Rapid Victories Against Extreme Poverty
Around one billion people live in extreme poverty, suffering from economic deprivation so severe that they must struggle daily for survival. Extreme poverty is sometimes defined as living on under $1 a day, but more accurately it is the lack of reliable access to basic needs, including adequate food, basic health services, safe drinking water and connectivity with the wider world (via roads, power and telecommunications).
Recent orthodoxy holds that extreme poverty results from corruption, mismanagement and weak institutions. A corollary is that institutional improvements take considerable time, so the escape from extreme poverty is likely to take decades. Without denying the benefit of stronger institutions, I suggest that excessive focus on institutional reforms has gotten the policy sequencing more wrong than right. Often, more direct aid can dramatically reduce extreme poverty in just a few years.
The proximate cause of extreme poverty is that the poor lack basic tools to achieve adequate productivity. "Tools" should be interpreted broadly to include not only machinery and software for production but also agricultural inputs, clinics, medicines, schools and safe water. Even in poor countries with weak institutions, aid from rich countries can help the poor gain access to the needed tools in a very short time. The result can be a dramatic surge of productivity that raises household incomes and initiates self-sustaining economic growth.