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Globalization and the Poverty Challenge




Speech to members of Opportunity International

by
James D. Wolfensohn
President
The World Bank Group

Sydney, Australia, August 1, 2001

Introduced by Brooks C Wilson, Chairman, Opportunity International
Australia, and
Member, Opportunity International Network Board

J. D. Wolfensohn:

It's a great pleasure to see all of you here as it is a pleasure for me
to have the chance to talk to you on two subjects, Globalization and
Poverty. They are the two issues that I deal with and I have been really
pondering as to how I can do that in the space allotted to me for this
speech - how I can bring together two issues that are really so enormous
and try to make some sense out of them in a very short compass. So I
thought maybe the way to approach it is to share with you the way in
which I see these issues, how it is that I feel about these issues and do
it in a personal way, trying to explain to some of you who are my friends
for so many years, like Brooks, why it is I am doing what I'm doing and
not retired like so many of my friends are, those that are still with us,
that is, and what it is that is driving me in this task.

Let me start with the issue of globalization and the people out in the
streets who try and bring it to our attention. I start very simply with
the role of my own institution and trying to get a picture of the world.
I look at the world as a world of a couple of hundred countries, with six
billion people; 4.8 billion of the people live in developing and
transition economies and 1.2 billion of the people live in the developed
economies, of which Australia is one. Australia, by the way, has one-
third of 1% of the global population. In this world of six billion, 20%
of the people of the developed world have 80% of the GDP and 20% have 80%
of the world's GDP. I have been criticised by an Australian statistician
for not drawing your attention to the fact that dollars have different
values in different parts of the world and that I shouldn't use 80/20 and
that it should be something else. Well, let me acknowledge tonight that
he's right, but I'm using 80/20 because it's the only way that I know how
to express it and we are looking at purchasing power parities and that
sort of thing. So let's just accept for the moment that there is an 80/20
split in the world. The other thing which is undeniable is that there are
three billion people who live on under $2 a day. And there are
1,200,000,000 (one billion, two hundred million) people that live on
under one dollar a day. There are a couple of billion people that don't
have access to clean water, a couple of billion people that have no
access to power. Three billion people have never made a phone call.
They're the lucky people. They are not disturbed by cellular telephones;
they live a calm life. And that is a picture of the planet on which we
are operating. Within that world we have Africa, with 600 million people,
sub-Saharan Africa, 45 countries and their GDP is less than Australia's.
Their combined GDP is around $300 million, Australia is getting close to
$400 million. You have in the Americas, where I was just in a meeting in
Québec with the leaders of that hemisphere; 35 countries, five of whom,
namely the United States, Canada, Brazil, Mexico and Argentina, account
for 95% of that hemisphere's GDP. You have near us here two countries,
India and China, that represent 2.2 billion people out of the six billion
people on the planet.

Now why am I giving you these statistics? I am giving you the statistics
not to test my memory, but to tell you that this planet is divided up
into a number of units and it is certainly not a homogeneous planet and
there are probably all too many governments to deal with. If you think
we've got 45 governments in sub-Saharan Africa dealing with 600 million
people, then you talk about bringing development to those countries, it
means you have 45 presidents, 45 central bank governors, 45 leaders of
the opposition; 45, that's for the benefit of those Labour friends of
mine here tonight. you have really quite some difficulty in addressing
the questions of how you help these countries in terms of development.
The World Bank is at the epicenter of that because our job is to try to
deal with the questions of poverty and to try to deal with the issues of
development. We deal with those countries and have been doing so since
the end of World War II. We try to deal with the questions of poverty,
the issues of equity, the issues of social justice and issues that relate
to the lives of people that were described in the video that we saw this
evening.

In addition to that, just for perspective, I worry about the next 25
years. Because in the next 25 years, the six billion people on the planet
become 8 billion people on the planet and all but 50 million of those
people will go to the developing and transition economies. All but 50
million. So in another 25 years, we have, give or take, 6.8 billion out
of 8 billion that will live in the developing and transition economies.
So that means, of course, that there will be a sudden growth in people
and in GDP. I had the pleasure recently of being in Genoa, meeting with
the G8 leaders who were sitting in all their glory on one side of the
table and I said to them that their successors 25 years hence would be
representing, give or take, the same number of people. This was the
United States, Germany, the UK, Russia, France. They will be the same
size in terms of people. I told them that the people on the other side of
the table who were half a dozen governments and presidents of developing
countries, they would be representing another 2 billion people. These
statistics are very stark but you need to have them as a background if
you are going to try to understand either the issue of globalization or
the issue of poverty and so the first place to start is with a global
conceptual framework.
Now within that framework there are all sorts of other nuances with which
you need to deal. For example, the role of women; women who have broadly
not had a great stake in terms of development, but who represent an
extremely potent force in development. You also have the recognition that
the world has changed in terms of its interdependence and this gets to
the question of globalization. There are people who say let's turn back
globalization. No one has succeeded in turning back the evolution of the
world or the force of globalization since Adam and Eve. Certainly it has
been going on for millennia. The great economist Amartya Sen who won the
Nobel Prize a couple of years ago described it in terms of an analogy
with the katmanducha which is a Sanskrit word for the "well frog". 1,000
years ago, in Sanskrit literature, they were talking about globalization
by relating it to the katmanduch, the well frog who thought that by
living in the bottom of the well it saw the whole of the world, until it
got out and then it saw that there were other things. So the Sanskrit
literature of that time described through the eyes of a well frog what it
is like getting out and finding that there is another world out there. Of
course that world then was a world which was coming towards Europe, a
world which was bringing revelations and mathematics and many other
things to Europe. Now, there is a different form of globalization, but if
you think about it, we are linked in so many inevitable ways. We are
linked in terms of health, migration, drugs, crime, wars, communication,
finance, everything is linking. And international trade represents 30% of
the global GDP. The notion of saying stop to globalization is not real.

The question is, how do you adapt to globalization? Because all the
evidence indicates that if you put up your hand and say no and try to put
a wall around a country, there is no way that you have effective economic
growth - at least that's what the economists tell us and that seems to be
right. We're just in the middle of a study now but it is clear to us that
in terms of our recent study on the effects of globalization on the
developing countries, at least 3 billion people live in countries that
have benefited from globalization, but there are a billion people living
in countries that have not benefited from globalization. And the issue
is, how do you react for countries and how do you react within countries
for those that have benefits and those that do not have benefits. How do
you try to bring about an adjustment? How do you try to ameliorate the
problems that people have? How can you bring everybody along? What is
clear in developed and developing countries is that you have a growing
difference between the rich and the poor within countries and frequently
between countries.

Well, you may say, that's a travelogue of the world, but what does it
mean? What does it mean to us here? What does it mean to citizens in
developed countries? And it means a number of things. The first thing it
means, at least in my judgment, is that if you cannot deal with the
question of poverty, if you cannot deal with the issue of equity, then
you are not dealing with the question of peace. For me, poverty and peace
are the same things. You now have thirty wars in Africa. All the evidence
suggests that the prime cause of conflict is inequity. It is clear to me
also that it is impossible for someone in Australia or in the United
States or in Germany or in France to say that what is happening with
those 4.8 billion people soon to be 6.8 billion people is not of concern
to them. It is of concern to them. We are living in an environment which
is increasingly diminishing in terms of conceptual frame and increasingly
interdependent in terms of almost any aspect by which you can judge the
planet, whether it be environment or health or trade or finance or drugs
or crime or migration.

And so the proposition I put to you is that this issue of globalization
is very important to us because the growth is going to come from the 2
billion people in the developing countries. Their rate of growth is
higher than in the developed countries, the number of people is higher,
and the weight of the world is moving to developing countries. It is not
going to be possible for Australians or Americans or the British or
anybody to think that you can just live behind a wall. It might be
possible for people of my generation and for some of you, but one thing
is certain, it is not true for your kids. They will grow up in a wholly
different world. A world in which the developing world, and the
transition economy, will become dominant in size and the features of
which will determine the stability of the planet. That's not a moral
judgment, that's not a wild-eyed green talking, it's not someone who has
found religion. That's reality. And what is really important for people
in this country and in developed countries is to recognise that although
this inevitability is not so visible, it is inevitable and that it is
really important for us, for my generation, for your generation, and for
the next generation to take a stand in relation to responsibility and in
terms of what we pass on. And you can say that this is dogma and you can
say it's moralising and you can say it's someone who has made a few
dollars and he is now going off and doing good deeds, and can come and
preach. You can say that Opportunity International is a good example of
that, you have a faith based initiative coming along trying to wake you
up about these things. It is not faith based, although I am faith based
in my own Jewish religion, but I am saying to you that the issue that we
are facing is an issue of the planetary bargain.

I have been to 110 countries now. I think I know the planet pretty well.
And the issue of poverty is an issue that is common around the world. And
it is an issue which is either the stabilising or the destabilising
factor and when I give you numbers of 3 billion under $2 a day and
1,200,000,000 (one billion two hundred million) under $1 a day and when I
tell you that 800 million people go to bed hungry every night, these are
real people and as we said earlier they are people just like all of us.
We have just done a study of 60,000 poor people and they have the same
aspirations as we do. They want the same things for their kids. They want
peace, they want opportunity, they want a voice, they want a chance, they
don't want charity. They do not want charity. And whether it be through
micro-credit or through empowerment in every way that we can, it is
absolutely critical, in my judgment -as a matter of self-interest as well
as a matter of social equity, of morality- it is absolutely critical that
we engage people in the world not on the basis of charity, but of trying
to provide opportunity. One such way amongst many is micro-credit because
it allows people to fulfill themselves.

We will not solve the problem of poverty or global peace or stability
unless we change our perception of poor people from the object of charity
to the asset on which you build a better world. I am absolutely convinced
of that. The best people you meet when you travel are people in slums and
villages. They are very straight. They know exactly what they want. They
are very practical - give them a chance and they will run with it. And
the way in which we are positioning our own institution of the World Bank
now is to try and build on the real strength of those 3 billion people.
If you regard them as a burden it is impossible to solve the problem. If
you regard them as an asset there is hope - and I believe that
profoundly. And it cannot be done just by writing a cheque. It needs to
be done in partnership. It needs to be done by people like you and by
your kids and by your organisations who recognise that some work done
now, a reorienting of your thinking is not just a charitable act, it is a
question of being farsighted and caring about the planet and caring about
peace. It's really a fundamental issue. It's an issue of what sort of
world we want our kids to be in. It's an issue of what sort of stability
you want to have in your business. It's an issue of self-interest and
it's a critical issue for Australia.

Australia is part of a region with a lot of people. Australia is a
wonderful country, a fantastic country. These few days that I've been
here I wondered why I ever left because it's so fantastic. But it is a
country of 20 million people, with a GDP of about 1% of the global GDP. A
fantastic life. But there is no way that Australia, any more than other
developed countries, can be immune from global trends. It's just not
possible. I understand that the country is building up its military
forces, not for immediate defence but for peacekeeping. Why? Because in a
lot of places there is war and there is instability. Australia will be
involved in education and in health and in many, many other things. And
as a trading nation it's critical that you have places to buy and it's
very important that we in Australia understand the rest of the world and
see these trends. And I think that this is an incredibly important thing.
This week I will be announcing with the foreign minister an initiative we
are calling the "Virtual Colombo" Plan, which allows Australia to use its
technological skills and the skills of internet and communications to
play a major role in the world in terms of ideas and leadership. These
are the sorts of things that Australia needs to do in order to project
itself and in order to retain a leverage and leading position in a world
that outnumbers it rather considerably. But Australia is well off in this
because it is an immigrant nation. It has diversity, it has language, it
has potential and it has a sense of fairness. The recent studies done
here on overseas development assistance demonstrate it. And so I simply
appeal to you to think that notwithstanding the size of the country, that
there is the possibility to make an important contribution.

Remember, Australia is bigger than sub-Saharan Africa in terms of GDP,
but in 25 years sub-Saharan African which now has 600 million people,
will have 1,100,000,000 (one billion one hundred million) people.
Australia will not grow at that rate, and remember too that good people
with good ideas, with moral leadership, with ethical leadership, with
good business sense, and with a clear sense of direction and purpose can
make a big difference in the world. Whether it be through Opportunity
International or micro-credit schemes, or participation or interest or
just educating your kids, there is a real moment now to position the
country and to position ourselves in Australia in the forefront of the
people who are good planetary citizens. So I urge you to think about it.
I have had the privilege of working in this field now for quite some time
and I am not running for office and I'm not trying to give you slogans,
but as I started the speech I said I'd just share with you my feelings.
And that is the way I see it.

A planet that is 6 billion growing to 8 billion people where there is 20%
with 80% of the wealth, where the developing world is increasing at an
exponential rate, where the globe is becoming smaller, where there is no
way to avoid issues by putting a wall around yourself, whether you be a
developed or a developing country, where there is a big difference
between rich and poor, where poverty means peace and where your children
are going to grow up in a very different environment. You cannot wait 25
years to find out. It's time now to really look these issues in the face
and do something about them and maybe Opportunity International is one
such thing.

I look forward to the day when in terms of moral leadership, intellectual
leadership and just spiritual leadership, Australia can be at the
forefront in terms of making a better world. Thank you very much.