Post 6 Week 7: Sachs vs Easterly

Jeffrey Sachs and William Easterly have been arguing for years about the efficacy of foreign aid programs, whether or not they can be successful in helping people across the globe. Sachs, one of the masterminds behind MDG’s and SDG’s, has long been fighting against poverty in the world, rallying nations to gather aid. Easterly, his rival, is actually against giving aid to these countries, he suggests relying on the free market for these people to help themselves.

“Easterly has one piece of expert advice – freedom. Freedom means both as much political freedom as possible and economic freedom, ‘the most underrated of human inventions’, that is, free markets…Free markets will give would-be entrepreneurs opportunities to start their own ventures and create wealth if they are successful. As a committed demand wallah, Easterly also wants governments to stop pushing education and health care on an indifferent populace but rather allow them the freedom to find ways to get themselves educated and healthy, through their own collective action.” Easterly believes in the power of people’s own motivation and innovation, but I really don’t know if that’s enough. These people have usually been caught in a system of corruption, how is just “opening up the market” going to get these people to move forward? If problems like health and education are left up to these people themselves, I don’t think they will have the resources to improve their quality of life. Easterly does point out that these free markets may not work for the poor because they may not be able to participate in it. Also he points out that these markets can’t function without some rules, it would be madness.

Now Sachs, he stands on the other side of the debate. Sachs is a proponent of using foreign aid to help these people get out of their situations. Sachs likes to talk about the “poverty trap” and I do believe it is a real phenomenon. Poverty is a cycle, and I think factors like health and education are a huge part of the debate. Until these people are healthy and educated, I think that it will be really tough to get these countries out of poverty. Sachs supports using foreign aid because these people need a slight boost to advance themselves, to become active members of the free market. Empowering these people to succeed is important, their present conditions aren’t exactly conducive to a strong economy. By investing in specific, goal oriented projects, Sachs argues that progress can be made in the fight against poverty.

Me personally, I think that a combination of these two approaches is critical to achieving success. Foreign aid is crucial to giving these people the opportunity to help themselves, but also can be a very slippery slope. Factors like bad governance and corruption can seriously negate the effectiveness of aid. Not to mention the tendency for people to rely on this aid, there are simply too many ways for aid to lose its ability to actually help people. Rather than throwing money at these impoverished nations, I think direct goals like SDG’s are going to empower these people to achieve their own success. Nothing is ever really going to stick around in these countries if they people don’t have the motivation to improve their own quality of life. I think inspiring scalable, sustainable growth with small businesses is how to help them. Put the tools in people’s hands, and I do think they can do incredible stuff based on their own volition.

The first SDG, ending poverty in all forms everywhere, is quite an undertaking. I think it’s a very broad goal, and I’m not sure it’s achievable. No matter what, bad things will always happen. People will always fall on hard times, the key is having systems in place to bring them back up. The goal is more general than that I think, getting rid of systemic oppression that keeps these people mired in poverty, not just making people not poor. Now goal number 2, ending hunger and achieving food security, that is already achievable. There is more food being produced right now than can even be eaten by people, the problem is distribution. I think if we realized that wasting food because of profit is wrong, we could feed the people that need it. Throwing away food you didn’t sell, as a restaurant or grocery store, should be a crime like in France. That is valuable capital being thrown away, while people are literally starving for anything to eat. If we can eliminate that waste, it would go a long way in solving world hunger, and through that creating productivity in the market. People can’t work efficiently when they are hungry! Not that every problem boils down to capitalism and production, but it is the system that most of the world works inside. Throughout Poor Economics, I do think Banerjee and Duflo address these issues pretty thoroughly, I couldn’t tell you an aspect of the issue that they didn’t cover. They use pretty relevant examples for their arguments, and present the shortcomings of theories they present. Global poverty is obviously a huge issue to tackle, but I think they do a great job of zooming out and looking at the big picture, but also zooming in to individual cases. The thing is, as Easterly points out, there is no one-size-fits-all solution. Each nation has different cultures and needs, so their problems have to be approached differently. Agricultural techniques in South American jungles, for example, have no use in sub-Saharan Africa where water can be scarce and the soil difficult to grow in. Countries need individualized plans to approach their problems, and I think Banerjee and Duflo acknowledge that. Factors like sanitation, medical care, and educating the populace are integral to maintaining long term success, not just a short term bubble of growth. I don’t think these measures taken right now are sufficient, (as poverty isn’t quite done yet, is it?) but I think if resources were allocated more effectively that real progress could be seen.

How to solve global poverty is a huge question, so it will never have some short easy answer. The road will be long, and probably filled with potholes, but I think there is actually a great destination at the end. There is no reason that the world’s collective power can’t lift humans out of poverty. If we as humans fill in those potholes, there’s no reason we can’t have a nice smooth ride.

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Post 6 : The conclusion on foreign aid

The political debate on foreign aid

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After reading chapter 10 of the book, I have a shared opinion.

Sachs and Easterly have two different opinions on the foreign aid debate. Jeffrey Sachs said in an article for foreignpolicy.com: “development aid, when properly designed and delivered, works, saving the lives of the poor and helping to promote economic growth “. On the other end William Easterly says that gives an example which shows that countries do not need foreign aid “there have been plenty more examples of poor countries which grew rapidly without much aid — China and India (who each receive around half a percent of income in foreign aid) being the most famous recent examples. Meanwhile, aid amounted to 14% of total income year in and year out in the average African country since independence.”

I’m thankful for their opinions that since everything can’t always be black or white. At least, everyone can make up their own mind after reading the authors ideas and thoughts.

As for me, it is hard to give an informed opinion, when we don’t see what really happens, when we’re not “on the field”. However, I would take the side of Jeffrey Sachs since I think, poor countries do need help. Sachs believes corruption is a poverty trap, each one being a cause for the other. It’s a never ending cycle unless something can be done to stop it.

 In the best of the world even, there would also no corruption since we’ve read that out of the money given for schools, only 13% reached them. 13%. Indeed, Over the last sixty years, developed nations have sent approximately $1 trillion in development related aid to Africa and still over 50% of the population lives on less than a dollar a day so I understand that after reading those numbers it can discouraged the people who want to help. Especially when they give money that will go into some official’s pockets.

However, for the people who are optimist there is hope as we’ve seen with the Millennium Project who have helped countries like Tanzania, where road, water, and sanitation projects have helped 5 million people, with an estimated economic gain of well over $1 billion. It would have never happened without foreign aid. However, I have written in previous posts that the money should be a “help” and not a mean that is taken for granted. This money should lead to actual developments that have to be within the developing countries thanks to the work of the people there.


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I think that in a way Banerjee and Duflo address these issues sufficiently because they know what they are talking about. They’ve talked to the people in the poor countries of Africa and a they try to do their best to explain the state of the countries. They also give example of things that works and explain to us what there is a lack of access to nutritional food (i.e we have seen that a person could eat only eggs and banana and just with that they would have eat enough calories.) However, the subject is large and even though we know what richer countries could do to help the poorest ones, the means to put it into actions are harder because of many obstacles (officials, corruption…).

 One of the reasons people cannot bring themselves out of poverty is that they can’t afford food to be able to work well, Banerjee and Duflo argue that the argument made by Jeffrey Sachs of a “poverty trap” is not valid anymore. The policy measures that seem to work are explained in Poor Economics where it says why lack of nutrition is more of a cause and that there is a need to change the food aid policies that are currently in place in underdeveloped countries. Nutrition plays a large role in people’s economic situations. A study found that when poor people have extra income, they don’t use it to buy larger quantities but rather higher quality food. I would argue that goals #1 and #2 are linked because if people don’t have money they can’t afford food and therefore work well (have the energy to do so) and they can’t eat healthy food if they don’t have the money. It is my personal opinion of course.

            To answer the last question, I would say that some issues addressed and many global issues are taken. Thanks to Sachs and even Easterly, I am optimistic for the situation of the poor countries in Africa in a way that I wasn’t before. Even though they have different views on how to solve poverty, we know more on how to solve poverty than before. They showed the world what needed to be done, why and even how to do so. Finally, even though the Millennium Projects are limited, they can be beneficial and proved to be a big help.

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Post 6: The Review

For several weeks we have looked into the different reasons poverty has come about. There are several different “poverty traps” that countries fall into such as poor education or health or politics. Poor Economics refers to this trend as the S curve. The people on the left are the individuals often caught in these traps. The people on the right prosper. The according to the Poverty Trap Theory, the only ones to move are the individuals right around the middle, where the curves transition.

There is no denying the fact that there is an overwhelming amount of people considered poor. There is also no denying that a majority of the poor do not move out of the lives they live. Some of which simply cannot move up. Some of which do not want to change the way they live.

The question then is how to solve the problem, as we have been looking at for the past four or five weeks. Sachs’ main argument is to bring in outside stimulation. He believes that the problem could be solved if an outsider came in and taught the locals how to make a better living. Teach the local population how to farm more efficiently, for example, and they will then be able to make a better living and escape the poverty trap. Easterly does not quite agree. In his opinion, nothing will change unless the idea for reform comes from the local population. No matter how much money is given to jumpstart a program, it will not stick unless the people take hold and make it their own.

Between the two, I find myself agreeing more with Easterly. Many people simply do not enjoy being told what to do. We think, as humans, that our way is the best way. Of course, we enjoy free money and will participate in any organization that NGOs set up as long as we were paid to do so. However, after the money stops we are more likely to revert back into our own ways. In some ways, the local population needs to be aware of the malpractice going on. Education of the proper way, as Sachs suggests should not be thrown to the side.

In other words, there needs to be a balance between the two. It is extremely important that the local population is informed about the corruption in their society. In some cases, this is enough for the population to want a change. For some cases, the local population needs proof that the new way is better.

For the next point, here is a review of SDG Goal #1: End poverty in all forms everywhere and SDG Goal #2: End hunger, achieve food security and improved nutrition and promote sustainable agriculture.

Both of these goals are touched on in Poor Economics by Banerjee and Duflo. They both provide several examples of research in poor economies and how they worked or did not work. I appreciated the details of the research. There were names and specific cases to support each side of the debate. However, to some degree there were too many cases. The names and countries became muddled and hard to keep track of. Each example is a case study. In some countries, direct funding seemed to work to support more hospitals. In another country, interfering with the attendance of the clinic nurses actually made the system worse.

There are no over arching sets of data to show how any one method has helped around the world. Although we see similar trends in multiple countries, the reasons behind them vary so that there is no blanket solution. Poor Economics did a wonderful job at pointing out the problems and a few select cases that improved, but lacked evidence to show a solution for the world.

Post 6: The Start of a Quiet Revolution

The eradication of poverty has been discussed for many years, with many different opinions emerging on the best methods to help improve the lives of the poor. In Poor Economics, Banerjee and Duflo present the ideas argued by two leading economists. The first is Jeffrey Sachs, who believes that poverty can be addressed by focusing on concrete, measurable programs which address certain poverty traps and aim to give the poor a hand up and out of these traps. Sachs was the mastermind behind the Millennium Villages Project, discussed in my Post 2.

William Easterly, on the other hand, believes that aid money is mostly wasted by corrupt African governments or used for the interests of the rich world, rather than for the poor. He argues that the tremendous amount of aid already provided to African countries, totaling about $2.3 trillion, proves that it has done almost nothing in helping to improve the situation in many countries. Easterly has a “laissez faire” outlook on helping the poor countries in Africa, believing that these countries will eventually figure it out on their own, and rich countries trying to provide aid are only hindering their progress.

After having investigated both sides of this argument for several weeks, I have to agree with Sachs on his policy to eradicate poverty. While some aid programs may not use donations efficiently or can be easily hindered by corrupt governments, I believe that it is possible to create impactful, change-inducing programs that do not provide a hand out but a hand up for the world’s poorest people. In order for these types of programs to be created, those implementing them must intentionally design each program for its beneficiaries and be open to trial-and-error to determine the best type of program for each community.

Nick Parle, the author of PovertyEducation.org, also backs Sach’s argument and notes flaws in that of Easterly. Parle writes that “Easterly also argued that aid is not a successful means of promoting development because enormous amounts of aid…have already gone to developing countries without successfully eradicating extreme poverty. But this assertion is undermined by Easterly’s argument that much aid has been spent on destructive activities.” Parle makes the point that, had this aid money not been squandered by corrupt governments or by western countries determined to have their way in Africa, it could have made a huge impact on the lives of the poor.

Here, we can see a convergence of these two arguments. While Easterly is correct that a majority of the aid money that has been given to Africa has done nothing, it is because the money has not actually been used in situations where it could have made a difference. Sachs agrees that when aid money is provided in the correct capacity and towards the right programs, it can make a world of difference, even for small communities.

Now that I have read almost the entirety of Poor Economics, I am able to reflect on its discussion of the Sustainable Development Goals, or SDGs. The first two specifically, aim to “end poverty in all forms” and to “end hunger, achieve food security, and improve nutrition and promote sustainable agriculture.”

The authors address the first issue in detail, providing many studies and theories to back up their recommended policies. Education is one example that is consistently cited as a method to rise out of poverty and increase a person’s earning power over their lifetime. Banerjee and Duflo discuss PROGRESA as a successful program that has provided an incentive for parents in Mexico to send their children to school, while helping to meet the family’s monetary needs.

Microfinancing is another huge topic discussed. Poor families that receive microcredits are often more likely to cut regular spending, as their goals suddenly become achievable and their stress is lowered. Many other issues, like improving involvement in government, decreasing the prevalence of preventable diseases, and

However, it seems that less decisive policies were suggested for the second issue of hunger and food security. While the authors did investigate this issue thoroughly, it seemed that they were only able to identify problems leading to food insecurity. For example, in chapter 2, they find that most of the poor would prefer to spend more money on better-tasting calories, rather than maximize their calorie intake. Additionally, the authors found that when a poor family sees an increase in income, they do not spend this extra money solely on food – behavior that would be expected of those experiencing food insecurity. Overall, I felt even more unsure about how to eradicate hunger after finishing these chapters in the book.

There is a long way to go before first-world countries will realize the best methods to provide aid to the poorest countries of the world; therefore, it will be even longer before poverty can be eradicated. Poverty is caused by a multitude of complex and intertwined problems, ranging from low education to irresponsibly allocated aid to a lack of political accountability. Though huge, drastic changes will not happen overnight to improve the situation of these third world countries, small changes can build on themselves and become “the start of a quiet revolution.

Sources:

Banerjee and Duflo. Poor Economics.

Parle. Chapter 5: The Foreign Aid Debate. PovertyEducation.org. http://www.povertyeducation.org/the-foreign-aid-debate.html

Post 5 – Microfinance in Swaziland and Abroad

One area of growth that we are seeing right now in developing nations, is in microfinance! Poorer areas have trouble kickstarting growth because they lack the capital to finance their growth. With institutions willing to loan to lower income households, these people can afford to actually take a step and move beyond subsistence. Microcredit creates opportunities for small businesses to emerge, and thrive, in their own communities. In “Social Transformation – Role of Microfinance” by Kavita Kulkarni, Kavita goes through the basics of microcredit and how it can be utilized, but also the shortcomings. Microfinance does provide access to finance to portion of the population that previously wouldn’t have had it, but these households are not traditional clients and lack stable cash flows. These loans are best utilized when the recipients have a project ready to go, so there is no time for the money to be lost. The importance of starting these businesses is that they need to be sustainable and scalable, to create manageable growth. Banerjee and Duflo have to say, “Microcredit and other ways to help tiny businesses still have an important role to play in the lives of the poor, because these tiny businesses will remain, perhaps for the foreseeable future, the only way many of the poor can manage to survive. But we are kidding ourselves if we think that they can pave the way for a mass exit from poverty.”

In Swaziland, the banking system is under very strict control of the government. The CGAP Microfinance Gateway profile on Swaziland does mention non-bank financial services. “Microlenders” Unregulated industry with little avaiolable information on the size and nature of operations.” Other organizations such as Imbita and Lulote work to provide financing and educate the people about their loans. It also goes on to give several reasons for stagnant financing, attributing problems to three causes. “Low economic growth is hampering the development of formal financial sector; Large rural population is involved in subsistence farming which restricts the development of farming operations; Banks are unwilling to serve the lower income market.” I do agree that microfinancing has its limits, but it is a good tool in developing countries that can at least assist the people without giving too much pure aid. In Swaziland, the Swaziland Stock Exhange is “still struggling to build up sufficient market capitalization, and is highly illiquid.” So as far as alternative banking solutions, alternative solutions are not very widespread. Banerjee and Duflo talked about the use of ROSCAs, rotating savings clubs, and I would like to see if such methods could be successful in Swaziland as well.

 

As far as digital technology, it is definitely making a difference. Cell phones and mobile technology are allowing people to forward funds to each other and make their money more liquid. Technology also has a greater effect economically when the people can afford to implement it, so I would argue that after procuring some funds these tech advances would serve the people’s interests more efficiently. But to be sure, services like Kickstarter and GoFundMe here in the states have had success, would they be viable oversees? I think these are important questions, can crowdsourcing work in lower income, developing countries? It may take longer with smaller donations, but I think there could still be success there, as long as people have internet access.

Every plan and method has pros and cons, but with where some of these nations are, any opportunity for growth can’t be passed up. I think that alternative saving plans and ways to conglomerate are going to help these people succeed, and break that poverty trap. It’s just a matter of implementing resources efficiently, and encouraging some discipline and responsibility towards borrowed money. This is definitely one way that sustainable growth can be created!

Post 5: Microfinancing in Rwanda

Microfinance (n): the lending of very small amounts of money at low interest, especially to a start-up company or self-employed person.

Since the late ’70s, microfinancing has emerged as a popular method for helping the poor achieve financial independence. The idea is that the poor often need financing or loans, but do not have access to financing from formal banking institutions or require only very small amounts of money. Thus, microfinance institutions were created, providing small loans to the poor in an effort to lift them out of poverty.

In their book Poor Economics, the authors Banerjee and Duflo discuss the pros and cons of microcredits for the poor. A microcredit can be very beneficial to a poor person if they are confronted with an emergency expense, such as a sick family member. Without some sort of savings or access to emergency money, the poor may be forced to sell part of their business or borrow money from money lenders at outrageous interest rates. Microloans have helped to relieve some of this burden from the world’s poorest people.

Microloans have also been used to help the poor expand their businesses or receive education – things that can help to lift someone out of poverty and become self-sustaining. Some economists believe that the poor are natural-born entrepreneurs; they are able to create a living from themselves even when all odds are against them. Many of the poor are self-employed, so in many cases, a microcredit may be just what they need to expand their business or bring an idea to reality.

Overall, microcredits have been shown to not only give the poor a hand up, but to also provide them with hope that their situation can improve. Those who can’t see any hope for a better life are more likely to spend money on “temptation goods,” or buying of goods that provide immediate satisfaction but aren’t necessities, even though disciplined saving could easily lift them from poverty.  In one study discussed in Poor Economics, it was found that people who received a microloan were effective in cutting down on temptation spending, as they try to save even more money to meet their goals.

However, Banerjee and Duflo also discuss some of the negatives of microfinancing. For example, they argue that most businesses owned by poor people are destined to stay small because they don’t offer a differentiated product or service from many of the other businesses owned by poor people. One example listed in the book is women selling baked goods on the streets in India. The authors write that there was a baked goods seller about every six houses selling the exact same food, making business tough for every one of them. If most of these businesses are likely to be outcompeted by similar businesses, then a few extra dollars can only go so far in helping to boost them above the rest.

In Rwanda, almost 500 microfinance banks or other institutions existed as of December 2015. However, these institutions account for only 5.9% of the total assets in Rwanda. Most of these loans were provided for trade/hospitality funding, closely followed by construction/real estate and agriculture.  In a report from called Assessment of the Rwandan Microfinance Sector Performance, the authors discuss the history and current situation of microfinancing in Rwanda.

Microfinance institutions have existed in Rwanda since 1975, but did not see much growth until after the genocide in 1994. The sector experienced huge growth as donor funds flooded into the country. Unfortunately, because the industry was largely unregulated, problems such as a weak culture of loan repayments and bad money management by banking institutions arose. Reforms of the microfinance sector were made in 1995 and 2006, resulting in the closing of many corrupt microfinance groups.

There are three basic types of microfinancers in Rwanda. First are mobile money providers, which offer ways for clients to save and carry out financial transactions with “mobile wallets.” This helps to increase the reach of banking institutions because clients can bank remotely, rather than having to travel miles to the nearest bank.  Second are microfinance institutions, which are largely comprised of SACCOs. In this case, a community comes together and each person contributes some money, offering loans/services to only its own members. Lastly, microfinance banks are formal banks that provide microfinance services with the intention to reach underprivileged groups.

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The microfinance sector has grown steadily over the past three years, though the percent market share has increased at a much slower rate. While growth is expected in this sector, there is still room for improvements. The report found that rural areas in Rwanda are still underserved and see limited banking competition. The Rwanda government is planning to nationalize many of the smaller microfinance institutions into one national bank, and to expand its reach so that 90% of the population will have access to banking by 2020. Currently, 38.1% of Rwandas have a formal bank account, and 25.5% have a savings account, though most of these people likely live in more populated areas. The number of citizens in rural areas who use informal banking/savings is probably much higher.

The report details several possible areas of improvement, such as enhancing services based on client needs and strengthening staff skills to better provide for customers. Still, the authors are optimistic that the sector will continue to grow in Rwanda as expansion of banking branches, mobile banking, and ATM machines will positively impact financial inclusion in Rwanda.

Sources:
Poor Economics. Banerjee and Duflo
Assessment of the Rwandan Microfinance Sector Performance. MicroFinanza Rating, Access to Finance Rwanda, and Association of Microfinance Institutions in Rwanda.

Post 5 : Micro Angolan credit

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I would like to start by giving a definition of what is a micro credit. According to the business dictionary, a micro credit is: “A small financial loan made to poverty-stricken individuals seeking to start their own business. This type of loan typically does not exceed a couple hundred dollars, so an impoverished individual cannot solely depend on this type of loan to fund their business.”

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According to Banerjee and Duflo, the basic argument in favor of micro credit is that if the money is used well, it can help the improve

ment of the living situations of families, especially when they open a business or when farmers wish to buy fertilizer in order to harvest well the next year, for example. It is a good way to get out of poverty and to become more financially independent as well. However, to every good effects, there are also bad effects. And some institutions take advantage of the poor people. Especially those who do not use the money well once they got a loan. In this case, it may make things worse for some people if they borrow money and can’t reimbursed on time.

However, this situation is not only found in the countries of Africa but it can also be found in the US, for example: When a person is borrowing money, but can’t pay back on time, the interest rate and the fees are increasing which might make the situation worse. In the end, people who borrowed that money may end up more poor that they already were. It is a very unfortunate circle to be part of.

 Picture  : Banerjee and Duflo – property of Google Image

ANGOLA CASE:

            At the moment there are 19 commercial banks operating in Angola and focusing their business of retail and corporate banking. A few commercial banks, however, do have specific microfinance offerings.

There are two sides: It is hard for poor people to get credit however they need one to be able to build a business or even to buy a small property. I have found on the website of the UN Refugee Agency, an interview made by a man from Angola who said that “My $140 loan has financed a modest business in which me and my wife sell phone cards for mobiles. The micro-credit helped me to change a bit my financial situation. I can now buy bread on a daily basis, which was not possible before.” This man is very lucky and it is proof that micro credit can have a positive impact.

In Angola, a nonprofit called Development Workshop created a micro-finance program as a post-war economic strategy to help individuals create small businesses with the goal to reduce poverty. Using KixiCredito an institution providing micro credit, DW has been able to support over 13,000 clients.  KixiCredito offers small loans to poor individuals. In Angola’s informal economy, this has allowed individuals to set up businesses selling fish, baked goods… As of 2015, KixiCredito has injected 400 million USD into Angola’s national economy.

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Picture : Link

According to the book in Poor Economics, there are none significant numbers to prove that lives had been improved. Rises in income sometimes went from 5% to 7%, but this was not seen as a fantastical improvement.

As for digital technology, Angola is limited. It is important the poor countries progress to become up to date when it comes to technology, since it today an important part of our world.  Angola should develop in other industries such as agriculture and energy, which are currently areas of struggle. Right now, its main source of revenue is oil. Angola is a country which is facing a lot of obstacles and I understand that it must be hard to know what are the priorities.

 

Blog 5: Working towards Equality

Through Chapters 8 and 9 of Poor Economics, Banerjee and Duflo present two arguments backed by several case stories. The difference between the two boils down to the mind set of the family or business taking part in the micro-credits. Through several case studies, it was discovered that the poor in parts of Africa and India follow a similar saving pattern. Since they live on practically no wages, the poor use the money they make for what they consider necessities. They hardly find enough money left over to save. If they do have a higher yield than average, they find it hard to hold on to their savings. The poor have a hard time opening savings account to hold on to their money so they form support groups within the community.

The case studies showed that in many cases, the poor were not opposed to saving for future investments if they could do it right away. For example, when given the option to buy fertilizer right after the harvest instead of waiting for planting season, more farmers took the deal. They understand that investment would provide more. If they buy the fertilizer sooner, the poor will not sell it if another emergency comes up that they would have used the cash for otherwise. In these situations, Banerjee and Duflo would argue that micro-credits might be of good use. Farmers or Entrepreneur could take a small amount of credit to buy the fertilizer and then pay back each year with the more abundant yields.

There are some instances, however, where there simply no will to move up. For these cases, micro-credit would do little good. Just because a family could invest in a barn to house a few more cows, it would do little to change the current situation of the family. Therefor, it would be better to place the money in other things such as health funds and new clothes. Another example of the micro-credit not being a great idea, is when the investment does not equal the same as the yield. Just because the small shop could fill up their store does not mean that it is all being sold. It would not be in their best interest to invest more money in inventory. They would then not make any larger of a profit making it difficult to expand.

I believe micro-credit works on a case to case basis. It is hard to say it always works or never works as can be seen in the few example provided. I do think it would be a good idea to provide the service and educate as many small businesses and entrepreneurs about the system as possible. We cannot rely on the idea to solve the poverty trap completely, but it may be able to help out in percentage of cases.

The country of Lesotho has a micro-credit system in place. In 2005, there was a conference held by the Central Bank of Lesotho to review the policy and legal framework of the micro-finance system. They recognized the importance of small businesses and entrepreneurs in the prosperity of the country. The main issues discovered during the conference were the limited access to markets and institutional support.

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Millennium Challenge Corporation Meeting

As discussed in Poor Economics, micro financing does not have as much impact on the economy as the government might have hoped. It does help out with certain groups such as the women workers. Prior to 2006, women found great difficulty in finding credit. Since then the government has put in to place several reforms to provide more micro financing services to the women workers. So not only has the government worked to make improvements among the poor, but they have made great strides into bringing about women’s equality in the workplace.

 

Post 4: Swaziland, Cheetahs, and Democracy

In Africa, in these developing nations, there is a new movement forming. A new kind of leader is rising, young and inspired Africans who have the vision to change the world. These are called “cheetahs”, a new generation of professionals and leaders who are poised to help lift African nations out of their current situation. Inside South Africa we find Swaziland, a country with a whole heap of issues and very little growth. Much of this is caused by the government, the King of which is the last absolute monarch in Africa. The King allows no criticism of his regime, and employs police and secret service to keep his people in line. There is a congressional body and a prime minister, but they are both under heavy influence of the king and the elections themselves have been determined as unfair and biased by outside observers. One young man in Swaziland, Maxwell Diamini, is taking direct action to fight for freedoms in Swaziland. Any attempts or even discussion of democracy in Swaziland are considered terrorism, so Maxwell has spent much of his life in prison. As former President of the Swaziland National Union of Students, and current Secretary General of the Swaziland Youth Congress, Maxwell has been tirelessly fighting for free speech and for democracy in his country, but has faced much persecution. He has been held in jail for multiple charges of terrorism of criticism of the King’s regime, and also on explosives charges which were later dropped for being false (he was forced to sign a confession.) Many young people in Swaziland are adopting social media as a way to find fresh new perspectives, and to see how people feel about current events. I have actually found Maxwell’s Facebook profile, and he has some really interesting things to say!

“For the first time since 2009, I spent a full year out of prison. My court issues are not yet over pending the state appeal of our constitutional challenge of the STA. Major achievement for me, but I still deeply about Zonkhe Dlamini, Thantaza Silolo, and Amos Mbedzi who are still languishing in Jail. My heart feels for our brothers and sisters who are in exile. Far away from home and their love ones for our freedom. Their sacrifices are not in vain for our people shall be free and they shall come back to the land of their birth. May we reorganize ourselves in 2017 and wage a relentless and heroic struggle for our total liberation” (Diamini, December 31, 2016)

 

Obviously, Maxwell cares deeply about his country and his people, and is not done fighting for the youth in Swaziland, even after government intervention. Cheetahs like Maxwell with fresh perspective and tenacious drive are what give Africa hope, a new kind of leader with humanitarian goals and ambitious ideas. Swazilan ranks very poorly in metrics based on good governance and human rights, with the monarchy failing to do much to help its people. The Freedom House Think Tank gives Swaziland an 18/100 aggregate score on freedoms and civil liberties. 29% of adults age 15-49 are living with HIV infection, which can’t help economic growth or fighting for personal freedoms. Physical health is often the first step to getting work done and achieving goals, without it not much can get done because people aren’t able to reach their full potential. As a monarchy with little political agency for the common people, Swaziland ranks very low in democracy. In general, politically, Swazi citizens have almost no say in decisions for their country, and attempts to organize are usually crushed with violence and arrests. Swaziland does have hope, but that hope does not lie with its current government. The future and freedom of Swaziland is in the hands of its young people, like Maxwell. With sustained efforts, I do believe progress can still be made there.

In Poor Economics chapter 3, “Low Hanging Fruit for Better (Global) Health?” Banerjee and Duflo go into how problems of health impact low-income countries. Sachs’ “Health Trap” talks about this as well, and how poverty is compounded by poor health. People in these impoverished areas usually end up spending the same money on health care, but on less effective solutions. They tend to spend money on expensive cures like antibiotics or last-minute surgery, rather than inexpensive prevention measures. Investments like clean water and sanitation, malaria nets, and immunizations are cheaper and provide long-lasting solutions. Doctors in these areas often tend to underdiagnose and overmedicate, making antibiotics less functional in the future. But if health care providers have better education, these solutions can be implemented and people can actually be helped. By investing in cheaper hygiene systems, money can be saved and waste minimized. When the people are healthy, productivity and quality of life increase dramatically. By creating affordable healthcare and sanitary conditions, these impoverished countries will have the tools to succeed and develop as nations in the 21st century. The path forward is not clear or simple, but steps can be taken to ensure proper health care across the globe, with tangible results.

Post 4 : In the name of Angola

The presentation of a cheetah in Angola, Africa

Following the research last week on cheetahs, we have to look today more thoroughly on the work of one in our assigned country. I searched for the prominent Angolan journalist and the first name that appeared was Rafael Rafael Marques de MoraisMarques. Journalists are the ones that have a louder voice in the world since they are the ones that search the news, write about them to make them known to the public so I think it is important that the country has a specialist journalist.

Rafael Marques was born in 1971 in Angola. More than a journalist, he’s also a human rights activist who received several international awards for his research on the conflict of Diamonds as well as government corruption.

However, activists are facing a lot of risks when they defend the rights of humans especially when the country is not very open to changes and improvements. It is also the case for Marques since he was facing libel for exposing the horrors of the country’s diamond trade.

Also, he received a few threats such as this one :  “During a January 19, 2000 parliamentary debate on press freedom, for example, Mendes de Carvalho, a legislator from Your Excellency’s political party, stated that if Marques, 28, continued to criticize Your Excellency, he would not live to the age of 40.” (source : https://cpj.org/2000/03/angola-outspoken-journalist-will-be-tried.php )

It takes a lot of courage to defend what is right in a country where people are trying to stop you in the name of money and power that is why, I think,  Rafael Marques is a good example of a cheetah.

Picture : Rafael Marques – Google Images

Bigger insight on the freedom of Angola. Or the absence of it

 

According to Radelet, democracy is not only the free election where people can choose who they want to lead their country. Indeed, there are others facts such as “the protection of basic civil liberties and human rights, the establishment of public institutions” that are held accountable by citizens and help limit the power of their leaders (like countries of the first world) and finally the recognition of rights of freedom of expression, assembly and press.

Right now, Angola is ranked 5/16 but the Freedom House for the freedom of expression and belief. The state owns Angola’s only daily newspaper, all national radio stations and all but one national television station. There is no freedom of speech and people trying to fight for it are risking their lives (i.e Marques).

sans-titre

 

To answer the question : Yes, YALI is active in Angola which is a very good thing since The Young African Leaders Initiative (YALI)  was created by  the United States Department of State. It started in 2010 by President Barack Obama. YALI is a program which want to educate and network young African leaders with activities including a fellowship to study in the United States for six weeks, follow-up resources, and student exchange programs. This program gives opportunities to the youth to learn more.

 

Last part

Let’s answer a question that has a wide subject. What are major obstacles in raising developing countries out of poverty.

 

Some of the obstacles can be:

  • Too much foreign aid. Since we saw it is important for countries to give some money, however too much aid can also lead to little businesses being forced to close because it is ruining their economic system.
  • The education preventing people to move the country forward and having better life; difficult access to health and natural resources. Problems regarding crime, danger and diseases.

And a lot more….