How to Spend $50 Billion to Make the World a Better Place
Page 11
political barriers to overcome if governance is to be
improved.
In his view, the key issues for discussion are the obstacles to good global governance and the difficulties of institutional 90
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reform. Various factors, including the end of the Cold War and the current round of globalization, have raised the pro-file of governance as an issue in recent years, but there are a number of reasons why comparatively little improvement
has been made. In particular, there is a feeling among developing countries that reform is inequitable, with wealth-
ier countries continuing to look after their own interests.
Multinational companies, for example, may see little incentive to move away from ways of doing business that have
served them well, and these companies are often strongly
supported by their home governments.
This means that developing countries are unsure about
how much assistance they will get with reform, or what
share of the fruits of cooperation will be theirs. Reforming governments that are highly dependent on powerful interest groups is never easy, and strong incentives are needed if the effort is to be successsful. Effective reform of national governance is only likely to come about if global governance is first improved. In particular, international organizations must recognize that there are no universally applicable governance norms and that change is possible under any polit-
ical regime.
Equally, there must be recognition that the transition
to market democracy encouraged by international institu-
tions is not only difficult and costly, but also politically sui-cidal for many authoritarian regimes. Dictators can foster genuine economic growth if they forgo short-term personal
gain, whereas reforms can disadvantage some sectors of
society. Democratization and liberalization also may them-
selves allow new forms of corruption to develop.
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How to Spend $50 Billion to Make the World a Better Place Success in tackling corruption can only come from
balancing political realities with appropriate institutional reform. Although the reforms proposed by Rose-Ackerman
are credible, their political feasibility is questionable.
Andvig, in his opponent paper, concentrates on just one
of the opportunities in the challenge paper: international efforts to limit high-level corruption in business. However, first he discusses the difficulty of distinguishing perception of corruption from hard facts. He is clearly in agreement with Cartier-Bresson that reliable data is impossible to come by. In particular, he highlights the problem of “informational cascades”: Statements on the degree of corruption are taken as true and repeated, even though there may be
no hard evidence to support them.
He nevertheless agrees that corruption is a serious chal-
lenge, in particular where government is either itself dis-honest or too weak to deal with corrupt institutions. In the absence of revolution or invasion, only relatively weak tools are available to deal with this. Some of these take the form of interventions from rich countries (“the North”) to poorer, developing countries (“the South”).
The first route for influence is via the behavior of multinational companies (MNCs), deemed to be ethical and hon-
est in their home countries. Unfortunately, evidence from
World Bank surveys is not encouraging: MNCs appear to
act in much the same way as local companies in a corrupt
business environment. Effort is needed to improve this situation. Punishing corruption by denying companies the right to bid for international contracts is one route, but must
be strictly and fairly applied. Transparency initiatives as
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covered in the challenge paper also have their place, but
voluntary agreements are not sufficient.
Foreign aid is another major route of influence. Deny-
ing it completely to dysfunctional states could, as Rose-
Ackerman argues, have negative effects, but it could well
be targeted to less corrupt sectors in a given country, or to projects under the control of international agencies. There is also a case for being more objective about where to target aid: use of corruption indices (however imperfect) and hard evidence is preferable to choice based on perceptions alone.
There are some aspects of aid which can actually pro-
mote corruption. In particular, wages for tasks performed
by foreign aid agencies are often much higher than regular government pay.
In summary, while both authors are quite supportive of
the challenge paper, they present rather pessimistic assessments of the outlook for improving governance and tackling corruption.
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JERE R BEHRMAN1, HAROLD ALDERMAN2
AND JOHN HODDINOTT3
6
Hunger and Malnutrition
Introduction: the challenge of hunger and malnutrition
Alongside the tragedy of acute famine, which is frequently shown on our televisions, there is a much bigger problem of chronic hunger and malnutrition in developing countries.
Although this carries a very real human cost, it is the purpose of this chapter to look purely at the economic aspects: Assuring better nutrition can both reduce the economic
drain on poor societies and help them become wealthier
by increasing individuals’ productivity.
This chapter reviews the nature and scale of the prob-
lem and the economic benefits that would flow from
successful solutions. Four opportunity areas for effective 1 William R Kenan Professor of Economics and Director of the Population Studies Center, University of Pennsylvania.
2 Lead Human Development Economist in the Africa Region of the World Bank, Washington DC.
3 Senior Research Fellow in the Food Consumption and Nutrition Division of the International Food Policy Research Institute, Washington DC.
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How to Spend $50 Billion to Make the World a Better Place use of resources to reduce malnutrition are then proposed:
1. Reducing the prevalence of Low Birth Weight.
2. Promotion of infant and child nutrition and exclusive
breastfeeding.
3. Reducing the prevalence of iron deficiency anemia and
vitamin A, iodine, and zinc deficiencies.
4. Investment in technology in developing country
agriculture.
Using resources to address these opportunities woul
d yield benefits greater than the cost, so these opportunities are economically justified. Benefits would, of course, also be realized on a wider social and human scale.
The nature of the challenge
Hunger has been described as “a condition in which people
lack the basic food intake to provide them with the energy and nutrients for fully productive lives.” Malnutrition, in its strict sense, can be associated with over-consumption of food, resulting for example in obesity, diabetes, or heart disease. Such problems are of increasing importance in some
parts of the developing world. However, currently malnu-
trition in the developing world is primarily associated with undernutrition.
Although some commentators believe the regular fig-
ures published by the Food and Agriculture Organization
of the United Nations (FAO) understate the true incidence
of hunger, these nevertheless form the only relatively long-term global database. The figures indicate that the number
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of undernourished people in the developing world was 798
million in the 1999–2001 survey period: 17% of the total
population of developing countries. Although this is an
enormous problem, it should be seen against the back-
ground of their rapidly growing populations. There was an
increase of 662 million people during the previous ten years (nearly twice the population of the 15-member European
Union), while the number of chronically hungry people
fell very slightly (by 18 million). Thus the prevalence of undernourishment has fallen substantially. 90% of these
people live in the Asia-Pacific region (505 million) or sub-Saharan Africa (198 million). Despite the larger number
of people affected overall, the trend in Asia-Pacific has
been a reduction in the number and percentage of hun-
gry people, primarily due to better nourishment of peo-
ple in China. In Africa, on the other hand, the overall
number of malnourished people increased, and in some
countries the proportion of the affected population also
rose.
The socio-economic breakdown of malnutrition has
been estimated by the Hunger Task Force as approximately:
r 50% in farm households.
r 25% rural landless.
r 22% urban.
r 8% directly resource dependent (for instance, pastoral-
ists and fishermen).
Development of a baby prior to birth (the gestational
period) is crucial in determining its birth weight and
affects childhood development. Mothers who are of small
stature (directly affected by their own fetal development
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How to Spend $50 Billion to Make the World a Better Place and childhood nutrition), poorly nourished and prone to
endemic disease, tend to give birth to small children, who are at a developmental disadvantage. This is commonly
measured by the incidence of Low Birth Weight (LBW),
where an infant weighs less than 2500g at birth. In 2000, it was estimated that 16% of newborn babies in the developing world – 11.7 million children annually – could be classified as of LBW. In parts of south Asia, the situation is especially acute: an estimated 30% of babies are of LBW.
LBW is one important factor in determining early child-
hood development. Another is poor infant nutrition, particularly during the first two to three years of life. This has itself been linked to reduced breastfeeding. The net effect is reflected in the estimate that, in 2000, 162 million children (about one in three) were stunted.
In addition to the negative effect of malnutrition (both
of the child and mother) on physical growth of children,
deficiencies in micro-nutrients can have a major impact on development of intelligence. Lack of both iodine and iron
has been implicated in impaired brain development, and
this can affect enormous numbers of people: It is estimated that 2 billion people (one-third of the total global population) are affected by iodine deficiency, including 285 million six- to twelve-year-old children. In developing countries, it is estimated that 40% of children aged four and under suffer from anemia because of insufficient iron in their diets.
Potential benefits of meeting the challenge
Reduction of the incidence of malnutrition would have a
number of benefits. The most important ones identified are:
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r Reduction in infant mortality rates associated with LBW
and deficiencies in micronutrients. The World Health
Organisation (WHO) estimates that malnutrition con-
tributed to 3.4 million child deaths in 2000; 60% of total child deaths. Reporting in 2001, a WHO commission
estimated that a 10% increase in average life expectancy
at birth results in an additional 0.3–0.4% of economic
growth per year.
r Those who survive the effects of long-term malnutrition
are more susceptible to disease, which further compro-
mises their welfare. This also is a direct drain on health care services.
r Poor nutrition can directly affect physical productivity.
Reduction in chronic hunger increases an individual’s
capacity to do physical work and increases his or her
earning power. For example, a study of workers in rural
Brazil reported that a 1% increase in height (associated
with improved nutrition) leads to a 2–2.4% increase in
wages or earnings.
r For a variety of reasons, childhood malnutrition often
leads to an individual receiving less schooling, which
translates directly into lower lifetime earnings for the
people affected.
Opportunities related to hunger and malnutrition
Framework for considering opportunities
Although reduction in malnutrition would have clear eco-
nomic benefits (in addition to human and social benefits), the purpose of the Copenhagen Consensus is to compare as
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100 How to Spend $50 Billion to Make the World a Better Place objectively as possible these benefits with those delivered by meeting the other nine challenges.
This is done partly by comparing the overall net finan-
cial gain, which may sound relatively straightforward but
is complicated by the fact that benefits accrue in many
cases over long periods (the remaining lifetimes of chil-
dren whose nutrition is improved, for example). To bring all projects to a common basis, an estimate must be made of
the current value of all benefits to be received in the future.
This is done by a process called discounting, which is simply an assumption of the future value of money compared
with that of today. However, the choice of a particular discount rate will, over a period of ten years
or more, make an enormous difference to the current value (what economists
call the Present Discounted Value). Indeed, it can make
the difference between an opportunity being seen as highly valuable and being rejected as having too small economic
benefit to warrant the cost. There are other problems in
making such estimates as well. Putting aside the question
of discounting, for example, it is difficult to estimate the impacts of interventions given imperfect data that generally is generated by individuals’ behaviours and it often is difficult to estimate costs given programs that bundle interventions and use accounting prices that differ from marginal
scarcity prices. Finally, for the efficiency motive for public subsidies what is needed are differences between private
and social rates of returns, but such estimates are difficult to make and rarely available.
In a nutshell, there are no easy answers that are likely to be universally applicable. It is expected that a more subtle
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Table 6.1. Summary of benefits and costs for opportunities related to Hunger and Malnutrition
Opportunities
Benefits-
Discount
and targeted
costs
rates
populations
Benefits ($) Costs ($)
ratio ($)
(%)
Treatments for
$580–986
$200–2000 0.58–4.93
3–5%
women with
asymptomatic
bacterial
infections
Breastfeeding
$131–134
$133–1064 4.80–7.35
3–5%
promotion in
hospitals in
which norm has
been promotion
of use of infant
formula
Vitamin A (pre
$37–43
$1–10
4.3–43
3–5%
child under six
years)
Dissemination of
8.8–14.7
3–5%
new cultivars
with higher yield
potential
analysis of costs and benefits at a country level – and their sensitivity to variables – would be necessary.
Opportunity 1: Reducing the prevalence of Low
Birth Weight
Some 12 million children in the developing world are born
each year weighing less than 2500g, and are classified as