had rescued the ailing Bolivian peso, stopping the country's hyperinflation in its tracks. Sachs never looked back, soon becoming the most sought-after economic adviser to the developing world.

Over the past two decades, Sachs has treated over a hundred such "patients," from Latin America through Eastern Europe to Asia. Along the way, he's garnered a degree of celebrity rare for an economist, rubbing shoulders with popes and presidents, royalty and rock stars. Fame has brought with it greater scrutiny, and inevitably criticism.

After Bolivia, the summer of 1989 found Sachs in post-communist Poland, urging a crash course in market transformation. Heeding a Solidarity leader's request, he and colleague David Lipton held an all-night drafting session that produced a specific timeline of policy reforms, including the immediate removal of price controls and privatization of state enterprises. This tactic of rapidly injecting free-market reforms into stagnant economies came to be known as "shock therapy" (a label Sachs rejects).

Despite warnings from Polish economists who feared that their country lacked the experience to absorb such quick, radical change, the Sachs-Lipton brief became the nation's official economic policy on Jan. 1, 1990 -- and to disastrous effect, at least in the short run. In the absence of government controls, unemployment rates spiked, prices skyrocketed, and thousands lost their personal savings. Poland's woes inspired a firestorm of criticism that Sachs later dismissed, arguing that his strategy did in fact work in the long run. He pointed to the dramatic increase in per capita income by 2002 in Poland, which also enjoyed the highest rate of economic growth among post-communist nations during the same period.

Sachs' defense of his prescription, however, rings less convincing in the case of Russia. When Boris Yeltsin rose to power in the autumn of 1991, Sachs prescribed a similar dose of shock therapy to revive the moribund economy. However, not only did Russia endure economic disruption and unrest like Poland, the reforms also enabled the rise to power of a Mafia-like oligarchy who seized control of much of the country's newly privatized resources.

In Sachs' track record with post-communist economies, his critics see a man eager to advance grandiose visions of social engineering irrespective of their costs. So it's hardly surprising that his latest plan to eradicate poverty has more than its fair share of skeptics.

The Evolution of Aid Policy

In many ways, the evolution of Sachs own economic philosophy has mirrored that of development aid. Western nations have adopted various strategies to tackle global poverty over the past 50 years, and with varying degrees of sincerity and wisdom. Be it John Galbraith's liberal dream of balancing private and public sector wealth, Nixonian anti-Marxist programs of financial and military assistance, or cynical Reagan-era "structural adjustment" policies, the results have not been heartening.

Structural adjustment failed so miserably as a development tool that the IMF and World Bank abandoned it by the mid-90s. The net effect of these policies set back African development by years and widened Latin America's income disparity. In fact, the two nations that did witness major reductions in extreme poverty in the '80s and '90s were China and India, both of which rejected structural adjustment schemes.

Clearly, Western political and imperial agendas heavily tainted the last two eras of development aid -- agendas that Sachs himself may have served, knowingly or otherwise. Some economists claim, for example, that Sachs merely repackaged structural adjustment as shock therapy, and therefore ended up with exactly the same results.

While Sachs is not one to admit past errors in judgment, he does acknowledge changing his mind: "It has taken me 20 years to understand what good development economics should be, and I am still learning." He is careful today to distance himself from old-school development policies: "For a quarter-century, the main IMF prescription has been budgetary belt-tightening for patients much too poor to own belts -- finally, however, that approach is beginning to change."

Or as he puts it in his book, "It is no good to lecture the dying that they should have done better with their lot in life."


The New War on Poverty

Though he remains a free-market evangelist, Sachs' philosophy has gradually evolved to embrace a strong belief in the power of collective governmental action. Not surprisingly, topping the list of his urgent prescriptions is a demand that Western donors -- chiefly the United States -- honor their long-standing pledge to give 0.7 percent of their GNP to global development programs, a promise they've failed to deliver on for many years.

In End of Poverty, Sachs challenges the widely held myth that the U.S. government spends too much on foreign aid. The actual amount, as he reveals, is only 0.15 percent per year, or 15 cents for every $100 dollars of our GNP -- the lowest percentage of all donor nations. Even if private donations were added to that figure, total U.S. giving would still amount to just 0.2 percent of its $12 trillion GNP.

Sachs argues that raising the level of aid is easily affordable. For example, the Bush administration's 2005 tax cuts just for those earning more than $500,000 are sufficient to meet America's aid commitments.

Sachs' vision, however, is most powerful and compelling in its call for holistic approach toward economic development -- an approach, he dubs, "clinical economics," a phrase he derives from pediatrics. Clinical economics views entrenched poverty as a complex phenomenon, created by the interaction of a host of important factors -- such as geographic isolation, lack of infrastructure, environmental degradation, rampant untreated disease, and lack of education -- which combine to create entrenched poverty. UNICEF's Carol Bellamy calls this "the perfect storm" afflicting Third World nations like Malawi. Sachs argues that addressing just one or two of these problems at a time will not cure the disease. What is required is both a multi-pronged and unique strategy tailored to the needs of each nation. "One-size-fits-all" programs cannot, and rarely ever did, treat the underlying pathology of poverty.

According to Sachs, a required step toward creating effective development policy is to reverse the traditional top-down structure of aid delivery. Rather than leave the planning in the hands of Western governments and NGOs, the countries themselves should outline detailed strategies with specific investment targets and clear monitoring standards to put forward to donor nations. In some instances aid wouldn't necessarily require money, but donation of medicines, malarial bed nets, nitrogen-producing trees, and the like.

In requiring recipient nations to articulate their own needs in concert with the expertise of UN development specialists, Sachs approach also has the added benefit of assuaging traditional Third World fears about losing their sovereignty in the guise of international aid programs. It would ideally also ensure more focused, and thus effective, application of resources. It's ostensibly a village-up rather than World Bank-down model.

Another important component of Sachs' model is technological know-how, where advances in farmland reclamation and superior seed stock, renewable energies, cheap and effective medicines, and improved transportation and communication services become tools in changing the economic dynamic. Sachs sees technological innovation as a means to offer relatively simple and affordable solutions to endemic problems. Anti-malarial bed nets, for example, cost around five dollars apiece and can last for years. That's a small investment per person when compared with the incalculable toll of stressed family structures, lost productivity, and malarial treatment costs for a single infected person.

The bottom line, according to Sachs, is that the West can permanently lift the extremely poor out of hopelessness by committing to long-term investment in the essential components of economic growth: safe drinking water, irrigation, affordable health care, roads, power and telecommunications, among others. Beyond being a matter of global security, it's an obvious moral imperative, now more urgent than ever.

While Sachs' prescriptions can seem a little naive in minimizing, for instance, the daunting challenges of government corruption, self-serving superpower politics, and bureaucratic inertia, his over-arching message is abundantly worth heeding. He offers a new, more thoughtful, even radical way of seeing poverty and its solutions. For progressive movements, he offers a way to move past empty moralizing toward effective action.

Robert Cole is a freelance writer and historian living on Beaver Island, Michigan.

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