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Tackling Poverty Through Reform

Daniel Hoang
Independent Research
June 3, 2016
Advisor: Joshua Garner
Instructor: E. Leila Chawkat

Abstract
The purpose of this research was to evaluate what would be the best approach to minimizing the
problem of extreme poverty. Extreme poverty is defined by a person living on less than $1.25 a day. Many
of the people who live in this poverty lack sufficient access to important necessities like food, clean water,
or shelter. Impoverished people also lack basic human rights and are often exploited because of their lack

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of legal protection. However, with modern advancements in food production, industrialization, and
globalization, the problem of extreme poverty seems more solvable today than any other time in history.
By evaluating and analyzing multiple approaches to minimizing poverty, there will be more information
on what is effective and what isnt when it comes to minimizing poverty. This allows for future
researchers to continue to build upon to eventually find a solution to finally eliminate poverty.

Introduction
Poverty has been a persisting issue despite numerous efforts to solve this problem. Because of
poverty, millions of people experience a life of shortage to the extreme, with lack of food, clean water,
and human rights. However this lasting problem is not an impossible one. The technology and resources
today make it possible to eradicate extreme poverty as it is defined: a persons income amounting to only
$1.25 a day. There is no excuse for why progress cannot be made towards ending undue suffering of

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people caused by poverty. In order to most effectively solve the problem of poverty, there must be
governmental reform, as well as incorporation of the developing economy into the global economy.
There are many reasons for why there is extreme poverty in the world, including geographical
location, the availability of resources and materials for trade and consumption, and corrupt governments.
Most impoverished nations that we see today found themselves where they are due to post-colonization
(Spar). After decolonization by the Europeans, previous colonies struggled with finding new leadership
and reincorporating themselves into the global economy again (Economic and Social Development) .
On top of these problems caused by decolonization, there were new borders that broke land into countries
that included ethnic and religious rivals that make it very difficult to maintain order and peace within a
nation (Haugen).

Review of Literature
Government reform and limiting corruption is necessary to alleviating poverty. Charles Abugre, a
Ghanaian development economist who currently works as the head of African regional director for the
UNs Millennium Campaign in Africa, describes how corrupt government officials usually squander aid
money given before it reaches the people that need it in impoverished countries in Africa. For example, in
2009, in a conversation between Abugre and president of the Central African Republic, Ange-Flix
Patass, Abugre asked Patass to give up a personal monopoly he held on the distribution of refined oil

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products in his country. He was unapologetic. "Do you expect me to lose money in the service of my
people?"(Abugre). By limiting government corruption, the foreign aid money that other countries invest
into developing nations could actually lead to more effective progress. Jagdish Bhagwati, an economics
professor at Columbia University, explains how even though foreign aid money is often given with the
best of intentions, despite all these good intentions, if the conditions for aid's proper use do not prevail,
that aid is more likely to harm than help the world's poorest nations (Bhagwati). Once other countries see
the positive effects that their investment can have without the waste of corrupt government bureaucrats,
they will be encouraged to invest more and other countries may be encouraged to begin to invest as well.
Foreign aid money should only be invested into countries that already have or plan to reform their
government, otherwise it will be wasted and most likely never help the people it was meant to help.
Reform to government is also important for familiarizing developing economies with centralized
state institutions, efficient agriculture techniques, and new technologies that let one generation build upon
the advances of the last (The 10,000-year-old economy). Globalization spreads new ideas and
technology that lead to progress and innovation. Reformation of ineffective government structures can
lead to more effective use of aid money, encourage growth in investment spending, and incorporate the
developing economy into a larger more stable global economy.
Public infrastructure should be invested in to provide services and assistance to those who need it
most. Foreign aid is often misguided and goes to ineffective means of poverty mitigation. There are many
areas of need that should be addressed through improving public infrastructure. Crimes against those in
poverty are very unlikely to ever be accounted for since there is not any reliable law enforcement or
judgement system in place in many impoverished countries. For example, Gary Haugen, a human rights
attorney and founder of the International Justice Mission, described his meeting with a girl named

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Griselda from a poor town in Guatemala. One opportunity Griselda had to escape the poverty in her town
was going to school and getting an education, however Griselda could never go to school or leave her
house at times. This was because, while she was walking home from church with her family, in broad
daylight, men from her community just snatched her off the street, and violently raped her (Haugen).
Griselda and her family had nowhere to go to seek justice for the crimes done to Griselda, so she could
never take advantage of the schooling that was available to her. Also food production and disease control
are very important for economic and social growth: Without greater progress in food production and the
more effective control of communicable diseases, the necessary conditions for steady economic and social
development could hardly be said to have been created (Economic and Social Development).
Impoverished nations tend not to have safe drinking water in close proximity or electricity. Safe drinking
water leads to a healthier, improved quality of life. Cheap, reliable energy which is necessary to free
people from labors such as cooking over a fire, hand washing clothing, and other time consuming tasks
that could easily be solved by electronic appliances leads to specialization in labor and growth in an
economy.
Entrepreneurship and being incorporated into the global economy can provide sustainability of a
developing economy. An entrepreneur is a person organizes, manages, and assumes the risks of a
business or enterprise (Entrepreneur). When an individual undertakes the responsibility of starting and
running a business, they provide small scale production to begin with, forming a stable base for growth.
Small scale production of goods also can encourage a more equal income distribution (The 10,000-yearold economy), compared to larger more centralized production of goods and services. Increasingly,
developing nations have had more opportunities to become involved with the global economy, even the
poorest, play an increasingly larger role: Their [developing economies] share of value-added trade has

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doubled in two decades, from 20 percent in 1990 to more than 40 percent today (Developing Countries
And Global Trade). If developing economies become more integrated into the global economy, they are
subjected to experience growth. Additionally, Countries that, over the last 20 years, managed to grow
both their participation in GVCs [Global Value Chains] and their domestic value added in exports
experienced GDP [Gross Domestic Product] per capita growth of 3.4 percent on average, compared to 2.2
percent for countries that only increased their participation in GVCs without "upgrading" their domestic
value addition (Developing Countries And Global Trade). Even if an economy does not increase its
exports, by participating in global value chains, a developing economy is likely to experience around 2.2
percent of GDP per capita growth. However, if a developing economy does upgrade their domestic value
while in participation with GVCs, they are likely to experience even more growth, at an average of 3.4
percent of GDP per capita growth.
Countries should leverage their assets in order to build their economy. Assets should work with the
countrys needs. An example of a country that leveraged their assets in order to build their economy that
worked with the countrys needs is Singapore. Singapore's leaders trained a labor force to service both
the port and a subsequently constructed airport, leveraging the island's location to become a regional hub
for shipping, commerce, and eventually foreign investment (Spar). Also Costa Rica leveraged its
political stability and extreme biodiversity to position itself as a center for ecotourism in Latin America
and to then entice investment from foreign manufacturers, many of whose executives had first visited the
country as vacationers (Spar). Lastly, once Botswana had crafted a stable structure of property rights
around its vast underground wealth of diamonds, which elsewhere are typically exported in their rough
state, it formed an integrated, profitable industry around polishing and cutting the stones (Spar). All of
these countries evaluated the needs and available resources to themselves, and successfully implemented

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plans to best utilize the available resources to meet the country's needs.
If the assets that the country uses doesnt match the countrys needs it will prove ineffective and
costly.Brazil, for example, has a legacy of overinvesting in grand projects (dams, ports, railways) that
never meshed with either its assets or the world's needs (Spar). Another example is Kenya, that
constructed major fish-processing plants in the 1970s, neglecting to consider that most of the local
population had no history of eating fish and that the economy had no means of providing the freezers and
clean water that the plants required (Spar). When a country successfully uses the assets available to it
build their economy but doesnt consider the countrys needs, it can negatively affect a countrys
economic growth.
Poverty is a serious problem that humanity faces that is not only an allocative or economic
problem, but also a moral problem. But the problem of poverty can be solved through investment in
infrastructure, reforming of government, and incorporating into the global economy. It does not appear to
be a one size fits all answer to the problem of poverty, since poverty is a problem in various different
regions in the world with different people, cultures, and resources. Different places have different needs to
be met and different assets to be used. However by approaching the problem through these goals of
reforming government, building infrastructure, and incorporating into the global economy, it is possible to
successfully develop a sustainable new economy that can positively affect everyone else in the world.

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Research Methods and Data Collection
For this research, the data collection method, meta-analysis was used. This was the most
appropriate data collection method because it would have been impractical and difficult to set up an
experiment containing a developing economy as well as other important variables. By using metaanalysis, a researcher can receive data from various sources and with different perspectives conducting
their own research. This provides a wide range of perspective and data from which another researcher can
study and synthesize a new, academically based perspective. Meta-analysis provides a larger range of data
than an experiment or survey done by one party because it allows a researcher to compile their own
conclusion from others studies.
The research hypothesis for this research project was that in order to most effectively solve the
problem of poverty, there must be governmental reform, as well as incorporation of the developing
economy into the global economy. To address this hypothesis, meta-analysis of academic studies and
journals on the topic of developing economies and similar issues was used. A culmination of the different
studies from various reputable sources led to the researcher forming a new, substantiated thesis. In this
research project, the researcher used articles and documents from databases like the Gale Virtual
Reference Library, Gale Power Search, and the Opposing Viewpoints in Context database. Much of the
research for this product was conducted in an academic setting, either being in the Glenelg high school
library or journalism room.
The research discovered that there are many different factors that contribute to the problem of
poverty. However, by incorporating a developing economy into GVCs, developing economies
experienced an average of 2.2 percent of GDP per capita growth and an average of 3.4 percent of GDP

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per capita growth, if that developing economy followed up and increased their domestic value and
produced more (Developing Countries and Global Trade). In order to be successfully incorporated into the
global economy, developing nations must find how to best utilize the resources available to them to
increase involvement of other more developed nations (Spar). Another important contributor to economic
growth is basic infrastructure, like clean water, other utilities and disease control. Without these measures
in place, there is a consensus that there will not be much of a base for growth.
In Foreign Aid Is Ineffective in Alleviating Poverty," by Jagdish Bhagwati, Bhagwati explains
how when countries give foreign aid, although they do so in good will, is usually misguided and wasted.
Bhagwati cites how in recent times, African impoverished nations have regressed more than they have
progressed despite foreign aid. Bhagwati identified the problem with current foreign aid projects as a
sense of altruism and self interest. Foreign aid does not necessarily have the goal of eliminating poverty,
rather its goal is to form alliances and satisfy our own sense of moral duty. Corrupt governments are often
ignored when countries decide to give aid to developing countries, however corrupt governments are a
huge cause of waste of foreign aid. Effective use of foreign aid is crucial to effective development of a
country. This insight by Bhagwati of the huge parasite that is corrupt government officials to the
development of an economy provides support for the encouragement to reform corrupt governments.
In The secret of Singapore: why Cuba should look to Lee Kuan Yew's thriving city-state for
economic inspiration, by Debora Spar, Spar explains the path that Singapore took to experience
unprecedented post-colonial development better than any other small country. Spar accredited Singapores
impressive economic growth to an in depth understanding of the resources available to Singapore and
how to create a development strategy around those assets. Singapore had invested all the capital it could
into a port situated in the Strait of Malacca. Singapore continued to leverage its location to build an

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airport and make itself a hub of shipping, commerce, and later foreign investment. Spar also described
other successful ventures by developing countries. For example, Costa Rica using its extensive
biodiversity to form an economy based off ecotourism and later manufacturing, from investment from
executives who had originally visited Costa Rica as tourists. There were also counter examples of
countries that were not in tune with its own needs. For example, Kenya in the 1970s had created large
fish-processing plants despite the fact that the local population had no demand for fish and that Kenya did
not have the clean water or plants needed to run the plant. This article provides more examples of how a
developing country should approach development.
In Free Trade Has Reduced Poverty in the Developing World, by Jagdish Bhagwati, he explains
why and how involvement in free trade has benefited developing economies. Bhagwati describes how
countries who participate in free trade often experience higher economic growth, with examples like
Argentina and Canada. Bhagwati also explains why countries who participate in free trade experience
higher growth due to specialization, economies of scale, advancement as a result of competition, and
lower inflation due to the stability of being connect to other larger economies. This larger economic
stability and growth minimizes the effects of poverty by providing more opportunities for advancement.
Bhagwati adds more evidence and analysis towards the goal of solving the problem of poverty, much
needed for a research project.
In the Economic and Social Development article in the Worldmark Encyclopedia of the
Nations details the history of the United Nations approaches to minimizing poverty in the world for the
last couple decades since the UN was established in 1945. The Economic and Social Development
article described the detailed plans for the minimization of poverty and how the progress they made would
be specifically measured. In 1961, the UN launched their Development Decade plan with a goal of 5%

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GDP growth by the end of the decade through the support of policies meant to mutually benefit developed
and developing countries. By 1970, the UN had only raised the GDP of developing countries they targeted
by 4.6% due mostly to population growth. The increase in gross product per capita was only around 2%.
The UN learned that increased efficiency in food production as well as the controlling of the spread of
communicable diseases were crucial to economic growth. The UN then targeted raising the standard of
living of developing countries so they could be more equal to developed countries through encouraging
more equal income distribution. In 1990, the UN devised a goal to accelerate the development of
impoverished countries through the integration of developing economies with systems of stronger, more
established international economic systems. Many of the plans outlined by the UN were biased towards
the countries already in the UN since the plans required the cooperation and funding of many of the UNs
members, but these plans and their results do provide valuable information to a researcher to substantiate
a thesis with. These many approaches and trials to minimizing poverty allow a researcher to evaluate
similar approaches to the problem of poverty in the future.

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Results and Data Analysis
There are many approaches to alleviating poverty because the problem of poverty is a combination
of various, usually specific factors that depend on geography, political state, history and more. However,
from collecting data from a wide range of academic sources, it can be identified that there are two main
approaches that are most successful in helping developing economies and thus alleviating extreme
poverty. In order to most effectively help develop underdeveloped economies, the local government must
be reformed or strengthened to help their people, and the developing economy must be incorporated into
the larger global economy.
The first necessary approach is to reforming or strengthening the local government. Many
economists agree that for an economy to be able to grow, there must be a set of rules in place that
facilitates it. An example of this would be property rights. Without property rights in Botswana, there was
no way of enforcing what party would be the rightful owner of various diamond mines found around the
country. Once a solid structure of property rights was established, the people of Botswana were able to
invest more into the resource of diamonds that were available to them and eventually enter the cutting and
polishing of diamonds business (Spar). This simple government policy allowed for Botswana to make up
a sizable amount of their gross domestic product that would not have otherwise had. When giving foreign
aid money, it is imperative that the government be reformed. Many corrupt autocrats of developing
nations squander foreign aid money before it even reaches the people that need it most. For example, the
president of the Central African Republic, Ange-Flix Patass unapologetically asked Do you expect me
to lose money in the service of my people?(Abugre). Other examples include: Emperor Jean-Bdel
Bokassa of the Central African Republic used Western aid to buy a gold-plated bed, and Zaire's dictator,

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Mobutu Sese Seko, spent it on personal jaunts on the Concorde (Bhagwati). Foreign aid is useless, and
even causes economic regression, if the government remains corrupt and is not reformed.
The second necessary approach to alleviating poverty is incorporating the new economy into the
larger global economy. Although it may seem counterintuitive since all the problems may seem to be
contained within the borders of the developing country, there are various reasons for why looking to trade
in the larger global economy is better. For example, by entering the global economy and trading goods
with more developed regions, the more affluent countries will be more willing to invest in that developing
economy. Not only that, but with trade happening in between the two countries, foreign aid that is given is
more likely to be more productive. Observation of now highly industrialized nations in East Asia found
that high rates of investment reflected, in turn, the fact that the East Asian countries turned outward
beginning in the 1960s and therefore had world markets to work with when planning their investments,
(Free Trade Has Reduced Poverty in the Developing World). Also, by joining the larger global
economy, the developing economy is more stabilized. This is because Inflation-prone economies with
fixed exchange rate regimes, where countries only reluctantly adjust their exchange rates in response to
inflation, would soon find that their currency had become overvalued, (Free Trade Has Reduced
Poverty in the Developing World). By connecting this developing economy to the global economy, there
are more market factors that contribute to interest rates and other important prices. Every success story of
an impoverished nation becoming a large global player has been attributed to joining the global economy;
Whether its Singapore,Vietnam, Mexico, or more, all joined the global economy and all received rapid
economic growth. In Singapore, leadership trained a labor force to service both the port and a
subsequently constructed airport, leveraging the island's location to become a regional hub for shipping,
commerce, and eventually foreign investment, (Spar). Vietnam and Mexico were both in the top third of

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developing countries in terms of the increase in the share of trade in GDP [gross domestic product] during
1977-1997, they show better growth performance, (Free Trade Has Reduced Poverty in the Developing
World) due to their participation in free trade.
However there are many opportunities for growth of developing economies. There are some
sources that are a bit more pessimistic about the future of developing countries. The UN has measured a
strong dependence of developed nations on developing nations for cheaper labor and manufacturing of
goods. Developing economies have began to serve as a more powerful factor, as a necessary
consequence of the new and growing perception of the reality of interdependence (Economic and
Social Development). This leads to the question of how far can developing nations really advance if so
many depend on them for cheaper products. There have always been less well off countries, and there
seems to be a slim possibility that the problem of inequality will ever go away. Secondly, there is the
problem with reforming governments as well as economic and political philosophies in order to cooperate
with the global economy. Many developing and underdeveloped nations are ruled by authoritative
dictators that would not enjoy losing even a tiny bit of power and control. Emperor Jean-Bdel Bokassa
of the Central African Republic used Western aid to buy a gold-plated bed, and Zaire's dictator, Mobutu
Sese Seko, spent it on personal jaunts on the Concorde, (Bhagwati) and it is very unlikely that any of
those dictators are willing to give up such luxuries. Reforming a corrupt government in nations with this
type of leader could imply a violent uprising where innocent lives are lost. There is also the implication
that the competition that may be provided by developing nations joining the global economy could cause
conflict. For example, due to weak government structures and ideological differences in the Middle East,
there have been numerous conflicts involving the copious supply of oil fields. Even though many sources

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propose an avenue to alleviating extreme poverty, all facets of reforming government structures and
incorporating the developing nation into the global economy must be in place.
Discussion and Conclusion
The findings in this research project will help provide more helpful information to those who are
looking to effectively invest into the development of impoverished nations. Other researchers can
continue to build upon the research done in this project to make more progress against the problem of
poverty. The findings in this research project will add to the amount of evidence for governmental reform
and incorporation into the international economy being necessary to minimizing poverty. The findings in
this research project also support the idea that the problem of poverty can be solved to which it is not as
serious as a problem as it is now. Unprecedented progress against poverty has been made before, and it
can be made again. However, there are foreseeable limitations on this progress. For example, many
industrialized countries rely heavily on developing countries for cheap labor and many rich government
autocrats of developing nations rely on the corruption present for their wealth. These existing systems will
resist progress towards ending poverty if they can. Eventually, the world will have to make a decision
between more inequality in wealth and living standards and the staggering inequality present in the world
today.

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Works Cited
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Nol Merino. Farmington Hills, MI: Greenhaven Press, 2015. Opposing Viewpoints. Rpt. from
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2015. Web. 09 May 2016.

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"The 10,000-year-old economy." The Wilson Quarterly 37.4 (2013). Opposing Viewpoints in
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