Bending the arc of poverty
•
Speakers:
Jim Yong Kim, World Bank president
Kaushik Basu, World Bank chief economist
Chair: Lesley Wroughton, Reuters journalist
Panel discussion
Lesley Wroughton:
Comments on the vision for extreme poverty to be wiped out
Kaushik Basu:
- Kim thought out to define mission of WB, organised around mission ideas, broad targets and indicator
- I came in mid stream in new job
- Subsequent to consultation and discussion, there are two main ideas, but many others fall under this
- First: in keeping with WB has been doing for a long time, to take on absolute chronic poverty
- Poverty line – seems far too low at $1.2 per day, who will be below that line – but 1/5 of the world still live below that line, so we set ourselves a target with that line
- 2030 goal for end of absolute chronic poverty, but not to bring it to zero, there will be frictional poverty, but the strategy how to battle that will change
- We aim for less than 3% below that line by 2030
- Second: shared prosperity, after a lot of debate and discussion we will look at growth rate of income at bottom 40% of the country – how they are growing and focus on that
- Simple, but combines a lot of things – looking at growth but with focus on the bottom segment, so for everyone to grow but focus on the bottom segment
- Twist in the real world, a kind of inclusive growth
- Different countries will have different strategies, but reaching out to poor and relative poor, where they are
Lesley Wroughton:
World Bank will not reduce but eradicate poverty
Jim Yong Kim:
- I asked the question directly to Martin Ravallion before Basu joined us, is it possible to end poverty, how long would it take, and how could we set an ambitious target
- Ravallion work estimated 17 years – extremely difficult, so many things will have to go into place, and need to ensure climate change doesn’t destroy changes so far
- Seems like a clear simple goal, that changes way to work and galvanise community
- I have a lot of experience in setting targets, unless you have a clear target and end date there is no urgency in getting somewhere
- Clear mission, written on our wall, this was a group discussion – time to stop dreaming and start making it happen
- Question why you focus so much on income, isn’t there other aspects
- Of course it is, India example not just unilateral focus on income – so many potential things we need to do, health, education, social protection, won’t take focus off investment in human capital
- Have to provide energy, this is critical for businesses to form
- In every country in which we work our teams must be clear on how their work lines up with those two goal
- Will be different in different places, some will focus on agriculture, some on energy
- Will focus on areas where we can have greatest impact, need to be clear on WB competitive advantages
- Have lot of knowledge and data, teams working with public, private sector, guarantees – working across the WB group is very much our competitive advantage
- Shared prosperity is not just about the current generation, it’s also inter generationally
- This brings us to climate change, it’s a mistake to think about climate change as a long term threat, it’s a threat today
- We need to share prosperity with future generations as well
Lesley Wroughton:
You say that times have changed and you need to reflect on that. How can you see the WB changing and refocusing to work on new challenging things.
Jim Yong Kim:
- Especially on the country level, useful exercise on the India team – a higher proportion of investment to the poorest states
- 8% of people living in extreme poverty in the world live in Uttar Pradesh
- WB is full of people who are passionate about ending poverty, therefore we have the target – they could have done other work, but are at WB because of their passion and are doing great work
- Goals will focus them to think a little bit differently
- A lot of people come to WB with good ideas, but receive funding to tackle different ideas – difficult to say we are doing this, and not the other things
- We have a vision, we are not going to do this as it’s not to our comparative advantage
Lesley Wroughton:
How do you get to the more difficult things?
Jim Yong Kim:
- Difficult times for ODA, but I was just in India – in the next five years it will have a $1 trillion infrastructure deficit – aid flows can’t address these needs
- Need to focus on resources in the country and private sources
- We work with the private sector and have been successful in bringing in private sector sources, including private equity
- IFC has decades of experience in developing countries
- ODA is critical, have to be clear on what things to fund, but won’t reach the goal unless we make use of all resources
- Post 2015 we understand that private sector in infrastructure are going to be a critical part of reaching those goals, fortunately we already work in that field
Lesley Wroughton:
Poverty has different faces in different places in the world, the world is changing, there is the rise of these emerging economies – are they bringing prosperity, changing poverty?
Kaushik Basu:
- Poverty is different from one place to another, but not just with income line, it’s multi dimensional
- Different countries have different profiles on education, etc, so poverty can look very different
- No matter how you view it, unacceptable people should be below the line
- Find a lot of poverty in large economics
- China poverty started falling in 90s
- 3% a very hard target
- Take on the biggest countries, India, Nigeria, Pakistan, Bangladesh – will get very close to the targets by working with them
- But things below the number, its chronic absolute poverty we are after
- We will target even the smallest country
- If you do business as usual and we make the 3% target, we will still have a lot of people below the target
- So we can’t do business as usual, growth is important but not everything
- Lots of examples from history
- Need action apart from just go for growth, need complimentary action
Lesley Wroughton:
Countries like Tajikistan and Ethiopia, who have made progress, but not Nigeria – what difference can WB make – how to convince and help to get to difficult stages.
Jim Yong Kim
- Nigeria only has 1/5 of the energy they need – so how can we think about Nigeria making rapid progress
- Working on finding public private initiatives to dramatically increase energy
- Its also very expensive
- Have an opportunity to meet the energy needs, and reduce cost
- They say we have good policies and even have money, have 98% kids in school, but they’re not learning anything, so can use knowledge to focus on kids learning
- Have to be ready to respond to specific countries and their priorities
- Useful for us to provide data and assessment of need, but they generally understand what they need
- Trying to be the organisation that can help countries make it happen
Lesley Wroughton:
What makes it successful?
Kaushik Basu:
- South Africa is a developing country with rich country within geographical boundaries, plus historical burden – segregation by burden of history, not by law
- Need to focus on jobs
- Tajikistan poverty fell very rapidly through remittance inflow
- Means huge dependence on other countries, so need to diversify and have employment in the country
- If you look at patterns, look at China – was doing 2 things since 1970s, well directed policies, health, education at an early stage
- Sri Lanka interventions took place at an early stage even if they were poor
- Can’t wait until you are rich – WB can come in with expertise
Lesley Wroughton:
Target comes at a time when UN looks at post 2015, how does this fit
Jim Yong Kim:
- Working on a path where WBG and UN has been working very closely, the intention of the multilateral systems that the institutions would work very closely together – very strong support in the UN system for this particular target
- A lot of modelling going on, in that sense there is very clear agreement that if we don’t do anything poverty reduction will slow down
- We want to bend the arc of poverty, bend it back
- UN is completely on-board
- Take seriously in the most difficult areas, if we reach 3% and if there are FCAS that have 60% extreme poverty we need to look at this
- May travelling with UN general secretary to great lakes region – if we can find political security and economic solutions, how much more effective can we be
- Should have a set of post 2015 targets that are clear, ambitious and with a financing plan
- The importance of the private sector, some doubt this in something like the development goals
- But the embrace of the private sector is a question of how ambitious you are for the poor – you have no choice but to think about how to use private sector finance, how to build PPP
- Madrid meeting agreed on a having broad ambitious targets with financing plan
Lesley Wroughton:
Rise of people who just moved over $2, not extremely poor, but easily hit by shocks, growing numbers have started paying tax.
Kaushik Basu
- In some ways more difficult to reach this group, but poorer people are already hit by shocks
- Need to take precaution, but not override those that have already fallen there
- You need diversification, income from multiple sources, if you only rely on one thing, if that gets hit you have problems
- The role of the private sector – e.g. food for the poor, if you try to do it entirely by the state, you need to empower the poor, but there is profit to be made in carrying the food over
- Directing the power of the private sector to where we want it to go, change the incentives in the system
Q&A
(Questions from the web and notes from the audience)
What is the WB doing to ensure shared prosperity where inequality structures are not in place?
Kaushik Basu
- Structures of inequality not easy, we are drawing attention to the problem and numbers will be available
- We have to work with countries, them giving us their structures on how to deal with it – some will rely on trickle down, but we are asking them not to do this, but do direct policy measures
- Investment in health and education, human capital investment, you are empowering people to earn more – rich can buy their health and education
- A lot of variation from country to country
Jim Yong Kim:
- Asked these questions a lot, including on gender inequality
- Some scholars may be arguing massive inequality is good for growth, but a lot of states says it brings in instability, see the Arab Spring
- Where there are divergence we need to take position – ours is clear, if you grow without building in equality you get instability
- Some argue that culture is different on gender equality, this used to be argued for South Korea, but women became part of the work force, rights, recently female president – this happened without discarding the culture
- Respect for culture for is important, I’m an anthropologist, but we shouldn’t insist on gender inequality because of culture
- WB doesn’t not give prescriptions, but will deeply deeply engage in these discussions
- We will say the evidence on gender equality is overwhelming
- We have a position on these issues
Q:
Are you prepared to say no to projects if the evidence isn’t there for those at the bottom?
Jim Yong Kim:
- We have to apply these lenses now as we move forward
- Delicate balance ensuring countries are leading, but confidence that what we are doing is evidence based
- Lot of sources of development assistance, but even public and private is not enough
- WBG has a view, happy to work with all of our member countries
- We think the evidence leads us to a certain approach on some issues
Q:
Bank’s biggest failure in reducing poverty in the past decade?
Jim Yong Kim:
- No one happy about record in fragile and conflict states – need to make this an area of our speciality and do in collaboration with UN and bilaterals
Kaushik Basu:
- When I first met Kim told him about my interest in this, would like WB to go where no one else go
- Gender equality and culture, I’m a closet anthropologist – we have to respect culture, but gender equality is extremely important
Q:
To what extent member countries have bought into the vision – how to sell it?
Jim Yong Kim:
- Development community really need to look at these goals
- Priority for first 10 month was to really get to know our EDs, it has been deeply discussed, have very strong support on our board
- Now going to governors to finance it
- Will be a lot of questions, but so far a lot of heard very positive feedback
Q:
Will climate change make an end to poverty impossible?
Jim Yong Kim:
- If we don’t take direct action, very possible
- Thought I was keeping up with literature, but happening quicker
- Was shocked to know if we are to keep warming below 2 degrees, we are nowhere near reaching this
- Climate change not a separate topic, think about all the things we do that touches on climate change, eg energy, agriculture, cities
- With everything we do, we need to look at it through the issue of climate change
- Need to be sure the poorest countries have energy, can’t put the burden of climate change on poor countries – they will tell us they didn’t get us to the problem
- Inspiring exciting vision of Africa having all the energy they need and keeping it clean – need to set as a goal
- Sustainable Energy 4 All initiative – could reach this target in Africa
- Agriculture, climate smart agriculture reclaiming degraded land, older varieties, new technologies – so many exciting things we could do – need to focus on scaling up these approaches
- Chinese government asked to work on transportation – tremendous approaches already, just focusing on those three things can have tremendous impacts
- Need to have stabile price on carbon,
- Fuel subsidies amount to USD600bn a year, what can we do with this to invest in the poorest
- Difficult problem for everybody
- All would like to reclaim this money for other things, but politically difficult – what can WB do to help with this
- There are specific things we can do and we are committed to doing it
Q:
We can’t even agree on the Kyoto protocol, how can WB get around this?
Jim Yong Kim:
- Point is to not wait for the political processes to act
- Every time there is extreme weather event, look at us to ask what the plan is
- We just give them problems, but not a big major plan, they go back in denial
- Next time we need to come back with a plan, large scale to have an impact
- Working towards workable plan
Lesley Wroughton:
Should there be a separate plan?
Jim Yong Kim:
- Exactly what we are saying, clean energy for Africa, for as many countries as possible
- We are building cities right now, why not doing in a way is climate smart, also agriculture
Q:
Kosovo and IDA replenishment, WB is to invest in coal in Kosovo, how to connect these conflicting prospects?
Jim Yong Kim:
- The issue in Kosovo, their need for energy is so severe, not a question of everyone having multiple fridges, TV:s – people can freeze to death
- We try to look for anything no to do coal, but if we are the last resort, if this is a fundamental issue
- Climate change issue is very personal for me
- There is so much carbon being put into the air in Washington DC
- I don’t think it’s fair to tell the people in Kosovo that while rich countries continue to burn coal, you will have to freeze to death – poor people should not pay the price with their lives for our mistakes
Q:
Face of new lenders, China, India – how do you work with these groups?
Jim Yong Kim:
- Lot of talk about new funders, new instruments
- India will have 1 trillion dollar in infrastructure deficits, we need these new instruments
- We look forward to work with all these together, there is more than enough work to go around for everyone
- Poor people in the world understand this, WB has been doing this for 55 years – we know a thing or two on education, macro-economic policy, etc, serious about ending poverty and understand we won’t be able to do it on our own
- We are being asked to do some things together increasingly
Q:
Can you eradicate poverty?
Jim Yong Kim:
- Eradication is impossible, we’re talking about ending poverty
Kaushik Basu:
- Some can fall below the line due to conflicts etc
- There will be occasional fire, but we can attend to that
- These new countries, there are worries about difference of view points – but that’s not the case, the concerns are similar
- Fundamentally its very similar concerns across the world, so broad objectives will remain intact
Lesley Wroughton:
Last message
Jim Yong Kim
- Zoellick started the open Bank, with open data
- Want to extend that – engage with us, hold us to account
- We are very very serious about ending poverty
- We are going to make mistakes if you are trying to be bold and ambitious
- If we make mistakes, most important thing is to learn from them
- Won’t be paralysed by the possibility of making mistakes
- We need you to be with us and hold us to account
