The State's planned development finance agency will channel investment into aid projects - and a recent conference gives it some pointers, writes Marc Coleman, Economics Editor.
I've had it. Bono has had it. And last week hundreds of people attending the recent conference "Ireland and Global Development" had it. Have you experienced the joy of Sachs lately? If not, it's high time you started getting some.
Jeffrey D Sachs is one of the world's best-known economists and a leading thinker on tackling global poverty. A special adviser to UN secretary general Kofi Annan, he has also advised political leaders in over 100 countries on poverty.
He was in Dublin addressing the conference hosted by Trinity College. The conference itself was not conclusive, but then such events never are. Providing as they do a forum for many small organisations, each with their own "unique" and infallible views on world poverty, they are often pamphlet factories or point-scoring festivals, and usually generate more policy positions than the Kama Sutra.
But this time it was different.
Tedious experimentation with awkward, inconsistent positions on how to tackle world poverty were put aside. Instead, participants learned the secret of great Sachs: public sector intervention can help reduce poverty but in the long run private sector involvement is crucial; capitalism and trade are the friends of the poor, not their enemies; and severe poverty is global in nature, and so are its solutions.
The ideas have found worldwide, and readable, expression in Sachs's book The End of Poverty. Incidentally, while Sachs is possessed of the geekiness that afflicts most brilliant economists, the fact that Bono himself foreworded the book shows just how much street cred Sachs has accumulated. And even if some of the solutions promoted in the book are simplistic or controversial, its expose of world poverty is a huge leap forward in our understanding.
Some 93 per cent of the world's poor live in southeast Asia or sub-Saharan Africa. In 2002, the United Nations Millennium Declaration set the goal of cutting world poverty in half by 2015, compared with baseline levels in 1990.
The good news is that even before the declaration, significant progress was being made. In Asia, the proportion of people in extreme poverty has fallen dramatically, from 58 per cent in 1981 to 15 per cent in 2001.
But if progress is possible, so are failure and relapse. In Latin America, the share of those in extreme poverty remains stuck at about 10 per cent. In eastern Europe, the shock of transition from communism has pushed it up from negligible levels to around 4 per cent.
According to Sachs, we can eliminate world poverty by 2025 by understanding its roots. Some 200 years ago, everybody was poor, except a few kings and landlords. An explosion in world population and incomes followed, taking the global population from 900 million in 1800 to over six billion now and enriching a minority of the world's countries.
Britain's moderate climate, favourable geographical position, openness to scientific progress and its strong political, financial and legal institutions made it an early starter.
All of these success factors bar one are now transportable. So why do at least one billion live without sufficient nutrition, sanitation, healthcare or education?
One of the less-transportable factors, climate, has been significant in denying growing populations the water supply and soil fertility so important for the one economic sector that must first thrive before any other can: agriculture.
A remote or hazardous geographical location can affect trade possibilities - but at least infrastructural investment can overcome this. In some other countries, especially in Latin America, feudal land distribution or very weak economies mean that incomes are too low to save and reinvest in the future, let alone to sustain consumer demand for goods and services that might kick-start a modern economy.
Institutional factors are crucial because if legal systems are unfair or political structures unstable, stable economic life is impossible.
They are crucial also because if financial institutions are underdeveloped, the business ecosystem is deprived of its first source of nourishment and nothing will grow.
In relation to this last point, Ireland may be about to make a difference. The Government proposes to create a development finance agency to channel investment into deserving causes.
In that respect, the comments voiced at the conference by Gavin McGillivray of the UK's department for international development (DFID) was essential.
As head of international finance at DFID, McGillivray's work involves overcoming one of the main institutional barriers to alleviating poverty - the lack of access to investment finance in very poor countries. Several development finance institutions have been established, with government support from developed nations, to fund the kind of investments that commercial organisations ignore. But McGillivray argues that there are now too many of these organisations.
Moreover, they over-invest in non-frontier projects. Non-frontier projects are so labelled because either they could be funded by commercial investment or because they do not hit the most vital spot of the development agenda.
Frontier projects, by contrast, are those projects which foster the elementary and risky investments - bridges, farm equipment, water irrigation - that the private sector ignores. According to McGillivray, these frontier projects have been neglected. Far from creating more financing agencies, improving the work of existing ones is the priority, he adds.
But as a conference participant from Mozambique observed, Ireland has a comparative advantage in development work which comes from having been poor and then becoming rich.
The amazing work of organisations (like Trócaire), missionaries and individuals (like Niall Mellon) is testimony to how far we punch above our weight in the arena of Third World aid. So is the world prominence of people such as Peter Sutherland and Mary Robinson who are advisers to UN secretary general Kofi Annan on migration and human rights, respectively. Is creating yet another development finance institution the best vessel for all this talent? It is doubtful.
As Sachs himself underlines, sound institutional frameworks are vital in ensuring the efficient use of resources so essential for driving growth. The same principle applies to development finance institutions. The challenge to the Irish Government is to direct our country's huge bank of talent in this area towards existing structures without complicating them any further.
But, to resume the analogy we began with, economic theorists are a bit like eunuchs in a harem: as Brendan Behan remarked about theatre critics, they've seen it, commented on it and advised others on how to do it. But they themselves have never done it.
As far as the business of actually ending world poverty is concerned, the theory is one thing. Only good technique and implementation will hit the spot with accuracy.