Jeffrey Sachs' theory of poverty through the example of Bolivia

Résumé du document

Many theories have tried to explain why some countries fail to thrive economically. These theories have often focused on one aspect of each country to explain poverty on the basis of geography, political stability or lack of institutions. We will try, in this study, to explain why markets in developing countries have trouble growing in several dimensions at the same time and not only in one or two aspects. To do so, we will discuss the multi-dimensional explanation of poverty in Jeffrey Sachs' book, ?The End of Poverty: Economic Possibilities for Our Time'. In the first part, we will present the key elements that Sachs points out to explain poverty. We will determine if they are all equally relevant or if some of them are more important than the others. In the second part, we will analyze this theory through the example of Bolivia, a developing country which presents several points of interest concerning its geographical situation, its political instability and its low growth rate compared to its closest neighbors.

Extraits

[...] In Sachs' point of view, consequences of religion and culture are numerous on economy. Religious aspects might limit the role of women. This limitation can be dramatic as it sometimes excludes half the population as work force. In cultural barriers, Sachs also mentions racism. Racism can provoke economic inequalities and reduce commercial relationships. ) Other aspects: To create sustainable businesses, firms need nowadays to be innovative so as to create more added values and be able to face with foreign firms. [...]

[...] A survey in 2006 revealed that 13 out of every 100 interactions with public institutions involved payment of bribes. The phenomenon is so important that it is now considered to be a norm. The consequences on business are extremely serious. Even if the laws concerning investments in Bolivia are attractive, the quantity of procedures and the bribes necessary to speed them up discourage many investors. In addition to this, if a company manages to launch a business, it has to face with rigid laws concerning hiring and firing. [...]

[...] Another aspect of this poverty trap is the lack of access for the poorest to loans and micro loans which would enable them to buy some livestock for instance to increase their revenues. This poverty trap is linked to the lack of savings in developing countries too. The least developed countries have a saving rate far lower than other countries. The fiscal trap is dealing with black market which is extremely present in many developing countries. Informal working market is very present and no taxes are paid on this illegal work. [...]

[...] ) Economic barriers Jeffrey Sachs knows very well Bolivia as he worked there in the eighties so as to find solutions to hyperinflation. Now, inflation remains high there but other topics are more worrying. The economic structure of the country is mainly based on natural gas, oil and agriculture exports. The other sectors of the economy (telecom, agribusiness and the exploitation of oil spills) in the country are controlled by foreign firms. There has almost never been an attempt to diversify the activities and the Bolivian revenues are extremely influenced by this monoactivity. Corruption in the country is rampant. [...]

[...] The Andean mountain in the western part is also problematic to build roads and infrastructures towards the closest ports of Chile and Peru. ) Cultural dimension Cultural reasons are more difficult to find to explain why some countries fail to thrive. Culture is so wide that many explanations can be found to explain the lack of development in a country. The religious aspect is probably the most interesting one as it is deeply rooted in habits. For instance, let's remember the Max Weber's opinion about the key role of Protestantism to explain the flourishing American economy. [...]