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Poor Economics

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Submitted By marianjoi03
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POOR ECONOMICS: CHAPTER 1- THINK AGAIN, AGAIN

1st Argument: Foreign aid is not the answer to poverty

Reason: Foreign aid actually has its own benefits because as what was stated in the book, it would increase the investments of poor countries, thus, make them more productive. If they become more productive, it would result to higher incomes that will generate more investments in the future. Moreover, according to Jeffrey Sachs, poverty could have been eliminated in the near future if rich countries just committed to foreign aid yearly from 2005 to 2025. However, despite of its benefits, it actually does more bad to the economy and people. There will be a tendency that people get to be more dependent on foreign aid. They will stop looking for other solutions to solve their problems thinking that foreign aid will be the only answer whenever problem arises. Moreover, sine more money will be collected from the foreign aid, it could possibly lead to corruption. Another reason that foreign aid is not the answer was that, money from foreign aid actually only contributes a little to poverty. Nonetheless, where the aid is coming from is not important but rather is knowing the right kind of projects where money can be allocated to.

Interventions: One of the interventions implemented was prioritizing the needs of the people in order to choose the right kind of project to fund. Such projects are food for the indigent, pension for the elderly and clinics for those who are sick. Also, in order to solve poverty, people should have the capacity to help but before doing that, it is important for them to know of the different ways how to help. With this, another intervention used was through the help of Peter Singer. He regularly updates is website containing different example of things or solution that people can do or support.

Effects of the Interventions: Singer’s list of examples helped other people become knowledgable of the potential ways to help other people especially the poor ones. Moreover, the purpose of this list was to make the people realize that foreign assistance is not the only answer to their problems, thus, knowing that there are actually other specific answers/solutions to their problems. This realization would also help people limit their dependence to other countries. Also, through prioritising the needs of the people, more services will be provided to the people which will also reach the most needy ones.

2nd Argument: Poverty trap for poor countries is not always true

Reason: Poverty trap means that in context as having poor countries unable to surpass the poverty line or unable to pay for the investments merely because they are poor. Usually, a lot believed that poverty trap exists and that many had believed to the thought that poor countries who are in the poverty trap zone and have low income today will have a tendency to have lower income in the future, thus, will end up trapped in the poverty zone. Despite of this, I believed that poverty trap for poor countries is not always true. The economy is not linear which means that what happens now will not entirely indicate of what will happen in the future. Knowing this, poverty is not really permanent and in reality, many countries that used to be poor are now rich. It is just really dependent on the people and the steps taken by the said countries for them to get out of that poverty zone. There are actually a lot of ways on how these poor countries get out of that zone. According to the book, free market, just political system and right incentives would greatly aid solve the people’s problem, which in this case, is poverty.

Interventions: Since poverty trap is not always true and not permanent, there are a ways on how to get out of that poverty zone. As suggested from the book, one of the interventions that can be implemented would be the onetime infusion of aid, expecting that it could make a huge difference in the economy. Moreover, Jeff Sachs wants to spend on aid by means of giving away things to the poor. Another intervention was Jeffrey Sachs’s Millennium Villages Project which provides free fertilizers, school meals, working health clinics, computers in schools and etc.

Effects of the Interventions: One of interventions would be the onetime infusion of aid and as what I’ve stated on my first argument, aids could have negative effects. If the aids were coming from the foreign countries, there will be a tendency for the government to just corrupt the money collected. Moreover, many opposed aid believing that people’s freedom should be respected in more ways than one. As what was stated in the book, if people don’t want something you’re giving, then they should not be forced. Despite of this, onetime aid gives the people the chance to start on their own. Once having enough money to pay for their investments, they’ll be able to earn more, thus, gives a way for them to escape from the trap. On the other hand, The Millennium Villages Project benefits a lot of people. People get to receive a lot such as fertilisers, food, equipments and such for the betterment of their community. Estimating, half a million dollars a year were contributed per village. Its aim was to help villages have a self-sustainable economy coming from a subsistence farming. Another result of the said intervention was the benefits of the free harvest. One of the farmers in Kenya was provided by the free fertilizers and as a result, he became a lot more profitable from the harvests of it. And that according to him, the use of the aid, specifically the fertilizers, was the way that he was able to escape the poverty trap.

3rd Argument: The ideology and ignorance of the policy makers can lead to poverty

Reason: There are a lot of factors that really contributed to poverty and one of which would be the wrong ideology and ignorance of the policy makers. Many of them lack the sense of urgency with the emerging problem of poverty. Also, as stated in the book, policy makers had the wrong model of the world in mind. They are having two sides with regard to the problem, believing that poverty trap is there and that there was none. This led to the confusions as to what policies are more appropriate especially since even the policy makers itself were in conflict with each other towards their ideologies. Moreover, it is hard to match policies considering two different models. Thus, this leads to wrong policies being implemented. Also, too much focus on these debates and discussions as to whether poverty trap exists or not led to ignoring the real problem that is occurring. Another reason for the said argument would be the corruption that exists. Instead of using the funds to help alleviate poverty, money just goes to the pocket of these policy makers. This is also the reason why there’s a wrong appropriation of the funds. Less money goes to the poor and at the same time, their needs are not well prioritized.

Interventions: The wrong ideology and ignorance of the policy makers lead to wrong policies implemented, thus, worsening the poverty. Knowing this, it is important to ensure that proper policies are created and this can be assured through different interventions. There’s a need to practice the development policy which collects the right data that can be used to make more equipped/appropriate policies aligned to the environment of the country. They’ve implemented the use of Randomised Control Trials or RCT. Poverty Action Lab was also founded which basically aims to understand economy through the use of RCT. Moreover, through the implementation of RCT, they’ve evaluated the effectiveness of new drugs. Lastly, to aid the wrong policies of the policy makers due to their wrong ideology and ignorance, they’ve come to study well the behaviour of the people and understand how they decide.

Effects of the Interventions: With the Poverty Action Lab, it enabled a wide-range of research and experiments with the cooperation of a very large numbers of organizations, researchers and policy makers. Also, they’ve embraced the idea of randomised trials which gave the researchers the chance to work with a wide-array of respondents and a chance to implement large-scale experiments designed to test their theories. These experiments were very helpful since new theories will be formulated. If these theories regarding the economies are proven, it would greatly help design interventions and new experiments which can also aid the policy makers to create more appropriate laws. Moreover, it led to a closer interaction to the poor people, thus, enabled the researchers to study and understand the decision making and behaviour of these people. Knowing this would give solutions to the shortcomings of the policy makers. According to the book, policies regarding government subsidies are important. However, government subsidies can also pose negative effects to the people. But then, since through the experiments, behaviours were understood which identified the needs of the people. It then aids policy makers to understand the different levels of subsidy, thus, helps creating policies that provide a balanced government subsidy for the poor. Lastly, the new experiments carried out were beneficial to the health sector as new drugs were evaluated to cure illnesses such as Malaria.

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