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Conference on Humanizing the Global Economy


Dr. Jeffrey Sachs
January 30, 2002

What an honor it is to be with you, and let me congratulate you on having this remarkably important gathering on humanizing the global economy. We will, no matter what one's ideology, have a global economy now and in the future, and it desperately needs humanizing. Your role is tremendously important in this, among the most important voices in the world.

I was so honored to have the opportunity to meet with the Holy Father as he was preparing the encyclical Centesimus Annus ten years ago. I thought that encyclical taught a tremendous amount to the whole world about balancing the very real benefits of a market economy with the very real limitations of a market economy, an understanding that markets can accomplish some great good, such as the greatest production of wealth in the history of the world which we have today. But, markets don't automatically address the needs of the poor, and especially the "poorest of the poor". I still find magic in the phrase of the Church, "the preferential option for the poor and vulnerable" as really what we need to do to humanize the global economy.

I was in Africa last week in a hospital in Blantyre, Malawi, the largest hospital in the country. I saw a sight that I had never seen before, and never wish to see, and hope to never see again. The hospital ward is now overflowing with dying AIDS victims. Seventy percent of the admissions in the hospital are HIV-AIDS related. Each bed had three to four dying people in it. Usually two on the top lying head to foot, and two on the floor underneath on the ground, maybe on a mat or maybe just on the floor dying underneath the bed. There were no medicines in the ward, just dying people and their families. Looking into that was like looking into the inferno, frankly. The shock for me was that down the hall from that ward was the outpatient clinic, where those few Malawians who are "rich enough" to be able to pay the $1 a day needed to keep them alive with antiretroviral medicines were receiving the drugs, and those drugs were working splendidly because they are splendid medicines. They are a brilliant reflection of our current biomedical brilliance. Hundreds of Malawians are being kept alive by these drugs and a $1 a day, so that they can be doctors, nurses, social workers, teachers, and especially mothers and fathers; and tens of thousands of people are dying, hundreds of thousands and millions throughout Africa, because they don't have a $1 a day.

It could not have been more stark for me. Not only the shocking sight, but being paired right down the hall with the proof positive that there's a simple approach, at least to the goal of keeping people alive that happen to be infected with the virus. It's not too complicated; it's not very expensive. It would, by itself, undo the scene that we saw that same day outside of the capital city, Lilongwe, where we had gone to a village and saw a few grandmothers and several dozen orphans, and nobody in between ages twenty to fifty. I heard the grandmothers with their eight, or nine, or ten, or fifteen wards around them, sitting on the dirt outside of a mud brick hut talk about how they had lost all of their children, the mothers and the fathers of those orphans. They showed us how they would prepare the gruel that night with maggot-infested millet, and how they had carried three of the children on three occasions in the past three weeks ten kilometers each time to get to the hospital for antimalarial drugs. We saw, in other words, a dying society. But, I think the main point that I want to make is that it is a society that the rich world is leaving to die. It's nothing short of that. We have in our society somehow found a way to turn our gaze away from millions of people each year, not who are merely suffering privation or hunger, but who are literally dying because of our profound neglect in the rich world.

Our budget does not have a preferential option for the poor in the United States. It's not true, by the way, that we have poor so we have to attend to in the same way that Africa has poor or that the Andean community has poor. We do have poor, but we do not have poor starving to death by the millions or dying of infectious diseases and hunger interacting by the millions. And we found very prettifying terms in the United States to neglect these most extraordinary facts of our world. We're told there's no infrastructure to treat the people. Well, I stood there in the infrastructure. I stood there talking to the doctors that know perfectly well how to give the antiretrovirals, under a roof that I would call infrastructure, standing outside of an outpatient ward, and peering into the inferno of the dying ward where people are just being left to die, although virtually all of them could walk out of there with one set of pills in the morning and one in the evening and go back to their lives, and their children, and their families, and their communities.

I headed a commission for the World Health Organization over the last couple of years called the Commission on Macroeconomics and Health. I was asked by the Director General of the World Health Organization to try to understand the interaction of health and economic crisis or disease and economic crisis and what to do about it. I'm a macroeconomist. I study exchange rates, financial markets, trade policy, and so forth. I came into this perhaps too slowly, perhaps too ignorantly, by the mere fact that I noticed that wherever I was working, too many people were dying around me, including the counterparts that I was working with. And I came to know, step by step, how little we do, how completely utterly inadequate our response is.

So Dr. Brundtland gave me the honor of heading this commission. I feel a little like Jay Leno, I'll hold up the book. We produced the report and it has six thick volumes behind it of more than one hundred background studies. We concluded one thing. We concluded that approximately eight million people every year are dying because they're too poor. It's a myth to say the poor world lives at the edge of subsistence, they go right over the edge. They are the most voiceless people in the world. The Church is one of the most important ways that they get voice in the world.

These people can be saved. These people can be empowered. These people can be treated for their disease. We found that a small number of diseases account for the millions of deaths. It's AIDS, tuberculosis, malaria, diarrheal diseases, respiratory infection, maternal death in unattended child birth, and micronutrient deficiencies. Every one of them has technologies for prevention and treatment. Not one of them is rocket science. It took rocket science to make the technology, but not to prescribe the pills. Every one of these diseases can be approached through public health and through medicine to save lives and re-empower families to stop the insane explosion of orphans in Africa, which could become forty million orphans by the year 2010 on some current epidemiological analysis, if we just decide that Africans aren't worth $365 per year to keep alive.

So we came up with a blueprint which I rather like. It seriously asked what could be done, how would you provide interventions and so forth. And it found that, rather realistically, if the rich world would not tithe it's income but tithe the tithe of it's income--1/10 of one percent of its GNP--put aside one penny out of every $10 of income, that would produce $25 billion a year from the rich world, because we're a $25 trillion rich world GNP. And that $25 billion a year, when combined with scaled up efforts in the poor countries at realistic levels, could save, by our estimates, eight million lives every year. We also did something that-- I don't want to shock you --we put a price tag to the value of those lives saved. Isn't that a horrible thing economists do? Someone wanted a rate of return on this investment, so we did what the Global Compensation Fund did or the Disaster Compensation Fund for September 11th did. We made those kinds of estimates of "the economic value of the lives lost" and we found that the total economic cost to the low income countries is on the order of about $360 billion a year, and that about 60 billion a year divided between the rich and the poor world in addressing this, would recoup about six times the pure economic value, not to talk about the human value. You're the experts in adding that in.

This is what in my profession we call a no-brainer. This is an economic imperative, it's a security imperative, and of course, it's, first and foremost, a moral imperative. But somehow, we don't even make the radar screen in this country. It's something I don't understand. I thought growing up as a young person in the decade or two after the Holocaust, that the world would never again turn its back on mass unnecessary death. We know that we do all too often. We know in particular with Africa we have a blind spot that's just almost impossible to bridge. But here we are, ladies and gentlemen, in a world in which millions are dying now and they can't even get a word of mention in the State of the Union address. They can't get more than a symbolic token in our budget. It's a profound struggle for this country to get the Administration to ask Americans to give 75 cents per year, which is the Fiscal 2003 request that will be made next Monday for the new global fund to fight AIDS, tuberculosis, and malaria. Here's a president who talked about community, about reaching out, about finding values beyond ourselves, about the value of human life, and we are blind to the value of life outside our borders right now.

The United States has become the stingiest of all donor countries in the world. We stand 22nd out of 22 donor countries in our assistance as a share of our income. We are now down below for all aid, through all developing countries, for all purposes, to below one penny on every ten dollars. We're currently at .09 of one percent of GNP. Norway, Sweden, Netherlands, Luxembourg, Denmark are managing ten times that effort. Europe as a whole is managing more than three times that effort. The United States just fought last weekend, and won as it always does in international negotiations, to keep off the radar screen of the forthcoming Finance for Development Summit in Monterrey, Mexico, which the United Nations will host, any mention of the international goal of 0.7 of one percent of GNP for development assistance. The United States insisted that no numbers, no targets be put in, and our Treasury Secretary says every day, "Aid doesn't work, we're just not going to do that." But, he hasn't gone to Africa to stand in Queen Elizabeth Hospital in Blantyre, Malawi; he doesn't know. It's not his job to know, really. He should attend to our deficits, our inflation, and other things. He shouldn't be the final arbitrator of who lives and who dies. But we have a strange system where the Treasury oversees the IMF and the World Bank, and so we have out-of-the-air decisions, which affect literally saving millions per year, pulled out of no knowledge whatsoever.

So, I think we have a tremendous job to do in humanizing the global economy. I found, just to end, in the work in this report, that the gap in perceptions on these issues between the United States and other rich countries is growing wider and wider. I also found something which I'm sure all of you feel and know much more than I, in the parishes and in your dioceses, I find wherever I speak in the United States, Americans want to do more and they are shocked by what we are not doing. They believe deeply that we are the most generous people in the world, and that we should be. They believe that we do a Marshall Plan everyday. They believe we give roughly twenty times more than we do, and that tenfold of that is wasted. Well, maybe they'd understand better why so little is accomplished, if they understood how little we actually do. But, I searched for even one word of this in the President's speech last night and didn't find it. I searched for even one iota of reflection after September 11th that we're in the world together and that we share each other's pain, suffering, hopes, and that that has political ramifications as well as human ramifications. I think we have to help. I believe our fellow Americans achieve what they want to achieve in their own hearts, and even with their own wallets. It's a huge struggle, but I think it's the most important step needed for humanizing the global economy. Thanks a lot.

Questions and Answers Session

What do you feel about private philanthropists like Bill Gates and his foundation?

It's an interesting fact, I think, that the most powerful, innovative, creative, and successful of all organizations in the 20th century with regard to public health was the foundation started by John D. Rockefeller. The Rockefeller foundation was a brilliant, brilliant contribution to world knowledge, science, and health. Starting with hookworm eradication in the U.S. South, and then to yellow fever, to the development of vaccines, to the pioneering of the green revolution that has fed millions, it was a demonstration of mobilizing private vast wealth for vast public good.

I've said on many occasions that I thought the Gates foundation could be for the 21st century what the Rockefeller foundation was for the 20th century. I've, of course, met with Bill Gates and Melinda many times to talk about these issues. I find a compatriot who, maybe I'm as boring as he because this is what I talk about, is completely drawn by this agenda as well. But, I've also said to Bill Gates, "Even you, Bill, can't solve this problem by yourself." That's saying a lot, by the way. He gave $24 billion and that throws off an annual flow of $1 billion, of which about 70 percent goes to global public health, so about $700 million a year. Our estimate is that the rich world ought to be contributing on the order of $25 billion a year. So that gives some sense of the scale. I work closely with the foundation because I find that with that freedom from politics, they can be very innovative, as they were in starting the new Global Alliance for Vaccines and Immunization, which is the world's leading campaign to increase immunization now. That was an initiative thought up by Bill and Melinda, and they put down $750 million and the world rallied around that. So, they can do a lot, but they can't solve the problem financially. They have to leverage the problem. Overall, our private philanthropies for global activities probably are running on the order of $2.5 to $3 billion a year right now.

{some text omitted, because it was missing and unclear on tape}

The private philanthropy is wonderful, and it's powerful. You know very well that the Catholic Services in Africa in education and in health are at the top quality of the continent. They provide absolutely essential and lifesaving services all over the continent. I've visited so many mission hospitals in my work, and see heroic nuns that are doing things you wouldn't believe where there's no electricity, power, diagnostics, phone, car, no nothing, just using some bio-gas, if you know what that is, to fuel a Bunsen burner to try to sterilize some equipment when there's almost no instruments around. This is heroism. And this is what the Church does everywhere. By the way, in Lilongwe we were taken to that village by a Catholic Services mission from Ireland, and the sister showed us around. Again, it was heroism, but in a scale of such incredible need. What they were doing was raising enough money to put a plastic tarp under the thatch roofs so that the roof would not rain furiously on the heads of the eight or nine orphan children who were living with the grandmother in a tiny hut. So, philanthropy--vital, Gates Foundation--wonderful, but we've got to get the public role in here is the bottom line.

Could you please comment on the fact that we have been unsuccessful in getting major pharmaceutical companies to address issues of greater access to drugs for AIDS, malaria, and tuberculosis and offer some suggestions which would be helpful?

I think that the drug companies have been beaten up a lot, for some good reason too, on what their role should be in impoverished countries. Their basic role is "we don't care too much" because there is no bottom line there. But, what I've been arguing, and what our report argues, is that what they should do is guarantee to make available all of their products at production cost, not at prices that include the patent price, and that if a high quality generic producer can even produce it at a lower cost, they should be willing to license that. So, we recommend some corporate guidelines, a voluntary code of behavior for the American private sector in providing access.

What I've also said to the CEO's of all the companies is, "You too can't do it on your own." What Merck, Pfizer, or Glaxo, or others could do is to say, "We'll produce at cost, but somebody still has to buy it even at cost to provide it to the impoverished people." I've asked them to lobby on behalf of U.S. donor assistance, to be part of the solution. And the Chairman of Merck, Raymond Gilmartin, stood next to me at the launch of this report said that Merck is fully behind this, that Merck will offer its products at no cost, and that Merck will try to provoke a larger response. Merck's got a lot of other things on its mind if you read sections B and C of the Wall Street Journal these days, they're spinning off this and that. Gilmartin has been wonderful, but corporations have other priorities. What you can do is help them keep on track, and I think if you can call them together and say, "Here's some voluntary guidelines, and here's what you should do both in providing your products and here's what you should be asking the government to do to make sure your products are actually used, that's good corporate behavior. It doesn't make you into a charity, it just makes you a responsible citizen consistent with your bottom line. You're not making any money in Africa now, you won't make any money this way, but at least people will get your product."

I would be very happy to help you with that. I think, from what I know, they'd like to be "taken off the hook," not to be seen as the villains. They would like a solution, but it needs the government, which we don't have yet providing funding, plus their agreement. But, that is the package we're going to put together. That really can be accomplished.

How do we even bring the moral question of the value of human life forward when it doesn't seem to register in the world view?

Economists are, contrary to surface looks sometimes, are human beings also. They focus very much on creation of wealth, and on a basic lesson which is broadly true which is that wealth is created best by market forces, and that one can't really deny the global economy and still think that a poor country can develop. There's no answer for Peru, for example, in taking out from the global economy. The question is how to more effectively insert in the global economy, that's a different question. But, it's a very superficial profession also, because it is possible to be an economist and to ignore millions of people dying. Now you can ignore it. I did for a long time, not because I wouldn't be concerned, but because I thought that life and death issues were so central that someone must be taking care of them. It was for me the experience of working for twenty years in very poor countries, and beginning to realize that, because it took me some time, the extent of the neglect from the rich world, and our incredible capacity in every way, in the State of the Union address, in the budget, in our T.V. programs, and in our newspapers, to ignore these issues. I publish my share of op-ed pieces on this, but the newspapers say, "Ah, we don't want to hear another piece about all those dying people, can you come up with some controversy?"

So, I think people don't know and I do have to say the United States government has had an ideology of hiding the truth for twenty years. When the debt crisis started in 1982 in the poor countries, the U.S. tactic was to say "cleanup your act, we're not helping you out." When I started working in the Andes, in particular in Bolivia in 1985, I was shocked by what I discovered of this kind of attitude. The IMF for twenty years served, basically, to keep the barbarians away. You know, Finance Minister comes, "Go to the IMF!" and it was to protect the American taxpayer. We badly misused that institution. The U.S. misused it to the point that it almost got destroyed in its legitimacy. It became a hated institution because it was mouthing the words of the U.S. powers.

The new managing director, Horst Kohler, understands this extremely well, in my view. You heard him talk; I've been speaking with him for many months. He has been very bold, actually, in saying that the rich world is too greedy and it's not doing it's help in development assistance. And I've talked to him about putting these social realities into their documents, really for the first time, because you would be amazed at how antiseptic an IMF document can be, how it can disguise the truth of death as if it didn't exist. And we're going to put it right in. We have an agreement and Kofi Annan has asked me to help do that, and of course, Kohler has agreed to that. We're going to change the nature of these IMF documents, so that when you read them you will understand death and suffering in them and not just the budget balance. And step by step we're going to corner the United States, if I can put it bluntly, until this country recognizes its moral and practical responsibilities in the world. And they don't want that and they'll try to keep me away, and they'll try to keep others away, but the reality is just too shocking. You can't hide it anymore.

So, we tried for twenty years, and one final thought on that. The ideology was that economic reform is its own reward. I know a lot about that because I know that speech very well. I could give you the one hour version of it, the six hour version of it, or the one semester version of it. But, it's false. Economic reform is actually very important, but it's not sufficient, and markets don't solve the problems of the poorest of the poor. They don't even keep them alive. An efficient, well-functioning market can let millions of people die. That is not a market failure, that's the cost of poverty. But markets can work perfectly and people die, that's not a contradiction. Society can't work perfectly and let people die, but markets can, that's the limit of markets.

Our ideology still today in the Wall Street Journal and in this Administration is that market reform is its own reward. The President last night basically said, "We're going to help with trade liberalization, that's how we're going to help the poor world." He doesn't know that 8 million people are dying every year that he has responsibility for, and it's very hard to reach this point. They don't want to look at the numbers. Of all the countries I've dealt with in this, it's the United States that I cannot get into at the top, my own government. They know me very well. I taught most of these people in the White House right now. I can't get them to look at real numbers because they know the truth--it would require us to do something, and that's the one thing we don't want to do. Canada has, by the way, a major opportunity right now. Canada is hosting the summit this summer. I went to the Foreign Ministry last week in Canada and spoke to the leadership and Canada wants, of course, the summit to be very pleasant for President Bush. They want him to go home having had a good time in Canada. I said maybe he should go home hearing the truth. That's very tough for a host. But, I think the Canadian government knows the truth. I have no doubt about it. But, how do we get this across in this country? This country is 40 percent of the income of the rich world. Without it, we have nothing. We can't solve these problems without the U.S. participating, and we're not participating right now, despite the words.

What is the long-term viability of the quality of foreign investments being made so that the evils that you talk about are not repeated over and over again in the future? Do you think the time has come for us to change the model we have been applying at the Washington consensus, that the objective is for countries to be able to pay their external debt, don't you think there should be a radical change in the goal and that the question of external debt should be put aside, and look for a new model?

One question I can answer simply, which is that the debt needs to be canceled. That's what Jubilee 2000 was all about. The Jubilee year has come and gone, but the need has not been completed. We got about halfway up the mountaintop, I would say, on that one, and we're going to continue that fight. The Pope was one of the most important, probably the most important voice in the world, for pushing as far as we got on debt cancellation, there's no question about it. The day we had the rock stars and the Holy Father together on this issue was very memorable. I think it did a lot of good, but we only got halfway to where we need to go on debt cancellation. But, like many other issues, it's not going to go away and it's not going to be solved by itself over time. It's going to have to be solved. And so we'll get there, but the more we delay the more lives will be lost in the process.

As an economist, do you think it could be possible to reform the economic world order now?

I believe in it. Maybe this will sound cynical and wrong. I don't know how to make the United States spend 1 percent of its income for Africa, but I do believe we can get it to spend a tenth of 1 percent for Africa. In other words, I'm not believing necessarily that we're going to change the mindsets so profoundly that the resources will flow without constraint. But, the deep irony of this world, the deep irony, is that we are so rich now, we are so phenomenally rich in the rich countries, that even one penny on $10 can save millions of lives. That wasn't true thirty years ago or fifty years ago. The technologies weren't there and our wealth wasn't there. This is the ironic fact of the world we live in today. This is the first time in all of human history that we really can end the unnecessary deaths and the abject poverty and the hunger. We really can do it. It's within our material grasp for the first time in history. In fact, it's not such an effort. It's a few tenths of one percent of GNP, a few tenths of one percent to put all children in school, to get adequate nutrition to all children in this world, to keep children and their parents alive. This is not crazy idealism. This is the most hardcore, practical, realism now. Because we need it to live in a peaceful world too. This is for us also, not only for our hearts and souls, but for our daily lives. So, we're going to find our way to this also because it's not that hard. But, we just have a few minds to convince along the way.

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