Americans and Europeans will remember the last several years as a period of economic insecurity. But the economic history of our times will be recounted very differently in the rest of the world. As developed nations have struggled with financial instability and unsustainable debt, developing economies have raised hundreds of millions out of poverty. Our long economic winter is a pleasant summer in distant places.
According to the World Bank, extreme poverty — defined as living on less than $1.25 a day — has been declining in every developing region. The first Millennium Development Goal set by the United Nations — to cut the global rate of extreme poverty in half between 1990 and 2015 — was achieved in 2010, well ahead of schedule. Much of the good news has come in emerging markets such as Brazil, China and India. But on the African continent, the rate of extreme poverty has fallen below 50 percent for the first time since 1981.
As president of the World Bank since 2007, Bob Zoellick has seen this mixture of global economic panic and progress as closely as anyone. When he steps down in June, he will leave the rarest of legacies: a multilateral institution with its reputation enhanced. Zoellick acted decisively to help stabilize the finances of struggling nations during the worst of the financial crisis, as well as to provide relief to countries hit hard by a worldwide spike food prices. He has increased transparency at the bank while successfully raising funds to recapitalize it.
Zoellick is the most rigorous and unsentimental of idealists. During an interview in his office, he explained recent progress against global poverty in two words: “economic growth.” And growth is mainly a function of the policies and attitudes of nations themselves. “Development does not work unless local people own it,” says Zoellick. “If local people haven’t decided to do what it takes, it won’t happen.”
When outsiders seek to help, argues Zoellick, there is no “silver bullet.” Sometimes the most urgent problem is AIDS or malaria. In other cases, nations need a more educated workforce or better rural roads. Successful developing nations set their own priorities, adopt a “relentless pragmatism,” and move up a ladder of independence. Zoellick recalls the Rwandan agriculture minister coming to him for emergency food aid in 2007. Then, a few years later, she sought investments to increase agricultural productivity. Now the Rwandan government is asking for help building storage facilities, so expanding crop yields are not wasted.
The whole enterprise of foreign assistance, in Zoellick’s view, requires an attitude adjustment in the developed world. The United States and Europe can’t be depended upon for models of responsible fiscal management or a sustainable social safety net. So developing nations increasingly are learning, not from us but from one another. “South-South lessons are exploding,” observes Zoellick. “It is not us lecturing them how to do this. We are connecting them to countries at a closer stage of development.” Zoellick cites the example of conditional cash transfers — an approach to helping the destitute pioneered in places such as Brazil and Mexico. Governments are providing cash to the poorest 15 or 20 percent of the population — but only on the condition that they get regular health checkups and send their children to school. “This has done more for women’s health than anything in Mexico’s history,” says Zoellick. The World Bank has helped expand similar programs to 40 countries.
Promoting development, in Zoellick’s view, requires “humility without hopelessness.” He is an unapologetic advocate of free markets. He also believes that free-market lessons are better tolerated when they come from multilateral institutions and from rising nations themselves. Zoellick pointed out that the chief economist at the World Bank is now Chinese — a distinct advantage when the bank urges difficult market reforms.
Zoellick describes a big economic picture that many Americans have yet to fully comprehend. “We are switching to a world of multiple poles of growth,” he told me. “It used to be the U.S. and Europe. Then China and India. Africa can become a pole of growth.” During the past five years, two-thirds of global economic growth has taken place in the developing world.
This is a testament to a basic American belief: the universal economic potential of free men and women. But the fulfillment of that potential is requiring a number of attitude adjustments from the United States — now one economic pole among many.