American Power and Development

April 12, 2005

Edited transcript of remarks, 04/12/05, Carnegie Council-Eckerd College "America and the World" Lecture, St. Petersburg, Florida.

Introduction

PROFESSOR WILLIAM FELICE: Good evening. It is my pleasure to welcome you to this final event in our series called "America and the World: Ethical Dimensions to Power." This series is a result of a partnership between the Carnegie Council on Ethics and International Affairs and the International Relations and Global Affairs Program here at Eckerd College.

The series is also sponsored by Colonel Christian L. and Edna March, and President Don Eastman, who highlighted these Carnegie speakers in his Presidential Events Series.

Speakers in our series were asked to reflect on different aspects of America's moral legitimacy in the world today and the moral hazards implicit in a clash between how the United States—currently the world's sole superpower, with great potential to do both harm and good—is viewed abroad and the belief Americans still have in its values and international policies.

Our previous speakers have related these ethical dilemmas to American power and human rights, American power and empire, and American power and justice. Our speaker tonight will discuss the ethical dimensions to American power and development, and the role U.S. policies could play in international development and the alleviation of severe poverty.

There are few people as qualified to discuss American power and development as Dr. Nancy Birdsall, the founding President of the Center for Global Development, which is dedicated to reducing global poverty and inequality through policy-oriented research and active engagement on development issues within the policy community and the public. A principal focus of the Center's work is the politics of the United States and other industrialized countries that affect development prospects in poor countries.

Prior to launching the Center for Global Development, Nancy Birdsall served for three years as Senior Associate and Director of the Economic Reform Project at the Carnegie Endowment for International Peace. Her work at Carnegie focused on issues of globalization and inequality, as well as reform of the international financial institutions. From 1993 to 1998, Dr. Birdsall was Executive Vice President of the Inter-American Development Bank, the largest of the regional development banks, where she oversaw the $30 billion public and private loan portfolio.

Before joining the Inter-American Development Bank, Dr. Birdsall spent fourteen years in research, policy, and management positions at the World Bank, most recently as Director of the Policy Research Department.

Finally, Dr. Birdsall is the author, co-author, or editor of more than a dozen books and monographs. She has written more than seventy-five articles for books and scholarly journals. Please join me in welcoming the president of the Center for Global Development, Dr. Nancy Birdsall.

Remarks

NANCY BIRDSALL: Thank you very much, Bill. I must say it is really a great pleasure for me to be here in warm and sunny Florida. I feel very privileged to be, I think, the fourth and last—at least this year—in what is really an impressive series. I have always been a great admirer of a fellow institution, the Carnegie Council on Ethics and International Affairs, and I hope I prove to be a worthy successor to your last speaker, Joel Rosenthal, who is the President of that Council.

I am also really touched to find this gem of a liberal arts college on this gem of a peninsula here in Florida, and to learn a little bit from the students who shared dinner with me.

Let me, before I start on what I want to say, mention briefly the mission of the Center for Global Development, which I head. It is to reduce poverty and inequality in the world. We think we can make a difference, in a small institution.

We do it in a very particular way. We worry and plot and do a kind of shaming and naming and blaming game on the policies of the rich countries towards developing countries, policies that, therefore, affect the lives of billions of people in the developing world; and also on the policies and practices of the major global institutions, like the World Bank and the World Trade Organization and so on, that through the rich countries' influence, also affect the lives of people in that world.

So we think of ourselves as missionaries. We are hardheaded missionaries, because we are analysts, we are scholars, we are researchers. But we think of ourselves as missionaries to change the world. I say that, even though we are a very small institution, because I want to end up with a plea to you here to think about global issues, even if they seem so global and so large and overwhelming that it is hard to see how to do it.

I am going to be talking in three parts. First, I will give some long introduction that folds together what you might think of as the "soft power" challenge that the United States faces, given a world in which American power is still important and domineering. It is a global world. We are living with globalization, and we are living with the challenge of development. So the first part is linking these things: globalization, development, American power.

Then I am going to talk about four failures of America's soft power with respect to the development challenge. That is diagnosis. I will give you a long series of ideas that boil down to diagnosis about failures.

Then I will end, in the third part, on what the United States could and should do. As sometimes happens, that is shorter. I say the challenge is to go more effectively from diagnosis to what should be done. But that is an ongoing challenge.

So let me start with this issue of globalization and its link to the relevance of American power to the development question. You all know that globalization is a double-edged sword. It can have, and has had, tremendous benefits for many people. The notable example that development economists invoke is the huge reduction in poverty in two of the world's poorest countries—big ones, too—India and China, over the last fifteen years. Because of growth in India and China, and development's success, we have seen major reductions in the numbers of the world's poor.

But it is a double-edged sword. Globalization has also brought tremendous risk, associated with the communications revolution, and so on. You can think of those risks in two categories. One is what you might call conventional security risks: terrorism, which we have all been thinking about very much since September 11, 2001; weapons of mass destruction, nuclear proliferation and the threat of infectious disease; the problems of drug trafficking, money laundering—the kinds of risks that have increased as the cost of bad behavior has declined.

Then in addition to those conventional security risks, there is a set of what I would call a new kind of risk. Sometimes it is defined as a risk to human security. That would include the risk, the way I think of it, of leaving to our children and grandchildren a world that is even more unequal than the one we live in today.

We do live in an incredibly unequal world. The wealth and income levels of rich countries like the United States and Scandinavia, in Northern Europe, is one hundred times, on average, in real terms, the average income level in countries like Ethiopia, Nepal, much of Africa, and some parts of Central America. That gap was about 10:1 a hundred years ago. It is a 100:1 today.

That part of the effect of globalization is that growth in some places has left other places so far behind. But if you think of it in terms of our children and grandchildren, it is best to ask, do we want them to live in a world in which there are not 2 billion people living in absolute poverty, as is the case today, but as many as 4 billion, if current trends continue, outside of China and India, for the next forty or fifty years? A world in which we are now projecting that within ten years there will be 28 million orphans in Africa because of the AIDS pandemic? Poverty is at the heart of the AIDS pandemic, and thus of the tragedy of those children without parents. So that is the new human security risk.

The question, then, is whether America is using its power not only to capture for Americans the benefits of globalization, but to reduce the two kinds of risk (conventional security risks and human security risks) that globalization has brought and to guarantee a better world, a more secure, more prosperous world, a less unequal world, a world where fewer people live in poverty.

Another way to put it, of course, is, is America using its power to ensure that there is economic and social development in today's poorest countries? That is the question that I reframed in response to the request to talk about American power and development.

Now, what do we mean by "development"? I know that all of you have studied it and thought about it. I am going to give you fifty years of economists' thinking about what the development question is and what the answer is. It has gone through stages. In the beginning, after World War II, the idea was that the problem of development was essentially one of increasing infrastructure, physical capital, such as roads, in developing countries.

After a decade or so, when that worked only in part, it yielded to the notion that perhaps the problem was a lack of investment in human capital: in people's education, in health, and in women, in particular.

After another decade of worrying about infrastructure, agricultural development, human capital, the question became, maybe what we need to do is deal with countries' bad policies. Many developing countries are running state-led governments, and they are not harnessing the power of the private sector. So the problem is adjustment, the need to introduce market reforms. That was essentially the big push in the 1980s that perhaps some of you have studied, the period of adjustment loans from the World Bank and the IMF [International Monetary Fund], for example.

Sometime in the 1990s came the idea that we need to target the poor. It is like peeling the layers of the onion, going deeper and deeper. The problem is that not enough money is reaching the poor. I would say, by the mid-1990s, although all these things seemed to contribute, none of them, in some countries, were really working. The bottom line today, at least—but I think it is a real serious way of thinking about it—is that fundamental to the success of countries that are now poor is the creation and consolidation of sound institutions, both political and economic—good government, a central bank that is working, appropriate expenditure management, the rule of law, enforcement of contracts, property rights—all of these institutions that we take for granted in an economy like the United States.

So that is the development challenge. How did China do it? How did India do it? How is Vietnam doing it, even today? If we could understand how they did it—and there wasn't any simple cookie-cutter recipe—maybe we could provide some help to Malawi and Mali and the Maldives and Mauritius and Nepal—some of the world's poorest countries.

So that is the development challenge. Now, what is the paradox of American power in addressing that challenge? First, I would say there are two things to keep in mind that are troubling about our inability to use American power so far.

The first is that we are the military hegemon still, without question, spending threefold more than all other countries combined, on military power. But, obviously, military hegemony and hard power are not enough. They are far from sufficient to deal with this question of political and economic institutions—how you do microcredit in poor countries, for example, how you ensure that doctors are in health clinics with the necessary drugs when poor people arrive with sick children. That is one problem.

The second problem: We do have tremendous market power. We are still the single largest economy in the world, just a wee bit smaller than new and old Europe combined, than the European Union with its newest states added. Of course, the Europeans have trouble acting together. So without question we are the single largest economy in the world.

But our market power is no longer as overwhelming as it was in 1950, by a long shot. It does seem as though our military hegemony, combined with market power that is increasingly threatened by Asia and by a rise in Europe—that odd combination seems to be discouraging collaboration at the international level with other countries on the range of issues that affect the developing world—trade, environment, aid itself.

At the time of the Marshall Plan, the United States,was 95 percent of the foreign aid game. By the 1960s, it was still 50 or 60 percent in terms of money spent on foreign aid. Today the United States is closer to 15 percent of all the money spent by all the donor countries, through all the United Nations agencies, by all the non-governmental organizations. So we are not preeminent anymore in the use of one kind of soft power.

So that is the challenge, really—how to convert our hard power and our potential soft power more effectively into ensuring development in the poorest countries. I want to say a few words about what you could call a soft power strategy that the United States government currently has. There is a quotation from the National Security Strategy, issued by the Bush Administration in 2002, which basically says, "A world where some live in comfort and plenty"—that is us—"while half the human race lives on less than $2.00 a day is neither just nor stable. Including all the world's poor in an expanding circle of development and opportunity is a moral imperative and one of the top priorities of U.S. international policy."

In fact, this National Security Strategy is built on three legs: defense, diplomacy, and development. The problem is that it is more rhetoric, so far, than reality. But it is there, at least, so we constituents and taxpayers have something to build on.

With that as background, let me go to part two, my four failures in the use of soft power for development in the United States. I am going to talk about these failures in these four categories: development assistance, development-friendliness, our approach to weak states, and U.S. leadership (or lack thereof) in the global institutions.

Let me go to the first failure of soft power, which has to do with our level of development assistance. I am going to tell you a little bit about what this chart is telling you [see powerpoint, which can be dowloaded at the top of this document]. The top line, the pink line, shows the absolute amount of spending by the U.S. government starting in 1962 through 2004, and projected to 2008, in 2005 dollars. So these are real dollars in 2005 terms. What it is saying is something about the trajectory of spending on foreign aid. What you see is, looking at the left axis and going with the pink line, we went from more than $20 billion of spending in 1962 down to $10 billion in 1998. Under the Clinton Administration, actually, we reached a near-low over the four-year period. It has now recovered under the Bush Administration, slightly, to about $16 billion. That number excludes our spending on Iraq, obviously. You know your numbers on Iraq.

A warning here about politics and development spending. I have a colleague in the Center who did a study of the conditions under which development spending is most likely to increase. It has two parts. One is that when the same party is in the White House and in Congress, you increase the likelihood of more spending. When that party is the Republican Party, you increase the likelihood of development spending. It is a surprise to many from the blue-states part of the country. I am not sure whether Florida is blue or red.

But what I want you to focus on, actually, is not the top line, but the bottom line, the yellow line. What that tells you is the amount of spending by the United States as a share of our gross domestic product—in other words, as a share of our economy. Of course, our GDP has grown tremendously over forty years. But basically, what the yellow line shows you is that spending on development assistance has not kept up. Development-assistance spending has fallen from about 0.7 percent of GDP in 1962 to 0.15 percent of GDP today.

Some of you may know that there is a well-known survey among development experts which asked Americans, "Do we spend too much on foreign aid?" The answer was, "Yes." "How much do you think we spend on foreign aid?" The answer was, "Ten percent of GDP." Then these people were told that we are spending much less than that. "Should we spend a little more?" "Oh, yes." So we are confused, as taxpayers, about foreign-aid spending. It is actually very low, and it has been declining as a percent of our economy.

The dotted line is development as a percent of the federal budget. You see there that that has also been declining.

So we have what you might call "aid malaise" in this country. The aid budget is very low in per-capita terms. You see here on this picture that—well, it's a little confusing, but the fact is that in 2002, the United States was twenty-first of twenty-one OECD members [Organisation for Economic Co-operation and Development] in the amount spent on foreign aid. Here it shows that we are nineteenth of twenty-one. I urge you to go our Website to puzzle out that inconsistency. The main message is that we are very low amongst our allies in our spending.

The administration has asked for $419 billion for military and defense; $33.6 billion for all international affairs, including diplomacy; and $16 billion for development assistance. This development assistance that has increased under the Bush Administration, including the Millennium Challenge Account, which I would be happy to answer questions about, and the President's new program to combat HIV and AIDS, is fundamentally unilateral in spirit.

I will come back to that a little bit later. If I don't, I would be happy to answer questions about it. One of the problems with our aid approach is that there are more than sixteen agencies of the U.S. government involved in the delivery of foreign-assistance programs. So on the one hand, we are quite unilateral, and we don't really work very effectively with other donor countries, but we are quite diffuse and uncoordinated internally. Of course, the big agencies for foreign aid are USAID, the Millennium Challenge Corporation, which is a brand-new bureaucracy set up under the Bush Administration to implement this Millennium Challenge Account, and the Treasury is actually also very important. It is not much discussed, but it is very important because it is the Treasury that represents the United States at the World Bank and International Monetary Fund and all the regional development banks—the African Development Bank, the Inter-American Development Bank, where I worked, and so on.

Let me go to the second failure of soft power, which is to step beyond the simple story of money and aid, and look at the broader set of policies that constitute what you might call development-friendliness—or unfriendliness. To do that, I am going to use an index that we have developed at the Center that has become a signature product. We issue it once a year. We have done it twice. Our third edition will come out in the September issue of Foreign Policy magazine. We call it the Commitment to Development Index.

What this index does is, it assesses the efforts of rich countries on a range of policies that affect the poor: aid, of course, but also trade, investment, migration. I am going to talk about each of these in turn. It ranks policy efforts that affect all of the developing world, from the relatively better-off developing countries, like Brazil and Mexico, to countries like Bangladesh that are at $1,000 per-capita income, to Ethiopia and Nepal and many other countries that are at per-capita incomes under $500 a year, so well under $2.00 a day.

You see here that in our 2004 index, based on 2002 data, the United States tied for 7th out of 21. I am going to talk a little bit about each of those components. There is a more general picture, which you can also see on the web site. You see there that the United States is, starting from the right, about a third of the way in, showing our rank at 7. The worst country on this index, as measured last year, was Japan, and the best was the Netherlands.

How do we rank on each of the measures? I am going to say a few words about each one in turn.

You see there that on aid we are ranked 19. Actually, that reflects a couple of things. I will answer questions about it rather than trying to explain the distinction between 19th and 21st, which has to do with the quality of aid. That component measures not only quantity, but also quality. But let me talk about the other ones.

Let me start with trade, which is, of course, a very big issue. We were discussing at dinner with the students what happened in Seattle some years ago, the protests against progress in multilateral legalization of trade regimes. In fact, the United States ranks better than any of the other rich countries in terms of our approach to trade. Essentially, this part of the index measures the openness of rich countries to products and services from the developing world: How accessible are our markets?

The problem is that, although the United States ranks first, it is really only relatively speaking that it ranks first. Its top ranking has much more to do with how really terrible Europe, Japan, and several other countries are than how good we are. Let me tell you a little bit about how we are not so good, what our shortcomings are. I am going to mention four examples.

The first is that, although we have low tariffs overall—again, especially for many manufactured products from the developing world—we have very high tariffs in two key areas for poor people in the world. These are agriculture, and textiles and apparel. These are key areas for poor people because they are very intensive in unskilled labor. These are the areas where the poorest and least educated people can get a leg up. They can get jobs, they can get income for their families, and they can begin to acquire some skills—at least acquire income.

We also have what are called escalating tariffs, which basically boil down to, that as the value-added of a product grows, we tend to increase the tariff against it. For example, we have low tariffs on cocoa, but a much higher tariff on chocolate.

We also are among the worst sinners in our use of what are called antidumping and other non-tariff barriers to entry. We have a very active private sector, and companies often go to the government and say, "You have to protect us from a developing country's dumping its products on us." Because of the way our legislation is set up, it is not only easy for companies to do that, they actually are encouraged to do it, because if they should win a case, they actually receive the money; the penalty is paid to them directly.

The second area where we are very bad that I want to say a word about is agricultural subsidies. Here I have a couple of examples. In 2002, the U.S. Congress passed something called the Farm Bill, which awarded an additional $12 billion in subsidies to agricultural producers in the United States. Eighty percent of those subsidies go to large agribusiness firms. Those subsidies are not going to family farms. They are going to the rich and powerful.

There are two sugar companies in Florida that benefit from subsidies. These two companies, together, receive over $120 million a year in sugar subsidies.

What is the effect on farmers and consumers in developing countries? The problem, of course, is that subsidies to our agriculture keep prices relatively low on the world market. They lead to overproduction here of cotton, of rice, of wheat, of other subsidized products. That reduces the prices on the world market and means that farmers that otherwise would be competitive in producing cotton—in West Africa, for example—cannot get a leg into the market, so they lose the market and they lose their chance to have higher incomes.

It also means that in their own markets, in places like Mexico, the price of, say, corn is too low to create an appropriate market in which maize farmers in Mexico can make a living. So we wreck local markets for corn in Mexico, for rice in Ghana, and we crowd out developing-country producers from third-country markets, including, for example, in Europe, with our subsidies.

The fact is, the Europeans are even worse. Some of you might know the famous factoid about agricultural subsidies, which is that every cow in Europe is worth about $2.50 a day to its owner in subsidies. That is higher than the average income of 2 billion people in the world. Every cow in Japan is worth close to $7.50.

So those are two trade downers in terms of U.S. policy.

A third downer is our approach to intellectual property rights. This is controversial, but most economists would agree with me, at least on the concept, that the idea of intellectual property rights—namely, awarding patents for new products and new processes—the idea is to balance innovation, the incentive for innovation, through the use of patents and other forms of protection which protect producers with the need to ensure that consumers have access to new products at reasonable prices. It is a tradeoff between the producers and the consumers. The concept of intellectual property rights is to find some balance in which you create incentives for creative new products while not permanently harming consumers of those products.

The problem with intellectual property rights for the poorest countries in the world is that they basically don't have production; they don't have the potential yet to do their own creative development of new medicines, new agricultural products, new manufacturing products. They are basically consumers of new products.

The classic example, of course, has been the tremendous fight over the price of antiretroviral therapies, to deal with the AIDS problem, to treat people with AIDS in the developing world. Because of public pressure, those prices have come down, but it is also because of competition from India, a country which, until a few months ago, did not need to accede to the pressure at the international level to implement patent legislation, to have a tough intellectual property rights regime. The United States, because of the pressure from pharmaceutical firms, has been, unfortunately, the greatest champion of insisting that developing countries implement very tough IPR regimes.

Finally, there is, on the part of the United States, what I call bilateral bullying in trade. This refers to the reality that when the United States develops a treaty with one country, like Chile or Jordan, or a group of countries, like the Central American Free Trade Agreement, which is now being discussed in Congress, it is a bit of a bully—in fact, it is more than a bit of a bully. Essentially, what it does is, it pushes hard for those countries, independent of their own interests, to open their capital markets, to let in the insurance and financial industries from the United States. It is pushing hard for those countries to institute the intellectual property rights regime.

It may be that it is sometimes in the interest of some of those countries to do those things, but, essentially, they do it only because they cannot afford to pass up the opportunity to improve their access to the biggest, richest, most dynamic market in the world. In the case of many poor countries, like those in Central America, they actually have now some access under special preference arrangements, but they are desperate to lock in those preferences which we are unilaterally granting and can be revoked at any time. They want to lock them in, in a formal treaty approved by Congress.

So the situation is one of extremely asymmetric negotiations in which the big market becomes a bit of a bully.

Let me go to migration. You see that on migration that the United States ranks second in the world. The idea of the migration measure is to capture the openness of different rich countries to immigration, to people from the developing world. Why is that? Why do we see migration of people into rich countries as essentially a good thing for development? What out-migration does, particularly when it is out-migration of unskilled people, is it reduces the army of the unemployed in the sending country, thereby raising the average wage.

More important, for the people who move, of course, it increases their welfare tremendously. A taxi driver who leaves Ethiopia and gets off the airplane in Italy instantly has a sixfold increase in his income. That is why people want to move. The difference is simply the better infrastructure, the better legal arrangements, better access to credit, and so on—better roads for taxis, for instance.

Migration, of course, also generates an opportunity for remittances, and many developing countries now depend heavily for foreign exchange and for income on remittances from their out-migrants who are in rich countries. It generates the possibility that people will return with higher levels of human capital, new experience, and will bring investment to the countries from which they came—which we see very much, for example, in the case of Silicon Valley Indian-Americans, who are going back and catalyzing a lot of the investment in the so-called outsourcing work and computer software work in places like Bangalore.

So we measure the openness of developed countries to migration. The United States does reasonably well. In fact, measuring just legal migration, we are second in the world.

There is a problem, though, and that is that the United States is leading, at the moment, other rich countries in the one part of openness to other people that is risky for development—the kind of poaching, through special visa arrangements, of highly skilled, highly educated people from the developing world. As development economists, we would not say, "Don't do that," because there are such great gains to the people themselves, and because their contribution to the global economy is greater when they can be in a more productive environment. However, we would say, in the absence of sharing tax returns, of making arrangements so that some of the costs borne by peasants and workers in the sending countries to educate those people—so that some of those costs are somehow transferred back to those countries—we have a situation that is fundamentally unjust.

With the failure of any critical mass of educated people pulling together in small countries, especially in Africa, to generate the institutions that I referred to earlier that are key to development, the United States leads the world in creating special programs to attract skilled people.

Next, let's look at security, where we rank only 11th. Some might be surprised that we rank only 11th; some might think, how can we rank 11th when we are doing things like intervening seemingly arbitrarily around the world? But, in fact, this index uses various approaches to measure the contribution of rich countries to a more secure global trading system, and more global security in general, in terms of contributions to peacekeeping, money spent to protect sea lanes, and so on. The United States contributes more than 50,000 personnel, involved in interventions in Haiti, the Balkans, and Afghanistan. But our contribution is quite small, given how big we are and for our economic size.

The invasion of Iraq is not counted in the security measure, but our intervention in Afghanistan is.

[Gap in recording]

On the environment, the United States does very badly because we have the highest emissions of greenhouse gases per capita in the world; we have very low taxes on gasoline, which figures into the way we count the index; and of late we have not been very cooperative yet with other countries on a deal like the Kyoto deal.

On investment, the United States ranks sixth. That measures policies that facilitate investment flow to developing nations and policies that help avoid abuses, like bribery, corruption, environment, and labor, that foreign investment can bring. There, we are okay, but not great.

On technology, we get mixed marks. Our technology index measures total government subsidies for research and development as a share of GDP, because it is that research and development that has generated products like the Internet, health technologies, vaccines, and drugs that have had huge returns. Despite what I said about malaria vaccine [inaudible], new technologies created in rich countries have had tremendous benefits for improving health and raising life expectancy in the developing world. It is fundamentally research and development, often subsidized by the government, that has brought that about. In addition, there is research and development on agriculture that has generated the Green Revolution, which raised food production dramatically, high-yielding rice varieties and so on, in India more than twenty years ago, and elsewhere.

The technology measure also assesses—well, let me leave it at that. I think what it fails to do, what it cannot do, is deal with the issue I raised earlier of intellectual property rights. That is because there has been an agreement, pushed heavily by the United States, which now, at least on paper, makes all the rich countries' policies look the same. Some of you might know it. It is called the TRIPS policy, [trade-related aspects of intellectual property rights] under the World Trade Organization.

Let me go to the third failure of development policy, of soft power policy, which is the U.S. approach to weak states. we produced a report at the Center for Global Development called On the Brink, which essentially criticizes the U.S. approach to the fifty or sixty low-income countries in the world that are suffering from one or more capability gaps: a security gap (an inability to maintain a monopoly on the use of force)—these would be countries like Sudan today, Mali sometime in the past, the Congo, Angola, Colombia, because of its drug problem—a capacity gap (an inability to provide basic public goods, such as health and education); or a legitimacy gap (the inability to protect citizens' basic rights and freedoms).

When you look across the world at these fifty or sixty countries that face at least one of these gaps, you are talking about hundreds of billions of people. Just to give you an idea of the range of what we might call state weakness, the failure of institutions in the developing world: it runs from Somalia and Sudan, which you could call really failed states, to good performers, including Mozambique, Senegal, and Vietnam, where performance is fragile and institutions are still vulnerable to setbacks.

This is to give you a sense of how complicated—or how "unstrategic"—is U.S. policy towards weak states. We have several problems in the way we address weak states. We don't spend very much on development assistance, which is a form of prevention. We don't have instruments to intervene quickly when there is a crisis and help people. We don't have training of our military in peacekeeping, which is a kind of soft power. We don't have resources to help countries that have come out of conflict to demobilize their combatants, that demand the ending of child-soldiering and so on. We often fail to use our membership in the United Nations and other multilateral organizations to take leadership on weak-state problems.

Then we have the morass of policymaking on development, which affects the way we deal with weak states. What we could do is invest more in prevention, preauthorize rapid-response capabilities, establish a cabinet-level agency on development and security that would take into account this problem, and support international cooperation more effectively. I am sure a lot of you have been reading about the nomination of John Bolton to be ambassador to the United Nations and the kind of exposure that has brought to the past rhetoric. It is not just this administration, but a long history of kind of flailing about, when it comes to the United Nations.

Finally, the fourth failure is that of U.S. leadership in the global institutions. I think it is fair to say that the United States has eschewed leadership in reform of the voting structures that would have made the World Bank and the IMF more legitimate, with more representation of developing countries. It has been a little bit of a bully on those issues — or, at best, a holdout.

Rather than belabor it, I am going to go right to part three, in two minutes: What could we do about these failures to use our power effectively—our soft power—to improve the lives of people around the developing world?

In a word (or in a number of words), on aid policy, if we put more money into development assistance, we would be taken more seriously when we do good things. We could have more leverage for what are some good ideas, like the Millennium Challenge Account, which I didn't explain, but you might ask about.

We could address the second failure, development-friendliness, in simple ways, but hard ways politically. We could make a deal on agricultural subsidies. We could make a deal on a multilateral solution to the global warming problem. We could make a deal on issues like intellectual property rights. We could contribute on things like vaccines for example—the Center has a report about an initiative for vaccines, where the United States could take leadership.

To address failures three and four, I want to summarize it under this broader idea—at least the spirit of the idea—of establishing a cabinet-level development agency. Many countries in the world have cabinet-level development agencies that deal with this kind of problem and make it possible for them to coordinate internally, so that they can then better collaborate with other countries in international fora on development questions.

Let me end, not with trying to summarize what I know has been a lot of material—perhaps too much. It is a grand subject, development. That is both the pain and the pleasure. I think the issue about America's soft power, in the end, is the need for much more enlightened leadership.

To go back to where I started, I think we have to see this as something that is in the interest of the United States. That is the way people usually think about power, as something that you use in your own interest. However, it is also a moral and ethical imperative. There comes the need for us to exploit much more what I would call our soft power, to guarantee human development and human security, and in a way, I think, for the students here, to take up the challenge of ensuring that in 2050, when there will be 9 billion people in the world—8 billion living in today's developing countries, only 1 billion living in the rich world—there is much more encouragement of cooperation between those two worlds that are now much too far apart.

It is something that, because it draws on hardheadedness and soft-heartedness, I hope the students here will give serious thought to. If you care about global justice, in the broad sense, you have to care about putting the light back in the eyes of mothers, ensuring that girls go to school in the poorest countries in the world, and ensuring that your grandchildren don't live in a world in which some people manage, miserably, on less than a dollar a day and other people have all the privileges that we have here in this country—and especially here at Eckerd College.

Thank you very much.

 

Questions and Answers

QUESTION: I have a question about the agriculture subsidies that you talked about. How can you reduce them and sustain private farmers here?

NANCY BIRDSALL: Right. Would it wreck the family farm in the United States? Would it deprive millions of farmers here of a living? Basically, probably not. If the subsidies were wiped out tomorrow, there might be some small farmers who would lose out. But the irony is that it would be for the short term that they would have adjustment problems, because probably what would happen is that there would be a reduction in the value of land, which would make it possible for them to buy more land. Actually, many small farmers are constrained by the difficulty of acquiring land. They are competing with these big agribusinesses. That is one way to think about it.

As economics students, you know that if you take away those subsidies, you reduce the value of land. Small farmers could actually end up better off. There is no question that there would have to be some form of transition assistance. But at the moment, it is not correct to think that these subsidies are fundamentally supporting the little guys. They are fundamentally supporting the big guys, since most of the value of the subsidies goes to relatively few large agribusinesses or corporations. That is why they are so hard to get rid of, because the big guys have influence and power.

QUESTION: I am going to ask a gender question. I am wondering if you can speak a little bit about how gender is incorporated into the project with which the Center for Global Development is involved, and also how gender is involved in the decision process that you use when you make decisions about those projects.

NANCY BIRDSALL: I was the head of the United Nations Task Force on Education and Gender Equality, which was part of the larger Millennium Project that led to the report some of you may have read about, under the leadership of Jeff Sachs, that was released this year. So I have been personally engaged in the gender issue. We did that report, in fact, with a sister organization—not a brother organization; a sister organization—called the International Center for Research on Women, which specializes in women and development.

We actually have a project going on right now about girls' education. We would like to incorporate better into the index I mentioned the extent to which donor countries take into account the gender issue in their approach to working with developing countries.

Within my own organization, I'm the boss, and I'm a woman. Actually, of our dozen or so research fellows, four or five are women, in fact. Our director of financial operations is a woman. So we are actually quite gender-ideal, I think.

QUESTION: My question is, with the upcoming spring meetings of the G8, IMF, World Bank, do you see anything new or earth-shattering coming out of these meetings, especially related to putting that light back in the mother's eyes, as you talked about?

NANCY BIRDSALL: I would say I'm not very hopeful that there will be anything grand coming out of these spring meetings, which are this weekend, of the IMF and the World Bank. But I do have some hope that at the G8 summit in July, hosted by the U.K., there will be some breakthroughs.

I suspect that at the spring meetings, there will be some quiet discussion of several ideas. One that you might have heard about is a proposal for debt relief for the world's poorest countries and to finance that, in part, through the sale of IMF gold. I co-authored a book, the first book that we published at the Center, called Delivering on Debt Relief: From IMF Gold to a New Aid Architecture.

We are working very hard right now to put out some short notes that clarify the issue and to talk with our colleagues in the U.S. Treasury and to work with colleagues in the U.K. treasury on pushing ahead with the gold sales and with whatever hope there is for increasing debt forgiveness to as much as 100 percent. Our proposal is that that be done for countries that have income per capita under $500. If you do more than that, you end up, probably, robbing Peter to pay Paul—using resources that otherwise would go to other poor countries, in an imbalanced, unfair way.

So that is one example. I guess the other one is this malaria vaccine advance market commitment that I mentioned. Watch for that. If that works, we would be very excited. We would call that a homerun for the Center, because we really have been champions of that idea and have developed it. If that goes through, our tiny little group would want to take a lot of credit.

QUESTION: I have what may be a complicated question. Today you went over the Sachs and Birdsall report, where you made several recommendations on how to alleviate poverty in some of these countries where it is severe. The recommendations were very good, for the most part, and innovative—except for recommendation number one, which I found interesting, because the report came out in 2005, and in the first recommendation you talked about implementing U.N. Millennium Goals strategies within poverty-stricken nations by the year 2006. I am confused on this, because a lot of the poverty-stricken nations are a long, long, long way off from meeting these strategies anywhere in the near future, especially in sub-Saharan Africa.

So I am wondering if there is something that I don't know or if there is something really big that can be done to implement these strategies. Or is it just a grand recommendation?

NANCY BIRDSALL: Let me say a quick word about Millennium Development Goals, to try to clarify. The Millennium Development Goals were a set of commitments made by both rich and poor countries in the year 2000, at the United Nations, where there were over 140 heads of state, including the United States. They are a set of goals that include reducing poverty by half by the year 2015, reducing infant mortality by two-thirds, ensuring that every child gets through primary school, and so on. Most of them are to be reached by 2015.

One is to be reached by 2005. I think that is the one you are referring to. That is that there should be the same number of girls as boys enrolled in school, in primary, secondary, and tertiary school. That will not be reached. There will be failure on that first goal, the gender-parity goal.

The report that you are referring to, for others, is about making operational a strategy that would enhance the chances that developing countries could reach these other goals, as well as the gender-parity goal, by the year 2015.

We have done a lot of work at the Center on these Millennium Development Goals, including the task force I led. In addition, I have some colleagues who wrote a paper called "The Trouble with the MDGs," which I encourage you to look at, which talks about the difficulty of imagining that these are realistic goals, in some respects, for some countries, and the risk that we will call those countries failures when we get to 2015 if they haven't reached the goals, even though they may have proceeded more quickly than any country ever, including the richest countries in the world, by historical standards.

The Millennium Development Goals are just that—they are goals. They have a deadline. They are concrete. They can be measured. They can be monitored. I think most important of all, they recommend a compact, a deal, between rich and poor countries, in which poor countries also have obligations, particularly to clean up their governments, to reduce corruption, to minimize bribery and patronage, to institute the rule of law, to have sensible macroeconomic policies. That is their side of the bargain, to which they are firmly committed. The rich countries' side of the bargain is to fix aid, trade, migration, environment, intellectual property rights, and [inaudible] policies. I hope that addresses in part what you asked.

QUESTIONER: Maybe I could clarify that. I am aware that, as far as the Millennium Development Goals themselves, they are not supposed to be met until 2015 or afterwards. But in that first recommendation, you talk about poverty-reduction strategies, as outlined by the Millennium Development Goals, being implemented in poverty-stricken nations by 2006. That is where I am confused.

NANCY BIRDSALL: I think you might be referring to something a little bit different, which is that the report—in every country, there is something developed called a poverty-reduction strategy. It's a plan. The report says, by 2006, every poor country should have developed this plan for poverty reduction, which takes into account the demands of reaching the Millennium Development Goals. They don't need to get there. They are supposed to have a coherent plan by 2006.

QUESTION: I would ask you to either verify—or maybe I just don't understand. You were talking about the issue of migration and how the United States has implemented programs, and such programs bring in individuals from other countries, and how that is an economic problem for other countries. But I would argue that the problem of brain-drain is just as much of a problem, if not more so. I would ask you to talk a little bit more about the brain-drain effect on development in other countries.

NANCY BIRDSALL: Let me give a couple of examples that are troubling, and maybe they will illustrate the point. Of all the graduates of universities and colleges in Africa in the last twenty years, more than 50 percent are living and working outside of sub-Saharan Africa. So the poorest region in the world is taxing itself to get a few people through the tertiary level of education, and half of them are outside of Africa. It's a problem. It's not a simple problem. Some of them return with more human capital, more experience. Some of them will return and invest in their own countries. But many of them won't.

Of nurses in Malawi, there are only 20 percent from the stock of ten years ago who haven't already left, who haven't gone to England or the United States. English-speaking countries in the poor world are losing many of their health professionals because of the tremendous increase in demand and the much higher wages in the rich world. This is a global dilemma.

It is not a simple thing to fix, nor is it one where you want to make rules and say nurses should not leave Malawi, because if the health system is falling apart in Malawi, they can't be very effective there.

It is a great example of the crying need for some kind of international collaboration on rules that would make it possible, for example, for nurses and others to remit taxes back to Malawi, to ensure that it has more resources to go on with training. And to make it easier for people to go back and forth—imagine in the United States, if you enter illegally, with skills, you don't leave, because if you leave, you might not get back in. So our barriers to immigration actually make it more difficult for people who do get in to contribute in their own countries in some way. We are undermining connectivity. I hope that answers your question.

QUESTION: I read a piece you wrote about the Wolfowitz nomination. You compared it to the controversy surrounding the nomination of Robert McNamara. I was wondering, do you think that Wolfowitz will be effective as World Bank president in shaking things up there, as the Bush Administration refers to it, and how the LDCs [less developed countries] are perceiving what the message is from the Bush Administration on his nomination?

NANCY BIRDSALL: It is very hard to predict how Wolfowitz will be. It is one of the toughest jobs in the world. I think we will be surprised. I think he will be reasonably effective. The risk that he might bring because of being a Trojan warrior for unilateral U.S. approaches will be greatly reduced by the tremendous constraints of moving what is a great big elephant of an institution—think of it as a great big ship. To turn it a little bit takes a lot of time, energy, consensus building, and so on.

I actually don't think that it is a good idea to hope that Wolfowitz will "shake up" the World Bank. The World Bank has had many reorganizations where boxes are moved around, in efforts to try to address internal management challenges. But, in fact, the World Bank is probably a lot better run than was Enron, than was AIG, than was the Pentagon implementation of the Iraq intervention.

So it is not a question of shaking up the Bank. In my view, it is a question of leading the shareholders of the bank—the United States, the Europeans, the Japanese, and emerging market countries like India and China, and the poorest African countries, together—to make some fundamental changes in the instruments the Bank uses; the role that it plays in leveraging private capital; the question of whether there should be independent evaluation of the World Bank's work, which doesn't happen much now, as opposed to insider evaluation; the problem of the growing irrelevance of the Bank for countries like China, which means that its income will be reduced to support what is a brain trust for sharing best practice across countries.

So I am an admirer of the World Bank, but also a proponent of change there. But the most important changes don't have to do with internal management and shaking up the boxes. They have to do with changing the way the Bank is governed. How can it be, when most of the world's poorest countries are in sub-Saharan Africa, of forty-eight members of the World Bank, they are represented in two of the twenty-four chairs of trustees who make decisions at the World Bank, the board of directors? It doesn't make any sense at all. China has fewer votes in the World Bank than Denmark or Belgium.

So we have a situation in which there does need to be change, but I don't think it is the kind of shake-up that maybe the Bush Administration has in mind. Whether Paul Wolfowitz will take those steps, we must wait and see. Did I answer your question? You look unsure.

QUESTION: I was wondering what the LDCs are thinking about this?

NANCY BIRDSALL: Oh, right. I think it's interesting how quiet they are. It reflects their lack of voice now. My view is that they're not particularly happy with the appointment, but they don't want to risk whatever benefits they can hope for through the World Bank in the next five years by making a stink, particularly given that they know that they won't make a difference. Why make noise when you don't think it can matter? You just take chips that you have out of your pocket and waste them.

So I think the quiet from developing countries reflects, if not despair, a situation which isn't good, which isn't healthy—in a world where we have to have these countries at the table to address some of our deepest problems, like global poverty, global warming.

QUESTION: What about the role of the United States in connection with population growth, birth control and so on? I was reading, for instance, that the population in Rwanda in the year 2000 grew eight times faster than the population of the United States. Is there any U.S. role in that respect? Has the Bush Administration put a limit on birth-control information and so on, because of their fear of the increase of abortion?

NANCY BIRDSALL: Let me address that in two parts. The first is to say that I think the problem of population should be thought of more as a problem of lack of choice for men and (mostly) women in the developing world, to manage their own future, including the number and spacing of their children. If you think of it in demographic terms, it is true that there will be more growth of population around the developing world, but it is also true that there has been a tremendous decline in fertility in almost all countries of the world. Even in Africa, fertility has fallen. So the trend is downward. People are voting with their feet, to find ways to reduce the number of children they have—I think, in large part, because of the growing understanding that it's better to have fewer children and invest more in them, in the near future.

In this context, the United States played a big role in the 1960s and 1970s, but then, beginning with the Reagan Administration, the policies of the United States in developing countries have been more and more vulnerable to pressure from the conservative side, including the religious right, which has been very concerned about abortion. That has been carried over to concern about birth control and family planning. I think this has been a complete disaster, frankly—speaking of the gender issue—for women in developing countries. It is a disaster for development because it is reducing choices in a critical way.

I would add that right now President Bush's initiative is something called PEPFAR, the President's program for AIDS reduction. It is a very large new program to combat the AIDS pandemic in the developing world. But even in that program, there is a little bit of this problem of pressure from the religious right, which has led to a tremendous emphasis on abstinence, in what is called the ABC approach to a reduction of the AIDS pandemic: "Abstinence, Be faithful, use Condoms"—ABC.

You go to developing countries—I was in Mozambique last month—and many of the programs financed by PEPFAR, including for high school students, are doing the A and the B; they are not doing the C.

So this is an area where all of you can make a difference, in my view, by exposing the problem and taking a stand, writing your congressmen, saying, "If you care about reducing global poverty, if you care about people, if you want to give them choice over their own lives and create opportunities for them to lift themselves out of poverty, then you need to monitor and attend to this", as well as the larger range of policies I've discussed.

Thank you all very much.

VOICE: On behalf of Eckerd College and the Carnegie Council, I want to thank you very much, Nancy, for the presentation. It does demonstrate the complexity of development. Thank you.

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