“…a small think tank with a knack of spotting new trends…” – Geoffrey Lean, Telegraph.co.uk.
Chapter 7. Eradicating Poverty and Stabilizing Population: A Poverty Eradication Agenda and Budget
As indicated earlier, eradicating poverty involves much more than international aid programs. It also includes the debt relief that the poorest countries need in order to escape from poverty. For many developing countries, the reform of farm subsidies in aid-giving industrial countries and debt relief may be equally important. A successful export-oriented farm sector often offers a path out of poverty for a poor country. Sadly, for many developing countries this path is blocked by the self-serving farm subsidies of affluent countries. Overall, industrial-country farm subsidies of $258 billion are roughly double the development assistance from these governments. 79
These subsidies encourage overproduction of some farm commodities, which then are sent abroad with another boost from export subsidies. The result is depressed world market prices, particularly for sugar and cotton, commodities where developing countries have the most to lose. 80
Although the European Union (EU) accounts for more than half of the $120 billion in development assistance from all countries, much of the economic gain from this assistance in the past was offset by the EU’s annual dumping of some 6 million tons of sugar on the world market. Fortunately, in 2005 the EU announced that it would reduce its sugar support price to farmers by 40 percent, thus reducing the amount of sugar exports to 1.3 million tons in 2008. 81
Similarly, subsidies to U.S. farmers have historically enabled them to export cotton at low prices. And since the United States is the world’s leading cotton exporter, its subsidies depress prices for all cotton exporters. As a result, U.S. cotton subsidies have faced a spirited challenge from four cotton-producing countries in Central Africa: Benin, Burkina Faso, Chad, and Mali. In addition, Brazil challenged U.S. cotton subsidies within the framework of the World Trade Organization (WTO), convincing a WTO panel that U.S. cotton subsidies were depressing world prices and harming their cotton producers. 82
After the WTO ruled in Brazil’s favor in 2004, the United States made some token efforts to comply, but the WTO again ruled in Brazil’s favor in December 2007, concluding that U.S. cotton subsidies were still depressing the world market price for cotton. The affluent world can no longer afford farm policies that permanently trap millions in poverty in aid-recipient countries by cutting off their main avenue of escape. 83
Whereas most U.S. farm subsidies depress prices of exports from developing countries, the subsidy for converting grain into ethanol raises the price of grain, which most low-income countries import. In effect, U.S. taxpayers are subsidizing an increase in world hunger. 84
Debt forgiveness is another essential component of the broader effort to eradicate poverty. A few years ago, for example, when sub-Saharan Africa was spending four times as much on debt servicing as it spent on health care, debt forgiveness was the key to boosting living standards in this last major bastion of poverty. 85
In July 2005, heads of the G-8 industrial countries, meeting in Gleneagles, Scotland, agreed to cancel the multilateral debt that a number of the poorest countries owed to the World Bank, the International Monetary Fund (IMF), and the African Development Bank. Among other things, this initiative was intended to help the poorest countries reach the Millennium Development Goals. It immediately affected 18 of the poorest debt-ridden countries (14 in Africa and 4 in Latin America), offering these countries a new lease on life. 86
The year after the Gleneagles meeting, Oxfam International reported that the IMF had eliminated the debts owed by 19 countries, the first major step toward the debt relief goal set at the G-8 meeting. For Zambia, the $6 billion of debt relief enabled President Levy Mwanawasa to announce that basic health care would be now free. In Oxfam’s words, “the privilege of the few became the right of all.” In East Africa, Burundi announced it would cancel school fees, permitting 300,000 children from poor families to enroll in school. In Nigeria, debt relief has been used to set up a poverty action fund, part of which will go to training thousands of new teachers. 87
Even as debt was being reduced, development aid as a percentage of gross national income from donor countries decreased in 2006 and 2007. Although it rose in 2008, aid is still $29 billion a year short of meeting the 2010 target of $130 billion that governments agreed on in 2005. The bad news is that many of these same countries burdened by foreign debt were being hit hard when the global economic crisis brought falling prices for their mineral exports, falling remittances from abroad, and rising prices for their grain imports. 88
As noted earlier, the Bank estimates that increases in fuel and food prices have pushed 130 million people below the poverty line. And the Bank projected that another 53 million would be pushed below the line in 2009. In referring to the difficulty many developing countries were already experiencing in trying to reach the MDGs, Bank president Robert Zoellick said in March 2009, “These targets now look even more distant.” 89
The steps needed to eradicate poverty and accelerate the shift to smaller families are clear. They include filling several funding gaps, including those needed to reach universal primary education, to fight childhood and other infectious diseases, to provide reproductive health care and family planning services, and to contain the HIV epidemic. Collectively, the initiatives discussed in this chapter are estimated to cost another $77 billion a year. (See Table 7–1.) 90
Table 7-1. Plan B Budget: Additional Annual
Funding Needed to Reach Basic Social Goals
|Billion U.S. Dollars|
|Universal primary education||10|
|Eradication of adult illiteracy||4|
|School lunch programs for 44 poorest countries||6|
|Assistance to preschool children and pregnant|
|women in 44 poorest countries||4|
|Reproductive health and family planning||17|
|Universal basic health care||33|
|Closing the condom gap||3|
|Source: See endnote 90.|
The heaviest investments in this effort center on education and health, which are the cornerstones of both human capital development and population stabilization. Education includes universal primary education and a global campaign to eradicate adult illiteracy. Health care includes the basic interventions to control infectious diseases, beginning with childhood vaccinations. 91
As Columbia University economist Jeffrey Sachs regularly reminds us, for the first time in history we have the technologies and financial resources to eradicate poverty. Industrial-country investments in education, health, and school lunches are in a sense a humanitarian response to the plight of the world’s poorest countries. But more fundamentally, they are investments that will help reverse the demographic and environmental trends that are undermining civilization. 92
79. Organisation for Economic Co-operation and Development (OECD), Agricultural Policies in OECD Countries 2008: At a Glance (Paris: 2008), p. 9; OECD, “Development Aid at its Highest Level Ever in 2008,” press release (Paris: 30 March 2009); “The Hypocrisy of Farm Subsidies,” New York Times, 1 December 2002.
80. “The Hypocrisy of Farm Subsidies,” op. cit. note 79.
81. OECD, “Development Aid,” op. cit. note 79; OECD, OECD Statistics, electronic database, at stats.oecd.org/wbos, updated 2009; “South Africa: Weaning States Off Subsidies,” Africa News, 19 August 2005.
82. Julian Alston et al., Impacts of Reductions in US Cotton Subsidies on West African Cotton Producers (Boston: Oxfam America, 2007); OECD, op. cit. note 81; Elizabeth Becker, “U.S. Will Cut Farm Subsidies in Trade Deal,” New York Times, 31 July 2004; Randy Schnepf, U.S. Agricultural Policy Response to WTO Cotton Decision (Washington, DC: Congressional Research Service, updated 8 September 2006).
83. Schnepf, op. cit. note 82; Randy Schnepf, Brazil’s WTO Case Against the U.S. Cotton Program: A Brief Overview (Washington, DC: Congressional Research Service, 17 March 2009).
84. World Bank, Global Economic Prospects, op. cit. note 6, pp. 11–12.
85. “Ending the Cycle of Debt,” New York Times, 1 October 2004; debt servicing from World Bank, Little Data Book on External Debt in Global Development Finance 2007 (Washington, DC: 2007), p. 8; health care spending calculated from IMF, World Economic and Financial Surveys: Regional Economic Outlook—Sub-Saharan Africa (Washington, DC: September 2006), pp. 36, 43, from David Goldsbrough, “IMF Programs and Health Spending,” presented at Global Conference on Gearing Macroeconomic Policies to Reverse the HIV/AIDS Epidemic, Brasília, 20 November 2006, and from U.N. Population Division, World Population Prospects: The 2006 Revision Population Database, at esa.un.org/unpp, updated 2007.
86. “G8 Finance Ministers’ Conclusions on Development,” Pre Summit Statement by G-8 Finance Ministers, London, 10–11 June 2005; Oxfam International, “Gleneagles: What Really Happened at the G8 Summit?” Oxfam Briefing Note (London: 29 July 2005).
87. Oxfam International, “The View from the Summit—Gleneagles G8 One Year On,” briefing note (Oxford, U.K.: June 2006).
88. World Bank, Global Monitoring Report 2009, op. cit. note 1, p. 8; U.N. World Food Programme, “Financial Crisis and High Food Prices,” fact sheet (Rome: updated 11 June 2009).
89. World Bank, “Financial Crisis Could Trap 53 Million More People in Poverty,” news release (Washington, DC: 12 February 2009); World Bank, Global Economic Prospects, op. cit. note 6, pp. 11–12; Robert Zoellick, “Seizing Opportunity from Crisis: Making Multilateralism Work,” speech delivered at the Thomas Reuters Building, Canary Wharf, London, 31 March 2009.
90. Costs of meeting social goals in Table 7–1 based on the following sources: universal primary education from U.K. Treasury, op. cit. note 17; adult literacy campaign is author’s estimate; school lunch program from McGovern, op. cit. note 20; assistance to preschool children and pregnant women is author’s estimate of extending the U.S.’s Women, Infants, and Children program, based on ibid.; reproductive health and family planning from Speidel et al., op. cit. note 69, and from Speidel, op. cit. note 69; universal basic health care from Sachs and Commission on Macroeconomics and Health, op. cit. note 27; closing the condom gap estimated from UNFPA, op. cit. note 33, and from Population Action International, op. cit. note 33.
91. Sachs and Commission on Macroeconomics and Health, op. cit. note 27.
92. Jeffrey D. Sachs, The End of Poverty: Economic Possibilities for Our Time (New York: Penguin Group, 2005).
Copyright © 2009 Earth Policy Institute