Mary McIntyre

Week 2 – The Poverty Crisis in Developing Countries

Defining Poverty

Jacqueline Novogratz defines poverty as a group of four billion people who make less than $4 per day in her TedTalk, “Invest in Africa’s Own Solutions”. People living in poverty are often working as farmers, factory workers, drivers, and domestics. According to Novogratz, these people pay thirty to forty times more for goods and services like healthcare, housing, and water than those living in the middle class. Her main message during her lecture was that in order to end poverty the Western world has to let developing countries build business models that are financially sustainable and scalable. “We have to build business models that matter, are scalable, and work with Africans, Indians, and the rest of the developing world to do it for themselves,” said Novogratz. She believes that it is important for poor individuals in developing countries to make their own decisions to help solve their own problems, because they don’t want handouts. Instead of continuing to help developing countries with the “us” versus “them” mentality, Novogratz believes that its more dignifying and successful for developed countries to work to help guide the poor in developing countries to find solutions for themselves.

Millennial Development Goals and Neo-Liberalism 

Global leaders created the eight Millennial Development Goals with the main purpose of reducing world poverty. This includes eradicating extreme hunger, promoting gender equality by empowering women, reducing child mortality, combating diseases such as HIV/AIDS and malaria, and promoting environmental stability (MacArthur, 2013). In the past, neo-liberalism has served as a major factor in the opposition of eradicating world poverty. In the 1990s, with support from the World Bank and the International Monetary Fund, countries receiving aid had to cut back on government spending on public programs. Developing countries were expected to give back money spent of public programs because of the aid they had received. This is detrimental to developing countries because they need to put their resources into building sustainable programs and institutions in order to have long-lasting economic prosperity.

“Players on the Bench”

In his article, Own the Goals: What the Millennium Development Goals Have Accomplished, John MacArthur criticizes the U.S. government under President George W. Bush’s administration and the World Bank for their lack of involvement during the early years of the MDGs. After the UN Millennium Declaration in 2000, President Bush launched the Millennium Challenge initiative in 2002. The goal of this initiative was to increase U.S. foreign aid to countries without corrupted governments. In 2003, he launched the President’s Emergency Plan for AIDS Relief to improve access to AIDS treatment within the developing world. Although both of these initiatives held consistent with the tasks outlined within the Millennium Development Goals, the Bush administration refused to align with the Millennium Declaration due to tensions between the U.S. and UN over the Iraq War (MacArthur, 2013).

Similarly, the World Bank was hesitant about directly aligning itself with the MDGs due to “bureaucratic resentment of the UN” (MacArthur, 2013). According to MacArthur, the U.S. “missed easy opportunities to build political capital” and illuminate their contributions to the developing world because of its initial lack of support for the MDGs. The World Bank missed out by not taking advantage of the opportunity to expand its budget for the International Development Association, which is a branch of the World Bank dedicated to financially supporting poor countries (MacArthur). 

The Effects of Foreign Aid

In the article How to Help Poor Countries, authors Nancy Birdsall, Dani Rodrik, and Arvind Subramanian address how more foreign aid contributions would actually affect the developing world. According the article, although foreign aid has been successful in promoting economic prosperity within certain developing countries, it can only provide a limited amount of help to poorer countries. “Development is something largely determined by poor countries themselves, and outsiders can play only a limited role” (Birdsall et al, 2005). One of the problems with only providing foreign aid is that often poorer countries do not have the resources to use the donated funds in the most productive way. This occurs in countries with unstable or unproductive governments or institutions.

The times in which foreign aid has been most successful occur when there are narrow and very specific objectives. This is a contributing factor in the improvement of health issues such as the eradication of smallpox or the drop in infant morality rates in underdeveloped countries. When foreign aid is given without those specific objectives, institutions and governments of developing countries don’t always have the tools to be able to use it well.

Another problem with foreign aid occurs in the form of international trade agreements that are too restrictive and “impose costly obligations on the poor” (Birdsall et al, 2005). In some cases, restrictive trade agreements should be abolished. In other cases, there should be some leeway in the construction of the agreements that allow for developing countries to create their own economic policy that best fits the need of their country. This is because there has yet to be a single economic policy that can be applied to any country and survive.

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