TCS Daily


Poverty and Governance: Two Sides of the Same Coin

By Nick Schulz - September 20, 2005 12:00 AM

NEW YORK -- The Clinton Global Initiative wrapped up in New York over the weekend. The three-day confab, created by the 42nd president, brought together political and corporate leaders, Hollywood stars and philanthropists for a kind of American Davos. The attendees were directed to address four important global issues -- climate, governance, poverty and religion.

But a fundamental problem existed at the heart of the conference: treating "poverty" and "governance" as divisible, distinct issues. A growing body of academic research is showing us that the two are both sides of one coin.

Indeed, the empirical link between poor governance and poverty received a boost the same week of the conference when economist William Easterly released an important new working paper for the Center for Global Development.

Easterly has spent his career inside foreign aid circles. Within those circles, it has been widely believed that impoverished nations suffer from a self-perpetuating "poverty trap." This poverty trap is almost impossible to escape without a big push from wealthy countries -- hence the logic of foreign aid.

This view, while not entirely new, has been most recently championed by the economist Jeffrey Sachs of the Earth Institute at Columbia University -- whom the New York Times just editorialized is an "A-list economics geek." The only problem with this storyline, according to Easterly, is that "evidence to support the narrative is scarce."

Easterly found that, "Over 1970-94, there is good data on public investment for 22 African countries. These countries' governments spent $342 billion on public investment. The donors gave these same countries' governments $187 billion in aid over this period. Unfortunately, the corresponding ...increase in productivity... was zero."

If half a trillion dollars of investment and aid can't raise economic output, then what can? "The paper instead finds support for democratic institutions and economic freedom as determinants of growth that explain the occasions under which poor countries grow more slowly than rich countries." In other words, poverty -- and its alleviation -- are directly linked to governance.

Aid and Achieving No Impact

Despite these empirical links, the support among aid enthusiasts to pressure nations for improved governance is nonexistent. Ira Magaziner, President Clinton's health care czar, is now Chairman of the Clinton Foundation's Policy Board and runs the foundation's HIV/AIDS initiative. He headlined a session on "achieving impact" in fighting poverty.

Magaziner is a big aid enthusiast. He is also a planner and a technocrat. He believes smart people -- like him -- can help engineer solutions to problems such as HIV/AIDS that are endemic to impoverished regions.

So Magaziner has spearheaded a program through the Clinton Foundation that serves as a kind of anti-AIDS-drug broker for developing countries. Magaziner's team persuaded Indian drug makers to verbally commit to provide untested antiretroviral therapies from Indian drug manufacturers for $140 per person per year. Despite the questionability of giving poor Africans medicines of indeterminate efficacy, the announcement was widely hailed in the media as a breakthrough.

Almost two years into the program, however, and there is not much to show for it -- not even the lower price. At a meeting earlier this year of Indian drug developers and anti-AIDS groups, representatives from the companies said no one pays that low price.

The deal brokered by the Clinton Foundation contained, according to a representative from Cipla, one of the participating companies in the deal, restrictive conditions. These conditions include the need for large and "irrevocable" orders of drugs.

But these orders have yet to materialize realized. The Foundation promised to deliver 200,000 patients by the end of this year. They are significantly short of that.

It's not really the Foundation's fault that it can't deliver the patients. The health care systems in the countries now hardest hit by HIV/AIDS, such as those in sub-Saharan Africa, are a travesty. The necessary capacity to treat some epidemic diseases in these areas -- such as the clinics, doctors and nurses, refrigeration and transportation techniques, roads, electricity, clean water systems and other technologies -- is insufficient, regardless of the price of the treatments.

That lack of capacity is directly tied to poverty. And poverty is a direct result of poor governance.

"An Assumption of Trust"

Despite this obvious link, Magaziner says his Foundation will not pressure the governments they work with to change their policies to get out of self-inflicted poverty traps. Sensitivity to perceptions of colonialism, Magaziner said, means Westerners can't come in and tell them how to run their countries. "We start with an assumption of trust" of the governments they partner with, he said.

But if some of these very governments create the conditions that make serious and effective anti-poverty measures -- including treatment of infectious disease -- impossible, an assumption of trust won't necessarily translate into effective anti-poverty measures.

Bill Clinton claimed during his tenure as President that "The era of big government is over." But the era of bad government -- particularly in the developing world -- is still here and as impoverishing and deadly as ever. And it renders ineffective almost any aid effort to mitigate poverty or any big-hearted program designed to tackle disease.

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