Good morning. Thank
you, John, for that kind introduction. Thank all of you for coming, or
watching on the Webcast. And thank you to CSIS for hosting us at your
beautiful building. Before I begin, I want to
pause to remember the 147 students at Garissa University College in
Kenya who were senselessly murdered just a few days ago. Schools are
sacred grounds, and all who study there should be safe. Let us reflect
for a moment.
Just 15 years into
the new millennium, economic development in poor countries and emerging
markets is at a critical crossroads. Much of the attention has been on
the near horizon – concerns about the slow-moving
global economy, uncertainties over the price of oil, and conflicts from
the Ukraine to the Middle East to parts of Africa. But when we look at
the longer term picture, we see that the decisions made this year will
have an enormous impact on the lives of billions
of people across the world for generations to come.
2015 is the most
important year for global development in recent memory. In July, world
leaders will gather in Addis Ababa to discuss how we’ll finance our
development priorities in the years ahead. In September,
world leaders will come together at the United Nations to establish the
Sustainable Development Goals – a group of targets and goals set for
2030. And in December, world leaders again will gather in Paris to work
out an agreement based on government commitments
to lessen the severe short- and long-term risks of climate change.
At the same time, we
have witnessed the emergence of a major new player in development – the
Asian Infrastructure Investment Bank led by China, with more than 50
countries and regions signing on as members.
With the right environment, labor and procurement standards, the Asian
Infrastructure Investment Bank and the New Development Bank, established
by the BRICS countries, can become great new forces in the economic
development of poor countries and emerging markets.
The World Bank Group sees these development banks as potentially strong
allies in tackling the enormous challenge of bringing much needed
infrastructure to Asia.
Our mission at the
World Bank Group is defined by two goals – to end extreme poverty by
2030 and to boost prosperity among the poorest 40 percent in low- and
middle-income countries. These goals are ambitious
and there’s more than enough work to go around. By 2030, we will most
likely need 40 percent more energy and face a 40 percent shortfall of
fresh water – pressures that may well be further accelerated by climate
change. We estimate that the developing world
will need an additional $1 to 1.5 trillion dollars every year to be
invested in infrastructure – roads, bridges, railways, airports, energy
plants and desalination facilities.
If the world’s
multilateral banks, including the new ones, can form alliances, work
together, and support development that addresses these challenges, we
all benefit – especially the poor and most vulnerable.
It is our hope – indeed, our expectation – that these new institutions
will join the world’s multilateral development banks and our private
sector partners on a shared mission to promote economic growth that
helps the poorest. I will do everything in my power
to find innovative ways to work with these banks. Next week, during the
Spring Meetings of the World Bank Group and International Monetary Fund
here in Washington, I plan to continue my discussions with Chinese and
other officials about these potential collaborations.
Our ambitions for
economic development couldn’t be higher. We’re no longer talking about
billions of dollars for economic development. We’re talking about
trillions of dollars – which means that we must be
creative and use all of our resources to leverage much-needed private
sector investment to build infrastructure and create jobs.
The decisions we
make this year, and the alliances we form in the years ahead, will help
determine whether we have a chance to reach our goal of ending extreme
poverty in just 15 years.
The good news is
that the world has made substantial progress already. In 1990, when the
world population was 5.2 billion, 36 percent of people lived in extreme
poverty. Today – with 7.3 billion people – an
estimated 12 percent live in extreme poverty. Over 25 years, we’ve gone
from nearly 2 billion people living in extreme poverty to fewer than 1
billion.
But we still have
nearly 1 billion people living on less than US$1.25 a day. Few of us can
even imagine what this is like. Let’s remember what poverty is. Poverty
is 2.5 billion people not having access to
financial services like bank accounts. Poverty is 1.4 billion people
without access to electricity. Poverty is having to put your children to
bed without food. And poverty is not going to school because, in order
to survive, everyone in the family needs to
earn a few cents each day.
Some say it’s
impossible to end extreme poverty – especially in just 15 years. But we
know it’s possible. We know in part because of our past success, and
because we have learned from years of experience about
what has worked in particular contexts and what has not.
Later in the year,
I’ll talk in depth about our strategies to boost prosperity for the
bottom 40 percent, especially in middle income countries. But today, I
want to talk about our broad strategy to lift nearly
a billion people out of extreme poverty and into the modern world.
Inside the World
Bank, for the past 50 years, we’ve continuously distilled and analyzed
our global experience in fighting poverty. As a result, our advice to
governments has evolved over time. We now known
that our strategic advice must evolve even more. Our strategy to end
extreme poverty, based on the best global knowledge now available, can
be summed up in just three words:
Grow. Invest. And insure.
Let me talk about each one.
First, grow.
The world economy
needs to grow faster, and grow more sustainably. It needs to grow in a
way that ensures that the poor receive a greater share of the benefits
of that growth. We can reach the end of extreme
poverty only if we mark a path toward a more robust and inclusive
growth that is unparalleled in modern times.
Decades of
experience have taught us that economic growth is the primary driver of
increased personal income and poverty reduction. Sustained growth
requires macroeconomic stability in the form of low inflation,
manageable debt levels and reliable exchange rates. Government policies
also must prioritize growth in sectors that increase the incomes of the
poor.
The World Bank Group
will continue to support governments and make investments in a broad
variety of areas in the fight against extreme poverty. For instance, in
countries with great amounts of mineral wealth,
governments can encourage pro-poor growth with improved education
systems and the development of more diversified economies. In most of
the developing world, though, efforts to end extreme poverty will
require us to focus on boosting agricultural productivity.
Despite the massive
global migration to urban areas, 70 percent of the world’s extreme poor
still live in rural villages. They are mostly farmers or work in
informal jobs – providing services to rural populations.
Our experience in China shows that, in poorer economies, growth in
agriculture is four times more powerful in lifting people out of poverty
than growth in manufacturing and services.
But how can
countries follow China’s example? It depends on the local circumstances.
Sometimes it is just a matter of giving farmers more control over how
and what they produce. This is what Vietnam did during
the Doi Moi economic “renovation” in the late 1980s. Over the next
three decades, Vietnam became a top exporter of rice, coffee and tea,
and its poverty rate fell from 57 percent to 5 percent.
Helping farmers
improve yields requires increasing access to better seeds, water,
electricity and markets. According to one study in Bangladesh, six years
after constructing 3,000 kilometers of roads to connect
communities to markets, household incomes increased by an average of 74
percent.
Promoting growth in
agriculture also depends in part on the integrity of the global food
system. At next week’s Spring Meetings, we’ll be releasing a new
discussion paper to develop a strong food system –
one that raises the incomes of the poorest, provides adequate
nutrition, and combats climate change.
That’s the growth
part of the strategy. The second part of the strategy is to invest – and
by that, I mean investing in people, especially through education and
health.
The opportunity to
get children off to the right start happens just once. Investments made
in children early in life bring far greater returns than those made
later on. Poor nutrition and disease can have
life-long implications for mental and physical health, educational
achievement, and adult earnings. Clean water and sanitation facilities,
both at home and in school, also have a substantial impact on future
professional opportunities. They help children avoid
infections that cause developmental disabilities and ensure girls’
consistent school attendance, even after the beginning of menstruation.
Investments in girls
and women are particularly important because they have a multiplier
effect on the well-being of the extreme poor. When empowered through
education, mothers have healthier children; and,
when they have financial resources, they’re more likely to invest in
the next generation.
We must also set
clear learning standards in schools. The level of learning among young
people today in many countries is alarming. Over 50 percent of young
people in Kenya who have completed six years of
schooling cannot read a simple sentence. Over 70 percent of children
completing primary school in Mozambique do not have basic numeracy
skills. These low achievement levels have devastating implications for
when people look for jobs.
We know that using
new technology can help transform educational outcomes. For example,
Bridge International Academies uses software and tablets in schools that
teach over 100,000 students in Kenya and Uganda.
After about two years, students’ average scores for reading and math
have risen high above their public school peers. The cost per student at
Bridge Academies is just $6 dollars a month.
One of the most
effective ways to encourage investment in the extreme poor and improve
health and educational service delivery is accountability. One study in
Tanzania found that doctors in public clinics
spend an average of only 29 minutes in any day seeing patients.
According to other research, in India, primary teachers in public
schools are absent 25 percent of the time, and primary care doctors 40
percent of the time. Governments can help poor people monitor
and discipline service providers for these failures, and also create
incentives for public employees to do better. Those that do will reap
far greater returns on their human capital investments.
The final part of
the strategy is to insure. This means that governments must provide
social safety nets as well as build systems to protect against disasters
and the rapid spread of disease.
National social
assistance and insurance schemes protect against setbacks like illness
and unemployment and can promote growth and human capital development.
For instance, cash transfer programs can be substantial
and cost-effective: Brazil’s Bolsa Familia has cut extreme poverty by
28 percent in a decade, for a cost of just 0.5 percent of GDP. Despite
successes like this, 870 million people living in poverty still do not
have access to any kind of social assistance.
Another critical
element of insurance is protecting people against catastrophic risks.
Examples include universal healthcare schemes, better quality healthcare
services, disaster risk management, and financing
tools like catastrophic bonds or draw-down facilities. This may sound
technical, but the so-called cat bonds are very effective. They make
funding immediately available to countries responding to natural
disasters.
Similar approaches
should be used to protect against pandemics. Ebola revealed the
shortcomings of international and national systems to prevent, detect,
and respond to infectious disease outbreaks. Ebola
also taught us that the poor are likely to suffer the most from
pandemics.
The World Bank Group
has been working with partners on a new concept that would provide much
needed rapid response financing in the face of an outbreak. The idea
behind a pandemic emergency facility is to
mobilize and leverage public and private sector resources through
public funding, and through market and private insurance mechanisms. In
the event of an outbreak, countries would receive rapid disbursements of
funding, which would, in turn, help contain outbreaks,
save lives, and protect economies.
There is no single
blueprint for countries in their efforts to end extreme poverty. But our
strategy suggests priorities for the future. First, agricultural
productivity must increase. Second, we must build
infrastructure that provides access to energy, irrigation, and markets.
Third, we must promote freer trade that provides greater access to
markets for the poor and enables entrepreneurs in low- and middle-income
countries to grow their businesses and create
new jobs. Fourth, we must invest in health and education, especially
for women and children. And finally, we must implement social safety
nets and provide social insurance, including initiatives that protect
against the impact of natural disasters and pandemics.
Nine months ago, the
World Bank Group started one of the most ambitious re-organizations in
its history. We knew we needed to restructure in order to meet the
evolving needs of low- and middle-income countries.
In a world where capital is more easily available, we needed to
emphasize our greatest strengths – the marriage of our vast knowledge to
innovative financing to deliver programs that have the greatest impact
on the poorest. Our new global practices, cross-cutting
solutions areas, and regional units are working closely with
governments to develop customized poverty reduction programs. These are
based on analyses of a wide range of local factors, including the
demography and location of people living in extreme poverty.
Our aim is to help countries translate global experience into practical
know-how to solve their most difficult problems.
We know that ending
extreme poverty will be extraordinarily difficult – in fact, the closer
we get to our goal, the more difficult it will be. The most persistent
poverty will be in fragile environments. In
five years, we expect that more than half the world’s extreme poor will
live in conflict affected countries. Conflict, as we know, can have
devastating effects on our fight against poverty.
Poverty itself can
also create a fertile landscape for conflict. For example, where people
feel excluded from progress due to joblessness, discrimination or
corruption, they may take up arms. These factors,
for example, have made it easier for extremists in the Middle East and
Africa to recruit for their cause. More violence destroys buildings,
bridges, schools, clinics – and most importantly, lives. This
destruction, of course, causes even more poverty.
We can help break
this vicious cycle and promote security if we implement development
policies and programs that promote growth – invest in human capital –
and insure people against risks that can plunge them
into poverty. Initiatives to strengthen institutions are also
important. Governments must be more accountable to citizens, and work to
reduce arbitrary treatment at the hands of security forces and the
demand for bribes from poor people. This will help to
minimize the likelihood of violent conflict and eliminate a driver of
poverty.
When conflict persists, the hard truth is that poverty reduction is extremely difficult.
When the fighting stops, though, progress is possible.
Over the last two
years, I’ve made three trips with UN Secretary-General Ban Ki-Moon to
Africa – to the Great Lakes region, the Sahel, and the Horn of Africa.
Our purpose was to take advantage of these opportunities
when fighting stops. In these three regions, we’ve worked with partners
to collectively move billions of dollars to promote regional
development. We’ve taken steps to increase cross-border political and
economic cooperation, which we hope will make conflict
less likely. We’ve also increased investments that will benefit the
poor and most vulnerable, reducing the drivers of fragility. Our
partners have included the European Union, the African Development Bank,
the African Union, and the Islamic Development Bank.
This kind of collaboration will give us a fighting chance to end
extreme poverty.
Still, it won’t be
easy. Development has never been easy. We find encouragement, though, in
the record of the past 25 years. We’ve reduced extreme poverty by
two-thirds and shown that great gains can be made
through the strategy of grow, invest, and insure. In the fight to end
extreme poverty, many countries have succeeded in taking something that
seemed impossible and making it possible. The end of extreme poverty is
no longer just a dream. The opportunity is
before us.
Governments of the
world must seize this moment. Our private sector partners must step up.
The World Bank Group, our multilateral development bank partners, and
our new partners on the horizon, must all seize
this moment. We must now collaborate with real conviction and
distinguish our generation as the one that ended poverty.
We are the first
generation in human history that can end extreme poverty. This is our
great challenge, and our great opportunity. We will be guided by a
half-century of evidence and practice. It is doable
… it is in our sights … and it will be, I believe, humankind’s most
significant and memorable achievement. We can end extreme poverty. The
final push must begin right now.
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