The Real Reasons Why The World Still Has Not Escaped Poverty
The world produces enough food to feed 10 billion people. Malaria is an entirely preventable and treatable disease. An average simple caesarean section costs less than USD 150. It costs on average about 29 US cents per day to provide clean water for each person. A single-pit VIP family latrine can be built for as low as USD 70.
However, as late as either 2018 or 2019, the world still saw that 815 million people in chronic hunger, 405,000 people died of malaria every year — most were young children in sub-Saharan Africa, 295,000 women died during and following pregnancy and childbirth, 785 million people lack even a basic drinking-water service, and 2 billion people still do not have basic sanitation facilities such as toilets or latrines, with 673 million still defecate in the open¹.
Why do we still tolerate such horrible conditions, when it is supposedly so cheap to provide for these basic services? It is almost like all the international organizations who are in charge for such problems deliberately set up their programs for failure. Surely that cannot be the case for all international organizations, staffed by brilliant and well-intentioned development professionals?
Here we are taking a closer look into five intractable problems that are major components of global poverty: hunger, health (here I picked a book on the malaria epidemics), discrimination faced by women, and access to clean water and sanitation, by reviewing one book for each of the problems. These are also issues that impact investors have been trying to help resolve by putting capital in entrepreneurs trying to devise market-based solutions to resolve them.
These books were written with critical eyes by people outside of the development sectors. Each book is selected because each of them is a tour de force in term of comprehensively describing the historical context and the current dynamics rather than just optimistically praising success stories, glorifying fancy technical solutions, or over-emphasizing quantitative analysis like many other development literatures. Be warned: many international organizations are named and shamed in these books.
Note: Some of these books are a bit dated, published a little more than a decade ago. But considering how complicated the issues discussed in the books are, with most of them still persist in one way or the other in 2020, many if not all of the learnings are still valid and useful to learn.
By Roger Thurow and Scott Kilman, published 2009
Thurow and Kilman were both foreign correspondents for WSJ, stationed in Europe and Africa for a couple of decades. They were in the front row when the 2003 Ethiopia famine struck and witnessed it unfolded. The famine was not a result of inability of Ethiopians to feed themselves. Rather strangely, in the year prior to the famine, Ethiopia produced a bumper harvest that brought grain prices down, effectively reducing both the financial ability and the incentives for the farmers to prepare for the next planting cycle. The lack of post-harvest infrastructure in the country, both physical (in term of proper storage) and financial (in term of having a liquid commodity futures market), were making much of the previous gains in yield eventually hurting the farmers and the nation.
Donor countries who were rushing to help with the famine but nothing was done for the Ethiopian farmers. The US, as the biggest donor, insisted that all food aids have to come from the US although it would cause a major logistical delay. They ignored the fact that Ethiopia still had some grains in the warehouse even though the quantity was not adequate. In the US (and also EU and Japan), farmers form very strong lobbying groups so that they receive perennial subsidies and in some cases enforce monopoly of these farmers as the sources of food aids. These agricultural subsidies have indeed always been the most contentious issue in the WTO negotiations as they practically ensure the lack of competitiveness of the agriculture sector in poor countries in the international market.
Another issue touched by the book is on how Ethiopia and Egypt had been unable to agree on how to share the water from the Nile. Ethiopia has always been on the losing side for being not allowed to harness the upstream part of the river by the powerful countries who want to stay aligned with Egypt in the political issues in the Middle East. Again, it shows how food and agriculture — already fraught with natural issues such as pests, weather, and climate change — are deeply intricated in complex webs of domestic and international politics. Complete eradication of hunger and chronic malnutrition issues will not happen while sidestepping the political issues like what the development sector has been doing until today.
by Sonia Shah, published 2010
There are two major diseases ravaging Africa until today: the relatively recent AIDS epidemic and the much older but not less harmful malaria. I picked a book on malaria here due to its longer historical context and how it has been able to defy all human attempts to control it, even when generous billionaires such as Bill and Melinda Gates, and at least six other new organizations that are pouring their attention into the issue, collectively increase the annual kitty to fight the disease from a paltry $100 million a year in 1998 to over $1 billion in 2008.
Do more resources mean more effective solution? Shah, a relentless journalist who traveled to corners of the world to investigate the epidemic, seems to disagree. Even as early as the late 2000s, WHO and the Gates Foundation had a disagreement on what the end goal should be: Gates, with the enormous amount it controls, wanted to completely eradicate malaria, while WHO, with their decades of experiences, being more realistic by simply wanting to keep the disease in check. According to WHO’s experts at that time, and still valid today, the issues of mosquito’s tenacity, population movements, resistance to insecticides and drugs, lack of community participation, poor statistics and worse surveillance, and persistent poverty will always remain. With two major organizations having such major disagreement, the national governments and on-the-ground experts were utterly confused.
WHO itself is not a completely benign organizations free from internal politics. Even basic things like the actual number of malaria cases is extremely hard to estimate, because a lot of cases went unreported, or reported as something else. One of Shah’s sources explained in a funny (albeit ironic) way: Different WHO programs devote themselves to different diseases, from flu to tuberculosis to malaria. Jockeying for public interest, influence, and funding, and working in relative isolation, each tends to exaggerate the burden of its assigned disease. Finally, someone added up the mortality figures for all the diseases, which resulted in an impossible, implausible sum. Embarrassed, WHO held a meeting and literally doled out the numbers: “Okay, measles, you get one million; malaria, you get a million; tuberculosis, a million.”
The book brought the attention to a surprising fact that many Africans view malaria rather differently. They are used to having contracted malaria fevers and consider it a common illness, something as common as traffic accidents in Europe or the US. Some of them hold even more extreme views that consider malaria as a useful anti-colonialism tool: non-Africans are more susceptible to severe bout of the diseases compared to Africans who mostly have acquired partial immunity due to having multiple infections since childhood. No wonder that most externally-driven efforts to fight malaria has not been very successful so far.
by Nicholas Kristof and Sheryl WuDunn, published 2010
Kristof and WuDunn are a couple who join forces to investigate issues afflicting women worldwide, ranging from prostitution, rape, human-trafficking, sex-selected abortion and female infanticide, honor killings, female genital mutilations (FGM), to maternal health issues. While many of these issues are egregious and should be stopped immediately, practices like honor killings and FGM are delicate issues that have been deeply embedded in many cultures, hence to be gently threaded.
Kristof experienced at least a couple of backlashes when he was trying to quiz women from different cultures about their “issues”. In Saudi, he was told that, “Why do foreigners always ask about clothing? Why does it matter so much what we wear? Of all the issues in the world, is that really so important? Look, when we’re among ourselves, of course we complain about the rules. It’s ridiculous that we can’t drive. But these are our problems, not yours”. In Sudan, it was more straightforward, from a woman, “This is our culture! We all want it. Why is it America’s business?” Of course, if culture were immutable, China would still be impoverished and WuDunn would be stumbling along on three-inch feet, but culture change is slow and has to be driven from inwards by grassroot social entrepreneurs.
Education is the best way to dramatically improve women’s lives. When a woman can read and write, she can take care of her own businesses, she can read and follow instructions posted in the health clinics, and she can make police reports. The book told one fascinating story about how a group of women in Nagpur in India, led by a fierce and highly-educated Usha Narayane, had won a violent battle against a mobster group, whose leader in the end was lynched in the courtroom by the women he used to torture.
The development world has finally caught up with gender issues and agreed that empowering women is much more effective than empowering men, due to women’s tendency to nurture their families and not succumbing to temptations like alcohol or gambling. It is not only that women are half of the talents available to develop their countries, but they are also educators for the future generations of their families.
by Fred Pearce, published 2007
Many of the wars in the past were fought over access to oil deposits. In the future, majority of wars will be fought over access to clean water. In this book, Pearce skillfully told a gripping narrative about how nations and provinces are fiercely negotiating over rights to water resources and how humans foolishly grow water-hungry plants like cotton and alfalfa that suck whole rivers, lakes, and aquifers dry. However, building dams is the biggest folly we have committed when it comes to water.
Most governments around the world have the penchant to build mega-dams. Mega-dams mean mega-projects that are prestigious for both democratic and authoritarian rulers, with multiple benefits of both large-scale irrigation and electricity. However, dams often turned out to be too expensive for the benefits being delivered, and they wreak havoc on traditional communities that rely on the wetland. Reservoirs created by the dams also turned out to be one of the biggest contributors of methane gas, the primary cause of climate change. Even after all these facts are known, the World Bank is again lured and recently still planning for more dam constructions.
The negligence of the international organizations did not stop at dams. For 20 years, United Nations officials, as well as Bangladeshi aid groups, urged Bangladeshis to stop drinking unclean pond water. Instead, they were to invest in tube wells to tap into underground aquifers. Unfortunately, no one tested the aquifers for arsenic. Today, this is considered one of the largest public health crises in the world.
There are good news, too. Drip irrigation technologies, originally developed by water-scarce Israel had advanced considerably. Widespread adoption did not happen, though, as the initial costs are deemed to be too expensive by most farmers, while there is not much incentives to switch when many governments are still providing subsidies on water and electricity to be used to drill ground water.
Ancient water-harvesting technologies like qanats and dewponds are also making a comeback, after modern researches reveal them to be actually superior and more sustainable alternatives to our current way of retrieving water from the environment.
How do we resolve global water issues? Pearce suggested that we have to give up the idea that water has to be extracted from nature and put inside metal or behind concrete, treat water as precious resources rather than something that just falls from the sky, and do better science and investing in a “blue revolution” to bring the green-revolution crops in line with hydrological realities. I could not agree more.
by Rose George, published 2014
This is the most fun book to read out of all five books, it had to be because it deals with human waste, naturally one of the most disgusting matters for us humans. I highly recommend you to read the book even if you are not interested in the subject, as Rose George brilliantly put together a narrative that encompasses London sewerage system to Toto factory in Japan to the impoverished areas in Africa.
Human waste is an increasingly difficult problem to deal with as the number of humans continue to grow. Even infrastructures in London (already the biggest in the world), New York, and Brussels — capital of EU — are grossly inadequate as they were designed centuries ago. Human waste is not too difficult to treat, but all other things that we like to put on our toilets — drugs, used oils, and other toxic materials — are impossible to be processed separately.
Sanitation and the issues of open defecation is also typically not the highest priority in people’s mind. One African quoted in the book saying, “When there is cholera, and there is scarcity of drugs, the outcry is very high. But anyone in the street who sees their neighbor disposing of feces in the street will not complain. There is no outcry about sanitation.” Apart from rare social entrepreneurs like Jack Sim of the World’s Toilet Association, providing toilets to the poor is a very low-profile activity, below almost all other items in the development agenda.
Then there is the problem of not being able to immediately realizing benefits for households who adopt proper toilets. As with any innovation, households will not adopt in a uniform manner, and the categories of innovator, early adopter, late adopter, and laggard are as relevant to latrine building in developing countries as they are to adoption of compact disc players or mobile phones in developed countries. However, the benefits are only realized when everyone in the community has also adopted it, because if your neighbors do not have proper toilets then their waste could pollute your water source.
The book makes me think about my own waste footprint. My city does not have a piped sewerage system, so every few years I would have to get a vacuum truck to empty the septic tank in my house, bring the content to … somewhere. I really have to find out soon.
What are the lessons that impact investors can learn about the issues described above?
Many of the failed or struggling projects described above (and there are many more failure cases described in the books) are top-down or outside-in initiatives, from mega-dams to indiscriminate DDT spraying of malaria vectors. Bottom-up initiatives and local knowledge passed through generations are the ones who have better chance of delivering long-term results. Other than qanats already mentioned above, one of the most effective malaria medicines today is artemisinin, discovered by Tu Youyou in 1972 after screening through thousands of ancient Chinese herbs. The solutions that impact investors need to back are already out there, either inspired from nature or ancient wisdom or freshly coming out of the labs. The pool of technologies available should be adequate for impact investors to thrive.
The other lesson is that many of the issues are interlinked to one another. Water problem is related to Sanitation problem and Hunger problem. Health issues are closely related to Gender Inequality issues. People who die from malaria are often the ones with chronic malnutrition. Solving one issue and not the others might not be effective or sustainable. Interestingly, when the famed Professor Jeffrey Sachs in 2006 amassed USD 120 million of aid money to experiment to help only two villages with combined basics of clean water, healthcare, malaria-preventing bed nets, transportation networks and so on, it also did not work. So, fellow impact investors and entrepreneurs, be humble.
Last but not least, apart from the challenges of dealing with the original poverty-related issues, impact entrepreneurs, investors, and the grassroot communities have to embrace the challenges with a world that has already been altered, for better or worse², by the powers of big governments and institutions.
My hope is that I would someday, perhaps in 2040, read again about the same topics from a new set of books and find out that impact investing have contributed to the significant progress from our today’s achievements, and everyone of my children’s generation will be better off than the bottom billion of my generation.
 Take these numbers with a grain of salt. As we shall see later, this kind of estimates is often based on assumptions that are based on more assumptions
 Mostly worse