MIDPOINT IN ACHIEVING THE UN’S MILLENNIUM GOALS: GOOD NEWS, LESSONS LEARNED AND CHALLENGES AHEAD – March 11, 2007  

In the current environment of heated political divisiveness found around the world, the UN’s Millennium Goals are refreshing in that they are objectives that have near unanimous support. The ambitious goal of lowering the levels of poverty around the world is something that Americans and Europeans, Republicans and Democrats, liberals and conservatives, young and old, North and South, and East and West can all agree upon. However, achieving these goals is not a simple task; poverty reduction is a complex issue and if there were easy solutions, the world would have already eliminated this major cause of human suffering a long time ago. According to a recent article written by Bryson for the Associated Press, many leaders in Africa have acknowledged the limitations of financial aid as a tool to use in poverty reduction. Foreign aid often creates climates of dependency and there is little empirical evidence linking foreign aid with poverty reduction throughout Africa or other regions of the world. This suggests that while money will be required to achieve success, it is only one ingredient of the recipe needed; and throwing money at the problem of poverty has not been shown to be an effective method in the past. Poverty reduction may normally require complex cooperative arrangements that involve many different individuals and organizations that attack the problem from multiple angles. Poverty reduction has been shown to be associated with reduced crime rates, lower levels of infant moralities, expanded life expectancies and improved overall standards of living. Money may not guarantee happiness; on the other hand, it is hard to make a case that being in extremely poverty can be a solid foundation on which one can build a satisfying and productive life.

While there remains far too much suffering around the world due to extreme poverty, there has also been a significant amount of progress in improving the lives of people is many parts of the world. While it is generally agreed that there is no single method that can be used in all places around the globe to lessen the grip poverty has over the planet’s citizens, lessons learned from the success stories may provide ideas about developing general principles that can then be adapted to specific situations and locations.

MACROECONOMIC LESSONS FROM ASIA

Most of the recent poverty reduction in the world has taken place in Asia. In Vietnam, back in 1990, over 80% of the population lived in extreme poverty (earning less than $2 a day), but that number has fallen to well under 50% today according to a recent World Bank report. However, the greatest success story of rapid poverty reduction the world has ever seen can be found in the recent history of China. During the period of 2001 through 2005, an astounding 156 million people were able to lift themselves out of extreme poverty and now instead of living in despair, they have hopes for the futures of both themselves and their children. It should be mentioned that this reduction in poverty was achieved without substantial foreign aid. India and other parts of South and Southeast Asia have also recently seen substantial improvements in the standards of living of many of the continent’s most disadvantaged people. Although the good news out of Asia is heartening, poverty has not been eliminated in Asia and there has been less progress in many other areas of the world. There is still a lot of work to do and the conception of new ideas and approaches are needed in order to achieve the UN’s Millennium Goals.

How has poverty been attacked in Asia? "Clearly, sustained strong economic growth has provided an indispensable foundation for the broad declines in poverty seen in most East Asian economies in recent years" (World Bank 2006, East Asia Update). How the economic pie is craved up in an economy will have an effect on poverty reduction, but having a bigger overall pie seems to help in ensuring more individuals are getting a big enough slice to live on. Noble Laureates Sen and Becker have often supported the concept that one of the keys to economic growth and poverty reduction is to open up a country's economy to international trade and investment. Furthermore, history has shown that embracing the world brings success while protectionism and attempts to keep people and economic activities separated from each other are not effective economic policies. Foreign trade and investment bring in tangible assets, such as money, factories and equipment, as well as intangible assets such as training and new ideas. Eskew in his 2005 article in the Chief Executive argued that instead of using international trade and "globalization" as topics to be debated politically, people of all political orientations should be celebrating the success that has come from increased economic and personal interactions across national boundaries and work together to increase openness and to enjoy the resulting benefits for all.

A TALE OF TWO REGIONS

Elson, in his recent article for the IMF's publication Finance and Development, looked at the tale of two regions, Asia and Latin America. In 1950, Latin America had significantly higher levels of economic development and lower levels of poverty than were seen in Asia, but today, the positions have reversed. What were the factors that allowed Asian economies to lessen poverty and what factors slowed progress in Latin America? There were three major factors found holding up improvements in the lives of the improvised in Latin America that were different from the factors that had evolved in Asia. These factors were macroeconomic instability, lack of integration with the global economy and the low quality found in public institutions within Latin America.

These results suggest that governments, international organizations and private industry all have a role to play in poverty reduction. Macro-economic stability requires the efforts of national governments; but also regional organizations such as NAFTA, the EU and ASEAN, and supranational organizations such as the UN, World Bank and IMF can play constructive roles. In addition, private for-profit companies have a supporting role to play in macroeconomic stability by focusing on long-term direct investments into developing nations while reframing from more speculative and potentially disruptive investments. Additionally, NGOs and other organizations can assist by supplying monitoring and education in support of macroeconomic stability.

Integration with the global economy requires governments to support policies of economic openness and to resist the calls of special interests for protection from competition. Private companies are the organizations for the most part that actually connect lesser developed regions with the global economy, and therefore are important in integrating improvised regions into the global economy. Large multi-national corporations are sometimes criticized for exploited lesser developed regions, but the reality is large companies mostly ignore these areas of the world since potential profits are relatively small and dealing with the bureaucratic red-tape that is often found in these regions is too much of a hassle. For private for-profit companies to play a greater role in poverty reduction may require these companies to develop new perspectives and paradigms. However the effort may be worthwhile and it has been shown that private enterprises can play a significant role in poverty reduction by finding sustainable methods that will bring profits for themselves while simultaneously providing quality jobs, work experience and infrastructure development to less economically developed countries. In addition, international NGOs and other organizations can assist in connecting less developed areas to the global economy by designing programs aimed at including individuals into the global economy who market force have neglected, as well as through a variety of education and training programs.

The primary responsibility for improving the quality of public institutions lies with the national governments. However, private profit-making enterprises can do their part by refusing to pay bribes and lobbying for efficient and transparent public institutions, and there is substantial research that indicates the presence of foreign companies in developing economies has a positive influence on lessening the amount of corruption tolerated of government officials. Furthermore, international organizations can assist in the training and monitoring roles in order to lessen the influence of corruption emanating from public institutions in developing economies.

TOP-DOWN AND GRASROOTS APPROACHES

Economic development is also strongly correlated with improved health, education and lessening the levels of crime and violence. However, this can lead to a chicken and egg type of question about the direction of causation. A strong case can be made economic development lays a strong foundation for poverty reduction, improved health and education and lower crime rates. An equally strong case can be made that improved health and education and lowering crime rates lead to economic development and the resulting declines in levels of poverty. In all likelihood, economic development works in tandem with the aforementioned other factors in reducing poverty in a complementary fashion.

Therefore, a strictly top-down approach that relies solely on governments and liberalized macro-economic policies, or a strictly grass roots approach that doesn't take into consideration the macroeconomic structure of an economy, would probably not be as effective or quick in achieving the goals as a combination top-down approach mixed with efforts at the grassroots level.

An example of a very effective grass roots program is the Grameen Bank founded by the most recent Noble Peace Prize winner, Muhammad Yunus. The bank has improved the lives of thousands of those that used to be living in extreme poverty in Bangladesh through micro-credit lending programs. The Grameen Bank has been an extremely cost effective way to allow people to raise themselves out of despair. Important lessons learned from the Grameen Bank include the concept that ideas and implementing the ideas are equally if not more important, than money in developing sustainable poverty reduction programs; and furthermore, not all of these ideas will originate from individuals from developed countries. 

THE CUP IS HALF FULL

It seems to be human nature to pay more attention to bad news and problems while taking for granted all the positive events that occur around us every day. TV news channels and newspapers bombard us with negative images of wars, disasters, political bickering, and poverty on a daily basis. Only rarely do we see or hear about young children being able to go the school in areas where a generation ago there were no schools, or about families being able to purchase for the first time items, such as a refrigerator, that many of us consider our birthright to own, or about the amazing increases in life expectancy and lowering of infant morality that has taken place in many areas of the world in recent decades. The overemphasis on negativity can give the false impression the world is a horrible place and there is little we can do about improving its condition. In fact, the opposite is often the case.

The problems caused by wars and disasters are important and deserving of attention. There are also many lessons to be learned from the mistakes and follies of mankind at its worst. However, there are also a lot of lessons to be learned from mankind's successes. We can learn from the macro-economic policy shifts seen in recent decades in China and India that have indirectly improved the lives of millions. We can learn from the grassroots projects, such as that of the Grameen Bank, that have directly improved the lives of thousands.

We can learn from history that economic development is not a competition between nations. For example, there are many who fear China and Asia's economic rise and claim this rise is coming at the expense of American and Western economies and workers. However, research indicates that in today's global integrated environment, economic growth in one region of the world normally stimulates growth in other areas. China has been growing rapidly in recent years, while simultaneously the American economy has also done well. There has been a huge growth of manufacturing jobs that have been created in Asia while at the same time the unemployment rate has dipped below 5% in the USA. Economic development in the less developed areas of the world should not be something to fear and it has not been shown to be a direct threat to the economies of the USA or Europe. Along with the increased competition in some areas of the economy, there are increased opportunities in others. The world should be celebrating the progress than has been made while redoubling efforts to spread the progress to all of the citizens of this planet we share. Swedish Prime Minster Goran Persson summed up the situation by proclaiming, "The good news is that we know that development works. The challenge now is to make it work everywhere."

Dr. Scott A. Hipsher

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The Author of the article holds a Ph. D. in Management Science from Capella University, MBA degree from Bangkok University and B. Sc. from the University of Maryland. He is presently a lecturer at Bangkok University, Webster University and Mahidol University in Thailand. He is a member of the International Academy of Business. Mr. Hipsher is the co-author of the forthcoming book "The Nature of Asian Firms: An evolutionary perspective" (2007).

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