Address at the Secretary's Open Forum, U.S. Department of State

It is a privilege for me to be here because of the crucial importance that we give to the relationship with the United States, which, in many senses, was one of the progenitors of our institution.  The Bank would not exist were it not for the initiative taken by the United States after the Second World War, when we were set up as the International Bank for Reconstruction and Development, a task that we fulfilled with the United States' very strong guidance. More than strong guidance, because there has been a convention that the President of the Bank--and there have been nine of them so far--would be nominated by the President of the United States, and not surprisingly has always been an American citizen.

So there is a close lineal relationship.  The United States has 18 percent of the shares of our institution and has been a very strong partner throughout the period both in terms of joint activities and in terms of a sense of direction.   It has been a pretty good deal for the United States, I am forced to say in the presence of Bill Schuerch of the Treasury [Deputy Assistant Secretary for Multilateral Development Banks and Specialized Development Institutions], whom I see there, because the United States put in $2 billion in cash, and since that time, more than $340 billion in loans have been made by the institution, because we, in the institution of the Bank borrow on the basis of our credit and standing and on the backup of institutions.

So the leverage has been very significant, and in the case of IDA [the International Development Association] , our institution which deals with the poorest countries, set up by President Eisenhower, we have expanded our role from reconstruction and development into dealing with the question of the poorest countries, and there, too, with $26 billion committed by the United States, more than $140 billion has been loaned on concessional terms.  And more recently, the institution, again with leadership from the United States has addressed the question of increasing grants rather than concessional loans, and under the leadership of the United States, we were given permission to put out on the order of $1 billion worth of grants in the last round of the IDA negotiations, and we're now waiting for the next round.

So our Bank has been closely associated, and I see Mr. Natsios [Andrew Natsios, Administrator, US Agency for International Development] in the audience, and we have, I'm very happy to say, a very close relationship with USAID in many places in the world.  And so, I come here not as an outsider but in a sense as a partner in a joint endeavor and one that I think has gone very smoothly in years past.

There have been many people who have spoken of the importance of our institution and the work that we're doing, perhaps no one more than George Marshall, who was around at the time of our creation.  And he spoke of how normal it was for the United States to take the lead in terms of creating an environment of economic and social stability as a basis for peace.  So that is my commercial for the Bank.

Now, let me deal with the question that is before me and which is before all of us, which is the issue of poverty and the issue of development, and this is the opportunity that I have been looking for to try and say first of all thank you to the United States but also set the challenge that I see us all facing as we move forward.

Mr. Keppler [William Keppler, Chairman, U.S. Dept. of State Open Forum] spoke of some of the numbers, and I think it's important to remind oneself that while the headlines today are on Iraq and Afghanistan and the Middle East and to some extent on Argentina and emerging issues in different parts of the world, there is an issue which is just beyond the horizon, perhaps not immediately visible, but the issue of the structure of our planet, the way were running and what's going to happen in the next 25 and 30 years.

Mr. Keppler spoke of 6 billion people on the planet today, 5 billion of whom live in developing countries.  And the 5 billion have about 20 percent of the global resources.  The 20 percent of the world, 1 billion or take 20, a little less, have 80 percent of the global resources, and that's the United States and the wealthy countries of the OECD.

So we start with an imbalance, an imbalance that has been cut away at over the last years as we have found in human and social terms that the lives of people in developing countries have, in fact, been improved over the last years.  Life expectancy in the last 40 years has gone up 20 years in developing countries, more than in all the time before that.  Literacy has been significantly improved.  Infant mortality and maternal mortality has been improved.  More people are getting access to water and sanitation.

We have quite a lot to be proud of, and we have also seen economic growth which is fundamental to the development of an approach to alleviating poverty and to bringing about greater equity.  So we have reason to be pleased, but we also have reason to be deeply concerned-about an imbalance within countries between the rich and the poor which we are seeing growing in so many parts of the world and about what is going to happen in the next 25 or 30 years.

In the next 30 years, the planet grows from 6 billion to 8 billion, and all but 50 million in developing countries, so that the President in 30 years' time will be here talking about a world of 8 billion people, of whom 7 billion live in developing countries.  And he'll be talking of a world in which India and China in terms of real purchasing power, particularly China, will be approaching this country in terms of economic  strength.

By 2017, we will have a world in which the United States does not dominate international trade, as it does now-w ith 12 to 14 percent and China with 4 percent-but one where China will equal the United States in terms of its share of global trade.  So we're seeing coming up in this next period a real movement between the developed and the developing world and a change of some sort in the  equilibrium.

When I was in Evian, President Lula[Brazilian President Luiz Inacio Lula da Silva]came into the meeting that is typically held prior to the G-8 meetings themselves, when the leaders of the G-8 meet with leaders of the developing world.  And in a somewhat humorous way, President Lula said, "you know this is my first time in this  august club, and I'm thrilled that we're here invited by the G-7.  But as I look around this room, I see President Hu of China; I see Prime Minister Vajpay of India.  I see my friend Obasanjo from Nigeria.  I see Thabo Mbeki from South Africa, and it occurs to me that we represent 5 billion people in the world.  Maybe next year, the G-8 can come visit us, because we, after all, are a different force."

And it was said humorously, but in Cancun, certain groups came out which tried to reassess the balance, and there is a different balance emerging.  But this balance is one that cannot be dealt with by developing country leaders alone.

 What came out in Monterrey, what came out in the Millennium Summit was a recognition by all of the leaders of the world, by the President of this country, and subsequently reinforced by Secretary Powell-to whom I must pay great tribute to for his perception and understanding of the issues of development and the issues of poverty.  He's a man who singularly grasps these issues.

But what came out in the Millennium Development Goals was agreement that the most important goal in the new millennium is dealing with the question of poverty.  They came out with a series of goals:  that we should halve poverty by 2015; that we should get all the kids into school; that we should address the questions of maternal and infant mortality; that we should address the questions of water and sanitation; that we should address the questions of the environment…because it was recognized in 2000 that there aren't two worlds; there is one world. When  leaders came together, there was a need to set these global objectives.

And it was followed by Monterrey, a meeting at which, again, the United States played a very significant role, but where very simply and very broadly, the partnership was established between developing and developed countries.  It was written down and reconfirmed, by the way, in Johannesburg and reconfirmed again in NEPAD-the arrangement between the African countries about their objectives. 

And very simply stated, the developing countries said: "We know we have a responsibility.  We can't expect free money.  We must expect an effective use of money.  And so, we have to strengthen our capacity.  We have to deal with the issues of legal and judicial reform so that we can protect rights.  We must have a financial system that works equitably for people from the rich to the poor, and we must fight corruption, that cancer which is degrading so many of the countries around the world and which is inhibiting, if not distorting, the efforts that are being made in terms of development not just from the outside but within countries."

And may I add parenthetically that it is not just people in poor countries that are corrupt in this business; there's a corrupter, and there is a corruptee; there is someone who is doing the corruption, and there is someone who is enjoying the corruption or participating in the corruption.  So the corruption issue spans the developing and the developed countries. And again, the leadership of this country's Foreign Corrupt Practices Act has been a signal development in terms of dealing with the issue of corruption in this country.  And fortunately, now, we have, with a UN resolution and with the OECD resolutions, a criminialzation of corrupt practice, whereas, when I started this job, corruption was tax-deductible in many countries.

So you do have a change which is emerging on the corruption side.  But it remains a central and important issue.  But the wealthy countries said in Monterrey and in Johannesburg, "we understand what you guys have got to do, but we have got to do a lot too.  We have to help you with building capacity.  We have to open our markets to trade, because we understand the integration between trade and aid. We also have to take a look at aid and increase the amount of aid, and it needs to be effective aid." And a lot of work has been and is being done on the effectiveness of aid.
 This is not a new notion, although one that is posed very pointedly and appropriately by the administration.  The issue of effectiveness of aid is something I've been totally preoccupied with in the eight and a half years I've been in the Bank. That means getting your own organization in a proper condition.  It means transparency; it means partnership; it means measurement; it means harmonization.  It means all of the things that go into making aid effective, which Mr. Natsios and others well know.

But as we look at performance in terms of what is happened since Monterrey-and as I said, reconfirmed in Johannesburg and reconfirmed in the NEPAD, the arrangements between the African countries for their future-one has to doubt whether we have yet grasped the full impact of what we're saying.

When Mars was close to the Earth some months ago, I said to some of my colleagues, "If a Martian arrived here today and took a look at how we're trying to reach our goals, and he looked at the way we spend our money, the way we come together as earthlings to deal with these issues, he would get in his spaceship and he'd go back to Mars, and he'd say these people are crazy.  They make the promises; they say what they're going to do, but look how they're spending their resources."

Aid has, in fact, dropped from 0.5 percent of GDP to 0.22 over the last 40 years.  So we have $50-odd billion being spent today, rather than significantly larger amounts in real terms years ago.  The trade issue, to say the least, is not very clear at this moment as a result of Cancun.  We have on the order of $350 billion-$100 billion in subsidies, the rest in tariff protection benefits-to agricultural producers.  And in 1999, we had $800 billion being spent on defense.  It's probably over $1 trillion today.  The 1999 figure came from this building just a month or two ago when they did a report on defense, and the last figures available were 1999.

But as you look through those, you find this amazing $800 billion on defense, $50-odd billion on development expenditures.  And you have to say to yourself, if we are serious about the question of equity, if we are serious about the question of social justice, if we are serious about the question of peace, is there a dynamic in the world to really stand up to the plate in terms of dealing with this issue?

My judgment is that that is not clearly answered yet.  I think that we have learned a few things in the last years.  First of all, we have learned that there aren't two worlds.  September 11 showed that visibly.  If anyone thought there was a wall between developing and developed countries, the image of the World Trade Center dropping was to me the image of that wall disappearing.  On August 19, when we saw in Iraq an attack on international institutions and the tragic loss of life, we came to realize that even international institutions are no longer protected or part of the process.  They are engaged in the battle.

And we have also seen, I think, very clearly that while poverty itself does not lead to terror, poverty certainly creates an environment in which people can be susceptible to leadership which can lead them to do things which they would otherwise not do.  And I'm not a brilliant economist, and I'm not a brilliant sociologist, but one thing I've observed in the eight-and-a-half years I've been in this job is that we need to deal with the question of giving people the opportunity to have hope, the opportunity to deal with their lives in a way that everyone in this room wants.

We did a study of 60,000 poor people, and, interestingly enough, the conclusion of what poor people want is the conclusion of what we want:  they want a space in which they can live freely and without challenge.  They want an opportunity for their children.  And they want hope, they want voice.  The women want their rights.  They do not want to be beaten.  They do not want to be a second-class citizens, which happens too much around the world, and I regret to say in recent studies, too much in our own country.

And they don't look for charity.  The fascinating fact is that they look for opportunity.  They want hope.  And if you give hope to people, you have a real chance of peace.  And if you don't give hope to people, you run the risk of instability.  You run the risk of lack of peace.  You run the risk of terror.

That, at least, is my belief:  that we cannot address the question of long-term peace; we cannot address the question of stability in our planet unless we today give leadership on the question of equity, social justice and the fight against poverty.  I see no other way to deal with the question of stability on our planet than dealing with that issue.

Unfortunately, it is not a front-page issue.  It is not an issue that will feature in our next presidential elections.  It is not an issue that features very much in any presidential elections.  And, yet, the linkage between the communities of the rich and poor are with us every day-with the environment, with trade, with finance, with migration, and, as Al Larson [US Dept. of State Under Secretary for Economic, Business, and Agricultural Affairs] said just now, with the issue of remittances.  There are nearly $90 billion of remittances now flowing to developing countries, compared with $50-odd billion in development assistance:  $90 billion, growing exponentially.  Migration is linking us in a way that is certainly coming out in Europe and certainly coming out in own country.

Health links us, as do crime, drugs and terror.  There are no partitions anymore.  We are dependent on each other.  And what I look for from our Secretary of State and from our country is a leadership that will say yes, we must deal with Iraq; yes, we must deal with Afghanistan; yes, we must deal with the crisis of the moment, but the imperceptible crisis in the next 20 years is imbalance.  It is the issue of equity.  And this is an economic issue, it's a social issue, and it's also an issue of what is right.

Our country can give a lead in global leadership.  It can give a lead in bringing together the people of the world around what is right for humanity.  We can talk about ethics.  We can talk about morality.  We can talk about belief.  We can talk about spirituality.  We can talk about something that is at the core of the human aspiration and human life itself.

And if we can give that signal through the State Department and elsewhere, then, we will be fulfilling the destiny that is upon us as the richest nation in the world and one that can evolve not just into a nation on its own but as the true leader of our planetary development.