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IMF Survey Vol.29, No.19 October 2000

Chair’s opening address: Manuel calls for help in closing poverty gap so all can share in benefits of globalization

International Monetary Fund. External Relations Dept.
Published Date:
January 2000
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When we think about globalization—about progress on the one hand and increasing poverty on the other—we must not forget the specifics that add up to a new generation of human suffering that afflicts nearly half the world. We need to understand the dimensions of poverty, but more important, we need strategies to combat it and the faith that we can change things. We must take responsibility for our destiny and ownership of our future.

In his opening address to the July 1944 conference that would establish the Bretton Woods institutions, U.S. Treasury Secretary [Henry] Morganthau referred to the great economic tragedy of our time—the prewar depression that would, among other factors, eventually lead to the outbreak of World War II. It was to prevent the repeat of depression and war that the Bretton Woods institutions were formed.

The great economic tragedy of our time is poverty. We have yet to overcome this tragedy. Despite all the progress we have made since 1944, we still live in a world where billions of people wake up every morning to hunger, disease, poverty, and despair—a world where, despite the advances in wealth and technology, we have not been able to breach the poverty gap.

All of us today face the urgent task of making sure that the benefits of globalization are equally spread. We welcome the rededication of the Bretton Woods institutions to the cause of reducing poverty. In so doing, we must recognize that the overarching purpose of the Bank and the IMF has remained essentially the same: to oversee the process of globalization and facilitate the integration of the nations of the world into the global economy in a mutually beneficial way.

Growing inequality poses the greatest risk to the future of the global economy. If the majority of the world’s population is increasingly marginalized and economically disenfranchised, then globalization will fail. As custodians of the institutions that provide the anchor to the global economic system, we have a responsibility to ensure that globalization translates into a better life for all the peoples of the world.

The current robust state of the global economy is due in no small measure to the success of the fundamental reforms undertaken by developing countries. Their boldness needs to be matched by the richer countries.

But the positive outlook for the global economy masks the problem of continued widespread poverty and inequality. Africa has the most catching up to do, with projected growth for 2000 at 3.5 percent. This rate of growth in itself is a significant achievement, given huge terms of trade losses and natural disasters, and is the product of concerted macroeconomic reform across most of the continent. But it is still far below the 5 percent annual growth that is needed simply to keep the number of poor in Africa from rising. As Africans, we face a number of critical challenges. We need to remain focused on economic reforms and on building the institutional capacity that will ensure that the gains we have already made are enhanced. Our fiscal policies must remain focused on social development and infrastructure. We need to invest in education and training to overcome significant skills gaps. We must continue to strengthen our democracies by strengthening the institutions that underpin them—parliaments, the legal system, and civil society.

However, while there are many measures that African countries can take, it is important not to lose sight of the fact that sustained growth in emerging markets and other developing countries must be seen as a global project. Whether developing countries are able to benefit from the fruits of global growth depends not only on their own efforts but also on the efforts of those developed countries with which they share the global arena.

As long as developing countries remain debilitated by unsustainable debt burdens, required growth rates will not be achieved. Debt remains one of the major obstacles to sustainable growth and development. The enhanced HIPC [Heavily Indebted Poor Countries] Initiative has yet to be fully implemented, and full funding has yet to be realized. Another issue that we must give attention to is the burden being placed on bilateral debtors who are not Paris Club members to provide debt relief on comparable Paris Club terms. Unless wealthy countries take responsibility for a larger share of debt reduction, a disproportionate burden will fall on poor and middle-income countries that have often been creditors in the spirit of good neighborliness.

Let me now turn to a more universal problem, that of governance. Improving governance is essential. It is the responsibility of governments across the world to ensure that limited resources are effectively channeled to areas of need. Over the past decade, good governance has sadly become a standard conditionality in contracts between borrowers and lenders. I want to suggest that these conditionalities belong, rather, in the contract between a government and its people. Good governance has to be more than a euphemism for corrupt-free governments. It is about ensuring that elected office is the channel for the delivery of goods and services to citizens and not for the enrichment of those in office.

Despite substantial progress made in liberalizing trade regimes, developing countries still have difficulty benefiting from an improved global trade regime. The rest of the world is open only on a selective basis. The integration of world trade requires equal access for all countries and for all products and services. Fair access to the markets of the developed countries is critical to sustainable growth and development. It is imperative that we urgently refocus our efforts on a comprehensive and equitable conclusion of a new round of multilateral trade negotiations.

The continued decline in official development assistance is of great concern. Given the substantial savings gap in the poorest countries, debt relief is unlikely to be effective in helping our countries fight poverty without well-targeted aid. The added cost of dealing with HIV/AIDS and other communicable diseases only underscores the importance of additional financial assistance. The rich countries have never been richer, and the poor countries have never been more capable of managing aid; the decline in development assistance is inexcusable and should not be tolerated by civilized and compassionate societies.

Global institutions continue to have a critical role in addressing the fundamental structural weaknesses and imbalances that confront us. Growing inequality and persistent poverty, on the one hand, and the heightened fragility of the global economy, on the other, mean that the World Bank and the IMF continue to have a vital role. To respond to this role, these institutions have to reflect the needs of those they are designed to serve. This means not only a reconsideration of the governance structures to give a greater voice to developing countries but also a greater appreciation of what developing countries expect from the Bretton Woods institutions in terms of programs and products.

It is important that the voice of developing countries be heard more strongly in the Bank and the IMF. We must ensure that we can exercise ownership in a manner far beyond the outdated formulas that currently govern quota distribution. For this reason, it is imperative that the forthcoming discussions on quotas be viewed from the perspective of the needs of global development, rather than merely from the perspective that economic might is right.

We share a common vision of the world, free from poverty—a world where our unique collective intelligence and creativity can be used to enhance the well-being of all people.

In parts of the world, the promise and the potential of this economic liberation are becoming evident. But for most people, there has been no escape from grinding poverty. And because the hints of wealth from elsewhere have brought no escape, hope hangs on a thin thread. The challenge is to turn despair into hope—hope based on the knowledge that the world cares and rooted in our common humanity and our determination to ensure that our children and their children will enjoy a life rich in opportunity and free of poverty.

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