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Home » Opinion » Foreign Views

The best ways to fight poverty

By Bjørn Lomborg | August 3, 2015, Monday | Print Edition

Better economic outcomes mean empowering entire populations with better health, more education, longer life and less vulnerability to challenges like natural disasters.

Many of the United Nations’ proposed 169 development targets for the next 15 years are, at their heart, concerned with poverty reduction. But not all targets are equally good.

The Copenhagen Consensus Center, of which I am director, recently asked 60 teams of economists to evaluate the benefits and costs of these proposed targets, which will come into force to replace the Millennium Development Goals in September.

One of the least desirable targets seems laudable at first: full employment for all. Unfortunately, this is a dream, not a target. Economies need some unemployment to allow workers to change jobs, and most governments already focus on job creation.

Research suggests that politicians and interest groups would use a full-employment target to support expensive, protectionist policies that generate great jobs for some but drive many into the informal economy. So it would probably end up doing less good than it would cost, and it is certainly not the way to reduce extreme poverty.

About 14.5 percent of the world’s population, or one billion people, live on less than US$1.25 a day. So why not end extreme poverty by simply transferring enough resources to this billion people to get them to at least US$1.26 a day? The world’s poorest would be able to feed and educate their children better and become healthier.

But, in addition to the financial cost, there would be huge administrative challenges, along with corruption and institutional deficiencies.

When these factors are weighed against the benefits in monetary terms, each dollar spent ending extreme poverty with cash transfers would achieve about US$5 worth of social value. That is not a bad return at all, but there are many better ways to help.

One possibility is to triple mobile broadband penetration in developing countries. This would provide small-scale businesspeople such as farmers and fishermen with market information, enabling them to sell their goods at the highest price — and to boost productivity, increase efficiency and generate more jobs.

Good target

Our research shows that the benefits, added up, would be worth US$17 for every dollar spent — making it a very good development target.

An even better intervention addresses migration. More than 200 million people today work outside their home countries. As rich countries age, they need more workers. At the same time, people from developing countries are more productive in a developed country. Easing restrictions on migration would allow young people from developing countries to expand industrialized economies and generate the taxes needed to pay for care for the elderly.

Such migration would also be good for the developing countries, because migrant workers send home remittances. In total, every dollar spent on increased migration would produce more than US$45 of social good — possibly more than US$300.

While in today’s political climate, increasing migration might be difficult to achieve, it is worth pointing out how effectively it could help the world’s poorest.

The single development target that would have the biggest impact on global prosperity would be the completion of the Doha trade round.

Lowering trade barriers would mean that all countries could focus on doing what they do best, making everyone better off. Moreover, freer trade would accelerate economic growth, owing to increased innovation and knowledge exchange. Heavy reliance on trading in a global market was one of the main reasons that South Korea has developed so rapidly and essentially eradicated its poverty in the last 65 years.

Economic models indicate that a successful Doha round would make the global economy US$11 trillion richer each year by 2030, with most of the benefits going to developing countries. Each person in the developing world would earn US$1,000 more per year, on average.

The number of people living in extreme poverty would fall by 160 million. For every dollar spent, mostly to pay off Western farmers blocking the current negotiations, the world would achieve more than US$2,000 of benefits, making free trade a phenomenal investment.

Bjørn Lomborg, an adjunct professor at the Copenhagen Business School, founded and directs the Copenhagen Consensus Center. Copyright: Project Syndicate, 2015.www.project-syndicate.org. Shanghai Daily condensed the article.

Foreign Views


 

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