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 You are in: Bureaus/Offices Reporting Directly to the Secretary > Policy Planning Staff > Secretary's Open Forum > Proceedings > 2001 - 2002

The State of the World: Assessing Global Sustainability

Jeffrey D. Sachs, Director of the Center for International Development at Harvard University
Remarks to Open Forum
Washington, DC
June 28, 2002

Opening Remarks and Introduction

Thank you very much, Alan. I am so honored to be here, and thankful for all of you to be together this morning so that we can talk about the state of the world and where we are heading. In particular I'd like us to think about where we are heading in policy terms as we go off to Johannesburg at the end of August for what will be the largest gathering in the world during the past decade, and certainly for many years to come, on the issues of sustainable development.

I think the stakes at Johannesburg are very high. I don't think the success of that summit is by any means assured. I also think the American foreign policy interest in a successful summit is very high, and it should not be discounted.

We don't have many chances to have a dialogue on the global stakes with the whole world participating. We may not necessarily like that very much, but such a dialogue is essential for the health of the world. If we were by some terrible misfortune to leave Johannesburg with a broken down meeting filled with recrimination, with the argument that somehow the United States and other rich countries had turned their back on the poor, or had failed to step up to the challenges of sustainability, I think the consequences for our foreign policy interests and for our interest in creating a prosperous and sustainable world will be tremendously undermined. I also know that the time is short, and that the preparations for the Johannesburg meeting have not by any means tied up all the loose ends by any means. So far it is fair to say that this will be a summit of loose ends rather than agreements and conclusions. The time is very short pulling together a strategy which befits our wonderful country, and which makes sense for the world.

I am going to try in a few minutes to sketch out my own interpretations of what the challenges are; why we are facing a multitude of profound problems that will not go away on their own; why we have no real interest or ability to duck the issues, and somehow pretend that they are not here; and how we can get some practical things done in Johannesburg, despite the fact we just have a few weeks remaining. We do not have time anymore to set a detailed plan of action to achieve a thorough blueprint of progress. We should have done so by now, but we havenít. We shouldn't have to wait for summits to take much more serious action on sustainable development than we have done as a country. We've had 10 years since Rio, which have been 10 bad years on critical dimensions of sustainable development. We have a few weeks left before Johannesburg without any agreed specifics, I would say, and yet the stakes are very high. Hence I am going to try to propose some practical things that even in a short period of time could help at least to fit the need and avoid a debacle, which I very much fear.

So what is this issue of sustainable development and where are we on the road towards achieving it? At first, I have to say, when the term became popular I thought it was enough of a buzzword that I'd avoid it. But I also have to say that when I was asked to suggest a name for my new chair at Columbia University, I suggested Professor of Sustainable Development. As much as Iíd shy away from buzzwords I've warmed up to the term. I think that it does convey in just the two words some very important concepts and priorities.

First let me say a word about development. Development is about material progress, and it is about material progress of the world's poor in particular. We have some very poor people on this planet whom I want to talk about. These are not the kind of poor we have in the United States. Our kind of poverty raises many important political, ethical, and economic issues, but the poor of the poor in the world do not suffer the same kind of poverty that the poor in the United States suffer. The poor of the poor suffer what I summarize as poverty that kills.

There are about a billion people in the world who are living lives of such remarkable material deprivation that they are fighting for survival, and often not winning that fight. That's why life expectancy in Africa is 50 years and not 80 years as it is in the rich countries. That's why life expectancy in some of the very poorest places in the world has declined below 40 years now. Millions of people every year are losing in the fight for survival, and are dying in mass numbers in our planet in the 21st century. When I think of development, I think of these people, and I think about how one can address what must be the most urgent need in the world, the need of survival itself.

Sustainability can mean all sorts of things, of course. It can mean the ability to have society not keel over in conflict or in crisis or it can mean the ability to maintain material progress for poor countries. What we mean by sustainable development is the ability to achieve development in a way, that doesn't undermine the very life support systems of the planet. So in a broad sense we mean environmental sustainability.

Just as with the issues of the poorest of the poor, we all know that we face profound challenges to maintain a livable planet. At the same time I think we all know that we haven't stepped up to those challenges yet, because we can't quite figure out how to master the problems whilst preserving our prosperity as well as our other goals and ambitions. We face a lot of complexities in achieving environmental sustainability, but I think every one of us should know -- except perhaps if there is an editorial writer from the Wall Street Journal here -- that we face real problems. I say that because there's just one place in our society, which denies that it's even a problem, which calls the climate change a pseudo-science or denigrates the profound risks that we are facing. I don't think that is an issue in this room. I think in this room the issue is what to do in the face of a large number of complex choices and constraint that are economic, social and political in nature.

We are going into a 10th anniversary of the Rio Conference on sustainable development. It is therefore logical to ask how we have done since 1992. There was an agenda for the 21st century decided at the Rio Conference, the so-called Agenda 21, which is a pretty clever document although most of us don't read it. I have to confess that I had never read it before a few weeks ago. It's long and it's a bit ponderous, but these are not easy subjects to boil down to a page.

Agenda 21, whether perfect or imperfect, was a complex response to a complex set of challenges, but I think the overwhelming fact is that on the ground it was largely ignored or not implemented during the past 10 years. I'd say more broadly that, aside from that specific text that came out of Rio, sustainable development did not have a good decade at all. In this country we had a pretty good decade in the stock market until recently and we had a pretty good decade of economic growth and we made some progress on our own physical environment in many places. But we did not have a good planetary decade in sustainable development. Actually, the last decade has been pretty disastrous for the poorest of the poor, that part of our humanity that faces the life-and-death struggles. It was more death than life in a large part of the impoverished world. This was the decade when the AIDS epidemic became the AIDS pandemic, when we reached the incredible phenomenon of more than 65 million afflicted people without yet any international response that is anywhere commensurate with the scale of the crisis.

It wasn't a very good decade for the poorest of the poor as measured in the sheer numbers of gross national product per capita, our simple short-hand, and not altogether bad, summary measure of the state of economic well-being. The poorest of the poor did not have a booming stock market in the 1990s. They did not have the wonders of globalization lifting their boats. They actually experienced absolute declines of income per person, despite having started at the very, very bottom of the world. Somehow globalization did not reach those who most urgently needed economic development.

If we look on the sustainability side of the agenda, we know, too, that in almost every area that has been identified by scientists, ecologists, policymakers, and all of us in our daily lives, when we experience the increasing summer heat or the increasing absence of snow in Boston, that something is not right, and that the situation is not getting under control. We lost major ecosystems functions in the last 10 years. Our fisheries globally are in a disastrous state of affairs all over the world for all types of marine ecosystems. The devastation of tropical rain forests has proceeded apace throughout the world. The illegal logging coupled with the deforestation resulting from impoverished people spilling over into increasingly marginal lands in the Amazon, the tropical rain forests of Africa or Southeast Asia, was unabated. Watersheds lost their capacity to prevent flooding because of upstream deforestation. Massive environmental damage and loss of life has become a daily and annual occurrence. We have had more once-in-a-century floods every year than that label would suggest.

Of course long-term climate change has continued, no matter how many times we said we don't know whether it's happening. The facts on the ground don't care what we say. The evidence all over the world, from the biological evidence of changing annual cycles of crop and animal development, to the spread of pathogens due to changing climate patterns, to the increasing intensity of El Nino, which may very well be a signature of the long-term climate change, to the evidence of our melting glaciers, to rising ambient air temperatures, to the evidence in the oceans, suggests that whatever we say and how much we debate it, climate change is happening. If there is one major thing that we have learned in the last 10 years from the paleoclimatologists it's that our climate system is so unpredictable even at short-term range that the mean forecasts from our models of climate change may miss the risks of huge nonlinearities, so-called huge responses, to manmade events in the coming decades, which could send climate patterns far outside of these mainstream forecasts.

Despite this having been the decade of sustainable development since Rio, the evidence does not suggest a pretty picture. Here we are with a few weeks to go to Johannesburg, essentially without any plan of action. Somehow I am sure our political leadership wants to get in and out unscathed. That, however, is not going to be enough, because the world, the climate, the ecosystems, and the dying people are not reading what we are saying or counting the number of speeches we give. The facts are marching along, and until we start to address the real facts the spin isn't going to matter.

We need a diagnosis, and we need some ideas of what we can do. I want to give you both, at least a personal view of why we are heading the way we are, and some thoughts about how in practical terms we could actually do much better. So let's talk about U.S. foreign policy, since we are here at the heart of U.S. foreign policy. Let's talk about us. Talking about us does not mean us versus them; it means us living in the kind of world that we would like to live in: a world without people dying in mass numbers around us, creating social conflict, and regions of social collapse through our neglect.

Let me talk first about the development part of the sustainable development dimension. What's happening with globalization? Why isn't it lifting these boats in all parts of the world? Why haven't the poorest of the poor had benefits even during a boom of the 1990s? There's a simplistic but false reason that's offered. In various ways it has been offered for decades. This simplistic answer is "Well, the poor have only themselves to blame for reason X". Reason X could be that their culture or their governance is not right, and that they are just a bunch of corrupt thugs. In the past, Reason X has been the wrong color of the skin, wrong race, wrong religion, you name it. We have always had the capacity in the rich world to blame the poor for their problems. It's been much harder to do a serious analysis that understands the complexity and the diversity of experience.

When you try to understand the patterns of global development, what you find is a highly diverse set of experiences that calls for a more complex set of interpretations and diagnoses. First of all, it is not as if globalization is failing all poor people by any means. The fact is that billions of people are benefiting from globalization, and that world markets as well as market forces really work. We did have a boom in one of the poorest places in the world in the 1990s; China made tremendous progress following a decade of tremendous progress in the '80s. In fact so much progress was made that China, which was on the edge a quarter century ago, is well on its way to becoming a real economic powerhouse. This is a very different set of issues, indeed.

We had a lot of progress in India, not uniformly across the country, but for hundreds of millions of people. The market reforms in the 1990s really paid off in big ways in many places in that vast subcontinent. Particularly in southern and western India around Mumbai there was tremendous economic progress and improvement of lives.

In Mexico there was a lot of progress also, at least if you draw the line through Mexico City and look north without looking south.

However, globalization is a complex phenomenon, and large parts of the world did not share in that same experience. That is what we have to understand better. What we need to understand is that market forces aren't equal in every part of the world. For example, they'll reach Shanghai a lot faster than they'll reach Kandahar. Market forces will reach Monterrey, Mexico a lot faster than they'll reach La Paz, Bolivia.

The way in which the world economy is pulled by market forces depends on geography, ecology, the conditions of life, the levels of education, the burdens of disease, the nature of governance, and so forth. This is a complex mix that is characteristic of complex processes, such as economic growth.

There are some basic principles that one can see in the developing world. Countries that are close to the rich markets have an advantage. It's better to be Mexico than it is to be Ecuador in this story because transport costs are lower. When General Motors is deciding where to invest for a new assembly plant, it is going to go across the border to Monterrey -- it is not going to go to Quito. When the American government is deciding where to negotiate its next treaty, it is going to go to its next-door neighbor first. It is not going to go to Chile, except with a very long lag. Being next-door to a large market makes a very big difference. And let's face it: being far away makes a big difference, too. The issue at stake is not governance, it is latitude and longitude, and it is extremely powerful.

Being near a port makes a big difference. If you are going to set up a new factory to make polo shirts, which is not a bad activity to employ poor people as a stepping stone to economic development, it sure is a good idea to have a port nearby, so you can actually ship the product. It would be pretty expensive to send it first-class by air instead.

World trade takes place by sea trade for the goods produced by standardized technologies and bulk production. If you're Afghanistan, Kyrgyzstan or Kazakhstan, Mali, Chad, Niger or the Central African Republic, Rwanda, Burundi, Bolivia or Paraguay, don't believe you are running the same race. Let us understand that the burdens of land-lockedness are not simply a matter of good or bad governance, as we too simply diagnose, but are again facts of geography. We need to respond to this with a more sophisticated American foreign policy.

Let's also understand that if you are a poor country and afflicted with the AIDS pandemic, it is a downer for foreign investment as well. Again, it is not a matter of governance in some simplistic calculation either. What's the country in Africa that we would have declared to be the best-governed country by any standard, the one that we would have chosen by the kind of classifications we'll use for the Millennium Challenge Account, for example? I saw already someone rightly picked the winner; it would be Botswana. It has a parliamentary democracy, wise leadership, and good results on Transparency International's list. And what's the country in the world with the highest HIV prevalence in the entire world? Botswana. Its HIV prevalence of forty percent implies a population that's dying. Hence, let's not be so simplistic in our cause-and-effect assumptions when we essentially blame the poor for all their problems.

In summary, the evidence is that being close to the major countries is good. The evidence is that being located near a port is good. The evidence is that being in a temperate eco-zone that doesn't sustain year-round malaria transmission is good. The evidence is that being in the humid temperate zone that has year-round precipitation, as opposed to the sub-humid tropics that may have eight months of dry season is good. It's even better than having 11 months or 12 months of dry season, as the Sahel does in a bad year. In essence, climate makes a huge difference to development. Being up in the mountains is no good for Afghanistan. It's no good for Ethiopia, it's not good for the highlands of East Africa, and it's no good for the Altiplano, either. Let's think! Let's stop pretending that it's a simple matter: "Get your markets right, do your economic reform, follow the IMF advice, and all will take care of itself". Until we get over that simple-mindedness, we will not be able to pursue an adequate American foreign policy because we will not understand what's happening in reality to the economies of countries of great significance for our policies.

If we believe that Afghanistan's development problems were due to the Taliban, rather than the Himalayas and land-lockedness, and that the Taliban were the effect not the cause, then we are going to be very disappointed as well. We have to think about real economics, not about some page out of the playbook of the IMF that lectures countries rather than think about the deeper problems. Those lectures can be right, but they can never be enough.

So where do the poorest of the poor live? The poorest of the poor are in the tropics. The poorest of the poor are in malarious regions. The poorest of the poor are in the sub-humid tropics with fragile ecosystems. The poorest of the poor are in the continental inlands far from world markets. The poorest of the poor are a whole Saharan Desert away from the European markets or a whole hemisphere away in the Andean region from the U.S. markets. The poorest of the poor are in places that we have considered traditionally to be of little strategic significance for the United States. As a result a congressman from a protectionist textile district in North Carolina can swing our policy enough to block the development of a new textile sector in Africa in viable places like Dakar, Accra or Dar es Salaam, because these places just don't count. The poorest of the poor don't have the North American Free Trade Agreement.

The poorest of the poor suffer well beyond anything that they can address themselves. Some of the poorest of the poor are in such desperate shape and such desperate straits, that they are utterly trapped in their impoverishment in a way that all the lectures in the world about good governance are not going to solve by themselves.

Letís take a look at how much saving is done in these impoverished countries. Their saving rates are essentially zero, or even negative when properly calculated. What does that tell us? When an impoverished person doesn't receive enough nutrition to meet basic metabolism requirements, he or she does not save metabolically. Instead the person wastes away, because the inputs are not enough even to sustain the given conditions. When countries are so poor that they are not meeting even basic needs, their societies waste away as well. They don't have the surplus for saving for the future. They have a hand grip just to try to stay where they are. Many do not manage to stay where they are, because even to stay where they are would mean to be replenishing nutrients that are being depleted from fragile soils, or somehow to compensate for declining aquifers, or to compensate for falling land-to-labor ratios. The latter is due to the ironic but profound fact that the poorest places in the world have the highest population growth rates because impoverished people, whose children die in large numbers, compensate by fertility rates that are also the highest in the world.

Population growth rates in these impoverished regions that are not achieving economic are at levels of 3 to 3.5 percent per year. This implies a doubling of the population within a quarter of a century. In other words, these countries are in a downward spiral, as they do not have the surplus necessary for investing in the future. They often fail to attend to even the basic needs. Our answer for the past 20 years has been to send IMF missions to these countries to talk about belt tightening or to say, "Privatize that sugar mill. That will do it". None of these policies address the real problems. What we haven't done is asked what is really needed, where, how and what would it cost, and who can pay for it?

Now let me turn from the development side to the sustainability side. The picture there is much more complex, although I don't think the development picture is particularly simple. The sustainability issues really are even more complex, in part because of the complexity of our ecosystems. We have not yet advanced enough scientifically enough to understand a lot of the ramifications of ecosystem dynamics at a local let alone global scale. Yet, we are facing challenges that humankind has never faced before. We are affecting our planet in a way that has never occurred before. We therefore require a lot of new science to understand these processes better.

Thank goodness for the scientists, because they keep pulling us back from the edge of disaster. If the scientists hadn't understood how chlorofluorocarbons interact with stratospheric ozone, who knows how many millions of deaths would have occurred from cancer due to the higher levels of ultraviolet radiation that would have reached us. Thank God for the geochemists who saved these lives and for the grants that made it possible for them to do their research. We are living with new dangers that we don't even know. We pretend that itís better not to talk about them, because November elections are always coming around, in whatever year. But you and I are not to be fooled. Our children will realize what is happening once it doesn't snow anymore in many parts of the US, or when new diseases appear that no one has ever heard of before, or existing ones are spread to new places. We're gambling without really facing up to the problems. I don't like to gamble.

So what can we say about the issues of ecosystem sustainability? I would say first of all that ecosystem sustainability does not take care of itself through the self-interested invisible hand. This is an area where market forces alone will not work, because the prices that we get on the market do not reflect the true social costs and benefits of the inputs and outputs that we produce when they impact on the water cycle or the clean air or the biodiversity or the climate. There is absolutely no reason to believe that market forces by themselves will address these problems.

Therefore, at the very least we need ways to tweak the market and more realistically to regulate the market to address these problems. Interestingly, insofar as local environmental issues are concerned, we repeatedly come to a good answer in our country. However, this is typically achieved with a lot of political stress, delay, posturing, and waste. We have done reasonably well in cleaning up the particulates above our cities, or the waterways in a lot of our major populous regions. We understand better than we did 25 years ago the risks of toxic wastes and the way we handle the refuse. We have even been able to cooperate across states on regional problems like acid rain, where one state is the polluter, whilst the consequences are borne downstream or downwind. On occasion we have even been able to cooperate across an international border with Canada to address common ecological problems, say, in the Great Lakes, or acid rain itself. Our wealth has helped us in this. Since we are not fighting for survival we can fight for a better quality of life. We'd like to live longer. We'd like our children to live longer. We'd like them to grow up healthy without the adverse effects of lead in the atmosphere, or toxic waste in the water supply. Hence we find social mechanisms to address these problems.

And as you have heard, I am leaving Harvard after 30 years. When I was a freshman at Harvard in 1972, one of the first paper I ever had to write was on what's called a contingent valuation of being able to swim in the Charles River, which at that time was so polluted that it was impossible to swim in it. Ironically, I am leaving Cambridge just as it was declared last month that it is now safe to swim in Charles River again. In 1972 I wrote that I'd be willing to pay a not small amount for this good, but I didn't know it was going to take 30 years for the necessary changes to be implemented.

If we are able to solve the problem, we must ask what the problem is? I think that we are plagued by two kinds of problems with sustainability. First are the problems of sustainability in impoverished places that lack the necessary resources to address these problems. Poverty is a major factor in causing unsustainability. Impoverished people, desperate to grow food on fragile soils of the wet-dry tropics, cut down trees. Impoverished people without access to a modern energy grid, use biomass to meet up to 95 percent of their energy requirements, which can lead to large-scale deforestation. Impoverished people in their desperation don't have the necessary means to make the kind of investments that we have made, for example in more sustainable energy technologies. Hence, unsustainability is a characteristic of that downward spiral of the poverty trap that I talked about earlier. It is not primarily a matter of bad governance or bad management. Instead it is principally a matter of impoverishment.

The other problem with sustainability concerns situations where it's not our own air, ground, water, or backyard that that suffers from the adverse environmental consequences of our actions. Examples for this are cross-border pollution or the degradation of global ecosystems, the so-called global commons. Unfortunately we are really bad at managing the global commons. As a result we have done very badly in the world on preserving biodiversity, on addressing long-term climate change -- where we keep pretending it doesn't exist -- and on protecting the global commons of our fisheries. All of these are cases were cooperation is really difficult, because it's not just us, and it's not just our political system. This is the essence of 21st century diplomacy, which is why the State Department is so vital. We have to find ways to reach agreements across the world for global-scale problems. That is the essence of multilateralism.

The UN conferences dealing with these issues are important for the United States even though we seem to hate to go to them. We tend to ask ourselves "What are all those other people doing there and why should we be there? " After all we're the United States. However, these conferences are for us, because they are the only hope of finding global solutions to global-scale problems. They constitute the only mechanism we have for addressing the global problems in sustainability that we cannot address on our own.

In summary, sustainability fails for two reasons. On the one hand the impoverished cannot invest in sustainability and on the other nobody is looking after the global commons. We got ourselves into a funny posture in this country about the latter. We have got our dudgeons up that we should not do anything about climate change when those poor countries are not doing anything about it either. At the same time as all of you know, we are contributing 24 percent of the greenhouse gases that are going into the atmosphere, wrecking the climates in other parts of the world, despite representing only 4 percent of the world's population.

I already tell other countries suffering from intensified El Ninos and from other consequences of the anthropogenic climate change underway, "Don't ask for aid from the United States, ask for compensation, because that's what we are talking about right now". Here we have found our way to be indignant about this issue by saying, "Look at what they are not doing." This is a little weird, and we need to think it through in a much better way.

We have a few weeks left before Johannesburg, and I absolutely believe it is a danger for our country to have a debacle at Johannesburg. I don't know if you feel the same way as I do. I spend a lot of my time outside the United States often meeting with leaders after U.S. officials leave the room. I stay in the room when the door closes, and I hear a lot, and see a lot. I do not believe that we are perceived to be doing our part. When leaders of poor countries say, "That was really nice, we really thank the United States", I know what they say afterwards. I know what people on the ground say because I meet them -- not the sophisticated people with the spin or the PR, but the people dying, the people that are hungry, the local community groups trying to do something about this. I know what they say, and I do not believe that we can lead the world as we aspire to do for freedom or in a fight against terrorism if we are not also leading the world towards sustainable development.

It's not going to fool anybody to announce another effort of this or that on an insignificant scale. It's not our editorial pages that count. It's not the public's inability to measure magnitudes that counts. It's not enough to proclaim $20 million a year for African education, and dress it up as a five-year program of doubling an insignificant amount of aid to a still insignificant amount. That doesn't count. Unless we begin to address these problems at the proper scale, our foreign policy is deeply jeopardized and the chances for sustainable development in the world are gravely undermined. Otherwise we will continue with the paths of recent years, with profound risks, regions in failure, whole regions in outright conflict and instability, impoverished people dying in mass numbers, and us scratching our heads and asking why the ten-thousandth mission of the IMF to country X has not yet produced a turnaround.

I really think we need to get real. I know we don't want to, and that it would require a different mode of thinking than the one we have been used to for 20 years. We actually have to think about how we could get the job done instead of what we can get by with so that we are not attacked at the summit. That requires a different view. Unfortunately, we don't have enough time to reach the right answers in the next six weeks before Johannesburg. So we need to reach something a little short of the right answers, but not something quite so hopeless for the world as our current stance.

Let me give you a modest suggestion. I think as a country we need to find the determination to help lead to solve these problems. That's the first point. We are not there yet. We have to actually believe that we want to solve these problems.

Second, we have to understand that these are not merely volitional problems of bad people abroad doing bad things. Instead they are structural problems of the sort that I have been discussing. These problems are complex and require new approaches.

Third, we have to understand that solving these problems is going to cost money. Boy, do the politicians hate that. But is the problems are not going to go away with a nice speech. We are not going to end the AIDS pandemic by dribbling out money in big announcements. The people that are dying know the difference, whether we do or not. This government, as far as I know, has never even internally tried to write down a real plan of action. The kind of numbers that we are getting -- two hundred million here, three hundred million there -- are pulled out of thin air. As an expert, I can tell you that. I challenge anyone to tell me where a plan of action is, because I am quite, quite convinced it does not exist. We require real resources to do this work.

Fourth, we need a framework to act. I think it's not so hard to find the basic framework. We do not have time right now to go through a whole analytical litany, but what I'd tell you would not be very surprising. Indeed, I'd find a lot of it in the President's speeches without follow-up by action. I'd tell you, for example, that there is no chance of development in the poorest of the poor countries unless children have access to health and education. The evidence is really strong on that. I'd tell you that there is no chance of African development until the AIDS pandemic is brought under control. Again, the evidence is really strong on that. I'd also tell you that if we trade away fast-track, or if we trade fast-track by trading away Africa's rights to export textiles and apparel to the United States, we are on a fool's errand.

I would say that there is a framework where investing in basic human needs of education, health, water and sanitation, and other basic infrastructure is essential. It is a framework in which market-based growth can take place, especially from the large port cities of Africa. None of it would be too shocking once one starts thinking about it, provided one actually starts thinking about it in an operational way.

We have no plans in the world for this right now. It's amazing. The Secretary General of the UN identified five main thematic areas for breakthroughs in Johannesburg under a not felicitous but actually useful acronym of WEHAB, water, energy, health, agriculture and biodiversity. He said those are areas where we can make real progress for the world. Issues to be addressed include water for the poor, protection of scarce water resources; energy for the poor with clean energy investment; environmental health, so that millions of children no longer die every year from unclean water or from indoor air pollution resulting from smoke-filled biomass stoves. Other priorities are increases in agricultural productivity in agriculturally stressed regions -- to halt the spread of populations into marginal areas, -- deforestation, watershed degradation, as well as biodiversity protection. The latter is important in order to stop destroying species at what is the sixth greatest extinction rate in the history of the planet, albeit a human-induced one.

As the Secretary Generalís advisor, I have been looking into the five areas of WEHAB. What I have discovered is that there is no plan of action for any single one of them on a global scale. There is no plan in the drawer of the World Bank or some other agency that tells us how to get water to the one-point-something billion people in the world that don't have access to it. There is no plan suggesting what could be done at scale to address the biodiversity challenge. Why is that? The answer is that we have not asked this question for a long time. Itís like when you're on autopilot and you don't look for directions, I guess. In my eyes this is a disaster.

I know that the main reason why we haven't asked these questions is that we were afraid that the answer coming back is that it would cost more money. The great pretense of our age is that the rich don't have to do anything for the poor besides donating phony amounts, and I'll put the $200 million for the Global Fund into the category of phony amounts since it only corresponds to 70 cents per American in FY '03. I can show you in five minutes why we need at least 10 times more than that so we have to ask ourselves what are we doing? We are afraid to look not at what will pass but at what is needed. We are just afraid to look.

We shouldn't be afraid because not only do we need to solve the problems, but also the amounts required to do so are not so big when you look. That's the deep tragic joke in all of this. We are so rich that if weíd look systematically at what is really needed we'd say, "Is that all? What's this fuss been about all this time?" That's the deep joke: weíre afraid to look, and if we did look we'd find out that it's all quite manageable.

For two I looked on behalf of the World Health Organization into what it would really cost to address the health crises that are killing millions of people every year. Think about how we have responded to some thousands of deaths, and then think about 20,000 deaths every day from preventable or treatable causes in impoverished countries. It turns out that the amount needed is around $25 billion a year from the rich world. Does that number scare you? It shouldn't. We're a $25 trillion rich world economy, so this sum represents merely one-thousandth of our income. That is one penny out of every $10 of our income. By really addressing AIDS, malaria, TB, and other killers with one-thousandth of our income we would save millions of lives every year. However, we have been afraid to even ask the question, or, I have to say, to read the paper when others ask the question.

The report that I chaired got a lot of resonance around the world, but not so much resonance from Washington. It seems that people don't want to read. They don't want to find out. It's too inconvenient to do so even though the answer is actually enormously favorable. I am not here to sell you a crushing burden; I am here to tell you that these problems are manageable, if we address them. In this light it is amazing that we, the country that wants to lead the world, haven't even asked anyone to look for an answer to these challenges for years.

So, what do we need to do during the next six weeks, since we are not going to get good reports on each of these five areas? In my opinion we -- that is the United States and the other rich countries -- need to agree to global initiatives to address these challenges at a global scale. We need to stop pretending that USAID pilot projects or specific projects in this or that country are addressing these problems at anywhere near an adequate scale. Instead we need to agree to global initiatives at a global scale, and we need to agree with other rich countries that we are going to commit the necessary resources to do so. For example, we could have the World Bank create trust funds for us to collaborate; or we could put some of the IDA funds as special contributions to water, energy, health, agriculture, or biodiversity. In addition, we could make separate pledges. For all of this, however, we need the agreement that we are going to look truth in the eye, and that we are going to commit to reach a global scale to face these problems.

Next, since we have not been addressing these issues at scale for the last 10 years, we need to commit to doing our homework now. We have to go to Johannesburg and say, "The dog ate my paper, but I am really going to do the homework this year." We need to say to all of the poor countries, "You develop plans of action. We will work with you, and we will commit to being your partner to achieving the Millennium Development Goals that we have committed to with you in these areas." We need to make the political commitment to follow through.

It is important to note that no plan made in Washington alone is going to solve all these problems. This is because the local context, as I have stressed, is the unique feature that has to determine much of the shape and contours of such a plan. What is needed from Washington is the global commitment to respond to the local plans of action with a scaled response that is meaningful.

As the inventor of the United Nations, we need to stop shunning the United Nations, or pretending that it is a foe of America's freedom of action. Instead we need to invoke the international system to say, "Come back to us as one of the member countries and not just one of them but really the world leader. Come back to us with a conceptual framework that can knit together the country actions with our pooled financing commitments and a sequence of steps so that we can do the job."

At Johannesburg I think we have time to create a framework of action that isn't seen as empty and doesnít just consist of lecturing countries to be better governed. We need some good governance, too, to be real partners and to use our wealth, our knowledge, and our technology effectively. We need to honor our umpteen but so far broken commitments to be effective enablers of development. We must leave Johannesburg understanding that there is a path ahead with American finance behind it, mechanisms of action, country-level responses, and a timetable. Secretary O'Neill would call this a business plan. I firmly believe in this, but it's just what we precisely have not been doing on our side.

Finally I would like to stress that in the end it's going to be our brainpower as well as our capacity to cooperate that will allow us to address the two greatest challenges: clarity of thought and knowledge, as well as cooperation. There are plenty of uncertainties, and I do not want to leave you with the impression that we really understand everything that needs to be done. We understand the directions in which to move, but there are going to be lots of surprises, and there is a desperate need for new and improved science and technology in every one of those areas. Fortunately, we are in the middle of the greatest scientific revolution in history, and the capacity to mobilize science and technology is greater than ever before. However, for the same reasons that I have stressed earlier, science does not automatically get mobilized for these problems any more than money does through the markets. We have to make the decision to invest money to find out how to sequester carbon or how to make coal burn cleanly, which would both be of incredible benefit for us and the world. We have got to invest in understanding biodiversity, and we also have got to invest in new technologies for fighting AIDS, malaria, and TB.

We have to understand that part of our global commitment is to put our resources and our shoulder to the wheel to do the things we can do. We need to support the poorest countries in reality, not just in PR. Together with them we need to look seriously at genuine business plans, not just at whatever we think is the least possible amount that we can announce in Johannesburg. We also need to invest in the knowledge, which will be critical in seeing our way through this very challenging century.

Thank you for giving me the opportunity to share my thoughts. I am grateful for all the work that you in the State Department do. We depend on you, and I am sure you are going to get it right. Thanks a lot. (Applause.)

Question and Answer Segment:
Mr. Lang: Professor Sachs, on behalf of the Secretary's Open Forum Distinguished Lecture Series, I would like to thank you for that compelling and insightful presentation. Please give him another round of applause. (Applause.)

As we open the question-and-answer segment of our program, I'd like to ask you as a courtesy to please come to one of the microphones and state your name and organizational affiliation before posing your question or offering your comment.

I'd like to begin this segment of the program. Professor Sachs, meeting global challenges such as those posed by HIV/AIDS will require much more than public investment. In fact, earlier this week, Secretary Powell and Secretary Evans joined a distinguished panel of experts for an Open Forum Conference here on public-private partnerships in the global fight against HIV/AIDS. Having told us in your view what our government hasn't done, I would like to hear you comment on the role of business in working with government, labor, the NGO community, and foundations to leverage resources to address this problem.

Mr. Sachs: We live in a world, for good reason, where a lot of the knowledge and technology that I talked about resides in our private sector. That's the beauty and strength of our economic system. If we are going to address the AIDS pandemic, for example, we have to get these wonderful antiretroviral medicines to the people that need them. Those are medicines that were typically discovered by American companies, often in partnership with the National Institutes of Health. Hence the basic science, the applied science, and the drug development are a public-private partnership in and of itself.

We could not solve this problem without the cooperation of industry. I have been working with CEOs of the major companies for the last three years in trying to encourage them not to be philanthropists, which they are not fundamentally since they are profit-making companies, but to actually be able to respond to the crisis as a partner of a public effort in ways that are both good business and good for the world. The drug example is perhaps the cleanest example. Our patent system allows drug prices to be marked up far above costs, based on the correct idea that it's that mark-up that provides the incentive or the fuel for research and development. Countries that impose price controls on drugs at artificially low levels end up with less research and development being undertaken. Such research is expensive and very long term. It typically costs hundreds of millions of dollars to develop a new drug. As a result, of course, the antiretrovirals were priced at around $10,000 per patient per year in the U.S. market. Since we're a rich country, we could afford that, through health insurance, out-of-pocket expenses, and a lot of government support. We have spent many billions of dollars a year to help our own HIV-infected poor obtain antiretroviral treatment.

However, at those prices, the drug companies obviously were selling nothing essentially in Africa. For this reason others and I made the argument, "Well, it's clear there is a win-win here. How about selling your drugs in low-income countries at cost, say, at roughly $300, to donors that would buy them and help make them available to impoverished people? Through selling at cost, you wouldn't lose money. You wouldn't make money either, but you wouldn't lose anything relative to your current position. The advantage would be that your drugs would save millions of lives. In addition, you would get out of the line of fire of the anti-globalization movement, which can't quite understand how these drugs are around whilst millions of people are dying." Such so-called differential pricing is an example of how a public-private partnership would work.

I know that the private sector will do that. They have already come around to that in individual announcements. But even they didn't understand why their drugs didnít move once they had cut their prices. They thought, "Okay, we've done it. We did what the activists wanted us to do. Our prices are now cut, but why we are still not selling anything?" They didn't understand the African non-market, because they didn't understand how impoverished Africa is. Even at $300 or $500 per year you cannot sell the drugs, since we are talking about the poorest place in the world.

Whatís still missing in that public-private partnership is the public side. We need our pharmaceutical industry to stand with the president of the United States and the secretary of State in the Rose Garden to announce a partnership. According to this plan our companies would provide these drugs at cost. The U.S. government and our other partners will then buy these drugs and make them available to the poor. We will save millions of lives and we'll fill stadiums around the world with people saved by the President of the United States. These people will know who they are, since they will be the ones taking the drugs. We will make a difference for them and for us. It's an easy call. Still, somehow we haven't gotten that meeting in the Rose Garden yet.

Q: My name is Russell Jones from World Expertise. I am an engineering educator, and I am working to help developing countries pull up their technological knowledge by building engineering schools and enhancing them. My interest is in capacity building. I wonder if you could comment on how we could divert resources from the U.S., the World Bank and other agencies, to build capacity so that these countries learn how to fish instead of having us give them fish.

Mr. Sachs: Thanks. Of course as someone in the education business myself, I am a big believer in capacity building, and think that we should put that at the center of what we are doing. However, I tend to view capacity building not as stand-alone, but as something you do as you are solving problems. For example, if we scale up AIDS treatment, we would do a lot of capacity building by training doctors and nurses. We would achieve full medical or nursing schools, workshops, partnerships, apprenticeships, and so forth.

In general our problems in our country are solved by industry-university-government partnership on many issues. When we have an environmental problem in a region, the local universities get involved, the government gets involved, and the private sector gets involved in a three-way partnership. It is vital to support similar kinds of partnerships in poor countries.

However, I guess what I would not do is argue principally for capacity building per se. Instead we need capacity building in the context of the scaling up of solutions to the problems that I have discussed. Then people would be doing real things, and they would be learning how to do them better.

Q: Thank you. Ben Fairfax, Department of State. I'd just like to hear your views on I think some possible obstacles to implementing the program that you set out, and some of the tensions. First of all, in the area of real resources, as you know the U.S. has a tremendous and growing current account and trade deficit. Unfortunately since 9-11 a potential government budget deficit. We have economic problems we are going through now. As a result of all of this, of course, the U.S. is heavily dependent upon foreign capital investments, debt, loans and so forth. In the context, how do we get the necessary political consensus in this country to spend the kind of resources you are talking about?

Secondly, a question concerning potential tension between development and sustainability. As you develop these poorer countries, they are going to be using more natural resources, more energy, and so forth, and they are going to be producing more waste products. All other things being equal, doesn't this put more strain on sustainability?

Thirdly, in the area of AIDS, what has been talked about at this point is putting a lot of -- considerable money into supplying drugs to help people in these poor countries with AIDS/HIV. Certainly this helps to extend their life. It helps to mitigate the symptoms -- maybe they can work longer and so forth. But this is not really a cure. These people still have this disease. So how does this really solve the real problem of HIV and AIDS, and how does this relate to solving the problem of preventing the spread of this further? Thank you.

Mr. Sachs: We seem to have been able to figure out how to raise money for everything except poor people in this country. (Applause.) A few weeks ago, seemingly out of the blue to us city folks, we voted $180 billion of agricultural subsidies, with hardly a murmur. I won't go through the litany of other things that we found money to spend on in the last couple of years. Somehow we went from $4 trillion of protected budget surpluses to the plea that we can't do anything for the poorest people of the world. Something is wrong in that equation.

What I have found is that there is no time, whether it's boom or bust, whether it's the greatest wealth increase in the history of the world, whether it's the peace dividend or war, when the explanation is not, "Well, we can't do more for the poorest people in the world." This is not true and it is not good foreign policy. We find ways to spend additional billions of dollars on everything else. It's just on this particular issue that we find we are bound by limits.

Given our $10 trillion economy, we could actually do it if we cared to put aside another penny out of every $10. Do you know what the joke is also? The public wouldn't blink, because the amount is so small. It's not even a huge political problem. When the President rightly announced the Millennium Challenge Account earlier this year, there wasn't a huge public outcry, even among the conservative right. Aside from a few aficionados like us, it barely made notice, because we are so rich and only talking about pennies. There is no budget constraint on this. Just take a small fraction of the $4 trillion that we found our way to use up. The serious answer to your question is that you could fit the required amounts into our budgetary capacity if you care to do it. It has got to be a national priority, which it has not been so far. The problem is that no administration -- I am totally bipartisan on this, I hope you understand -- in recent history has gone and asked for a plan of action. This is what we need now.

On the question of AIDS, the third part of your question, a lot of people in this country and probably many people in this room, take pills every day to keep themselves alive. We don't say, "Well, why do that?" That's what medical treatment is. Somehow this just becomes not right when it's poor people taking pills every day. By letting these people die we are creating a continent of orphans, which you people are going to have to deal with in foreign policy terms for the next generation. It is not going to be a nice picture.

I am all with you that we need better interventions, like finding an AIDS vaccine. This is where investments in science can make a big difference. However, the idea that an African is not cost effective at $300 a year is one of the most profound blunders of our foreign policy that we've incurred in generations. We are just blowing it through bad analysis.

The second part of your question was --

Q: There seems to be a tension between development and sustainability.

Mr. Sachs: I think that that's actually not quite right. The rich countries are actually the ones that are afforesting. The rich countries are the ones cleaning their water. The rich countries are the ones that have fewer particles in the atmosphere. They are the ones that can afford to take care of these problems. It's not true that development necessarily leads to a deteriorating environment. Poverty is itself one of the major inputs to environmental unsustainability.

Nevertheless, the link between development and environment is as you say in one critical area, and that is man-made climate change due to emissions of greenhouse gases. In this case it is basically true that higher economic development under current technologies is met with or is underpinned by higher fossil fuel burning. However, that is not a dilemma but a problem. We have to find new solutions to this that make sense.

Science will play a huge role there, because finding ways to have safer fossil fuels is both feasible and a high priority. The President himself has wisely said that. Still, we are not investing in the necessary science at anything like the scale of the problem. This is another example where the speeches are terrific, but only a small program is created, which is completely incommensurate with the challenge. So the first thing I'd say is that we need massive investments in science.

The other thing that economics teaches, which is a heretical thought in this country, is that when you have external effects of your actions, markets won't handle them. I believe -- and I'll duck as I say it -- that we are going to have a carbon tax in this world sometime during the next generation. I am not holding my breath, but I believe that it is the right policy. It is the right answer, and we'll eventually come to it when the hysteria dies down.

Mr. Lang: We have gone beyond our allotted time, and I'll take the final question from you.

Q: Mike Bosshart, Office of Recession Affairs in the Department of State. You cited a figure of $25 billion a year to address one letter of the five-letter WEHAB acronym. Do you have a cost estimate, ball park or otherwise, for addressing all five letters of that acronym, one? And, two, do you have a cost estimate for the sustainability of the global commons element, the other part of global sustainability? And is the total as risibly low as you seem to suggest?

Mr. Sachs: The answer is no, there is no comprehensive number, but there is a strong reason to believe that it's well below one percent of our income. I think that it is probably on the south side of a half a percent of our income. Just to give you a round number, right now we in the rich world are spending 0.2 percent of our GNP on ODA, which corresponds to $50 billion a year. The 0.7 percent target, which the United States has never endorsed, but which is the internationally accepted norm for development assistance as a share of rich-country GNP, would result in $175 billion a year. It would therefore make room for an additional $125 billion. $60 billion of this amount would come from the US, because we are currently at 0.1 percent of GNP and on our way to 0.15 percent. As everybody knows, we have the lowest share of income that we devote to development assistance of all the donor countries in the world.

A number of us have tried to obtain rough estimates for the annual amounts required. A really comprehensive approach to education looks to cost probably 10 to 20 billion dollars; health will require $25 billion; and energy, as a proxy for rural development, will arguably cost $10 to 20 billion, in order to make a very significant impact in a lot of places. These numbers that I'm suggesting are all based on one idea, which has not been at the heart of our way of operating. The idea is to target the poorest of the poor instead of middle-income countries, because I do believe that resources are scarce. We should therefore direct them to those who really need them instead of focusing on what is convenient at the moment or what generates the highest headlines, which tend to be the middle-income countries instead of the poorest of the poor.

In summary my guess would be that the number that was floating around in Monterrey of $50 billion extra assistance would actually allow for a tremendous if not fully comprehensive approach to all of these problems. This is the number that Chancellor Gordon Brown, the Secretary General, and others talked about. It would cover a tremendous amount of rural infrastructure quite comprehensively -- water, sanitation, roads, agricultural productivity, together with health and education. An additional $50 billion would raise ODA from 0.2 to 0.4 percent of rich country GNP.

The biodiversity challenge is probably not a huge price-tag issue. It involves some significant increase in scientific investment, but probably on the scale of a few billion dollars a year, not tens of billions of dollars.

At this point the cost of addressing long-term climate change is anybody's guess. If we can achieve scientific breakthroughs on clean fuels, for example, this is clearly the way to go. I have a colleague at the Earth Institute at Columbia, a physicist and chemist at once, who, among others, is working on carbon sequestration. This could be a wonderful thing if it works, because it says, "Burn that coal, and we'll sequester the carbon that comes from it." We then would not have to give up on the ten gigatons of coal that we have sitting under Montana and West Virginia, which would make Senator Byrd and Senator Baucus very pleased. I think this is a great strategy. However, we are hardly investing any money in this science right now, even though, the thermodynamics, chemistry, and kinetics look right.

On the climate change issue I would add that the President is right in one major dimension, which is that we need to know a lot more. But then we have to act on the logic of that, which means very heavy investments in biomass energy, carbon sequestration, energy efficiency, renewable energy, and so forth. That ought to be a major theme of American science and American industry.

Q: Thank you.

Mr. Lang: We'll have to leave it there. I'd like to thank you once again, Professor Sachs, for that illuminating presentation. And I'd like to thank all of you for your thoughtful questions and comments. At this time, it gives me great pleasure to present to you, sir, the Open Forum's Distinguished Public Service Award. I want to commend you for all that you have done, all that you are doing to underscore imperatives for helping the poorest of the poor invest in the future, our shared future, and for attending more thoughtfully to the global commons. Congratulations. (Applause.)



Released on September 6, 2002

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