Sample Economics Paper on The Big Push, Poverty and Foreign Aid

  1. The Big Push: Sach’s Perspective

The Big Push model of growth best explains the interdependence of economies. The underlying principle of the model is that economies push each other to growth by virtue of their economic expansion. In this context, every economy grows in a sector in which other surrounding economies have grown and have created dependencies such as the demand for raw materials. Sach’s perspective of the big push is best seen in his explanation of economic growth among the European countries and England and the issues of poverty and foreign aid in developing countries.

The argument in favor of the big push is prompted through the assertion that the process of economic expansion is a complex one that is characterized by continuous contact between the developed/rich countries and the poor countries. Transitions occurring during economic growth are often tumultuous and result in different speeds of growth among poor and rich countries, which explains the persistent global gaps in economic growth (Sach, 2006). By attributing global economic expansion to the continuous confrontation between poor and rich countries, Sach gives the impression of continuous borrowing of concepts by countries that are already developed by those that are still in the process of economic growth. At the same time, this argument for economic growth through continuous confrontation gives an impression of interdependence among countries whereby those that are already higher up in the economic growth curve consistently require various forms of support from the ones that are still on course in the growth process and are therefore continuously compelled to support those poor countries in order to get what they need.

From Sach’s explanation, the big push is implemented at the national and international level through massive investment in various sectors of the economy. Sach asserts that “The transition to modern economic growth involved urbanization, changing gender roles, increased social mobility…” (p. 38). In addition to these, Sach mentions transitions characterized by changes in family structures as well as increasing specialization across several sectors of the economy. In most cases, the transitions involve several upheavals both in terms of cultural beliefs and in terms of social organizations. These characteristics are the attributes of the big push, which is normally characterized by massive investment in multiple sectors. Most of the countries in which economic development progresses faster than in others have natural resources in various sectors, and they leverage those resources for their benefit. Countries that have no resources and/or have more endemic natural challenges find it less easy to initiate economic development and have to depend on the push or pull from the endowed countries. In this context, countries such as those in Sub-Saharan Africa, which are still at low economic growth stages and additionally experience challenges such as high prevalence of malaria and HIV/AIDS, are unlikely to invest in economic growth prospects unless boosted through foreign aid (Sach, 2006). On the other hand, countries such as England and Britain, which have both agricultural and industrial resources, find it easy to invest heavily. This heavy investment is what pushes other countries to invest due to demand for raw materials and other products that are available in the low economic growth countries.

The implementation of the big push at the international level is seen even more explicitly through the concept of diffusing economic growth, which Sach explains based on three stages. The diffusions entailed the historical adaptation of economic practices and concepts from one region to the other. During the first diffusion, the spread of economic development was from Britain to the North American colonies and involved the transfer of British technologies as well as food crops and legal frameworks into North American. This could be attributed to the changes in economic structures through the introduction of cash crop farming (cotton and sugarcane plantations) by the British into North America. Similarly, the second diffusion, which mostly involved the spread of economic development within Europe, was characterized by the transfer of natural resources. The third diffusion involved the spread of economic development from Europe through Latin America, Asia and Africa, and mainly focused on the spread of industrialization through confrontations between the relatively industrialized Europe and the rest of the world, which was non-industrialized. These patterns of spread in economic development could be attributed to the incessant need for resource sharing and interdependence between countries which promotes economic development in the underdeveloped areas to support the economic growth in the developed areas. Industrialization in one country results in increasing demand for raw materials, which prompts other countries that produce the required raw materials to also enhance their productivity and subsequently their economic growth.

  1. The World of Global Development

In his book, Easterly describes the concept of development through focus on the problem of poverty, and how nations attempt to address the issue. The basis of economic growth in any country is to reduce the percentage of the population that lives in abject poverty, and one of the ways through which attempts are made to realize this is by providing support to the impoverished communities through foreign aid. Easterly therefore describes global development through the unending interactions between developed and undeveloped countries based on a distinction between those who give foreign aid and those who receive the foreign aid. The givers do so in a bid to reduce the impacts of poverty and subsequently raise economic growth of the underdeveloped countries. This however comes with various challenges and rarely attains the intended goals.

Easterly feels that the approach of the Western world about eliminating world poverty fails because of the challenges associated with foreign aid. The most prevalent of these challenges is that foreign aid given by developed countries does not reach the poor children in the underdeveloped countries. This failure is attributed to the cycle of idealism, high expectations and disappointment from negative results, which is followed by a backlash of cynicism (Easterly, 2007). The second challenge is that the western approach to poverty elimination relies on planners rather than searchers, and the latter have no motivation to pursue the planned outcomes to the end. Since poverty is a complicated interconnection of social, political, technological and even institutional and historical factors, such unmotivated planning is not reflected in the results. These challenges form the basis of Easterly’s conclusion that foreign aid cannot be the solution to poverty across the world.

Unlike Easterly, Sach holds the opinion that if managed effectively, foreign aid can be a solution to world poverty. In response to Easterly’s arguments therefore, Sach would probably agree with the argument that the western approach to foreign aid is dysfunctional towards poverty reduction. The model of foreign aid envisioned by Sach is driven by need, and is motivated by a combination of external demand and internal motivation. Economic development in underdeveloped countries in Sach’s argument is characterized by the intentional and demand-based response to economic growth in other countries. This is whereby economic growth in wealthy countries motivates those countries to invest in the growth of the poor countries through foreign aid. The foreign aid is then invested in the poor countries and the profits used for further economic development. However, these outcomes have not been observed with foreign aid or charity driven attempts at poverty reduction, hence the common criticism of Sach’s argument that foreign aid can end poverty. The concept of planners and searchers thus comes perfectly into play in that the nations giving foreign aid demand for no accountability and gain nothing from the foreign aid; at the same time, the nations receiving foreign aid for specific purposes have no pressure to perform and no demand for actual practical reports on the reach or use of foreign aid.

From a personal perspective, the use of searchers instead of planners in foreign aid can reflect the same big push model envisioned by Sach, and can facilitate economic growth. Foreign aid is an essential contribution to economic development particularly in countries where poverty is a significant problem. The perspectives shared by both Easterly and Sach are appropriate for application in global economic development frameworks. Specifically, the consideration of poverty as an adaptive problem that requires multi-angular analysis can be the starting point of systems thinking towards poverty elimination in the developing countries. The support of the developed countries can thus be through provision of motivations for ensuring that foreign aid reaches the intended recipients such as through grassroots interventions.

  1. The Middle Way

The perspectives shared by Sach and Easterly concerning foreign aid and their contrasting beliefs of its ability to eliminate poverty are harmonized by the middle way provided by Banerjee and Duflo (2012). The middle way emphasizes the combination of ignorance, ideology and inertia as the basis of understanding and addressing the problem of poverty in the contemporary world. Banerjee and Duflo focus on the roles that the policy maker, the aid worker and the expert have to collaboratively play towards making the world a better place. The perspective shared by the two authors is that poverty is not a straight forward social policy issue that can be solved through one single strategy, and that a single experiment is insufficient towards deciding the best approach to ending poverty. Instead, a step-by-step strategy to fighting poverty is proposed by Banerjee and Duflo, with emphasis on a shift from lazy thinking towards more active and informed decision-making.

The proposed middle way begins from the argument that a single foreign aid policy cannot address the poverty issue as proposed by Sach as the world is continuously evolving and policies have to be changed frequently to address the issue of poverty in its various forms. The proposal however agrees that foreign aid can help address poverty when implemented step-wise with continued support. It counters Easterly’s argument against foreign aid on account that the failure of foreign aid to reach the targeted populations should be considered an indication of the lack of interest in foreign aid as suggested by Easterly. However, the concept of dependence on searchers versus planners is borrowed with emphasis on the need to focus on ignorance and ideology as a basis for changing policies towards ending poverty.

The approach suggested by Banerjee and Duflo is deemed effective for fighting poverty. Its application to different case studies such as the case of John and the prevalence of malaria in Kenya, Kennedy and the challenges to accessing fertilizer for farming, Pak Sohlin’s difficulties in accessing food, and Ibu Emptat’s experience with malaria, all point to the ineffectiveness of a single approach to foreign aid as a strategy for poverty eradication. The outcomes are quite diverse and dependent on several factors including the national economy, access to employment and health conditions of the country. Individual factors also play a significant role in determining whether one gets out of poverty following the reception of foreign aid to address their primary problem. The returns on foreign aid issued for certain problems such as health are also more significant and widespread that those of foreign aid issued for problems such as access to food. These outcomes explain the relevance of continuous policy change and the relevance of ideology and policy towards eradicating poverty through foreign aid. Banerjee and Duflo therefore provide the most potentially effective recommendation for addressing the foreign aid stalemate among scholars.

 

References

Banerjee, A., & Duflo, E. (2012). Poor economics: A radical rethinking of the way to fight global poverty. Public Affairs.

Easterly, W. (2007). White man’s burden: why the west’s efforts to aid the rest have done so much ill and so little good. Penguin Books.

Sachs, J. (2006). The end of poverty: Economic possibilities for our time. Penguin Books.