The Goal to Eliminate Economic Inequality - Assignment Example

? There are established economic goals that are widely accepted in most countries. These include economic growth, full employment, economic efficiency, economic stability, economic freedom, economic security and economic equality (McConnell and Brue, 8-9). Some of these goals are complementary, meaning when one goal is achieved, other goals may also be realized. However, there are some goals which may conflict with the other. This is because in order to achieve certain goal, there may be a need to sacrifice another. Because of this, countries need to prioritize their goals for their economies, assess the trade-offs and later on decide on the best way to achieve a certain goal. Although the focus of one country may vary from another, economists and government policymakers continue to work on policies to achieve these goals. The goal to eliminate economic inequality is one of the many established objectives focused not only within a single economy but also the whole world. Economic inequality is seen in both microeconomics and macroeconomics level. In a microeconomics perspective, it is evident through the occurrence of unemployment. Unemployment is perceived as a basic cause of inequitable distribution of income in an economy resulting to some group of citizens facing poverty while others enjoying abundance. On the other hand, inequality in a macroeconomics perspective is observed as nations differ in their endowment of economic resources. Some nations are endowed with abundant economic resources while others are left to suffer with their very minimal amount of resources. From both perspectives, we end up having two groups when we talk about our people or nations of the world. Economic inequality results to poverty creating the divide between the rich and the poor. Poverty hinders economic growth and development. It is the root of cause of problems such health problems, economic distress, unemployment and more importantly hunger. That is mainly the reason for economists and government policymakers all over the world to establish ways on alleviating if not completely eliminating poverty. With economic growth and development, there will be rising outputs and income; people are more able to meet their needs and wants. This also results to improved quality of life as greater opportunities are provided without sacrificing other opportunities and pleasures. A nation experiencing growth and development can resolve socioeconomic problems better and undertake new programs to alleviate poverty more readily without impairing existing levels of consumption, investment and public goods production (McConnell and Brue, 132). The level of economic growth and development of a country also reflects its position in the world economy. Countries are categorized as either developed or developing - the first being wealthy and the latter being poor. Wealthy group was composed of most of the Western European countries, Canada and the United States. Inhabitants of these regions lived (and still lived) in great affluence and consumed a large part of the world’s resources. The other group - Latin America, Asia and Africa- was poor, underdeveloped and contained almost 75 percent of the world’s population (Appleyard and Field Jr, 381). World Bank characterized countries according to their incomes. In its annual World Development Indicators in 2000 and World Development Reports in 1999/2000, countries are grouped as low- income economies, lower-middle-income economies, upper-middle-income economies and high-income economies (World Bank, 251). Economists and government policymakers, especially those in developing countries began to look for reasons to explain this disparity and for ways to eliminate it. Poverty creates the disparity that is experienced by the people from the developed and developing countries. There is a need to realize and address the issue of poverty especially in the continent of Africa. William Easterly worked on a paper entitled “Can the West Save Africa” in 2008. In his paper, Easterly recognizes the presence of dual opinion on the ‘save Africa’ movement. The first one is termed as transformational approach. This approach identifies that social change is very much possible and that it is upon political leaders and experts from wealthier countries to ignite the movement and achieve development. The second approach is called the marginal approach. It views that while change is possible it can only be gradual at most and that self-organization, creative ideas and measured political reforms are the answer but all of these are constricted by the norms and traditions of any given place (Easterly, 3-4). Easterly started his paper by recognizing the fact that Africa really has the “need” for foreign aid to end its poverty and there is really a “big push” coming from the wealthy or developed nations around the world especially the Westerners. “It is the poorest region and has the worst per capita growth rates (which are obviously related facts if we measure poverty at the end of the period). From the study of Chen and Ravallion (2008) as of 2005, 50.4 percent of Africa’s population (380 million) live below the World Bank’s international extreme poverty line ---$1.25 a day in PPP terms -- this proportion is about the same as it was in 1981. The mean consumption of this group was $0.73 a day” (Easterly, 9). From this figures, it is very evident that Africa is in need of foreign aid. “The goals of the Western effort are ambitious, not limited to promoting overall economic growth. A 2000 UN Summit agreed upon “Millennium Development Goals” (MDGs) for the year 2015 such as cutting poverty in half, reaching universal primary enrolment, sharply reducing mortality of infants and mothers, achieving gender equality, dramatically increasing access to clean water and other social indicators. Although this effort is worldwide, most of the MDG campaign focuses on Africa, where the shortfalls to the goals are the greatest” (Easterly, 2-3). The wealthier nations are in a better position to extend help to the Africans. The knowledge or recognition over the need to be able to help out in the efforts to at least reduce if not to totally end poverty can be seen in many forms. Organizations were also formed with the primary objective of addressing the problem on poverty. Aside from the pledges that G-8 leaders have committed to Africa, well-known celebrities and personalities have done actions such as concerts by Bob Geldof , music video of Angelina Jolie and Jeffrey Sachs, special edition of Vanity Fair with feature articles such as “Madonna’s Malawi, music albums and other alternative means were able to help financially in the fight against poverty. Celebrities like Bono, Bill Gates and Queen Rania of Jordan called for “emergency” actions during the World Economic Forum in 2008 to reduce poverty in Africa by the year 2015. After recognizing the need and efforts to save Africa from poverty, the question is can the West really save Africa? Easterly examines the efforts of the two approaches by testing their ambitions or goals. An approach with the goal of achieving a large permanent gain in an aggregate indicator such as growth through the level of GDP per capita or a package of aggregate social indicators is considered transformational. For example, programs aiming at permanently raising the growth rate of the economy by means of a permanent increase in aid are clearly transformational. However, an approach will be considered marginal if it has the goal of solving a much more specific problem with a target group of beneficiaries which is smaller than the entire population of a country. Program to administer deworming drugs to a specific group of schoolchildren will fall to a marginal approach by this test. From this test, the two approaches are also evaluated. As transformational approach sees that very rapid and comprehensive social change is possible in developing Africa, marginal approach argues that only gradual social change or “one step at a time” is possible in saving Africans from poverty. “The stronger the ambition of a transformational approach, the stronger the support it would seem to require from research findings, since the costs and consequences of success and failure are greater for large-scale programs than for small-scale ones” (Easterly, 6). But on the contrary, marginal approach effects are easier to test than those of transformational ones. The difficulty in testing lies on the identification problems concerning multiple endogenous variables and selection biases in aggregate data, uncertainty about what control variables should be included, the usual impossibility of natural experiments at the system level, and the difficulties of attribution of outcomes to interventions with a program that involves multiple interventions. Another thing to pay attention with is the quality of macroeconomic data in developing countries. There were significant discrepancies and revisions between macro data and household data on aggregate trends in income and poverty. Macroeconomic studies also revealed that there were no yielded positive results from programs using transformational approach for Africa. Because of these difficulties and findings, solutions are offered by the proponents of randomized evaluation shifting development towards marginal approach and away from transformational ones. In evaluating the effects of marginal approach, micro data such as indicators of inputs and outcomes which are usually easier to measure will be used. Another cited advantage for the marginal approach is the easy detection and determination of the cause of failure. Theories and evidence of the effects of Western aid to Africa were also discussed in Easterly’s paper. Models such as the poverty traps and multiple equilibria were seen as both the explanation for African poverty. By making direct monetary transfers or by directly improving an input into development was seen as the potential lever by which Africa can be transformed. However, there is an alternative view suggesting that there is a unique equilibrium as determined by adverse fundamentals. From this view, they require Western efforts to seek directly to improve the fundamentals with more modest payoff. “Poverty trap” goes with the transformational approach while the “fundamentals” goes with the marginal approach (Easterly, 17). Problems with the implementation of aid programs were also tackled as international goals were believed to have certain theoretical flaws ranging from international collective action problem up to the multiple agents with serious free rider problem. But despite these problems, there are some relatively successful stories in Africa. Education is one because primary enrolment started off very low and then rapidly caught up to other developing countries after the injection of aid. Another successful story of the effects of Western aid in Africa is their health. The child mortality has improved dramatically over time as certain diseases were eliminated. Western aid also impacted the health conditions of Africans as they introduced major breakthroughs in their health technologies. Other positive effects of the Western aids include the improvement in water and sanitation infrastructure and agriculture. Improvements with such infrastructures helped Africans address related problems like malaria, hunger and nutrition, soil fertility, soil erosion and deforestation, land tenure and clean drinking water. With the positive effects of the aid, policy recommendations should made to promote the proper implementation of different programs. Problems with policy intervention, corruption, democracy and the like can be eliminated if people will learn from the past and work together to make change. Be it through the transformational or the marginal approach, the world’s problem on poverty can still be solved. Africa is not a hopeless case. With the help of its citizens, the Africans, the government, foreign aid and everyone in the society, we can save Africa. Bibliography Appleyard, Dennis R and Alfred J Field Jr. International Economics 4th Edition. New York: McGraw-Hill Companies, Inc., 2002. Easterly, William. Can the west save Africa? Cambridge, September 2008. McConnell, Campbell R and Stanley L Brue. Macroeconomics: Principles, Problems, and Policies . New York: McGraw-Hill Companies, Inc., 2005. World Bank. World Development Indicators 2000. Washington, DC: World Bank, 2000. —. World Development Report 1999/2000. Oxford: Oxford University Press, 2000. Read More