Tuesday, January 18, 2011

"... everyone knows that just ain't so."

Today's fact that everyone "knows" but isn't true:
There is not enough money to be given away in the world to make the poor well off.
This one is repeated often in discussion of foreign aid. Is it true?

Well, it depends on what you mean by well off. If well off means the consumption of the typical American then, surprisingly, there is enough production (money). The GDP (PPP) of the world is just $74 trillion or about $10,700 each for of the world's 6.9 billion people. The typical American family of four would have $42,800, not far from the $45k median for the country.

But it isn't feasible to move more than half of the world's GDP in the developing world through foreign aid. No one is talking about that. Foreign-aid focused proponents of development, such as Paul Farmer and Jeff Sachs (and myself) are talking about sending enough money to provide for the basics for health and happiness.

To get life expectancy up to around 70 years--not far from the 78 we have here in the U.S.--only requires food, vaccines, clean water, and basic sanitation facilities. Providing all of that can be done for as little as $200 per person and would only affect fewer than 1 billion people. The total cost in foreign aid would be on the order of $200 billion, or 40% of what the U.S. alone spends on the military.

Bottom line: There is plenty of money to make everyone reasonably well off. There just isn't enough money to make everyone rich.

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