Here is an excerp from an article on the 8 Millenium Development Goal's (MGD's) the UN has established to combat poverty, particularly in East Asia and Sub-Saharan Africa www.un.org/millenniumgoals/. This piece deals with the 0.7% of GDP which rich countries are supposed to devote to foreign aid. This information comes from the magazine the Economist.
One target that can be measured is the 0.7% GDP which rich countries are supposed to devote to foreign aid. Many donors have promised "efforts" to reach the target, but only five have met it. Mr. Bolton does not intend even to try. "The United States has consistently opposed numerical aid targets from their inception in the 1970's," he wrote to his UN colleagues.
But Jeffrey Sachs, the economist who is the MDG's chief intellectual sponsor, thinks the 0.7% target now has more than history to recommend it. Suppose, he says, we gave the money needed to reach the poverty line to everyone below it. How much would it take?
Martin Raviallion and his colleagues at the World Bank put the international poverty line at $1.08 per day, measured in 1993 purchasing-power parity dollars. They estimate that in 2001, 1.1 billion people fell short of this line, by $113 on average. Giving $113 a year to 1.1 billion people would cost $124 billion. As Mr. Sachs points out, this is little more than 0.6% of the the combined GDP of the OECD's 22 donor countries, measured in the same purchasing-power parity dollars. Thus the promise to devote 0.7% of GDP to fighting poverty has a theoretical rationale today that it did not have when first proposed in 1970. With an aid budget that size, the "poverty gap" could in principle be filled.
Mr. Sach's thought-experiment is intended as no more than an "eye-opening" illustration. But it is nonetheless misleading, argues Surjit Bhalla, a former World Bank economist who now runs Oxus Fund Management, a hedge fund. As Mr. Bhalla points out, the "dollars" used when measuring poverty around the world are not the dollars given in aid. The first is a unit of purchasing power. The second is a unit of currency, which has varying purchasing power depending on where it is spent and what it is spent on. As Mr. Bhalla points out, a dollar earned in America buys much more in Ethiopia or India than in Japan or America itself.
So how many dollars would have filled the poverty gap in 2001? Not $124 billion, Mr. Bhalla reckons, but only $25.1 billion. In fact the rich world gave more than $46 billion in aid that year, and has been giving more than enough to fill the poverty gap in almost every year since 1990.
Unfortunately, a victory over poverty cannot be so easily purchased. The rich world cannot pour a given amount of money into one end of an MDG pipeline and expect to see, emerging from the other, a predictable number of people freed from destitution and disease.
One target that can be measured is the 0.7% GDP which rich countries are supposed to devote to foreign aid. Many donors have promised "efforts" to reach the target, but only five have met it. Mr. Bolton does not intend even to try. "The United States has consistently opposed numerical aid targets from their inception in the 1970's," he wrote to his UN colleagues.
But Jeffrey Sachs, the economist who is the MDG's chief intellectual sponsor, thinks the 0.7% target now has more than history to recommend it. Suppose, he says, we gave the money needed to reach the poverty line to everyone below it. How much would it take?
Martin Raviallion and his colleagues at the World Bank put the international poverty line at $1.08 per day, measured in 1993 purchasing-power parity dollars. They estimate that in 2001, 1.1 billion people fell short of this line, by $113 on average. Giving $113 a year to 1.1 billion people would cost $124 billion. As Mr. Sachs points out, this is little more than 0.6% of the the combined GDP of the OECD's 22 donor countries, measured in the same purchasing-power parity dollars. Thus the promise to devote 0.7% of GDP to fighting poverty has a theoretical rationale today that it did not have when first proposed in 1970. With an aid budget that size, the "poverty gap" could in principle be filled.
Mr. Sach's thought-experiment is intended as no more than an "eye-opening" illustration. But it is nonetheless misleading, argues Surjit Bhalla, a former World Bank economist who now runs Oxus Fund Management, a hedge fund. As Mr. Bhalla points out, the "dollars" used when measuring poverty around the world are not the dollars given in aid. The first is a unit of purchasing power. The second is a unit of currency, which has varying purchasing power depending on where it is spent and what it is spent on. As Mr. Bhalla points out, a dollar earned in America buys much more in Ethiopia or India than in Japan or America itself.
So how many dollars would have filled the poverty gap in 2001? Not $124 billion, Mr. Bhalla reckons, but only $25.1 billion. In fact the rich world gave more than $46 billion in aid that year, and has been giving more than enough to fill the poverty gap in almost every year since 1990.
Unfortunately, a victory over poverty cannot be so easily purchased. The rich world cannot pour a given amount of money into one end of an MDG pipeline and expect to see, emerging from the other, a predictable number of people freed from destitution and disease.
posted by Andy Christophersen at 6:32 AM
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