The End of Poverty: Economic Possibilities for Our Time

In medicine, differential diagnosis is the process by which doctors identify one disease from others that present with similar symptoms. Sachs applies differential diagnosis to economics in Chapter 4, where he asserts that there is no one-size-fits-all cure for extreme poverty, then builds upon the idea in subsequent chapters. He believes that economists must examine each economy on a case-by-case basis, to identify the specific problems that require attention in a given country.

The Age of Enlightenment was a philosophical movement spanning the 17th and 18th centuries. Enlightenment-era thinkers believed rational thought, republican government, liberty, and science were crucial to social progress. Sachs frames his call to action as an evolution of Enlightenment ideals and cites the work of Immanuel Kant, John Locke, Adam Smith, and others to situate his ideas within that tradition.

The End of Poverty is a call to action to eliminate extreme poverty within 20 years. Sachs defines extreme poverty as the condition in which households cannot meet their basic survival needs, living on just $1 per day or less. He contrasts extreme poverty with moderate poverty, which allows survival but little more, and relative poverty, or a household income below a certain percentage of the average national income. As of 2005, approximately 1 billion people were living in extreme poverty.

Sachs cites technological advancement as a driving factor behind rich countries’ economic prosperity. The Industrial Revolution, which occurred in Europe and North America between 1760 and the mid 1800s, saw many such advancements, such as new manufacturing processes, mechanization, and the rise of steam power. Sachs suggests that the world’s poorest countries remain so poor partly because they were not privy to these developments.

In his discussion of the poverty trap, Sachs argues that poverty becomes a cycle because it creates disadvantages that propel its existence. He illustrates this idea with the innovation gap: Poor countries do not have the markets or finances to purchase new inventions, so there is no incentive for them to invent. In other words, “the rich move from innovation to growth to further innovation” (62), while the poor remain stagnant.

The IMF is one global institution that Sachs highlights in his discussion of extreme poverty worldwide. He argues that IMF has failed to adequately serve and support the world’s poorest countries, despite its mandate to reduce global poverty, foster international trade, and ensure financial stability.

The ladder of economic development (or the ladder of economic prosperity) is the metaphor upon which Sachs centers the entire text. According to Sachs, poor countries need only a boost up to the first rung of this ladder, then they can continue ascending independently, achieving and sustaining economic development on their own.

These economic development goals were put forth by the UN’s Millennium Assembly at the turn of the century. The MDGs included eight targets with an intent of completion by 2015. Sachs uses these goals as a benchmark for his own call to action. The MDGs include (1) eradicating extreme poverty and hunger; (2) achieving universal primary education; (3) promoting gender equality and empowering women; (4) reducing child mortality; (5) promoting maternal health; (6) combatting HIV/AIDs, malaria, and other diseases; (7) ensuring environmental sustainability; and (8) developing a global partnership for development.

Sachs asserts that poverty often creates more poverty because the poor are often “too poor to save for the future and thereby accumulate the capital” (56) that would improve their economic circumstances. Sachs terms this cycle the “poverty trap” and argues that it is the primary reason for continued economic stagnation in poor countries.