James D. Wolfensohn: A new global balance needed; the challenge of leadership
Regional, Politics, 9/25/2003
James D. Wolfensohn, President of the World Bank Group, spoke to the Board of Governors of the World Bank Group at the joint Annual Discussion in Dubai. Wolfensohn said: Knowledge and the exchange of ideas are key to our collaboration.. That is why we have prepared -- together with scholars and experts in the region -- four new reports on employment, trade, gender, and governance. That is why our website and its wealth of development experience are available in Arabic.
This is an ancient region that has given civilization so much - in science, mathematics, culture, and religion. And yet, it is also a young region where an astonishing 60 percent of its people are under the age of 25.
I would like to offer my remarks today particularly to the young people of the Middle East -- and of the world.
Last week, in Paris, I met with youth leaders who represented organizations with more than 120 million members worldwide. The meeting also included rural youth and street kids; children orphaned by AIDS and civil conflict; youth from the excluded Roma community; and young people with disabilities.
Mr. Chairman: by the year 2015, there will be 3 billion people under the age of 25. They are the future. But, as the young people in Paris said most forcibly, they are also the now.
And their expectations of us are high. To respond to them, we must address the fundamental forces shaping our world. In many respects, they are forces that have caused imbalance:
In our world of 6 billion people, one billion own 80 percent of global GDP, while another billion struggle to survive on less than a dollar a day. This is a world out of balance.
Over the next 25 years, 50 million people will be added to the population of the rich countries. About one and a half billion people will be added to the poor countries. Many will experience poverty, unemployment, and disillusion with what they will see as an inequitable global system. A growing number will leave their home countries to find work. Migration will become a critical issue.
There is further imbalance between what rich countries spend on development assistance-- $56 billion a year-- compared with the $300 billion they spend on agricultural subsidies and $600 billion for defense. The poor countries themselves spend $200 billion on defense-more than what they spend on education. Another major imbalance.
Developing countries are projected to grow at twice the rate of developed countries. But many will need help to bridge the gap between rich and poor. Pressures on environment and natural resources, like water, will become central issues. Interdependence will be more evident. Opportunities will expand, but so will dangers.
Three years ago, world leaders gathered at the Millennium Summit to assess the future. They committed to cut poverty in half by 2015. They agreed on Millennium Development Goals - for health, education, and equal opportunity for women. They set targets for the environment, from the air we breathe to the preservation of our forests and oceans.
These are remarkable goals. Many leaders spoke of them as being morally right. Our human responsibility, but also in the global interest. They agreed on a bargain - one that was spelled out in meetings in Monterrey and Johannesburg.
Developing countries promised to strengthen governance; create a positive investment climate; build transparent legal and financial systems; and fight corruption. Developed countries agreed to support these efforts by enhancing capacity building, increasing aid, and opening their markets for trade. There was unprecedented agreement on the bargain and the actions required to achieve it. What are the results?
The developing countries' policies and governance have never been stronger. As I mentioned, they are growing significantly faster than rich countries. But this good news should not blind us to other important realities. Progress on poverty differs sharply among regions.
China, with 1.3 billion people, will achieve most of the Millennium Goals. India, with a billion people, is on track to meet the poverty goal.
But in many other countries, the Goals will not be met.
Sub-Saharan Africa, with 600 million people, will fare the worst. The number of people living in absolute poverty will increase, not decrease. Only half of Africa's children will complete primary school; 1 in 6 will die before they reach the age of five, many from AIDS.
Part of the reason is that reform is not happening fast enough in the developing nations. There is still too much cronyism and corruption. In nearly every country, it is a matter of common knowledge where the problems are and who is responsible. Frankly, there is not enough bold and consistent action against corruption, particularly at the higher levels of influence.
What about the developed countries' part in the global bargain? Here too, there has been progress:
Commitments made in Monterrey towards an increase in aid of around $16 billion a year by 2006; Substantial pledges to fight HIV/AIDS and malaria, and for conflict prevention and reconstruction; and Better allocation and use of resources, including enhanced donor harmonization-as in the Rome Agreement earlier this year.
But these actions-while laudable-do not match the promises made.
In Dakar, donors said no sound primary education project would go unfunded. They committed to an "Education for All" initiative requiring several billion dollars of incremental grant funding for a 5-10 year period. Yet, today, under the "fast track" program, only seven countries have received a promise of funding, only for a total of $200 million over three years, and reaching less than 5 percent of the 115 million children who are not in school.
This naturally leads developing countries to be concerned about where the additional resources will come from--to help them open schools, hire teachers, and plan for secondary, as well as primary, education.
They worry that resources needed to meet other goals are not forthcoming. That debt relief is not sufficient. And that monies go to the latest crisis or to fight drugs or terror -- rather than to long-term development They worry that only half of existing aid flows actually reach them in direct cash transfers for their programs. And they worry that repayments of debt are crippling their capacity to grow. Developing countries feel they have made significant efforts to fulfill their part of the global bargain. But they do not see enough delivery on the other side.
The recent impasse at Cancun is a case in point. Two-thirds of the world's poor people depend on agriculture for their livelihood. As the developing countries see it, rich nations put forward proposals that did not respond to their central demands in this crucial area. They also found unacceptable a view of negotiations in which they are expected merely to respond to rich-country proposals.
At Cancun, developing countries signaled their determination to push for a new equilibrium. They signaled that there must be greater balance between the rich and the powerful, and the poor and numerous. They signaled that for there to be peace and sustainable development, there must be a different set of priorities. There must be greater cooperation.
The fact is that aid today is at its lowest level ever. It has fallen from 0.5 percent of GDP in the early 1960s to about 0.22 percent today. And this at a time when incomes in developed countries have never been higher. Against this background, the Bank has taken a close look at how progress toward the Millennium Goals could be accelerated-- through better policies, more effective use of aid, and higher aid levels. Our analysis, based on current plans, finds that:
Š First, aid is being used more effectively today than ever before -- because of improvements in many developing countries and in the improvements in the allocation of development assistance.
Š Second, our analysis shows developing nations could easily absorb double the extra $16 billion per year promised in Monterrey for 2006. And this is a conservative estimate. The $50 billion in additional aid per year proposed by Chancellor Brown could be put to effective use very quickly.
The prospect of such funding would encourage developing countries to make more rapid reforms. Leaders are more likely to take action if they know that resources are forthcoming on a consistent basis. They will not move if the financing and benefits of reform cannot be assured.
Action on trade is equally important. It is inconsistent to preach the benefits of free trade and then maintain the highest subsidies and barriers for precisely those goods in which poor countries have a comparative advantage. Developing countries also need to help themselves on this point, since they pay substantial tariffs in South-South trade.
Restoring balance to our world will not happen unless there are serious efforts to build greater public understanding about the importance of poverty and inequity. My generation grew up thinking that there were two worlds-the haves and the have-nots-and that they were, for the most part, quite separate. That was wrong then, and is even more wrong now.
The wall that many people imagined to separate the rich countries from the poor came down on September 11 two years ago.
We are linked in so many ways: not only by trade and finance, but by migration, environment, disease, drugs, crime, conflict and-yes-terrorism. We are linked - rich and poor alike -- by a shared desire to leave a better world to our children. And by the realization that if we fail in our part of the planet, the rest becomes vulnerable. That is the true meaning of globalization.
We know elections are won and lost on local issues. But it is global issues-and especially poverty -that will shape the world our children live in. Leaders must make the case for development. It is a domestic as well as an international issue.
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