GiveWell generally focuses on the question of how to get “bang for your buck” as a donor – help as many people as possible, as much as possible. Against this approach, one might seek to factor in the potential of a program to get at the “root causes” of poverty, and start – or be part of – a chain reaction that ends poverty at the country or even world level. (One example of such reasoning in nonprofit marketing is here.)
Below is our take on the following broad question:
Why have some parts of the world emerged from poverty while others haven’t? How can financial aid from developed nations best be directed to cause large-scale emergence from poverty?
To us the key points are:
Past emergences from poverty have taken many different forms; there are no clear/consensus patterns or formulas in these stories.
This statement – which we have seen little to no literature contradicting – is well illustrated by the work of two major commissions, each of which set out to find patterns in the history of economic development.
A 1993 World Bank study on the rapid growth of 8 countries in East Asia concluded (overview; similar content on page 366):
The study attempts to explain East Asia’s success and to develop a model of rapid growth with equity. It finds that the diversity of experience, the variety of institutions, and the variations in policies among the [high-performing Asian economies] does not allow a model to be developed.
The report identiﬁes some of the distinctive characteristics of high-growth economies and asks how other developing countries can emulate them. It does not provide a formula for policy makers to apply—no generic formula exists. Each country has speciﬁc characteristics and historical experiences that must be reﬂected in its growth strategy. But the report does offer a framework that should help policy makers create a growth strategy of their own. It will not give them a full set of answers, but it should at least help them ask the right questions. Fast, sustained growth does not happen spontaneously. It requires a long-term commitment by a country’s political leaders, a commitment pursued with patience, perseverance, and pragmatism.
There are many different prescriptions for the actions most likely to end poverty.
Various scholars propose large-scale plans – based on theories of the root causes of poverty – for ending (or drastically reducing) poverty. However, it should be noted that their plans (a) are very different from each other; (b) tend to be highly multidimensional and to depend heavily on governments and/or international institutions. (In other words, few put a single “silver bullet” intervention at the heart of their plans.) Three prominent examples:
- Jeffrey Sachs (The End of Poverty) argues that poverty itself is self-reinforcing: when people and governments have low enough income, they cannot make the necessary investments to create strong future growth (see pages 245-250). His recommendations, presented in the UN publication Investing in Development, center around aid to developing-world governments, in support of multidimensional and country-specific poverty reduction strategies (page xx). Such aid is to be roughly doubled from 2003 levels by 2015 (page xxii); other recommendations include loosening trade restrictions and increasing relevant scientific research (page xxii).
- Paul Collier (The Bottom Billion) believes the world’s poorest countries are caught in one or more of four “traps” (page 17): patterns of civil war (chapter 2), “resource curses” in which large natural resource wealth prevents healthy economic development (page 39), the condition of being “landlocked with bad neighbors” (53), and bad governance in small countries (65). His agenda (177-183), like Sachs’s, includes an emphasis on free trade, but it also includes major roles for military intervention to deal with conflict as well as international laws and charters to hold governments accountable. Although he supports aid to some governments (179), he specifically cautions against the dangers of too much aid in some cases (page 181), and proposes circumventing governments through “independent service authorities” in others (177, 179).
- Peter Timmer (Agriculture and Pro-Poor Growth: an Asian Perspective) argues that “No country has been able to sustain a rapid transition out of poverty without raising productivity in its agricultural sector” (page 3) and recommends a set of interventions focusing on rural areas, particularly agriculture (pages 29-30).
There are reasons to see health aid as a promising approach to reducing poverty. There are also reasons to see it as neither necessary nor sufficient for this goal.
The idea that improving health would lead to improved productivity, and thus less poverty, is one that makes intuitive sense and has some suggestive evidence to support it. Working Group 1 of the WHO Commission on Macroeconomics and Health (PDF) summarizes many different kinds of evidence including cross-country analysis, studies on the productivity of people receiving nutrition supplements, and analysis of changes in calories available over time (see pages 5-12 for an overview, although we are looking for a clearer and more complete review on this topic).
But there is little reliable guide to how much economic improvement can be expected to come directly from health improvement, and even strong advocates of health aid such as the Commission on Macroeconomics and Health do not see health aid as sufficient (by itself) to end poverty. (See pages 28-29 of the commission’s final report.) There is also no consensus that health aid is necessary; some see past emergences as having been led by agricultural improvements (such as Timmer, discussed above) and/or having been accomplished largely without external assistance of any kind (as William Easterly does – see page 347 of White Man’s Burden).
No single theory of the “root causes of poverty” is supported by overwhelming evidence or broad expert consensus. We don’t find any compelling enough, or relevant enough to what individual donors can do, to compete strongly with the goal of improving individuals’ lives – a goal that could itself be the best approach to speeding the end of poverty, particularly if you believe (as scholars such as William Easterly do) that the emergence of nations is most likely to be homegrown.
There are many proven, cost-effective, scalable ways to significantly improve people’s lives. We feel that adding to one is the best use of an individual donor’s funds.