Remarks to the Council on Foreign Relations

I was asked to come and speak here, and I had some difficulty in finding out what the subject was. But I was told that if I didn't mention something about Iraq to this audience that it would not be a successful meeting. And after that I could go into my usual plea that you should remember what I do the rest of the time. And despite the fact that that element may be less exciting, it's something I was allowed to do after I talked about Iraq.

So let me start with Iraq and deal with it expeditiously, and say that for the Bank, the role has been one that we are used to. You'll remember that the name of the World Bank is actually the International Bank for Reconstruction and Development, and frequently in recent years we have been called upon to deal with the issue of reconstruction in post-conflict situations, and that is the basis on which we were called into Iraq.

And we were asked to come with a needs assessment -- essentially a plan for reconstruction, which we have done jointly with the International Monetary Fund and with our colleagues in the U.N. And that led to an assessment of an examination of 14 different subject areas, ranging from governance to health and education, infrastructure. And we completed that study some weeks ago, that permitted at the beginning of October a preliminary meeting to take place, and then a week ago the meetings that were held in Madrid.

The result of that analysis was that a reconstruction plan in these 14 areas would take both time, attention and $36 billion, and to that was added the assessment of the authority that looked at some issues that were outside the scope of the Bank's purview , and in particular security and energy. There were a few other minor items that were discussed there, but the conclusion there was that in that same five-year time period there would be a requirement for $56 billion.

It was not said how that would be funded. It was hoped by some that there would be additional resources that would have been made available as a result of budget surpluses, particularly if oil was to flow at high prices. And the assumption was made not to count on that money, because there's a lot to be done to run the country. Let's look at a stand-alone basis for funding, and the conclusion was $56 billion. Therefore, the meeting was held in Madrid, and in Madrid the United States confirmed its contribution of $20 billion, yet to be determined the extent to which it is debt or grants, but with a strong admission on the part of the administration that it should be grants. And there was additional indication of interest in excess of $13 billion.

The question that is asked is, "was it a success or was it not a success?" I would have to say that with a need of $56 billion in a five-year period to start out, with $33 billion, is a pretty good start…what you need is an adequate body of money to get you started. Frankly with a $20 billion front-end contribution that is available immediately in cash, even that would have been a decent start. But it is much better to have this additional funding. So I think you could say on that limited test of how much money, the $33 billion is a very sporting amount of money, and plenty of chance to get things organized over a two- or three-year period towards the ultimate reconstruction, which no doubt will change during that five-year period in terms of both extent and in terms of the way in which we want to do it.

What was made clear was that there were certain parameters that were fundamental, the first being security. Kofi Annan, in a very good speech, a very short speech, indicated that the security question was paramount in terms of U.N. involvement. And of course there is the residual and indeed ever-present question of governance -- how the authority will relinquish its own current post and its objectives currently to an Iraqi government under an Iraqi constitution.

But the conference itself was, I would have to say, generally a success. The people that you would expect not to have given at least turned up, but they didn't give. And that was not surprising. I was asked when I came back was I surprised. I said, 'How can you be surprised if they're still debating the politics? Why would you expect them to pull out a checkbook?'

So what happened is what happened, $33 billion a decent balance between grants and debt. And one other very significant overhanging issue, which is the issue of outstanding debt. What I was very anxious to ensure was that the meeting should not conclude just on the basis of new money, when you have a gross national product of a country of the order of $15 billion, and you have outstanding debts somewhere north of $120 billion, and as much possibly as $150 billion -- even before you get the claims from the last war, of which there are $40 billion currently outstanding, and they could be greater.

So if one looks at the economic viability of the country, there's absolutely no doubt that in this current year it will be essential, as was indicated by the G-7 in Dubai, that there is a necessity to deal with the question of overhanging debt. You cannot have a country that has 800 or 1,000 percent ratio of its outstanding debt to GDP. We get worried in countries when it's 70 percent, and when it tops 100 we get concerned. And when it's 150 under the HIPC highly-indebted country initiative, it becomes eligible for debt relief. So at 1,000 percent or 800 percent it's clearly an integral part of the solution that needs to be dealt with. So when one talks success, it is success in relation to the immediate needs of funds, but it needs to be associated with the work that's being done this year in relation to debt relief.

Fundamentally, there are problems, as I think you know, social problems, still remaining in Iraq. The damage is not significantly as a result of the war. The damage is a result of 20 years of neglect. Twenty years ago the GDP per capita of this country was something north of $3,500 per person. Today it's somewhere between four and six hundred dollars per person. No one knows exactly. But it is of that order, and maybe one hopes it will be $700 next year.

But the statistics are really horrendous. Infant mortality runs at 100 per 1,000, which means that one in ten children that are born dies. Under-5 mortality, after they live, is 50 per 1,000. And maternal mortality is 294 for 100,000. To give you an idea, that compares with 41 in Jordan. So this is not a country that is in great shape in terms of human aspects, and therefore it is of great interest and concern to us in terms of the social aspects of what is going on.

So that's where we stand. The question is also asked, 'How quickly can you get this money out? When are you going to start? And I'd have to say a large part of that depends on security. We've seen what's happened in these last days. It's not a question of being fearful or a coward. I've said I'd be perfectly happy to go in and have meetings in the green zone personally, and maybe taken someone with me. But if I send 20 or 50 people out there they don't have the benefit of bullet-proof cars and a phalanx of people to protect them, and they don't stay inside the palace.

What is difficult for me particularly, is that I was there two weeks before the bombing in August, and unfortunately tragically in addition to Sergio and his team, we lost one of our colleagues, and three people were very badly injured. I think we along with everybody else are really apprehensive about sending colleagues in while the place is difficult. I know President Bush said yesterday this is a very dangerous place. I think he used the word "dangerous" 15 times, I am told. And if that is anywhere true, even if he used it five times, it's dangerous. And it makes it very difficult to commence the sort of work that we have to do until the security is available.

Nonetheless, there is a lot of preliminary work we can do. We've set up videoconference facilities. We can meet outside Iraq. What is crucial is the transference of responsibility and the ability to put something together with the Iraqis themselves so that this thing can be done on a more secure basis and a more owned basis by the people in Iraq.

Well, that quickly is a snapshot of the Iraq situation, and I'm told by Bob that I have a total of 20 minutes, so that's instant Iraq. And I now have 'instant' what I think are the other problems. And one of the other problems that I am dealing with is of course the environment in which all of this is taking place. And there, again in a snapshot, my belief is that in terms of stability, both of that region and of our planet, the issue of poverty and the issue of equity have become central.

 I'm happy to enlarge on these issues in response to questions, and if anyone were ever to ask me to write for the remarkable journal of this institution, I might even give it to you extensively. But let me give you a snapshot.

There are 6 billion people on the planet, 5 billion of them in developing countries; 1 billion of them in the rich countries. The rich countries have 80 percent of the wealth, and the 5 billion have 20 percent of the wealth. That's the first imbalance. The second imbalance is that of the 6 billion, approximately 3 billion people live under $2 a day, and a 1.2 million under $1. And that is the second snapshot.

The third thing is the way we deal with this issue on the basis of the Millennium Development Goals and on the basis that what's happened since has not been totally successful. The Millennium Goal, if you will remember, are the set of objectives that were set in the year 2000 at a conference held at the United Nations by the heads of all the countries.

On a matter of both moral positions and on a matter of self-interest and on a matter of looking at the planet, they came out with a millennium statement which directed itself to the question of poverty as being the central issue. There were certain other things on the environment that were added, but fundamentally they set millennial goals because they said, and I reread many of these speeches, they said, 'Look, it's morally right to do this, but it's also in everyone's self-interest, because globalization means that we are all together, and that we have to think differently than we did just in domestic terms.'

No one, I think, doubts the difficulty of going beyond domestic political issues in an individual country. And I think it will be a small, if any, part of the presidential debate about what happens on global poverty. But insofar as it affects domestic issues, it will come up, which is probably not going to be formulated in that way. But they agreed that one would halve poverty in the world, one would get all kids back into school -- there are 150 million kids not in school. They would improve infant and maternal mortality, and they would look for a better world environmentally. This is the speed version of the millennium goals.

And it was subsequently agreed, in Monterrey, that the way to do this for the developing countries was to strengthen their government, get a judicial system that protected rights, have a financial system that works, and fight corruption, as a sort of set of preconditions to growth. And this is not something imposed by anybody. It was subsequently re-endorsed by the African countries in an agreement called NEPAD, because every one of the leaders, or the enlightened leaders of developing countries, said we can't go forward unless we do that. And some progress has indeed been made in countries on the basis of the Monterrey Consensus.

The rich countries said, 'If you do that, we'll help you with capacity building; we'll open our markets for trade; and we will increase development assistance.' Well, the history on that set of objectives has not been terrible, but it has not yet been compelling. The American government under President Bush has in fact indicated that over the next three years the United States will put on another 50 percent to its development assistance. It will add $5 billion to the development assistance that it's providing. And the European Union said that it would add, give or take, 7 or 8 billion over that same period. So there is some progress in terms of additional monies.

But what happened in Cancun at the very least was a disappointment in terms of the undertakings that were hoped for. And, unfortunately, despite the evidence of increased expectation of money, we have already run into some problems. I took, just as a singular example, the issue of education for all, trying to get kids into school, and we took seven countries only. We were in fact shooting at 25 -- seven countries only, with only 4 percent of the kids that are out of school. And we said, let's finance that. And we came up with fairly modest demands -- maybe as much as $800 million a year over a 10-year period of what would be incremental funding, because people didn't want it out of one pocket into another. Well, we succeeded with a lot of trouble so far in raising $207 million for the first three years, and we're almost to the brick wall. We are going to have another go in a month's time.

But today, with the background of less growth than we would want, and many other distractions, the money is not flowing. And what I must say is that it's unlikely that the developing countries will take the steps that are necessary, be it on social reform or even on corruption, if they don't see the benefits coming on the other side. It's one thing to make a move, if you know that if you get the support you can look confidently to the future. But this is an issue of great significance.

So the next point I want to make in the 10 minutes I've got on this subject is to say that everything doesn't stay still, and that in the next 25 years the world grows another 2 billion, give or take a couple hundred million. And all but 50 million of the people will go to developing countries. So that in 2025, we have a world of 8 billion people, of which 7 billion are in developing countries.

It is my strong belief that unless we deal with the question of equity and the question of stability and the issue of hope, there is not any way that we can guarantee peace and security to our people, wherever they are in the world. And that knocking off heads of fundamentalist organizations is no doubt meritorious, but it will not deal with the questions of fundamental stability.

The other thing you should know is that in 2025 you will have more than 3 billion people under the age of 25 -- in fact, under the age of 23. I've just been launching and working on an initiative with youth, and I met a group in Paris of young people with whom we're working, representing a couple hundred million young people. I started to talk to them about the future, and they said, "Listen, we're not the future -- we're the now -- we are here now, and there are 3 billion of us today. And there are a 1.8 billion that are under the age of 15, and there are 1.2 billion between 15 and 23. And we're the people that can both make the world and ruin the way things are going."

I think you've seen -- whether it be in child soldiers or in people that have never had a job -- that the issue of stability is tied very closely to the question of development and the question of hope. And there I have to say I think we've got it really wrong. I mean, when Mars was close to the Earth, I started to write a piece in which I said if a Martian came down and had a look at us in relation to the millennium goals, he would go back and report that we're crazy.

We have a $33 trillion global economy. We have an interest in terms of developing countries. The Martian would say, 'Well, I see that they are all linked on one planet -- by the environment, by health, by trade, by commerce, by drugs, by terror, by crime, by migration -- migration, a major issue in terms of demographics.' And in response to their own self claims, there they are, the rich countries, and they are putting now $56 billion into development assistance, of which of that only half goes in cash -- the rest goes to consultants and various other diversions. I hope I have not offended any consultant here -- very important work that is done. But the cash does arrive. And yet there's $350 billion of which either through the result of tariffs or subsidies goes to agricultural subsidies, agricultural assistance, and $800 billion is spent on defense.

So we have this curious imbalance between, if you buy my analysis, the issue of what is certain to affect the future of those kids I saw in Paris and the future of your kids or some of the junior members here, your future. I see my colleagues here -- we may not have to worry so much, except Bob, who seems to have eternal life and youth. But for the people in 20, 25 years' time, the issue is going to be this issue, and it is a certain issue. This is not a speculative issue. This is an issue that is on a train that is just coming down that track. And we are not addressing it, and we are not addressing it in a proper way. And this issue of imbalance of the resources that we are putting and the imbalance of our interests is something that I think this Council can well explore and support in terms of an area of serious interest.

I love coming to the Council to say this. I still have a few friends here. Most think I have gone off the rails, because I used to be a perfectly understandable investment banker with a kink about music. Now they see me coming here talking about poverty, and talking about these issues. And wonderful -- certainly hope that I'll stay in Washington, but wonder why -- how it has affected me. All I can say to you as my friends here is that after 8 and a half years in this job, I really passionately believe that this issue of poverty and this issue of equity is the issue that needs addressing as much or more as any other issue that we face.

It is my hope that in terms of having the opportunity to talk to you here tonight, and then respond to questions, that we can do even more on the Council to address an issue which is the issue of our day, and which is the issue which will determine the question of civility and peace.