Fighting Poverty with ‘Clinical Economics’

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SEATTLE, Washington — Economist Jeffrey Sachs is renowned for his devotion to economic development and poverty-reduction around the world. Sachs has authored dozens of studies on the topic, with one groundbreaking technique attributed to his work in particular: clinical economics. Inspired by his wife, who is a pediatrician, Sachs noticed how a seemingly simple fever could actually have thousands of causes each with their own unique corresponding treatments. Further, Sachs believes this parallels conditions for developing countries around the world. Each may be struggling with poverty, but blanket solutions will not work because each requires a customized approach appropriate for that country. Sachs’ book ‘The Age of Sustainable Development’ describes clinical economics and groups his explanations of persistent poverty into seven key symptoms:

1) Poverty Traps. Almost a buzzword, poverty traps refer to the inability of poor countries to invest in the resources or capital which spark growth. Either these investments cannot be found in domestic markets, or the start-up costs are too high. Therefore, these nations are trapped in poverty because of this initial hurdle. To rectify this, Sachs argues governments and other international forces should fund such investments.

2) Bad Economic Policies. Well-meaning countries sometimes enact protectionist measures with the intent of empowering domestic producers. However, a common consequence of these policies is stifled trade and the loss of global economic opportunities. While their motive is understandable, Sachs believes a more appropriate solution is to choose policies that encourage competitive goods and seek to generate higher revenue at home through international trade.

3) Financial Insolvency. When a country is faced with spiraling debt or a significant deficit, aggressive policies to immediately resolve financial burdens can lead to hyperinflation and the complete devaluation of domestic resources. Conversely, a constrictive approach could also suppress investment, which equally limits opportunities for the poor. According to Sachs‘ clinical economics, the solution in either case is to ensure proper, consistent and proactive monitoring of any government’s financial decisions.

4) Physical Geography. Geography can mean disease, natural disasters or  resource limitations. Countries that are relatively inaccessible can also be cut off from trade networks. However, physical geography is unique among symptoms in that it is largely unchangeable. Therefore, Sachs focuses on solutions that lessen dependence on a standard geography. Sturdy infrastructure, vaccine distribution and adaptation to strengths can all reduce poverty inflicted by geography.

5) Poor Governance. Often the policies of a certain country may seem adequate on paper, but are compromised in practice due to corruption, inefficiency or incompetence. For example, some resources may be given away as bribes, some may be lost and some may be given to the wrong people. To address such instances of poor governance, Sachs states that nations need further oversight to ensure their effective operation.

6) Cultural Barriers. Culture can have a significant effect on poverty-reducing behaviors and on attempts to change them. Some cultures may be more supportive of women’s rights or human capital via education, factors which undeniably stimulate economic development. To this point, Sachs maintains that cultural equality should be an objective tied closely to alleviating poverty.

7) Geopolitical Relations. International disputes can make things much worse in impoverished countries, either directly (war) or indirectly (sanctions, refugees and verbal disagreements deterring economic activity). However, many of these threats are also deeply entrenched in historical, environmental and non-state causes. Sachs claims that solutions must either correct the root cause or transcend the conflict entirely.

The World Bank’s states that nearly 1 billion people still live in extreme poverty around the world. For these diverse communities, clinical economics could help to more accurately identify the causes of and solutions to poverty. For everyone fighting to alleviate poverty for these populations, from academics to nonprofits, Jeffrey Sachs believes targeted approaches will lead to faster results.

Zachary Machuga

Photo: Flickr

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About Author

Zach Machuga

Zach writes for The Borgen Project from Bradford, NY. He has a passion for economic development and world travel. Academically, he has a dual Bachelors degrees in International Studies and Economics, and is currently pursuing a Masters with Northeastern University in Global Studies, concentrating in Sub-Saharan Africa. Zach is a proud dairy farmer and Lady Gaga enthusiast!

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