[1] A New Year's Resolution (Jeffrey D. Sachs); [2] This can't go on forever - so it won (Joseph Stiglitz)

A New Year's Resolution[1] 

by Jeffrey D. Sachs [2]

 

It is time for New Year's resolutions, and this year's are obvious. When the 
millennium opened, world leaders pledged to seek peace, the end of poverty, and 
a cleaner environment. Since then, the world has seen countless acts of 
violence, terrorism, famine, and environmental degradation. In 2005, we can 
begin to change direction.

Knowledge, scientific advance, travel, and global communications give us many 
opportunities to find solutions for the world's great problems. When a new 
disease called SARS hit China last year, the World Health Organization 
coordinated the actions of dozens of governments, and the crisis was quickly 
brought under control, at least for now. 

When Bill Gates donated $1 billion to bring vaccines to poor children, he made 
it possible to protect tens of millions of young people from preventable 
diseases. When an agricultural research unit called the World Agroforestry 
Center discovered that a certain tree could help African farmers grow more 
food, they introduced a new and valuable approach to overcoming Africa's 
chronic food crisis.  

Unfortunately, such examples of international cooperation are as rare as they 
are impressive. With our knowledge, science, and technology, the horrendous 
living conditions of the world's poorest people could be dramatically improved. 
Millions of people could be spared malaria, HIV/AIDS, hunger, and life in 
slums. The problem is not that we lack good solutions. The problem is that we 
fail to cooperate globally to put those solutions into practice.  

United Nations Secretary-General Kofi Annan has honored me by making me his 
Special Adviser on the Millennium Development Goals and asking me to lead a 
group of scholars and development experts in identifying practical steps to 
reach the goals by the target date in 2015. This effort, known as the UN 
Millennium Project, will issue its report to Secretary-General Annan on January 
17, 2005. Our study, Investing in Development: A Practical Plan to Achieve the 
Millennium Development Goals, will be available for free around the world at 
www.unmillenniumproject.org.

What we learned is easily summarized. For every major problem - hunger, 
illiteracy, malnutrition, malaria, AIDS, drought, and so forth - there are 
practical solutions that are proven and affordable. These investments, in turn, 
would strengthen the private sector and economic growth. Yet they require 
global partnership between the rich and poor countries of the world. Most 
importantly, the world's richest countries need to do much more to help the 
poorest countries make use of modern science and technology to solve these 
great problems.

The US, for example, currently spends around $450 billion each year on its 
military, but less than $15 billion to help the world's poorest countries fight 
disease, educate their children, and protect the environment. This is a 
mistake, because military approaches alone cannot make America safe. Only 
shared prosperity can truly make the planet secure. The US should be investing 
much more in peaceful economic development.

Germany, Japan, and several other rich countries are also doing much less than 
they should - and much less than they promised the poor countries that they 
would do. In 2002, all donor countries committed to "make concrete efforts" to 
reach 0.7% of national income in development aid to poor countries. Germany, 
Japan, and the US, among others, remain far below this commitment.

The year 2005 will offer many opportunities for citizens around the world to 
insist that their leaders keep their Millennium promises. After our report is 
issued in January, Secretary-General Kofi Annan will issue a report to the 
world in the spring, identifying the practical steps that should be taken this 
year. Around the same time, an important commission on Africa will issue a 
report to United Kingdom Prime Minister Tony Blair. Then, in July, the UK will 
host the annual G-8 Summit of the rich countries.  

Blair has promised that he will make the fight against poverty and long-term 
climate change the two priorities of the summit. In September, the world's 
leaders will reconvene at the UN to decide on their actions during the coming 
decade.    

The rich and powerful nations often declare their leadership in the world. The 
US claims that it helps the world fight poverty, but instead spends its money 
on weapons. Germany and Japan say that they want a permanent seat on the UN 
Security Council, but neither has yet followed through on its own pledges to 
help the world's poorest people. The world's poorest countries will ask 
themselves why they should vote for Germany and Japan to have permanent seats 
on the Security Council if they can't keep their promises.   

Nothing would be wiser for the world's rich countries than to fulfill their 
pledges to the world's poor, hungry and disease-ridden peoples. Therein lies 
the path to sustained peace. 2005 is the year that words can become reality, 
and that the world can begin to fulfill its hopes for our new millennium. Let 
us make our leaders aware that we aspire to shared peace and prosperity. Let us 
pledge that the rich and powerful should take real actions to help the poor, 
the weak, and the suffering.

 


---------------------------------

[1] Copyright: Project Syndicate, December 2004. 
http://www.project-syndicate.org/commentaries/commentary_text.php4?id=1822&lang=1&m=series
 


[2] Jeffrey D. Sachs is Professor of Economics and Director of the Earth 
Institute at Columbia University.

 

===============================================================================

 

This can't go on forever - so it won't [1] 

Global economic forecasters tend to be upbeat. But not this year 

Joseph Stiglitz [2]
 
The beginning of each year is high season for economic forecasters. With few 
exceptions, Wall Street economists try to give as upbeat an interpretation as 
the data will allow: gloom-and-doom forecasts do little to sell stocks. But 
even the salesmen are predicting a weaker American economy in 2005 than in 
2004. 

The biggest global economic uncertainty is the price of oil. Oil producers 
failed to anticipate the growth of demand in China. Supply side problems in the 
Middle East (and Nigeria, Russia, and Venezuela) are also playing a role, while 
George Bush's misadventure in Iraq has brought further instability. 

High oil prices are a drain on America, Europe, Japan, and other oil-importing 
countries. America's oil-import bill over the past year alone is estimated to 
have risen by around $75bn. If there were any assurance that prices would 
remain permanently above even $40 a barrel, alternative energy sources would be 
developed. But we are now in the worst of all worlds - prices so high that they 
damage the global economy, but uncertainty so severe that the investments 
needed to bring prices down are not being made. 

Meanwhile, the world's central bankers have been trained to focus exclusively 
on inflation. Many will recall how oil-price increases in the 1970s fuelled 
rapid inflation, and will want to show their resolve not to let it happen 
again. Interest rates will rise, and one economy after another will slow. The 
march towards higher interest rates has already begun in the US and elsewhere. 

For the past three years, falling interest rates have been the engine of 
growth, as households took on more debt to refinance their mortgages and used 
some of the savings to consume. Central bankers are hoping that this will not 
play out in reverse - that higher interest rates will not dampen consumption. 
Hope may not be enough. House prices could well decline; at the very least, the 
rate of increase is likely to slow down. 

This is only one of the uncertainties facing the US economy. Clearly, some of 
the growth in 2004 was due to provisions that encouraged investment in that 
year - when it mattered for US electoral politics - at the expense of 2005. 
Then there are America's huge fiscal and trade deficits, which jeopardise 
future American generations' well being, and represent a drag on the current US 
economy. 

As one of my predecessors as chair of the Council of Economic Advisers, Herb 
Stein, famously put it: "If something can't go on forever, it won't." But no 
one knows how, or when, it will all end. Indeed, President Bush 's election 
promises include partial privatisation of social security and making his 
earlier tax cuts permanent, which, if adopted, will send the deficits soaring 
to record levels. What, exactly, this will do to business confidence and 
currency markets is anybody's guess, but it won't be pretty. 

As a result, an even weaker dollar is a strong possibility, which will further 
undermine the European and Japanese economies. Moreover, America's gains will 
not balance Europe's losses: the uncertainty is bad for investment on both 
sides of the Atlantic. 

Europe, for its part, is finally beginning to recognise the problems with its 
macro-economic institutions, particularly a stability pact that restricts the 
use of fiscal policy and a central bank that focuses only on inflation, not on 
jobs or growth. But there is a good chance that institutional reforms will not 
come fast enough to lift the economy in 2005. 

China - and Asia more generally - represents the bright spot on the horizon. It 
may be too soon to be sure, but prospects for taming the excessive exuberance 
of a year ago appear good, bringing economic growth rates to sustainable levels 
that would be the envy of most other countries. 

By contrast, the world's other major economies will probably not begin 
performing up to potential in the next 12 months. They are all caught between 
the problems of the present and the mistakes of the past: in Europe, between 
institutions designed to avoid inflation when the problem is growth and 
employment; in America, between massive household and government debt and the 
demands of fiscal and monetary policy; and everywhere, between America's 
failure to use the world's scarce natural resources wisely and its failure to 
achieve peace and stability in the Middle East. 

© Project Syndicate 

 


---------------------------------

[1] The Guardian, Saturday January 1, 2005. 
http://www.guardian.co.uk/comment/story/0,,1381645,00.html 


[2] ? Joseph Stiglitz is professor of economics at Columbia University and a 
Nobel prize winner.





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