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By Nicholas Stern

Nicholas Stern is chief economist of the World Bank.

At last month's U.N. Summit on Financing for Development in Monterrey, Mexico, world leaders agreed to make the world a better and safer place. Poor and rich countries proclaimed their readiness to work together as partners in the fight against world poverty. Now is the time for putting these commitments into practice. Now is the time to move from words to action.

We must begin by understanding the scope of the problem. A new World Bank study released during spring shows that many poor countries are in danger of falling short of the Millennium Development Goals, which aim to halve global poverty by 2015 and to spur significant improvements in education, gender equality, health care, and in overcoming hunger and environmental degradation.

The report paints a grim picture of human misery on a number of fronts and points to the challenges that the international community faces in the years ahead. In Rwanda, one mother dies for every 40 live births -- a maternal death rate more than 200 times the level in rich countries. Globally, 1.2 billion people live on less than $1 a day; 2.4 billion people lack proper sanitation; and one in every three women in the developing world cannot read or write.

In some countries, a half-century of progress in extending life expectancy has suffered serious setbacks. In the past decade, life expectancy fell four years in Russia, five years in Uganda and a staggering 14 years in South Africa, with the declines in Africa mostly the result of HIV/AIDS. In the time it takes you to read this newspaper, 600 more people will have contracted HIV, most of them Africans.

Is the outlook hopeless?

Certainly not. The World Development Indicators report shows that over the past 40 years, notwithstanding the recent setbacks, life expectancy at birth in developing countries has increased by 20 years -- about as much as was achieved in all of human history prior to the middle of the 20th century. And over the past 30 years, adult illiteracy in the developing world has been cut nearly in half, from 47 percent to 25 percent.

As we work toward the Millennium Development Goals, nations need to do a better job of setting explicit goals and monitoring progress, so that poor countries and the international community are well informed about the successes and failures and can respond accordingly. And by putting in place the policies, institutions and governance necessary for rapid, sustained, poverty-reducing growth, developing countries can accelerate their progress toward the goals.

The results are clear. Twenty-four developing countries that increased their trade integration with the world economy in the two decades ending in the late 1990s achieved more rapid income growth, longer life expectancy and better schooling. These countries, home to some 3 billion people, enjoyed an average 5 percent growth rate in income per capita in the 1990s compared to 2 percent in rich countries. Thanks to brisk economic growth in China and India, the world will probably reach the overall goal of reducing the proportion of people living on less than $1 a day to half the 1990 level by 2015, from one in every third person in the developing world to one in every six.

But progress is uneven, and too many regions and countries are falling far short. Unless the growth rate in sub-Saharan Africa improves from the past 20-30 years, when growth barely kept pace with population growth, the number of poor people in the region will rise from 300 million today to 345 million in 2015.

Most developing regions could still reach the 2015 target if average growth in per capita income speeds up to an average of 3.6 percent per year. That growth would be nearly twice the rate achieved over the last decade, but the experience of some countries shows that it is possible. China averaged almost 9 percent annual growth in GDP per capita in the 1980s and 1990s. Vietnam saw growth of almost 6 percent in the 1990s, which reduced poverty by more than a third between 1993 and 1998. And in India, faster growth in the last decade has helped to reduce substantially the proportion of people living in poverty.

Achieving that stronger growth in the developing world will require both poor and rich countries to live up to the commitments they made in Monterrey. Poor countries must improve their policies, institutions and governance; and rich nations must open their markets to exports from poor countries and increase foreign aid.

On trade, rich nations must reduce tariffs, subsidies and other barriers that undermine developing countries efforts to compete in global markets.

These actions can and should be taken now, without waiting for the results of protracted World Trade Organization negotiations. Rich country agricultural subsidies of $300 billion a year undercut the farm exports of poor countries. These subsidies, which go mainly to a relatively small number of large agribusiness corporations, are five times what the rich countries provide in foreign aid to a developing world of close to 5 billion people. Rich countries could put these funds to better use by underwriting the costs of change at home or, even better, in the developing world.

Monterrey signaled a reversal in the trend of falling aid, with the European Union and the United States both pledging to increase development assistance over the next several years. Those increases are a step in the right direction but fall well short of the additional $40-60 billion a year that will be needed to reach the millennium goals.

The promises and proclamations of Monterrey offer the possibility of the start of a new era in development cooperation. The problems are immense, yet so is the potential for unprecedented progress. Many poor countries are improving their policies, institutions and governance, in order to foster sustained, rapid, poverty-reducing growth. The time is right for rich countries to do their part and move from words to action on the twin commitments of improved trade access and increased aid.

(c) 2002, Global Economic Viewpoint. Distributed by the Los Angeles Times Syndicate International, a division of Tribune Media services.
For immediate release (Distributed 4/23/02)

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