Millennium Villages: a new model for development

Jeffery Sachs has his own model of development. He says massive aid program could help in reducing poverty in poor nations. He has initiated a program called Millennium Villages where few selected villages would be given aid to achieve Millennium Development Goals. (To know more about these villages click here)

This article is recently attracting a lot of attention which talks about Sachs’ efforts at a village in Kenya called Sauri. It was the first village under the program. Thanks to Dani Rodrik for the pointer. I loved this para:

Africa has been ­drip-­fed aid for decades, Sachs writes in his 2005 book The End of Poverty, but it has never received enough to make a difference. What money has trickled in has been wasted on overpriced consultants and misspent on humanitarian relief and food aid, not directed at the root causes of poverty. The average African, Sachs says, is caught in a “poverty trap.” He farms a small plot for himself and his family, and simply doesn’t have enough assets to make a profit. As the population grows, people have less and less land, and grow poorer. When the farmer has to pay school fees for his children or buy medication, he is forced to sell the few assets he has or else go into debt. But if he had some capital, he could invest in his farm, grow enough to harvest a surplus, sell it, and start making ­money.

So finance is important. Initial capital which is what the aid provides helps the person in a much better way than simply giving him the goods. But then finance alone is not enough. He needs mechanisms which incentivises him to produce the goods and sell in the markets.

Now, providing finance and helping him establish initial business is an easier part, it is creating that flow through of finance and goods that is important. The aid just helps initially and it is this inability of development consulatants to keep the flow going, which has kept Africa in the poverty trap.

And this is where theories espoused by North, Rodrik, Acemoglu come in front that it is institutions that matter the most. How does one go about creating institutions? Acemoglu says it depends on the colonial origins which in turn depend on mortality rates (at places with higher mortality rates, the colonizers set extractive/rent-seeking institutions). Hence Africa continues to suffer. There have been some excepetions like Botswana, South-Africa but more or less the story is similar across Africa. How does one change it? As Rodrik says,there is no one solution. One has to adopt a case by case approach. One model does not fit all. So there are many ideas what leads to growth etc we still struggle with implementation of the same.

The article also confirms this and says at the end:

This is not to say that Sauri cannot change, or that investment in the village is wasted. But if Sauri is to become a useful model for development on a bigger scale, and not just another development expert’s white elephant, Sachs and others working on the project must acknowledge that they are still learning about Africa. Sauri is not yet a ­success.

Lasting changes in Sauri will come about not through distribution of commodities, but through education for children and training for adults. To put it another way, give a man a mosquito net, and when it rips, he’ll come and ask for another one. But show him how using a mosquito net benefits his health and how it will save him money on medication in the long run, and he might just go out and buy one for himself.

One Response to “Millennium Villages: a new model for development”

  1. Assorted Links « Mostly Economics Says:

    […] is a fantastic write-up on Jeff Sachs and his work on Millenium Villages. I had posted about them earlier as […]

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