How to Help the Poor

How to Help the Poor

 

By Lawrence H. Summers

 

Washington Post- Sunday, April 16, 2000 ; B07

 

Thousands of activists are in Washington this weekend because they believe that the international financial institutions meeting

here have a profound effect on people's lives around the world--and because they believe that few if any issues today are as

important as support for inclusive global economic development. They are right. All who are meeting here this weekend have

similar ultimate objectives. The differences are about how best to achieve them.

 

There are now 1.3 billion people living on less than $1 a day. It is precisely because it is so morally important to lift people out

of poverty that it is incumbent on all of us to think carefully and rigorously about the right strategies for economic development.

No country has lifted itself out of poverty in the postwar period without integrating itself with the rest of the global economy and without putting in place the right policies and institutions. Countries that have been more open have grown faster and more

equitably than those that have elected to cut themselves off from the global system.

 

Experience also teaches that succeeding in an integrated global economy requires getting certain choices right. It teaches that

we need to focus on the kind of policies that will deliver growth and generate the resources required to address the needs of all

the people. This, in turn, requires macroeconomic stability and the right monetary and fiscal policies to deliver such stability. It

requires key investments in health and education and basic public infrastructure. And it requires strong institutions and policies

to ensure that resources go where they are intended and both combat corruption and support a functioning rule of law.

 

The World Bank and the IMF are not perfect. They have, however, had a positive effect on the lives of millions of people. To

take just one example: The World Bank was crucial to financing the fight against river blindness, the transmission of which has

been halted in 11 African countries. As a result of eradication efforts over the past 20 years, more than 30 million people are

now protected from infection, and 185,000 who were already infected have been spared from going blind.

 

At the same time, as President Clinton emphasized at the World Economic Forum in Davos, if war is too important to be left

only to the generals, then economic policy in an age of integration is too important to be left to those who are concerned only

with commerce. The capacity to build the right kind of integrated global economy will not depend just on the success that

national governments have with their economies. It will also depend on developing the right kind of broader institutional

framework in which global integration can take place.

 

This is a challenge that has been and must continue to be high on the global agenda. In large part as a result of U.S. pressure,

the World Bank and the IMF have worked to become more effective in their core mission, and more responsive to public

concerns. For example: Key program documents and a vast array of data are now published on the World Bank and IMF

Web sites as a matter of course. The World Bank now requires environmental assessments, public disclosure and consultation

with affected people before it will move forward with any new project. Both institutions pay increasing attention to countries'

basic budgetary choices, notably, the adequacy of spending for health and education and excessive spending for unproductive

activities such as the military.

 

This weekend the World Bank and the IMF are taking several new steps toward building a more effective institutional

framework for integration that works for people. These steps include: ensuring that resources freed up by debt relief in the

poorest countries will be channeled directly into poverty-reduction programs; ensuring increased support for education so that

more children in the developing world are able to go to school rather than work in the fields or workshops; and the creation of

more rigorous monitoring and evaluation procedures for the activities of the international financial institutions themselves.

 

All those in the nation's capital this weekend--whether inside or outside the official meeting halls--are united by a common

concern for the plight of the world's poor. Their situation is unlikely to improve without additional international resources. And

the reality is that developing countries can gain such resources in essentially two ways: by exporting their products to the rest of

the world and by attracting and retaining private and official finance. From that perspective, there could be no strategy more

certain to keep these countries impoverished than seeking to deny them both routes to a better quality of life. We must not let

global integration happen without strong institutions that make it work for people. But we must let it happen.

 

The writer is secretary of the Treasury.

 

2000 The Washington Post Company