What if we could end global poverty?
What if we could do it on a comparative shoestring?
The idea of ending poverty as a planetary goal of primary importance is gaining real traction. No one believes that we will ever end all inequality -- in that sense, the poor are always with us. But an increasing number of people believe that we can eradicate absolute poverty: that we can raise every person on the planet above the basic thresholds of the Millennium Development Goals, that we can ensure than every man, woman and child on this planet has enough to eat and clean water to drink, some shelter, access to medical care, access to basic education and the basics of sustainable livelihood.
What would ending poverty do for us? Many things.
Ending poverty would provide rich soil in which development, even leapfrogging could take root. It would reduce global tensions, helping to fight terrorism and minimize conflict. It would take pressure off the environment, helping us respond better to biodiversity loss and climate change. In every imaginable way, progress will be made easier if more than a billion of us are not struggling for survival.
There are signs that the popular will is there: Make Poverty History, for instance, has launched a mass-movement complete with celebrities to advocate for fair trade, debt reductions and more aid; Sarah McLachlan's World on Fire video, Bono's efforts, projects like The Rough Guide to a Better World, even the outpouring of concern around last week's tragic tsunamis... all seem to point to a larger trend.
But can we actually do it? More and more people seem to think the answer is yes.
Jeffrey Sachs thinks we can do it with "one big push," spending $150 billion a year, which is, bluntly, not very much money at all. Others think we could do it more cheaply by focusing more carefully: The Earth Policy Institute, working from World Bank, U.N. and U.S. government figures, penciled up a budget for meeting seven basic and pressing needs throughout the developing world (getting every kid to school and feeding them lunch, teaching every adult to read, offering family planning to every couple and making sure condoms were available to any who wanted them, providing universal basic health care, and guaranteeing food for all pregnant women and preschool children). Their price tag? $62 billion per year.
Philanthropist Pierre Omidyar thinks it can be done for a fraction of that.
Embracing the work of microfinance outfits like the Grameen Bank, Omidyar points out that these models have managed to use small chunks of capital to achieve radical results. How much, then, would it take to extend microcapital to all the world's poor? "$60 billion, once and for all."
(more...)
Omidyar goes on to explain:
"[M]y model focuses directly on the Grameen Bank model of lending to the poorest of the poor. Admittedly, there are almost an infinite number of "ifs" that go into this number, but here is the logic:Grameen Bank has pioneered a banking model for the poor. Their borrowers are predominantly the "absolute" poor: heads of families (women) that don't have enough income to provide the basic necessities of food, shelter, and clothing for themselves or their families.
Without going into all the aspects that I believe make the Grameen model successful, they have found that 50% of their borrowers have lifted themselves out of poverty after five years. They are working hard to get this number to 100%, obviously.
Assuming this model is scalable -- and all indications are that it is -- I believe this is a great strategy to help people lift themselves out of poverty. Getting that 50% number up to 100% is the big challenge, but over the next 10 years, I'm sure they'll make serious progress.
Now, the economics. It turns out that at their current scale, it takes an estimated $200 to add capacity to Grameen to add an incremental borrower, and to get to the level of self-sustainability. Grameen uses traditional banking economics; the bulk of loans are funded from deposits of other borrowers. An incremental borrower becomes a profitable customer relationship after about two years. Yes, profitable. That means: no more capital needs for that borrower; no need for aid or grants.
If we assume the very big "if" [that] Grameen (and similar models) can continue to scale to add borrowers at that incremental cost, we figure it will take $60 billion to reach 300 million new borrowers. (And that doesn't allow for even greater economies of scale possibly driving that $200 number down over time.)
In Grameen's model, the borrowers are women, and the benefits of financially empowering a woman tends to be felt first by her children and family. Reaching the 300 million poorest women borrowers will effectively reach the poorest 1.2 billion people.
So the numbers that stick in my mind is this: $200 one-time, all-in, non-recurring puts a family on the path to lift themselves out of poverty, once and for all. $60 billion will be needed over the next 10-20 years to reach the 300 million poorest borrowers. These numbers are fantastically exciting to me, because they are absolutely within reach. This isn't about finding $150 billion every single year. This is about finding $60 billion over the next decade, and then you're done."
Now, Pierre himself would admit all sorts of caveats, what-ifs and other hurdles -- realistically so. But there are some countervailing forces here as well:
The spread of socially entrepreneurial approaches like those championed by Ashoka and our ability to transform lives with less money;
The redistribution of the future through the creation of access to a wider variety of technologies appropriate to the world's poorest people and the much more rapid diffusion of innovation throughout the developing world, including the spread of ICT tools;
The "bottom of the pyramid" business movement, which, done right, could turn into an engine of development;
South-South science, especially the potential for breakthroughs in science and medicine in the developing world;
Our increasing ability to respond to calamities as an opportunity, not just a humanitarian crisis by changing the ways we deliver aid, how we work with refugees, and how we rebuild shattered communities for sustainability.
Now, all of this together is far from a road map: but all these developments together are cause for real hope. It may be that 2005 is the year we realize that extreme poverty is not a human constant, but a problem we can solve. Better yet, it may be the year we really start to embrace solutions.
(thanks to John, Aaron and Peter for link suggestions, and to Pierre for letting me reprint his comment here)
