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0:01
>> Andrew Samwick: Ladies and gentlemen, I'm Andrew Samwick, the director of the Nelson A. Rockefeller Center here at Dartmouth College and it's my pleasure to welcome you to this afternoon's lecture Ending Poverty in Our Generation - Still Time If We Try, by Professor Jeffrey Sacks. Professor Sacks is the Rockefeller Center's Class of 1930 Fellow for this academic year. The Class of 1930 Fellowship was established by the membership of the class to continue the tradition begun
0:27
by President Ernest Martin Hopkins of bringing distinguished men and women to campus for brief visits. Professor Sacks is the 34th name to join a distinguished list that includes Nobel Prize winners, Supreme Court Justices, global statesmen and leading academics and public intellectuals. In addition to this afternoon's address, Professor Sacks visited earlier today, with the students and Professor Marjorie Rose's macro-economic class and spoke informally to students from a number
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of online campus groups focused on politics, public policy and leadership. I first met Professor Sacks when I took macro-economic and international finance from him as an undergraduate at Harvard, some 22 years ago. It was clear from even the first few lectures that this guy had a lot more going on than the typical faculty member, even on such a distinguished faculty. At the time, he was deeply engaged in the problems of developing country debt and in particular, the challenges
1:26
in a number of Latin American countries in which weak political institutions and deep social divisions made the usual remedies proposed by creditor nations unsustainable. Professor Sacks became a highly sought after policy advisor with his recommendations consistently recognizing the challenges beyond the simply economics and the need to push back against the austere recommendations of the international financial community to protect vulnerable populations
1:54
in developing countries from falling further into poverty. As a 19 year old aspiring economist, I cannot help but be inspired and I could only marvel at the fascinating way that someone had chosen to use his PhD in economics. In the intervening decades, Professor Sacks has stayed true to these virtues, but expanded the domains of his expertise and policy advising far beyond these beginnings. During this time, he has been at the forefront of the challenges
2:22
of economic development, poverty alleviation and globalization, promoting policies to help all parts of the world benefit from expanding opportunities and well being. He is also one of the leading voices for combining economic development with environmental sustainability. Now, the director of the Earth Institute at Columbia University, he leads large scale efforts to promote the mitigation of human induced climate change.
2:49
Redistribution of resources is a fact of human existence. In the area of climate change, the redistribution is clear and unavoidable. There is very little scope for mutual benefit when one party uses up a resource or contaminates the resources that others might seek to use during the course of its economic activities. Without a restructuring of the rules, there's very little hope of an equitable outcome, but in the area of global poverty alleviation, there should be room
3:17
for mutual gains from trade. The challenges to balance the decentralized activities of nascent private markets gets, with some centralized design for reinvesting the proceeds of those activities and socially useful goals that lift everyone out of poverty. Views of how to meet that challenge differ quite a bit in the economics and policy advising communities. Professor Sacks has been a leading advocate for the United Nations millennium development goals, which were agreed to in 2000 and aimed
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at dramatically reducing extreme poverty, disease and hunger by the year 2015. From 2002 to 2006, he was the Director of the UN Millennium Project and special advisor to then UN Secretary, General Kofi Annan on those goals. He continues to serve as a special advisor to UN Secretary, General Ban Ki-moon. He is also president and co-founder of the Millennium Promise Alliance, a non-profit organization aimed at ending extremd global poverty. We look forward to hearing Professor Sacks' views
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on how attainable such ambitious goals are in 2010. In addition to his role at the Earth Institute, Professor Sacks is the catalytic [assumed spelling]professor of sustainable development and professor of health policy and manage at Columbia University. The list of honors he has received for his academic and professional work is long and distinguished. He is the author of two New York Times bestsellers, Commonwealth - Economics for a Crowded Planet and The End
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of Poverty - Economic Possibilities for Our Time. I'm delighted to see so many Dartmouth students in the audience today. Every Dartmouth student, since the end of World War II has been confronted by the timeless quote from President John Sloan Dickey, "The world's troubles are your troubles and there is nothing wrong with the world that better human beings cannot fix." Born just eight years after those famous words were first uttered, there are very few people that embody them
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as well as our guest today. Ladies and gentlemen, please join me in welcoming Professor Jeffrey Sacks. [ Applause ] >> Jeffrey Sacks: Thank you so much. [ Applause ] >> Jeffrey Sacks: Thank you very much. Andrew, it's nice to know what a wonderful thing came out F-1430, you and it's a joy to be here. Thank you to Dartmouth for the invitation and to the students for a great day. All day, we've had some fantastic discussion already and I'm looking forward to more this evening so I'm very,
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very grateful and I love that quotation of the Dartmouth president because that's exactly the point. These are solvable problems and they're actually not -- they're complicated, but they're not that hard to solve and when it comes to poverty, we actually have a lot of wind in the sails because it a little weird to be in the year 2010 with all of the technology that we have, all of the capability and skill to have places in the world that are in extreme, extreme duress.
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In other words, if I were giving this talk in 1810, it would be kind of dream talk, although there were some dreamers of the enlightenment who believed that the problems of human poverty, which had afflicted human society forever and forever, could be solved. But here we are in 2010 and I find the question of ending poverty on the one side, really not so surprising, I just find it weird that there is still extreme poverty right now with all the tools that we have
7:13
to do something about these scourges. And in fact, a lot of my thinking has been to try to understand why it is that we still have places on the planet, in a way and I use the metaphor frequently, are trapped, in a poverty trap. It seems odd. It's not the normal situation in the world to be in extreme poverty. It's the exception now. It's in fact, becoming more and more of the exception. Thank goodness. Economic growth works. Markets work. Technology does lead to human advance though,
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if it's used wrong it can also lead to a lot of problems, but some parts of the world for complex reasons have been stuck and I want to explain a particular view of that that I've come to in my 30 years of work on this. It's not a view that was automatic or obvious for me. In fact, generally, in my life, until I saw things with my own eyes, I didn't understand them. My imagination wasn't good enough and economic theory has too many theories, by the way.
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They're all very clever and the hardest part about economic theory is actually not making a new theory, it's choosing among the hundred that exist to try to understand which ones are applicable, at which times and in which places. And when I saw more and more of the world and saw more and more of the economic progress and contrasted with places that were still stuck, that's when I began to develop some of the thinking that I have tried to employ and deploy during this past decade
9:02
of the Millennium Development goals. Those are the ideas that I want to share with you this evening. Why I think ending poverty isn't a matter of fate on the one hand. It's not a matter of what economists would call your differential equation system, which just tells you growth is going to do this and that to you, or it's not the inevitable result of a market economy. Though market economy is necessary and it helps, but it is something is within our grasp if we're clever about it.
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And from the point of view of the United States, well, we actually have a couple of paradoxes here. First, we have poverty in our midst that's very serious and that's a social shame and it's also unnecessary. And I'll come back to that later because we better reflect about the U.S. reality, as well as, the world's reality.
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The kind of poverty I'm talking about though is more extreme than the very real poverty that we have in the United States. I'm talking about the poverty that's so extreme that it is a matter of life and death survival for the poor and where millions of very poor people die every year, not recognized by us. Nameless without headlines and not even attributed to poverty, but really deaths from poverty, from chronic undernourishment, from lack of access to an $0.80 dose
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of anti-malaria medicine and so forth. That's the kind of poverty that I'm focused on, but the fact of the matter is, I don't want to give away punch lines, but the fact of the matter is we're not good in our own country at facing our own poverty and it's not surprising that we're even worse at facing the rest of the world's poverty right now. We've kind of reached in our society a blind spot where we don't understand poverty and we don't want
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to think about it, our politicians don't use the terms. If you listen to President Obama or any of his political opponents, all we have in this country is the middle class. We don't even want to mention poverty and this is a barrier to our clear thinking about these issues. And I want to try to clarify a few things today. So this is the kind of poverty I see very regularly. This is a place and I'm going to describe this project in a little bit of detail.
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One of the Millennium Villages, which I think some of you have probably heard about -- these are parts and places within Africa where we're testing the proposition that I'm going to speak about this evening, which is the targeted investments can break free -- can help communities to break free from the poverty trap. And this particular community where you see these men digging a whole is in Tigray Province, Ethiopia. So it's in the northern province of Ethiopia on the Eritrean border.
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It's a dry land region, which is the first giveaway because being in a dry land part of the world is almost the ticket to poverty, except if you happen to have oil under your dry land and then it's quite different, but if is you're dry and just scrub, it's a pretty tough life and not coincidental, but there would be poverty. This day really shocked me because we were led out to this area where these men were digging and I was asked,
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"Do you know what they're doing?" And I did not know what they were doing and I didn't know where we were exactly in the village. It turned out that this is a river bed in the village, but the river has run dry and it's run dry partly because of climate change, it seems because the short rains in Tigray Province had become shorter or non-existent over the years -- in recent years seeming to be because of long-term climate change, though, of course,
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it's only after a much longer statistical record that you say, "You nailed it," but it seems to be climate change
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and population growth at the same time. So more and more water taken out of the smaller and smaller trickle upstream. So by the time you get to this village, there is no water in the dry season for eight or nine months out of the year. And the men were digging the hole in the middle of the river bed to get to the water and they had hired a pump out of the incredibly scarce resources and they were going to pump the fields that day. But basically, this is a drought proned, famine proned,
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impoverished community and the legs are thin and everyone is undernourished and many hunger months a year. And we're working in this community among many places to try to end extreme poverty through targeted investments. And I have to tell you that when we drove here the first time, you go to the regional capital and then you drive on a tarmac for about an hour and then we turned off the tarmac into the bush and drove for an hour. I didn't know that was still the road, actually,
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because it didn't seem to be the road, but there was a little bit of road and then we turned one more time -- boom, boom, boom, just rock, not even level and went for another hour and my colleague sitting next to me was a world famous soil scientist, was looking out desperate because there was no soil. It was sandy, it was rock and he was just -- you could see the sweat, you know, what are we going to do here. And we had given instructions to all of our colleagues
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around Africa in finding the Millennium Villages, we want hard places. This is to prove the hard stuff, not the easy stuff near the road. And he looked at me and said, "This may be a village -- one village too far." And yet, there's a tremendous amount of progress here. What you're seeing there is changing actually, through proper landscape management and water harvesting at a landscape level and I'll come back to talk about that in just a few minutes.
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This is another site that greeted us in another of the Millennium Villages when we starting working in 2005 in western Kenya. And it is a place that I describe in the end of poverty was the first talk I gave to a community when we launched this project. Talk with the community, I should say. A high AIDS prevalence part of Africa near Lake Victoria. A maze growing rural community, hungry, impoverished, malarious, AIDS-ridden, really tough and this is Yala Clinic six years ago.
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Two patients to a bed. Something I had never seen in my life. In Malawi, I saw three patients to a bed. These are not people who know each other. These are strangers in an overwhelmed health facility and they're infectious too.
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So one may have TB and another may have AIDS. People are coming in a desperate state of affairs to the clinic and the water bottle that you see under -- the jerricans underneath, are water brought by the patients' families themselves because there's no running water in these clinics. It's not like this anymore, five years later, but this is a reality of what extreme poverty means, that even in a health facility there's no water, which by the way is -- cannot be a health facility
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in those conditions. If a nurse or a doctor cannot wash hands between handling patients, the damage that can be done simply by transmitting the diseases is phenomenal. And you walk into a rural clinic in a rural village in a poor part of the world, especially in Sub Saharan Africa and the chance -- I always -- first thing I do is I go to the tap and I turn it and 90% of the time no water comes out and then there's a quick excuse by the director of the facility, "Oh,
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we have water, but it's broken." It's been broken six years maybe, but it's an example of what extreme poverty is about.
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This is a puzzle and the puzzle is a deep one. Why in a world where we have now seven billion people living at an average output person of $10,000 per capita, because that's what the world produces is $70 trillion world product per year and in which most of the world I would say approximately, six sevenths of the world or maybe five and a half sevenths, that 5.5 billion of the seven billion people are in some sense out of the extreme poverty trap.
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Why are there places that are stuck in extreme poverty.
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There is a mainstream view of this is that in some sense, these places have themselves to blame and typically, the way we say it today is that it's the fault of their government. Governments, governments are corrupt, mismanaged, that's why the people are in poverty. It used to be because of the color of their skin. It used to be because of their culture, although that's a latent view that is widely held. And I think that there is a general kind of disdain and lack
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of seriousness, even within my profession often on these issues that it's all blame, it's not really deep enough understanding and frankly, I feel very fortunate that I've had a chance to work closely in these places now for 25 years and it changed my understanding of everything as I got more and more engaged. So first piece of advice, if I can share advice with you is go get engaged, see the world, get involved in problem solving. The books are great. What you learned is tremendously important
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and it takes you maybe halfway to a truth and don't let it ever pretend to take you more than halfway because until you see things with your own eyes, you simply can't get it. I had no idea what the AIDS pandemic was like. I had no idea what malaria was still doing in the late 20th century or early 21st century and I really had no idea about the nature of extreme poverty also until seeing it. But one thing I can tell you without --
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I actually want to show you some of the solutions so I don't want to talk at too much length about all of the diagnosis, but I had the experience pretty deeply over 25 years that the normal explanations that are given just don't sit right when you're actually looking at the problems close up. And the explanations are coming from 10,000 miles away, usually, from Washington or even from our own economics department
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and they're just too far away from reality
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and we miss very basic features. And the thing that drove me crazy is the basic premise of blame the victim one way or another or blame the victim's government because I found over time that I was working with lots of governments. Most of them had corruption in them and I would certainly include the United States in that mix. Quite a bit of corruption and yet, I couldn't find a moral ranking that these poor country governments were so much worse that, that really explained.
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In general, in poor countries, governance is worse in the sense that you don't have information systems, you don't have management systems, you don't have managers with high training and so forth. So there is a problem of poverty because governance cost money also. But the ranking of governments in poor countries, the ones growing and not growing are not a moral ranking as one would sometimes pretend or imagine. And I had this funny experience when I was advising the Bolivian government
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and the Vietnamese government.
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The Bolivian government, at the time, was actually much cleaner and it was doing economic reform and the Vietnamese government was incredibly corrupt -- one party state and Vietnam was booming and Bolivia couldn't get an investment if it gave it away.
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And it wasn't completely a surprise. Bolivia was at 12,000 above sea level in the Alto Plano, not so easy to get to among the highest transport costs in the world. Not a great place to make television sets or electronics. Whereas, Vietnam was right there with this marvelous coast, where Taiwanese or the Koreans or the Japanese could make a fortune with low cost labor in a coastal enterprise near a port in the Asian trade sea lanes for export to the United States.
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So factory after factory was going up. And the commissars were getting their cut.
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But it didn't matter, it was highly profitable. So I said, you know, it's not just the ranking of corruption, thank you. It actually matters if you're landlocked high in the Andes Mountains,
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or if you're coastal near the booming emerging economies. And so on and so on and so on. The main point is pay attention to the realities of the economics. Look at the costs, look at the possibilities, look at at the resources. If you're in a dry land and the drought comes every three years, it's really tough to have enough food to eat. And to have food security. And don't blame that on governance. And if the rains fail more the only governance that's really
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failing is our own because we're creating the climate change that's causing more and more of these crises. So it becomes a little bit more complicated when you get from the blame stage to the problem solving stage. And when you're assigned the task, not of diagnosing the problem only, or writing a good paper about it, but actually trying to solve it. And then you say, oh God, but the governance is okay, that can't be the problem, what's happening here, why, oh there's no road.
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I forgot. Oh there's no electricity. Oh there's drought. Hmm, now what are we going to do about that? Well, we should build the road. Hmm, how are we going to pay for that? No money. Why is there now money? Well, because everyone's impoverished. And you start to see that you've got problems that are a little bit more complicated and more engaged.
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So I came to a view 20 years ago, that we had to crack a set of inter-connected forces in very poor places that were quite complicated.
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Poverty trap, I believe is a useful metaphor. What does it really mean? It means a place that's in extreme impoverishment, as its initial condition.
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Typically, it can hardly stay alive reliably, meaning that infant mortality rates, child mortality rates are high, maternal mortality rates are high, life expectancy is low, under nutrition is rampant.
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Children drop out of school early. It's a lot of the poorest parts of the world, especially, in Sub Saharan Africa and South Asia.
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So saving is lower negative because you can't even survive on your current income much less save from it. Negative saving means that you're running down your natural capital, for example your local resources, you're cutting down trees for charcoal, you're depleting soil nutrients, you're mining the ground water because that's what you use in pumping for your irrigation if you're lucky enough to have that. So the saving isn't even zero, it's negative.
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And typically, there are many forces of disarray. Population growth is very high. Unless there's family planning and contraceptive availability, in a poor place, population fertility rates will be six or seven. And that means a population doubling every generation
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and that's happening in the poorest countries. Already in conditions of environmental distress. Climate change. Environmental degradation of deforestation, soil nutrient depletion, land degradation.
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Inevitability, poor governance but as an outcome, not as a primary cause. You can't govern when you can't tax and you can't pay a proper civil service. You can't pay your judges, you can't pay your police, you can't invest in information systems and so forth. And when you really reach the end of the line, conflict.
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The probabilities of violence and conflict are vastly higher in poor places than in middle income places. And this is causal from poverty to conflict. And recent papers have shown, for example, that in very poor areas of Africa when the rains fail, the probability of onset of conflict rises three or four or five times. And so you have an instrumental variable for the econometricians in the room and that is the rainfall that's showing that causations running from the poverty to the conflict,
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rather than the other way around.
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Now, my thought has been that the way to break the poverty trap is through investment in a diversified set of high return areas.
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Infrastructure, roads, power, water and sanitation, internet connectivity, mobile phone connectivity, all crucial for basic business development now.
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Second, of course, is human capital. And human capital means a safe childbirth, in fact, safe intrauterine development of the fetus, safe childbirth, nutrition and schooling.
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And so it's early childhood development, giving a chance for a child to grow to be a productive and a fully developed member of this society. And, of course, there is the social capital that needs development, whether it's the trust or the political institutions and so forth. But it is to invest, to build a capital base that is adequate for self sustaining growth. What does self-sustaining growth mean? Self-sustaining growth means, like most of the world,
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that you have enough income that you can save, invest in intellectual capital and human capital and physical capital and business capital and infrastructure capital, to keep an endogenous growth dynamic going. And that's possible.
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What's happening in the U.S.? Ah, we forgot to save. We started consuming so much that we actually ended up not saving even though we're the richest major country in the world, we're pretty miserable savers these days, and it finally hit the wall that our low saving creating a financial crisis and so on. That's not intrinsic to us, it's just a little too much consumerism and a little too little saving for our future. And now, massive budget deficients which is another form of dis-saving.
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But once you have a kind of income, even $2,000 per capita, not $46,000 like the U.S. has, you have enough to save. And that can lead to self-sustaining growth. So the idea of breaking the poverty, trap is to lay the base, to raise productivity enough, to get out of the trap.
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In the end of poverty I call it getting on the first rung of the ladder of development. Because once you're on the ladder, you can climb. But if you can't reach the ladder, you can't move forward. This concept I believe is correct obviously, because I go on about it incessantly. But it's not so easily understood apparently, or maybe it's not right, but I think it is. Because I'm constantly asked, well you know, what about dependency and analyst aid and so forth. So you don't get it.
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The whole purpose of the aid is to get off the dependency.
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Because if you give development assistance, not as a hand out of food, that's a bad idea, except if someone's starving, but it certainly allows the long term answer. But if you give the development assistance as investment and at a sufficient scale to actually reach the threshold where self-sustaining growth can take hold, you end the need for aid.
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I'm known as someone who loves aid. I detest aid. I want to be done with it.
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But you can't be done with it if you trickle it out in sub-therapeutic doses so that the country never gets better.
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You actually have to solve the problem, then you can be done with it.
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And then you can -- we can graduate from this era where even those transfers are needed. Now mind you, in -- when poverty is regional within your own country, there are two things that normally happen that are very important. One is migration. People leave the impoverished area and go to the wealthier areas. Second, is regional policy, investing from the richer areas to the poorer areas to break the poverty trap. So generally, if you're within a country and you have an impoverished region,
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maybe geographically distressed, and a booming region, the country will take care of itself through these mechanisms of market forces, basically. But if you're just impoverished all by yourself and you're stuck in the poverty trap, someone better come to help you. That rankles a lot of my fellow economists, because the game is you got to get out of this on your own. I'm not sure why in a rich world, that's the game when people are dying by the millions. So I'd rather do the little bit of help
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to break the poverty trap than to try to figure out the absolutely ingenious way for poor people to be able to survive on their own. And that's what I've been trying to say. So at risk of taking us a little bit of detour, I just want to give you the flavor of the formalism, because this is an academic engagement and I want to explain formally just for a couple of minutes how this works. So imagine a millennium village. And it starts out that the out subsistence, what you need
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to survive is 300 bucks.
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What you need to survive reliably. But the community is living at 200 bucks and you ask how can that be. And the answer is a lot of people die. And that's how life really is in impoverished places. Doesn't mean everybody dies, it means that one out of every five children die before their fifth birthday. Or it means that one out of every 100 childbirths the mother dies.
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So you're at $200. Sub-subsistence. Saving is zero because you can't even reach subsistence. But let's assume that a poor family will save a lot actually for its future, once it's beyond subsistence, like Chinese households.
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Now, suppose also that if you can get your hands on fertilizer, for example, each dollar of input gives $2.50 of output. You say well that's crazy, what kind of return is that? That's the actual return that you can get in many parts of Africa for using fertilizer. Well, why don't they use fertilizer? Because you can't afford it. You're starving. Poor people can't get it. Don't know it, they don't constitute a market.
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And you say no, Sacks, you must be crazy. But just look at the actual results, not at what I'm telling you. Farm families in Africa do not use fertilizer, except in the cash crop plantation areas. Because they're too poor. And there's actually a thousand papers on that point too.
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But it's surprising because the returns are quite high. But there's no financing.
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So and there's no financing because the contracts are also damn hard to enforce with impoverished people.
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So if you can save, because you're above the $300 threshold, then you've devoted to agriculture up to the maximum. And then after that you devote it to other kinds of capital improvements on your farm, beyond fertilizer. Maybe you buy a cow, maybe you buy chickens, maybe buy a chicken coop, maybe you do more irrigation and so on. What's the implication of this kind of poverty trap? If no one comes to help you, you remain at $200 per capita forever. You can't buy the fertilizer.
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You can't invest in it. You just go along plotting and that's how hundreds of millions of people live year in, year out. Really shocking.
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If you are given targeted aid for fertilizer, it raises your output. If you're given enough targeted aid it raises your output above $300 and you start to save. If you are given help long enough, five years, four years, so that you're saving becomes big enough that it can now buy fertilizer at the beginning of the season, out of self-financing, get the bigger yield, sell it, and may get an even larger amount of income afterwards, you've made it.
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And so the point is that in this kind of setting,
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the following happens.
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Purely theoretical. Three scenarios. One is no one gives you help. Second, you get help for two years, and third you get help for four years. So in the no help scenario, you're ODA, that's Official Development Assistance.
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We don't know that term in America because we don't do any of it, almost.
38:36
So here are the three models. The blue is no aid ever. The red is okay, one year or two years of $75 of aid going down to zero. And then the third is three years of $75 aid going down to $60 and then going down to zero. That's just the little illustration. What happens in these three scenarios?
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Income in the no aid scenario is trapped at zero forever.
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Income in the two years of aid is that you jump up, you get a little bit of saving, but it's not enough to get you out of the poverty trap. And when the aid is cut off you come crashing back down to subsistence after a couple of years. If aid is four years adequate, the green line takes hold. And that is that after four years you're on your own. You don't have to look back. You don't need any more assistance, you've made it. You've broken free of the poverty trap. Why is that?
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Because you've reached a level of saving that you can self-finance the inputs each year to be above subsistence to have a surplus to save for the future to make more investments. You've gotten out of the trap.
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That's my point. If we do a little bit, but just enough, it can't be too little because that's like giving a sub-therapeutic dose of medicine. You don't solve the problem. If you give enough, it's temporary and then real market growth. The stuff that applies to six-sevenths of the world then applies to the last one-seventh of the world. Let's help make that last step out. And I've spent now, ten years intensively trying to estimate the costs of what's really needed. It's an unusual approach.
40:43
It's so micro, it's more micro than micro. Because it's really asking what do you need for the health system? What does it cost for those community health workers for that clinical officer, for that medical officer, for the electricity in the place? What is the unit cost? How much is the ambulance? I find that good economics, by the way. My colleagues have their doubts sometimes. Is so intricate. But actually that's how to solve problems in my view is
41:12
to be very specific, very targeted, and to try to figure out what is that therapeutic dose that is enough to break the poverty trap. And the way we're doing this, specifically,
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is in the millennium villages. So the idea of the millennium villages is to actually make these targeted investments in what are now about 15 sites around Africa,
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in all of the major agro-ecological zones. So what's it like in the rain forest? What's it like in the Ethiopian Highlands? What's it like in the dry lands of Northeast Kenya? What's it like in the bimotal [assumed spelling] maze growing area of Western Kenya? What's it like in the unimodal maze growing area of Tanzania? And so on. Because ecology matters a lot. What does it take in each place to get out of the mess?
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It takes more in the dry lands, I can tell you, because you have to pay per irrigation. You have to pay for other things that you don't need necessarily in the other locations. So you want to find out specifically, what's involved. Africa is a very, very big continent. So doing this in one place or another wouldn't be sufficient. Today somebody, sent me this map by coincidence, stressing how big Africa is. You see China snuggles in to southern Africa. The United States into West Africa,
42:47
India into the horn of Africa. This is a very big continent. That's drawn to proper scale. So you can fit China, India, the United States, and Western Europe into Africa and still have a little space left over. And the point is that's why we're operating all over the continent in order to be able to understand, of course, also cultural and governance differences, but also mainly ecological differences. The idea is to achieve the millennium development goals in Africa.
43:24
The eight goals, but mainly the focus on health, nutrition,
43:29
schooling and income which are -- and basic infrastructure, which constitute the objectives of the millennium development goals. And this will be -- I'll leave the PowerPoint for Rockefeller Center, so everybody can look at it afterwards in detail. The five main interventions are agriculture, health, education, infrastructure, and business development. The idea is to make that base so that a few years of targeted investments can create a capital platform
44:06
on which self-sustaining growth can take hold. It's actually a ten year project. The first five years are devoted to the most basic systems building. The second five years, which are starting now, are devoted to the business investment in agriculture. So we're bringing in loans now rather than grants against the business opportunities. And there are specific interventions. That's the point. It's not just a general idea, do nice things, it's actually target the kinds of investments
44:45
that have been shown through decades of both experimentation and actual life to yield high returns. Whether it's fertilizer, high yield seeds, treadle pumps, agricultural extension services in the upper left hand corner. Whether an infrastructure of a cell phone coverage, internet connectivity in schools, road grading, and so on in the lower right hand corner. That's hard to see but you'll see it when you look more closely. Again, a list of very specific interventions
45:17
in the health sector, for example. We have a large health team on the ground. No ex-patriots actually doing anything. It's all village based. Though ex-patriots are part, or not just ex-patriots. I mean it's an international advisory group, but it's all locally implemented because the idea is this is for village development on their own. It's not for parachuting in somebody in to do something, it's for the communities to find their own way out. And the key is very structured systems building.
45:56
So you think about in an organized way,
46:00
what kinds of public investments need to be made to get the roads and the power built. What kinds of investments need to be made to help farmers grow more food. How to build the schools, the classrooms, and get the quality of education improved through internet connectivity. And so on. And so there's a series of timelines in key areas over the first five years and a similar kind of series of timelines in the second five years. And there's a specific budget.
46:37
This is a hypothesis based on the U.N. Millennium Project Work for Kofi Annan [assumed spelling] which tried to identify the costs of the targeted investments that would be needed. We came up with an estimate of $120 per person, per year in the villages. And the theory of the project is that if half of that can be brought from the outside,
47:03
then half can be mobilized locally. And together a $120 per person, per year investment carried out over five years will build the basic capital structure
47:18
of a self-sustaining community. The second five years, which is less money, about $35 coming from the outside, is to build the business infrastructure, the farmer cooperatives, nurseries, storage facilities, transport hubs and so on. And that's the work that's going on right now. So this is a, now, where does $60 fit into the scheme of things? If the world were to give $60 per capita in investment, not in handouts, but in investment, to the billion impoverished people,
48:00
that would be $60 billion a year.
48:04
The rich world GNP is about $35 trillion to $40 trillion a year, depending on the exchange rate and whether we're having a good year.
48:16
So 1% of $35 trillion is $350 billion, actually.
48:26
$60 billion's a tiny fraction of that. It's, you could say, two-tenths of 1% of the rich world GNP.
48:36
And mind you, another way to think about it is $60 billion a year, for covering $60 per capita per billion people. We're spending $100 billion this year in Afghanistan. Bombing people, by the way.
48:53
Not helping anybody, as far as I can see. So this is a modest amount of money, compared to the wealth of the rich world and the kinds of investments that we are making in other ways that I think are less salubrious. That's a hard slide to read. That one's a little easier. This shows as an example the change of crop yields. This is the decisive engine of potential growth for -- I should say potential engine of growth for rural Africa. It's raising agricultural productivity.
49:30
And there's a great benefit to be had, because there's a high return waiting to be taken that isn't taken because capital markets don't work in this impoverished setting.
49:43
And so there is a high return to putting seed and fertilizer into the ground.
49:48
And you get a move from about one ton per hector yield of maze, for example corn, to three tons per hector, even in the very basic conditions. Mind you, in U.S. farms you get ten tons per hector, and if you can bring in irrigation, you get double cropping so you could get 20 tons per hector. So we're just at the beginning of what's potentially the large increase of productivity. But if you're impoverished and doing traditional farming, you're stuck in hunger at one ton per hector.
50:25
And what this shows, the blue is where we started, and the red is where we are right now. And basically there's been a three to four fold improvement of productivity. That means income, because each ton is $200 per ton of income for the farmer. So it's another $600 per farm family, for example, that has come for a hector farm.
50:50
And many, many other targeted improvements have the same dynamic. If you invest, you get high returns. That's the basic point.
51:01
If it's giving a bed net to a household to protect the household from malaria, the returns are phenomenal because the bed net costs $5, it lasts five years, sleeps two children, fifty cents per child. And it saves a lot of lives. And yet, poor families are two poor to have it on their own. This an example of, well, this is just another slide showing that the institution of delivery, safe childbirth, go up of course when you have a clinic that can provide safe delivery.
51:43
This is the rate of utilization of clinics. It's visit's per person, per year, on average, in this Uganda Millennium Village. What's the point? The point is they drop the user charges for coming to the clinic and that allowed poor people to go use services. And that's also shown in this upper graph where this Ghana facility, which was collecting something like fifty cents or a dollar per visit to the clinic,
52:15
we supplied a subsidy to allow free access. And the use of the health facilities essentially tripled. And for impoverished people that's a difference of life and death.
52:29
So many, many improvements are possible in short order. In health you can bring down mortality rates from 200 deaths of children under five per thousand live births to, I believe, around 30 within a period of a few years. That's what we're aiming for. We're probably down from 150 to 200, down now to about 75 per thousand, because of the first five years. But the trend is sharply down. Just let me give you one example. We just trained and introduced a new method for neonatal resuscitation.
53:14
About 35% of deaths now are neonatal deaths, within the first 28 days. Most of those are within the first day of birth. And a large proportion of those are within the first minutes of birth.
53:31
Babies sometimes don't start breathing on their own.
53:36
Turns out a little plastic squeegee and a little bit of training is enough to get a huge rate of neonatal resuscitation. That's all it takes. Clear the airways, and a few other protocols. And this is a, something developed and now being spread by the American Pediatrics Association. And it's program is called Helping Babies Breathe. It's not done anywhere. So we started this in one of the villages, just as a trial, about six months ago. I don't remember which one it is,
54:14
but we just got the report yesterday. An incredible number of lives being saved, of neonates being saved in the first six months, start out zero, then there were seven resuscitations, then 20 resuscitations, and the curve went like this, and now like a sigmoidal curve it's leveled off. So we've really been able to reach, with almost no expense at all, a huge improvement and we talked today how to strategize to make sure that it now reaches all the millennium villages
54:46
across the continent because the health ministers come and then they see and then they say, "Oh, I get it. We can do that." So there's so many of these things that can be done at low cost. The problem, the damn problem is they can't be done at zero cost. I don't know if someone will be ingenious to get it from $60 to $20, I can't.
55:10
This is already squeezing to the bone for us. But that's such a little amount of money in the scheme of things that our governments ought to be running to produce massive yields like here in Malawi or this is now training community, health workers a new concept, not new the barefoot doctors in China they did this 40 years ago. But trained, properly trained and salaried community health workers is a boom in the millennium villages and in parts of Africa that can afford this right now.
55:44
These are my favorite bed nets, in distribution in, in Western Kenya. This is simply now with wireless broadband available increasingly. You're able to get schools that couldn't even imagine this online now. You put up a couple solar panels. These computers are down to $150 or $200. Costs, of course, you need local management and protection that they're not stolen and fixing things, and so on. So it's not zero cost, but it's absolutely feasible at low cost.
56:21
And, of course, safe drinking water with protected springs or piped water, as we're doing. And another wonderful basic intervention, school feeding programs. Changes life, because if the children are eating in the midday, they're attentive, they're coming to school, their parents are sending them to school. They're healthier, and the benefits for education, for attendance, for nutrition, are tremendous. And we, we've introduced this, of course, across all of the millennium villages.
56:56
So remember the goals. I didn't remember but that that slide did that.
57:05
These are all targetable through basic investments. And for middle income countries they're all affordable out of their own resources. I do not lobby for aid. I don't lobby anyway. But I don't advocate for aid for Brazil or for Mexico or for Malaysia, they can do it on their own, thank you. It's for the poor countries that can't do it on their own that we need to be giving help. It's not distribution, redistribution for redistribution sake in my mind, it's to build the base
57:38
of self-sustaining communities. Since about seven out of the nine million children who die every year before their fifth birthday are in south Asia and Sub Saharan Africa, that's where we need to target the development assistance. And there has been some good news, this is the curve of showing the development aid for health during the past decade and that's in constant inflation corrected prices. But the estimates of need are not 10, but closer to 35.
58:18
So we started out at a tenth of where we needed to be, now we're probably close to half, if you were to extend this to 2010. There's been real progress in getting closer. President Bush made a major advance with three things. With Kevlar for Aids with the President's malaria initiative, and with supporting the global fund to fight Aids, TB and malaria. Unfortunately, we stopped there and didn't invest enough in other kinds of interventions, and very little,
58:53
basically nothing new has happened during the Obama presidency so far. Now here is the truth and the kind of the crying shame. This is aid as a share of gross national product. It's the aid relative to the capacity. And there is an international norm UN target established 40 years ago, that countries should get, give 0.7 of of 1% of their national income in development assistance. That means 70 cents per $100 of GNP.
59:28
And five wonderful countries do it. The Nordic countries basically, Denmark, Norway, Sweden, Netherlands Luxenberg. They're the ones on the far left above the top line.
59:44
Then there's a middle group.
59:47
Average effort is about 0.47 of 1% of GNP. And whoa where do we find the United States? Ouch. We are the lowest, actually we're no longer the lowest, Greece slipped below us this past year, in the middle of their financial crisis. That's the U.S. $0.20 out of $100.
1:00:18
We're a country spending $5 out of $100 for the military. And $0.20 out of $100 for development assistance. In my view, it's fool hearty.
1:00:34
Fool hearty. It can't make foreign policy work. And if you read, as I just did, Woodward's book on the Afghanistan war, you'll go 300 pages and not see one cent in so maybe I missed it about development in Afghanistan.
1:00:57
It's all generals talking. Who to bomb and how many soldiers. It's completely reckless and naive.
1:01:05
Because Afghanistan's one of those landlocked impoverished countries that doesn't have roads, doesn't have power, doesn't have water, doesn't have irrigation. It's trapped in extreme poverty.
1:01:17
It's war ravaged. It lacks infrastructure, lacks transport. When that happens the only thing that moves is high value per unit weight, also known as poppy and heroin.
1:01:30
That's the nature of trade in a place that doesn't have roads. The stuff that you can afford to take out, but try taking out fruits that need to be properly refrigerated and stored and depots and quality for -- it's impossible, unless we do some development. So I don't know what they're thinking when they talk about the hearts and minds of winning the hearts and minds in this counter insurgency. It's fantasy land. They don't know anything about the hearts and minds of the Afghan people.
1:02:01
Nor do they even think to ask. And they call that the strategy. And that's $100 billion of our money. And then we turn around and we can't find one extra billion dollars for the global fund to fight Aids, TB and malaria, at last week's Replenishment Conference.
1:02:22
So this is what I call our choices for America. This is how it stands right now.
1:02:32
This is defense, definitely a euphemism because we also do offense.
1:02:40
This is development aid, and that's diplomacy. Those are what's called the pre-killers of U.S. foreign policy. And God if you are an architect trying to put a roof over those three pillars, it's preposterous. So don't let anyone tell you we can't afford it.
1:03:02
We can't afford not to do this.
1:03:06
This is completely misguided American policy. This is a little out-of-date because it comes from the end. I don't know, I guess it was updated.
1:03:18
Two days Pentagon spending, then it would now be higher.
1:03:24
Let's see 700, yeah, it'd be nearly $4 billion, it's now nearly $2 billion a day. So it'd be $4 billion. All of malaria control for all of Africa, for a year is $3 billion.
1:03:41
So it's less that two days military spending.
1:03:46
That's all the bed nets needed for Africa for five years. And that's the malaria budget.
1:03:55
And that part hasn't changed. So this is really, really messed up.
1:04:02
And I have a campaign going to get the Pentagon to take off next Thursday and Friday.
1:04:08
Just two days, nothing's going to happen. And then we could actually control malaria all through Africa comprehensively, just on that alone.
1:04:25
And it turns out, where we're fighting is impoverished dry lands, because the yellow areas are the dry lands and the red cones are the violent places,
1:04:44
and the overlap is very -- marked and very clear. And I can tell you it's no accident. When I was in Yemen five years ago, I came back from the trip. I was invited by President Saleh to see the huge challenges in Yemen, and came back shocked. Went to Washington, said this place is sliding into absolute violence.
1:05:16
Of course, no one cared, Yemen, what's that? That's one of 192 countries on the list.
1:05:23
And five years later we've got a massive military effort chasing Al Quaida all around Yemen, which is another fool's errand, because if we chase them out of Yemen they'll go some place else. If you want to secure a place to be safe it has to have basic governance and it has to have a basic means of life. And Yemen already five years ago clearly didn't. Somalia doesn't. The dry lands in the Horn of Africa do not.
1:05:56
Afghanistan does not.
1:06:00
And yet we pose these problems as military problems, not as development problems.
1:06:08
We're just not good at thinking this through right now. I think the economics is part of it and I think that close diagnosis and detailed analysis and deploying the models and theories that we have because poverty traps are a core part of economic development thinking. But like many things they're one of 20 models so they work it sometimes and they don't work other times. And so proper model choice is -- needs absolute rigorous engagement with reality.
1:06:43
But we have another problem which is even when we know it, we don't want to know it, we don't want to face it.
1:06:52
We're missing a lot of truths in our own country right now.
1:06:57
We haven't saved for years. We borrowed like crazy. As soon as we stopped borrowing, we started borrowing again through stimulus. Wrong idea in my opinion, after you have over consumed for 20 years to just amplify that through budget deficits didn't make sense to me, because we're not thinking for the longer term. And we're not investing for the longer term right now. And economic progress depends fundamentally on saving and investment, and on a rich saving and investment.
1:07:32
Saving on an investment not only in fiscal capital, but in infrastructure, in securing the environment, in breaking poverty traps, in creating social trust, in building new technologies, you have to think ahead. And if we don't think ahead we can't make it. And we have to think like a community and we're not good at thinking like a community. Our country almost doesn't have a society right now. It's just pulling itself apart. Anti-immigrant, racial divisions again,
1:08:07
it's quite striking and shocking. And it's all being, I think, amplified by a lot of propaganda, by a lot of high income campaign contributors and corporations who just want nothing except their taxes cut. Damn the future, damn the country, damn the budget, they just want their taxes low and everybody else can be damned. And it's a disaster.
1:08:35
And at a global level we're, of course, sliding into more hate. Now, China's our bugaboo. That's going to be with us for a while, because they're going to keep gaining on us, believe me.
1:08:48
But that's okay. That's progress. If we treat it right it's only neurosis and angst if we misunderstand it.
1:08:56
And we're not good at that, and we're not good at understanding the nature of society. The places where I'm working I want to tell you,
1:09:08
they're racially different, ethnically different, religious difference, everything. I've never for once had a moment of less than hospitality,
1:09:21
partnership, collegiality, problem solving, mutual respect in all the work. It transcends every line, because once you get down to the business of working together it's just a pleasure, first of all. It's exciting, it's exhilarating.
1:09:42
And all of these divisions of Muslim this and Christian that and so forth are meaningless and they go away immediately actually.
1:09:52
And we're just not good at understanding that either. And if we took a different approach so many of these problems would melt away. Not everyone, and I'm not saying to dissolve the army and that we don't need defense, I'm saying pay attention to human beings on the other side.
1:10:13
Because they want their children to survive, they want their children to be in school, they want to have water that isn't going to kill them with pathogens.
1:10:24
They don't want to die from a misquote bite.
1:10:27
They don't want their wives and mothers and daughters dying in childbirth because there isn't an ability to deliver the placenta, or to stop hemorrhaging, which is as low cost as can be.
1:10:41
It's just human beings on the other side.
1:10:44
And it's not that everybody's so corrupt that they're out to kill their own people and so you can't get bed nets to populations, or you can't get emergency obstetrical care, it's just nothing like that.
1:10:57
That's just convenient things for people in Washington to say, who know nothing. And that nothing is, that's a real line I'm talking about,
1:11:10
because they've got power and they have, they're irresponsible.
1:11:15
And they're not trying to find out. They're talking to the wrong people. Maybe they've lost the ability to find out. But they're not really finding out. So we need a global ethic to understand that we have a united society.
1:11:33
And I just about always close by pointing out maybe a deep pang of my upbringing. John Kennedy who, in 1963, used the philosophy of a common approach to solve the greatest problem of his era. And that was to put some break on the madness of the nuclear arms race that had almost led to complete destruction in the October 1962 missile crisis. And Kennedy said, this is madness, it's actually people on both sides, and we've got to find a way back from the brink.
1:12:19
And his last year of presidency before he was assassinated, in my view, was the finest year of an American president's leadership
1:12:27
in the certainly the post-War world, because he campaigned for peace. And he gave a great speech in June 1963 called the Peace Speech. Now, it was the American University Commencement Address, June 10, 1963. It's online, you should listen to it, it's absolutely beautiful. It's magnificent. And it was a speech about making peace with the Soviet Union. And I love it because it would be as hard as, you know, Obama talking about making peace with our biggest enemies right now.
1:13:01
And Kennedy was scared politically. He didn't even show it to many of his advisers because he thought they would stop him from making the speech. But it wasn't a speech telling the Soviets, you do this, you do this, you do this, you do this, and then we can have peace. It was a speech telling the Americans, we got to rethink what we're doing because our attitudes are as essential as their attitudes if we're going to have peace. Absolutely a remarkable insight, crucial. It's called empathy.
1:13:33
And we don't have it very often. But he had it and he gave this marvelous speech and when he gave it, Kruschev heard it, said that is the finest speech by an American president since FDR was, exactly what Kruschev told Abral Haramin [assumed spelling], the U.S. Envoy in Moscow. And five weeks later they signed the partial Nuclear Test Ban Treaty which was the first stop of the Cold War escalation. And I think it changed the direction of history.
1:14:06
And it was an act of ethical imagination, in my opinion, as much as state craft. It was ethics, because ethics is basically elaborated empathy. It's the ability to see things through somebody else's eyes and take seriously the implications of that. And Kennedy said in the speech, my favorite words which I like to end on because I think they capture the essence of what we're after. "So let us not be blind to our differences, but let us also direct attention to our common interests
1:14:42
and the means by which those differences can be resolved. And if we cannot end now our differences, at least we can help make the world safe for diversity. For in the final analysis, our most basic common link is that we all inhabit this small planet. We all breathe the same air. We all cherish our children's futures. And we are all mortal. Thank you very much. [ Applause ] >> I filibustered a long-time and you were very, very patient. Why don't we take a few questions and -- or comments.
1:15:39
By the way, I welcome comments as much as questions, as long as they're relatively brief. If there are questions, please. >> I was wondering how much the... >> Oh sorry, we have a -- we have roving mics. Why don't we start here and then a mike will come to you next. Yeah. >> Kate Patoski [assumed spelling]: Thank you so much. My name's Kate Patoski, I'm the volunteer coordinator here at the Tucker Foundation. You spoke a lot about agricultural investments
1:16:06
and investing in high, kind of high input agriculture. And I wonder how you respond -- I imagine you've received criticisms from people that champion sustainable agriculture. And how do you respond to them when they say, high input agriculture not only is an ecological degradation of some sort and how do you respond when they talk about kind of the cyclical trap of investing and high yield seeds and fertilizers when you're kind of indebted to a Monsanto, for example, for so long?
1:16:33
I would love to hear you speak about that. >> Yeah. So basically, everything has its proportions and being at one ton per hector where Africa is, which is the ultimate organic farming if I could put it that way, because there is, it's not the high productivity organic farming, but it's all organic because there's nothing, no chemical fertilizer used, has left the continent in the deepest hunger. All the rest of the world uses chemical fertilizers
1:17:07
because there's a basic budget of nitrogen that is fundamental for life, for us, and for the plants. And the basic budget is that if the nitrogen is not adequate in the soil, the plant can't grow. And if the plant can't grow, of course, you get a hungry population. And think about it that most soils in nature start out with an adequate level of nitrogen, but then each crop you take, takes the nitrogen out. It has to be replenished. There are basically two kinds of replenishment.
1:17:46
One is inorganic fertilizer and the other is organics, compost and so forth. Both can do because it's the same nitrogen. The yield from organic is much lower if you take into account all the land you need to get the, either the composting, the green crop, or the manure of the animal that you've been feeding to provide the manure. If you graze a cow in a nitrogen deficient area in Africa by the way, it's manure is nitrogen deficient also
1:18:24
by the way, so you don't get very much fertilizer out of it. So there is a basic nitrogen budget.
1:18:31
It's also the case not well understood that if you put compost and green manure and so forth in a heavy investment in organic farming you get nitrogen run off the same way, even more. So the utrification problems and the nitrates and so forth, this isn't just from chemical fertilizer, it is actually from organics as well. We have a basic problem, which is that seven billion people is really a tough load to feed on the planet. And the only way we're even coming close
1:19:03
to doing it right now, and actually, you could say ironically, the only way we got to seven billion also, is by the discovery of fixing atmospheric nitrogen in urea based fertilizer which happened around 1910. That brought us to where we are today.
1:19:22
If you don't replenish the soils in Africa, you can't, you can't escape from poverty, from hunger and from disease. So you need to get massive amounts of nitrogen in the soil. The chemical fertilizer approach by the way has to be combined with organics anyway. You have to leave crop residues and build up a natural carbon richness in the soil as part of good farming, period, but you can't do it without that dosing of chemical fertilizer.
1:19:58
What's important to understand though also is that if you started a nitrogen deficient environment,
1:20:07
adding nitrogen at the doses we're doing, say 50 kilo or 100 kilo per hector, is not an overload. In fact it basically is replenishment of what's missing right now. If you do it with micro dosing and techniques, use a little coke bottle cap and put it in to each seed hole, you can actually get more for the minimum. You get a big response and you get less run off and so forth. So that's also good farm practices are important. But simply trying to do without this
1:20:41
or thinking somehow I'm going to do it organically doesn't work. So you need the boost, that's number one. Second the income advantage is enormous and so it really pays, it helps people lift out of poverty. Third, it's not pesticides and long lasting herbicides and other chemicals. We're not doing that by the way, we're using integrated pest management in organic approaches, because the management of those chemicals is quite dangerous and it leads to a lot of toxicity for the farmers.
1:21:19
That's completely different from a diamonium phosphate fertilizer for example, or a bag of urea. So there's a big, make a big difference between the pesticides, especially the persistent pesticides and fertilizer, totally different in their ecological consequences. Finally is the seed issue. The seed issue is very basic, which is if you can't get a high yield on a, on the farmer's own seed, you need seed breeding. You need to buy the seed from some place.
1:21:56
And all high yield, yields around the world, three tons, four tons, five tons, ten tons, 20 tons, are improved commercial seeds. That's okay, if you can afford it. And it's not just Monsanto by the way. There's Western Seed Company, and many, many seed produces that are producing high yield seeds. But there's a huge difference of using your own seed which even with fertilizer won't have a response in using these high yield varieties, the kind that brought the green revolution in the first place.
1:22:35
Nothing is for free though. There are ecological risks to any place humans are acting, and intensification raises those risks, for sure. Because in Indian we're seeing water problems, now ground water depletion for example. So you have to go into this in a methodical way to understand what is sustainable.
1:22:59
But the low input, low intensification is what is already there right now. This is organic. And it's a disaster, a human disaster right now. And it's the highest hunger on the planet. So I'm not so worried about these things compared to the current situation. But I have to say, we haven't cracked the major agricultural problems on the planet because our whole global food system is not sustainable right now.
1:23:31
But the worst is people dying of chronic under nourishment. And I want to stop that because it can be stopped right now. >> [Inaudible]. >> Okay. Right over here. >> As a farm kid I especially appreciate your comments on that issue. I was just wondering, how big of an issue you think Dutch disease is with respect to foreign aid and what donor countries can possibly do to reduce that kind of issue. >> So the question is about the Dutch disease which is a non-communicable disease.
1:24:06
So named because when the Netherlands discovered natural gas in the North Sea, it caused the currency to strengthen and that squeezed the traditional Netherlands exports. And that became called the Dutch disease. And when it's applied to the question of aid, the idea is that you give aid and that leads to a kind of a consumption boom. And that squeezes out traditional exports. And I think that the, it's not a concern at all to me, zero, for the following reason.
1:24:43
It's not aid for consumption, it's aid for investment. And if you give the aid to double the food production, that's the opposite of the Dutch disease. You actually lower non-tradable's prices. If you give the aid to help build roads, or to extend the power lines and so on, you empower the export sector. So Africa exports almost nothing except a few high value commodities right now. Diamonds, gold, copper, coal from Mozambique and hydrocarbons and so on.
1:25:24
Because there isn't really a manufacturing sector of service sector exports. And the main reason is not barriers to their exports abroad because they face a market that's, for them, even more open than market that China faces which exports everything.
1:25:42
The problem is they are not competitive on the supply side. So they don't have even the most basic ports, roads, rail and other infrastructure to be able to compete at world prices compared to say Asian, Southeast Asian producers. Aid, aid for trade so called, should be devoted to building that kind of infrastructure. There's nothing really to squeeze out of the traditional exports. You won't squeeze out diamonds, you won't cause the exchange rate to appreciate so much
1:26:23
that Botswana stops exporting diamonds. It can't be done. There is no exchange rate that will stop Exxon Mobile from knocking down as many trees into the rain forest to get to the oil reserve, believe me. There is nothing that will stop these traditional -- not that I recommend it doing that way. There's nothing that will stop the traditional exports. The name of the game is building a diversified export base. That requires aid invested in infrastructure.
1:26:56
Thank you very much ladies and gentlemen.
1:26:59
[ Applause ]
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