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PROCEEDINGSMR. HAY: Hello and welcome, everyone, to our global launch this morning of the 1999 World Development Indicators, the 1999 World Bank Atlas, the CD-ROM that goes with the World Development Indicators 1999, and for those of you who get back strain from carting this one around, there's the little Data Book 1999, which should fit, I think, on the coffee table or in your pocket very nicely.
Let me also extend a very warm welcome this morning to journalists who are joining us via videolink from a number of countries overseas, notably Kazakhstan, Bosnia-Herzegovina, Cote d'Ivoire, Ghana, Lithuania, the UK, France, Romania, Togo, Uganda, Ukraine, Zambia, and Zimbabwe. So it really is a global launch this morning.
A quite note on the embargo. You will see at the top of your press releases and on the other material that these publications and the CD-ROM are embargoed until 3:00 p.m. Eastern Daylight Time here in Washington, D.C., or 1900 GMT. And so that is just over five hours from now.
So let's have some quick introductions up here. I'm Phil Hay from Media Relations here at the World Bank. On my left is Joseph Stiglitz, the World Bank's Chief Economist and its Senior Vice President. On Joe's immediate left is Eric Swanson, who is the team leader for the World Development Indicators. And on his immediate left is Shaida Badiee, who is Director of the Data Group which brings us these publications and has done for the last three years.
So, without any further ado, let me turn the proceedings over to Joe Stiglitz.
MR. STIGLITZ: The World Development Indicators 1999, which is this volume here with these two other accompanying materials, this book allows us to assess the progress, or in some cases the lack of progress, among the 4.9 billion people living in the developing world, and to see whether the gaps between them and the 900 million people who live in more developed countries are narrowing or widening.
Reflecting the broader perspectives on development that have emerged in recent years, the WDI highlights a wide range of indicators beyond traditional, macroeconomic statistics such as GDP, trade statistics, budget deficits, for example, health, education, and environmental indicators, along with a continuing report on progress in reducing poverty around the world.
By enabling us to keep track of progress in these important dimensions, the WDI should also help achieve deeper and more lasting progress and to make us aware that we can't measure progress solely by indicators such as GDP that do not fully account environmental impacts.
Looking at the historical record documented in the WDI, we may be more cautious of programs that promote growth in ways that are not sustainable or which "save" the economy, or at least the exchange rate, but at the cost of increased poverty, interrupted education, or declining life expectancies.
There is within these statistics both good and bad news. First, some of the more disturbing statistics:
We are beginning to see estimate of the social impacts of the East Asian crisis, but the long-term effects will not appear until future editions of the WDI. What we do know, in Indonesia, for example, is that average household spending has declined, particularly in urban areas. Most hard hit have been regions that were best integrated into the global economy and those affected by drought. Estimates of poverty rates now range from 14 to 20 percent, up from 7 percent only two years ago.
In East Asia and perhaps in Latin America, we see the effects of a severe turn in the business cycle. Such things have happened before, and the WDI records the data for most of the world's economies over the past 30 years. What we need to be concerned with now is promoting recovery from the current downturn; correcting the institutional weaknesses that led to the financial crisis; and most importantly, directing attention to the long-term structural deficiencies that have left some economies in the region in a state of peril.
The WDI also makes clear and helps put into perspective the most recent crisis. It will now enable us to see that the East Asia Miracle was real and that fluctuations in crises have, in fact, been a persistent part of the world economy over recent decades.
Despite the significant gains in development, the gap between rich and poor is widening. And with many countries, income distributions are worsening, increasing the social pain of economic failure.
Nowhere are these problems more evident than in the states of the former Soviet Union, where the numbers living in poverty increased from 14 million in 1989 to some 147 million by the middle of the decade, a ten-fold increase.
The problems in Sub-Saharan Africa, which have long been a concern, remain severe. In fact, in Sub-Saharan Africa, ten countries have seen life expectancies decrease over the past two decades, and in many of these, the rate of HIV/AIDS infection exceeds 10 percent of the adult population.
The report also offers some encouraging observations about the state of the world. For example:
Life expectancies have grown substantially in many countries, including Oman, the Gambia, El Salvador, Algeria, Egypt, and Indonesia, all of which recorded increases of 10 years or more since 1980.
Food production continues to increase, especially in middle-income countries. Worldwide, increases in food production continue to exceed increases in population.
Girls' school enrollments have caught up with boys' in most high-income, Latin American, Caribbean, and Eastern European countries.
India and China, which together account for 38 percent of the world's population, have largely avoided the financial crisis.
Over the long term, Botswana continues to be the world's fastest growing there in the world in the period 1965-1997, with 11.4 percent average annual growth.
In some parts of the world, cellular phone technology has leapfrogged traditional land lines. The growth has been fastest in Sub-Saharan Africa where the number of cell phones has, on average, doubled every year since 1990.
In closing, let me remark that development has achieved much in the last 50 years, and the data recorded in the World Development Indicators bears witness to those successes. Development is possible, even in the midst of a crisis. But the figures also show that development is vulnerable and not at all inevitable.
In the past 18 months, the world has focused its attention on the factors that have caused that vulnerability--not just by assessing blame, but by devising strategies to reduce that vulnerability, and to ensure that these responses to crises are not only effective, but that they also cushion the poor from the worst effects of the crisis.
However, attention has been diverted away from broader developmental issues, ones that must be faced head-on as we cross the threshold of the new millennium.
It is not just that Russia has been buffeted by crisis this year; more broadly, a decade after the beginning of the transition to a market economy, mots of the countries from the former Soviet Union have a lower per capita income, worse social conditions, and higher levels of poverty than they did a decade ago.
Despite the crisis, incomes and social indicators for the countries in East Asia are markedly better than they were 30 years ago, but in Sub-Saharan Africa, many countries face stagnation, or even worse. We can do better than this and, indeed, we must.
Let me now turn to Eric Swanson, who is head of the WDI team, who will say a few words about the book.
MR. SWANSON: Thanks very much. This is the third year that we've produced the World Development Indicators. Since I'm the third person to hold it up here today, I'm sure it's becoming familiar to you, and if you didn't get a copy when you came in, copies are available, along with copies of the Atlas and the little Data Book, which is 1999's latest figures, mostly 1997 data, available for you.
Let me just say a few things about what's in the WDI, a kind of quick reader's tour.
There are over 500 data series covering 148 economies in the book and in the CD-ROM. There's additional data for 62 small economies in the world.
For all the regions and the income groups that the Bank uses in its operations, we have aggregate statistics, and this year we've added a separate aggregate for the European Monetary Union.
In his remarks, Joe mentioned the limitations of measuring development solely in terms of GDP, and the WDI is an antidote for that kind of narrow focus. By presenting a broad range of indicators covering economic, social, physical, and environmental dimensions of development, the WDI offers a comprehensive, quantitative view of the state of development in the world and its people.
There are a couple of new tables in this year's WDI that illustrate our efforts to keep expanding its coverage. For the first time, we have included data on wages and productivity. Wages in hours are notoriously difficult to measure on a comparable basis, so we are very pleased to include results from an ongoing Bank research project that has pulled together numbers from many sources into a single comprehensive table.
And for the first time, we are publishing a complete series on genuine savings, which adjust conventional savings measures for the depletion of physical capital. It also takes into account the use of natural resources and environmental damage done, and at the same time adds expenditures on human capital as a credit towards national savings. Although we do not yet have a perfect measure of green GDP, genuine savings offers some important insights into the sustainability of current policies.
When we launched the WDI in this form three years ago, we promised to include a report on progress towards the international development goals of reducing poverty, mortality, and increasing education. You've already heard that events of the last 18 months have threatened to stall progress in parts of the developing world. The opening essay in Chapter 1, called "World View," provides much of the background to this assessment.
In addition, you'll find a discussion of the state of education and its important role in furthering development in the opening of the People section. The Environment section explains the basis for calculating genuine savings. The Economy section opens with a review of the recent economic events in the world as reported by the Bank's economic teams. States and Markets reviews work on measuring corruption and the quality of governance. And, finally, the Global Links section looks at the many pathways of global integration.
Throughout the book, you'll find information about the data, references to other sources of information, and some graphical illustrations that we hope will make the WDI truly useful to you in your work.
And now Shaida Badiee is going to make some of these data come alive by extracting them directly from the CD-ROM. Thanks very much.
MS. BADIEE: Thank you, Eric. To make the data come alive here, you're going to see a live presentation. So bear with me. Choose the screen that's most convenient for you to see, and I'm going to take you quickly through the WDI CD-ROM.
Most of you--some of you may already know about this, too, and how easy and wonderful it is to use. So I'm going to be very brief and end the presentation with a quick tour of the WDI Web site and Data Web site.
To show you the data, I thought it would be interesting to choose one of the stories that we had in the press release. Here we have selected adult mortality rates for a number of countries in Africa, and the best is to show you that data on a chart because it's very difficult to see on this screen in the spread sheet format. So we're marking it, and we're actually using the charts command to get to a chart of the data.
Here, as you see for these five African countries, the adult mortality rates have unfortunately increased much due to the HIV/AIDS infection, and as you see, the rate, the blue line, for 1997 is much higher than the 1990 and much higher than the 1980 also.
We're going to see the same pattern in the adult mortality rates for other countries. Let's look at the Eastern European and Central Asia countries. Here, again, we have chosen a few countries, five countries, and we want to see their rates. And, unfortunately, these don't look very good. They're very high adult mortality rates, and you see the blue line is higher than the previous years. And as you see, we have put the United States as the pattern, as the normal pattern for you to compare it with, to see what the rates should actually look like.
Now, so far you looked at the changes in time for a number of countries. What if you wanted to look at this indicator, say, still, adult mortality, for one year for the whole world. The function to use there is to choose the indicator you want and actually do a map of that indicator. And here you see the map of the adult mortality rate, and the highest one is 377 male deaths per 1,000, which is shown in that color purple. And as you see, there is a lot of purple in the map showing the high adult mortality rate.
While you're on the map, you can also choose any of those 500 indicators that we have put on the WDI CD-ROM for you to look at. Here let's choose an indicator of interest, aid per capita, and to see what it looks like. It looks pretty bad. The aid flow, the foreign aid flow, particularly to developing countries, you see is pretty low. The lowest color is that red, which you see a lot, and it's $6.80 per person per year, which is equivalent to a cup of coffee and a sandwich in Washington, per person per year. So as you see, it is pretty low. It is the lowest in 1997.
On the map, of course, you can see many other functions, but I'm not going to spend too much time there. The last function that I wanted to show you is the table tap function on the WDI CD-ROM, which gives you access to hundreds of ready-made tables that we have made for you to get to at the click of an icon. And here we're looking at a country-at-a-glance table which is a two-pager of some interesting social and economic indicators for the country. The table tap will give you also access to the whole book of WDI and also to Atlas and many other indicators that we have made for you there.
There is a Quick Reference table which we made for you impatient journalists--I mean short of time--to get to data that you want very quickly. Here we have, for example, the countries in the world ranked highest to lowest by GNP per capita, both in Atlas methodology and PPP exchange rate. So you can really quickly get to that and get to the story that you are looking for.
These tables, the Quick Reference table and other tables, we also make accessible to you on our Web site. You know very well the Bank's main Web site, so I'm not going to spend any time there. And you also know that we have a special place for you for the journalists to go and look at the latest publications using a password.
So on the WDI Web site, you have access again to the whole of the WDI book, and you can see, for example--here you can look at each one of the sections. We are right now on the Overview section, and from there you can within each section look at the tables that we have put under the WDI book. For example, we are now clicking on Table 1.1 that I think is the size of the economy, and you see that in the PDF format, very small size. But, of course, you can zoom in and bring it up to the appropriate size which is useful for you.
On the WDI Web site, you can also see the Atlas and all its maps and all the table, but, of course, it looks much prettier in the publication itself. We have also the Q and A and the press release and other information available there for you.
From the WDI Web site, let me remind you that there is one link you should really know about, and that is the link that takes you to the public data site on the Web. This is a data site that you should really know about. For example, we have the development goals there to remind you of what are those development goals that we have in the book, and it also takes you to the links, to the appropriate table in the WDI. So if you're doing work on poverty and you want to remind yourself what are those goals and what are the underlying data, this is the place to go.
If you are looking at a country and you want a specific country data, again, on the Data Web site there is a "by country" button, and you go there and you select the country that you want, and you get tables, for example, at-a-glance tables that I showed you.
You can select data by topic. If you're only interested in aid flow or, you know, other indicators or topics, you can select that.
And, finally, I wanted to tell you that from time to time we update this Web site, and the value changes that we make throughout the year to some of our major updates, we will put it up on this site so you can actually get to it. And we're coming up with a map function, and there is--as you see, there's a factoid that goes across the screen. From time to time we update this and make some interesting data stories for you. So do use it, and please watch this space. This is really an interesting Web site.
Thank you.
MR. HAY: Thanks very much, Shaida.
We did hope to have copies of Shaida's wonderful CD-ROM here this morning. We're not going to get our hands on them for a couple more days. Shaida's got one, indeed. But there's a yellow legal pad out in the front, and if you will just put your name and e-mail address and phone number, we'll get them to you as soon as they come into the warehouse.
So, without any further ado, let's throw it open to questions. Bring up the house lights.
Just a couple of quick housekeeping points. Wait for microphones, if you will. And if you can identify yourself for the poor people who do the transcript, that would be great.
And I think in fairness to our global audience this morning, let's keep the questions focused on the World Development Indicators. We'll see if there's time for anything else at the end of it. And for our friends overseas in countries from Bosnia to Zimbabwe, let me just repeat the fax number for you so you can send your questions to us here in D.C. It's (202) 623-9300. Once again, (202)--for Washington--623-9300.
So our microphones are in place, and questions? Let's go down here in the middle on the right and take this question here.
QUESTION: [inaudible] Lyle, from [inaudible] former Soviet [inaudible]. How do you assess this whole transition process? Has it been a failure? What's gone wrong?
MR. STIGLITZ: That's one of the most interesting questions that we are spending a lot of time pondering. Ten years after the beginning of the transition, when most economists said the problem in the former Soviet Union was that they had centralized planning, property rights--no property rights and, therefore, inefficiencies, distorted prices, you were going to change all that and it was supposed to release a burst of energy, entrepreneurship, and output was supposed to increase. Instead, output has fallen markedly, and poverty has increased markedly.
And I think the lesson that we've learned is market economies are far more complicated than textbook models often describe them, and that issues of governance, issues of legal infrastructures, issues of institutions are absolutely central.
I'm going to be giving a talk at the Annual Bank Conference on Development Economics later on this week where I'm going to actually spend quite a bit of time talking precisely about that issue.
MR. HAY: Eric, maybe you can run us through just a quick data summary, if you will, of some of these facts and figures about the former Soviet Union at the moment. We mentioned in the press release, of course, some rather dire poverty numbers and inequality. Just give us a flavor, if you will, of that.
MR. SWANSON: Well, Joe mentioned perhaps the most shocking number, which is the increase in the rate of poverty. That's measured on what we call our international poverty line of $4 per person per day consumption in the Soviet Union and other countries of the former Soviet Union and Eastern Europe, and there we've seen the numbers increase from 14 million to 147 million from the late 1980s, 1989, until the middle of the current decade. We will have further information on that. We'll be tapping into more numbers later this year. The Bank is trying to monitor poverty in all of its countries as quickly as it can, but you appreciate this is a not a number where you just go out on the street and count. It needs detailed household-level studies to properly assess poverty.
One of the interesting things that we have seen in the 1998 numbers from Russia is that to at least measure it in the national accounts, personal consumption is holding up. What's really disappeared is investment and public consumption, government consumption. I guess if you are not collecting taxes, it keeps down your public consumption as well.
Essentially, we see an economy that's in, I guess, chaos right now. It's very hard to measure exactly what's going on there.
MR. STIGLITZ: Can I just--
MR. HAY: Yes.
MR. STIGLITZ: --refer to page 7 where there are two interesting tables. One of them shows the Gini coefficient, which is a standard measure of inequality in the transition economies both at the beginning of the period of transition and at the end of the period of transition. And one of the things that comes across very striking is that there has been in most of the countries an increase in the degree of inequality.
So, in a sense, the economies in transition have repealed a standard law in economics which says that there is a trade-off between inequality and growth. What they showed is that you have negative growth and increasing inequality. So they've gotten the worst of both worlds, and that is, I think, one of the things that we will have to ponder as we go forward.
MR. HAY: Let's go behind Mr. Lyle, and then we'll go across the row.
QUESTION: Frank Collar (ph) from the Canadian Broadcasting Corporation. The report highlights or talks about the dangers of stalling over the next decade. I wonder if you could indicate the Bank's ranking of what are the threats to that happening, and particularly where the Bank feels it might be able to intervene to make a difference most efficiently.
MR. STIGLITZ: I think the issue that is most disturbing is that in Africa, where there has been very little progress and in many dimensions things have fallen back. I mentioned the HIV/AIDS epidemic, which is having an enormous effect on life expectancy. You don't expect a single disease to show up in the macroeconomic numbers, but if you look here and you look at our AIDS report that we came out with last year, you will see that that one disease is having discernible effects on life expectancies of five, ten years, or more in the case of some particular countries.
It's important when you look at these kinds of regional statistics to remember, though, that there is enormous variation across countries. There are some countries within Africa that are doing very well. In my remarks, I mentioned the case of Botswana, which has had one of the fastest rates of economic growth of any country in the world. But there are other success stories that probably have not gotten as much attention in recent years. Ethiopia and Uganda have both been experiencing robust growth.
As you look around the world, the other troubling set of stories, of course, are the East Asia crisis. Now, I'm actually optimistic that the countries will recover, not necessarily this year but within a couple years, and that while growth may not return to the high levels that it was previously, it will be robust growth because these countries continue to have high savings rates, high levels of education, and in the case of several of the countries, they have done a very good job of addressing their weaknesses, which means that there are good prospects going forward.
MR. HAY: Eric, Shaida, do you want to add anything?
MS. BADIEE: I just wanted to add that in terms of what the Bank will be doing, I just wanted to put one word on information. Being in the information business, we believe that measurement is very important. What gets measured actually gets done. So we're hoping that with more distribution of information such as the one that we have in the WDI and working with the countries we can actually stress more on building information infrastructure or data infrastructure to be able to capture these observations and to be able to share it and to evaluate the progress.
So I'm really putting my work on information and building up information.
MR. HAY: Let's go to the left here, a patient gentleman in the second row.
QUESTION: Mr. Stiglitz, you referred to the deterioration of the social indicators in East Asia. You also expressed optimism that the economies there will recover. How long do you think the social indicators will take to recover? Will they recover as fast as they deteriorated, and will it take more than growth to make them recover?
Also, could either you or Mr. Swanson just highlight some of the worse deteriorations that have taken place in these indicators?
MR. STIGLITZ: Let me just first mention, since you are from Singapore, one of the statistics that is in the report that you may be interested in. Singapore has the highest savings rate of any country in the world at 52 percent, something the rest of the world can emulate.
One of the things about social indicators is that they often lag the actual impact, and then they take a long time to recover. For instance, malnutrition has its effects often years later than the child who does not have the food. So, in that sense, some of the social impacts will be with us for a long time.
One of the aspects of the good news that I think was not fully anticipated was how effective programs of the World Bank and the Indonesia has been in forestalling some of the downturn in education that was a real cause of concern, and our programs in that area have managed to keep children enrolled in schools, in spite of the very significant adverse turn of overall reduction in living standards.
The issue in most of these countries is that wages and incomes particularly of workers in, you might call it, the lower-income areas of income have fallen precipitously, somewhere between 15, 25, and 30 percent.
Another aspect of this is that those parts of the economy that were really subsistence were not dependent on the market in the case of Indonesia, not the case of Singapore. Singapore is also the most urbanized country in the world, having basically a 100-percent living-in-urban environment, but in a country like Singapore, the very poor are often subsistence. Being removed from the market, they have not been as adversely affected by market turmoil. So, at the very bottom, the news is not as bad as you might have thought, until you realize the very bad are really very bad and are not participating in the market economy.
For those just above it, they have faced declining wages and increasing incidence of unemployment. They will recover when their economy recovers, and that will be happening in various countries with various speeds. I hope that at least in several of the countries that recovery is actually proceeding at pace, and by later on this year, we should begin to see indicators on the real side in at least a couple of the countries.
MR. HAY: Let's stay on this side of the tracks, the gentleman here on the left in the second row, and then I promise we will come back here.
If I could just send out a message, too, to our remote sites.
QUESTION: From India, just a couple of clarifications. You mentioned that Southeastern China will be able to meet the targets of a high-import by 2015. I was wondering whether you mean all of the countries associated or only some of them, and if so, which countries.
Secondly, you mentioned the mission of equality standards, $1, $2, and $4. Now, if it is $4 and the whole of India is poor, all of China is poor. So I was wondering whether it is possible to have a common measure.
MR. SWANSON: Yes, both very good questions.
Last year, we said optimistically that if we continued on the current course that Asia itself would meet the global target of reducing poverty rates by half. This year, we are not quite so optimistic, but we certainly expect that with continued real growth at its current levels in China and probably in India, though it is a bit dicier, we could hit those targets by 2015.
Country by country, it makes a great deal of difference, and it depends upon both the overall growth of the economy and it depends upon who benefits from that growth, that is to say, again, the issue of income distribution.
I am sorry. There was a second part of that question now.
MR. STIGLITZ: It was $2 or $4.
MR. SWANSON: It is one of the tricky businesses of measuring poverty that, although we try to establish a single international line, it is very clear. Even when that line is adjusted for differences in local purchasing power, the poverty does not mean the same thing in all places. Hence, we commonly use $1 a day amongst the poorest countries, the least-developed countries.
For countries that are already in an industrialized state and where there is a much different sort of market working, less home production, for example, that supplements incomes in the poorest countries and in agricultural countries, then we have to move that poverty line up to $2 or even $4 a day to achieve what we think, very subjectively, is a comparable level of impoverishment, if you will. No claims that this is an exact science, but we think it provides you with a reasonably good standard.
MR. STIGLITZ: The issues of measuring poverty are extremely difficult, and for those who are interested, there was a quite interesting report by the National Academy of Sciences in the United States about 3 years ago discussing some of the difficulties of coming up with an agreed-upon measure of poverty.
MS. BADIEE: I just wanted to refer the gentleman from India to page 10. We have a chart there which I think you will find very useful to answer your question for how far the different regions have to go to reduce their poverty by half by 2015, which is based on the PPP-dollar-a-day figure.
MR. HAY: Let's go overseas and take a quick question from Bosnia and Herzegovina. This may be a case of opening your books, and we can just look at a major thumbnail sketch. The question is: Do you have any facts about Bosnia for the last 3 years? Last year, for example, population quotes were that they had a population of 2 million, and they are suggesting that may have been on the shy side.
Open your data book, Eric.
MR. SWANSON: I am turning to my quickest reference, rather than going to all the pages of the WDI in the little data book where we have a page for Bosnia and Herzegovina. That is page 45.
You will be disappointed, but not surprised to see that there are many missing items there. It is a very difficult area still for us to gather current data.
The Bank's current population estimate is on the order of about 2 million. We have to recognize that subject has some contentious matters concerning the exact boundaries and the disposition of populations in the area.
A couple other quick items here. We have information on infant mortality rates, which is placed at 13 per 1,000 live births. It puts Bosnia in quite good shape compared to most developing countries. It is hovering just above the level that you start to pick up some of the high-income countries.
We do have some other information, strangely enough, more on the environment and technology side than we do on the economy side. For example, Bosnia at least is holding at zero on deforestation and approximately 80 telephone main lines per 1,000 people which seems strikingly low.
I guess I will stop there, but say they are our numbers.
MR. STIGLITZ: The richness of this book is illustrated by the fact that if you turn to the table on population, it shows that in 1980, Bosnia had a population of 4.1 million, and by 1997, it had decreased to 2.3 million. You can see within this one table a picture of the devastating that this country went through.
MR. HAY: Absolutely. So I hope that Drashan Simich [ph] in Bosnia is satisfied with that response.
At the back there, please, on the right, inside the last row.
QUESTION: Thank you. Irv Chapman from Bloomberg Television.
Dr. Stiglitz, in view of the forecast that Korea is going to be growing again and that some of the countries of South Asia have bottomed out and are beginning to turn up, in your optimism, have you modified your view at all about the prescription for dealing with future crises and the draconian measures that were taken that you criticized last year?
While you think about that, Mr. Swanson, your pregnant comment about savings and changing the desiderata, we are told that Americans are spending more, saving nothing or less than nothing. Whereas, the Japanese and Chinese and so on are champion savers, in spite of their need in Japan to spend and consume.
Are you suggesting that there is more to it than that?
MR. STIGLITZ: Let me focus on the issue of savings.
[Laughter.]
MR. HAY: You see, it touches on the other one.
MR. STIGLITZ: Savings and consumption have always been a two-edged sword. On the one hand, you want savings because it releases resources for investment. Investment is one of the key engines for economic growth.
On the other hand, if you do not have consumption, you may lack aggregate demand, and if you lack aggregate demand, you get into the traditional Keynesian problem of unemployed resources and not only lack of growth, but actually stagnation and unemployment and economic collapse.
The art of economic management entails making sure that resources are fully employed, and if you can manage that well, then particularly for low-income countries, if they can have high savings rates and have mechanisms--and this is where financial markets are so important--mechanisms of converting that savings into productive investments, then, of course, they will grow more rapidly.
Part of the East Asia miracle, as we have often talked about it, is that it did two things. One, unlike almost any other region in the world, it generated huge levels of savings, 30, 35, 40 percent, and in the case of Singapore, this year, 97 over 50 percent.
Secondly, it was able to convert those savings into relatively high-productive investments, and that really is markedly different from some of the countries in Eastern Europe and Russia where they had forced savings, but then were not able to convert those savings into productive investments. So their growth did not increase. So those are the two twin aspects of why financial markets are so important and why savings are so important.
For 30 years, they managed not only to generate those savings, but to generate a process of macroeconomic management that led those countries to grow smoothly and use their overall resources fully. So they managed neither to have unemployment, nor to have inflation. It was actually a remarkable balancing act.
In terms of the vocabulary that sometimes is used, that people say that the countries were vulnerable, that is not really true if you look at it in a historical perspective that these tables will bring out. For 30 years, several of the countries had only 1 year of economic downturn. Others has zero years of economic downturn, 30 years in which the world experienced all kinds of shocks, including two oil shocks.
So, if these countries were vulnerable, it was a newly acquired vulnerability. Their resistance to shocks was better than almost any other countries around the world, including most of the OECD countries.
To turn to the United States, the United States has, particularly under recent sound economic management, managed to keep inflation low and to bring unemployment down to 4.2 percent, to maintain growth and even increase the rate of productivity, but the low savings rate does suggest that there may be problems going forward.
At the current time, however, that low savings rate, which also means a high-consumption rate, is really a critical fuel for the world economy. The world economy has been experiencing a slow-down, and the strength of the U.S. economy has been a vital force in maintaining the overall strength of the world economy and what in several regions of the world is clearly a set of adverse economic shocks.
MR. SWANSON: Maybe I should add to the first question on savings, just a note that the table on genuine savings provides some interesting insights. The U.S. savings rate, which you point out is low, gets lower when we look at full savings adjusting for consumption of fixed capital, in particular depreciation. You realize that generally speaking we only know about investment. Estimates of how much we are using up of the capital stock are a bit tricky to come up with, but the estimate here says that the U.S. from a savings rate of 16 percent then uses every year about 10, almost 11 percent of its fixed capital up. So we are just replacing that.
The U.S., then, "adjusted savings rate," and I put quotations and so forth around this, falls down to about 10 percent. That happens in almost every country in this book. It shows that the effect of taking into account these adjustments is that the savings going on is less than meets the eye when we simply use the national accounts.
Singapore, for example, plunges from its lofty 51.2 to only 40 percent savings.
Costa Rica is one of the exceptional cases, one of the few instances we can point out where, if you will, nominal savings actually rise slightly when we take into account investments in education and use of resources.
MR. HAY: I want to talk on your first question. I think that is a fair enough answer. I would have thought Joe, the Bank, the international community, the IMF, everyone is looking forward to the future with regard to this international architecture debate to try and sort of work out what the future should be. So I think it is all in a state of flux.
The lady in red in the fourth row.
QUESTION: Angela Woods from Bretton Woods Update.
Mr. Wolfensohn's Comprehensive Development Framework aims to ensure a balance between macroeconomic, social, and structural reforms. What success have you had in encouraging the IMF to participate in this framework, and what success have you had in encouraging the IMF to develop more poverty-focussed programs?
MR. HAY: I think that is really one for them, isn't it?
MR. STIGLITZ: The one aspect of that that I want to touch on, in a way, the WDI provides some of the statistical basis that we can all use going forward in thinking about this comprehensive approach to development, that it does emphasize that development needs to look at poverty. It needs to look at the environment.
The table that Eric was referring to on looking at gross savings and then correcting it to get genuine savings, among the adjustments that we point out are adjustments for the depletion of natural resources and the degradation of the environment, which in the past have not been included in our perspectives on what is happening to economic growth.
MR. HAY: Shaida wanted to jump in there.
MS. BADIEE: I just wanted to add, since we are talking about a data book, in terms of data partnership, the World Bank and IMF, as you can see from the book, we work very closely with each other. In fact, we have a program. You probably have heard about the SDDS system which is setting standards in the countries for reporting socioeconomic data, and we work very close with IMF as they look for the macroeconomic and financial indicators. We try to also look at the social side, the social indicators, and collaborate with each other through capacity-building in countries and through training for improving the reporting of this information. So that one branch on the data, we have a lot of collaboration and partnership, and you see that through the book.
MR. HAY: Let's go to Paris very quickly. This, we should be able to deal with very smartly.
There is some confusion on page 1 of the press release where we talk about the 147 million or 1 person in 3 in the countries of the former Soviet Union. Is this referring to all transition economies, or is it just the former Soviet Union?
Eric, I would have thought that is a question for you.
MR. SWANSON: It sounds like a question for me.
The denominator there is the total population of all of the Bank's Europe and Central Asian Region, which is about 470 million or something of the sort, but includes countries that would not normally be considered transition economies, such as Turkey right now.
Therefore, my apologies if that sounds like a slightly funny number. In fact, I suppose it was the diffidence of the person putting together the press release who did not want to say that it was actually closer to, say, 1 or 2 people living in poverty. They broadened the base, while keeping the numerator a little narrower.
MR. STIGLITZ: Can I just make one remark that I meant to make earlier? We talked about the economies in transition. Most of the time, we are talking about Eastern Europe. There is one other area of transition, if you will, which is China, where there has been a movement to a new economic structure, which they referred to as a "market socialist economy with a Chinese character," but it is clearly a much more market-based economy.
One of the remarkable contrasts is the success of that transition as measured by most indicators, including increases in GDP, living standards, and reductions in poverty, the contrast between that and what has happened in the former Soviet Union, and as a result, I think, quite different economic policies being pursued.
MR. HAY: I hope our friend in Paris is happy with that.
Let's go here to the lady in blue in the fourth row on the right there.
QUESTION: Thank you. Jemma Daba from Trade Union World.
I just have a couple of questions.
MR. HAY: I am sorry. Can we just make it one? Time is running out.
QUESTION: Okay. The statistics on workers' incomes and wages, I just wanted to know to what extent the statistics allow you to make that link between the macroeconomic indicators such as growth and then what is happening to household incomes, levels of employment/unemployment, the condition of workers in the informal sector, if you are able to capture purchasing power within the informal sector, as well as data dis-aggregated by gender in order to look at the gender impacts of income and income trends.
MR. HAY: Okay. Thanks very much.
MR. SWANSON: As Shaida said at the end of her talk, keep watching this space. I mean, these are issues that we are hoping very much to deal with along with those kinds of questions, particularly gender disaggregation and disaggregation within the economy itself. Regional numbers are another very telling kind of statistic. We have not been able to include them in the book now, but it is a direction that we are moving in.
I think on some of your specific questions, you will be seeing a lot more detailed information, at least in some countries, coming out as a result of the Bank's ongoing poverty assessment work that will be released later on this year.
MR. HAY: Let me just say to our links joining us from overseas, if you can send us one more fax, a couple more, we will squeeze them in now.
Far left?
QUESTION: I am Ben Kahn with Agence France Press.
Ms. Woods from the Bretton Woods Update had asked about World Bank efforts to work with the IMF on ensuring that the focus of their policies is more on not just growth, but also concern for health and education and the poor. From your response, your response seemed to be mainly about information-sharing, and I was wondering, when you said earlier, Mr. Stiglitz, that the World Bank is going to be more cautious about policies that save the economy or at least the exchange rate at the expense of the poor, is that going to have no effect at this point on World Bank policy towards the terms of loans, joint loans from the IMF and World Bank to developing countries, or will that have any concrete effect on the World Bank's policy on the terms of those loans?
MR. STIGLITZ: Let me make two remarks. One of them is that already in the crisis countries, one of the main focal points of Bank lending activity was for a strengthening of the social safety net. I referred to a particular example in the case of Indonesia where we provided loans to make sure that education was not interrupted. So that has been and will continue to be a core focal point of Bank lending activities.
Going forward, we will continue to try to work more broadly to reduce--I hate using words that are so broad, but the vulnerability of countries, and included in those strategies of reducing vulnerability are strategies that put into place more permanent safety nets because one of the things that we know is that no matter what we do to these countries, the global marketplace imposes risks. There will be crises in the future, no matter what we do. What we have to do is to try to work to make sure that institutions are in place so that, when there are crises, the most vulnerable are less affected by that.
Our broader research program is directed at issues of the following kind. When there is a crisis, one wants to try to design responses to that crisis, which minimize, reduce the impact on the very poor. How to do that is one of the most important questions that I think all of us have to address in the coming years.
QUESTION: The effects on loans, the effects on the terms of IMF/World Bank loans?
MR. HAY: Let's plow on. I am sorry.
Here in the middle, just in the front of the camera on the left-hand side.
QUESTION: Thank you.
Matthew Lockhart from Christian Aid News.
It is pretty clear from the figures in the WDI this year that current growth in a lot of world regions projected forward, but is not going to be enough to deliver on the international development targets, especially for regions such as Sub-Saharan Africa.
Mr. Stiglitz said we can do better, and we must, and I really wanted to ask you how, especially if current growth is not going to deliver. Then, is the Bank going to have to start looking again at issues of distribution, and will you have any thoughts on how policies might affect distribution in a more favorable way?
MR. STIGLITZ: One aspect, obviously, is that the very poorest countries have not been able to get either enough official aid or private capital flows.
The Global Development Finance that came out just a little while ago pointed out that official flows from donor countries are basically on a per-capita basis at a 50-year low. While many of the economies in the world have been able to attract large amounts of private-capital flow--and private-capital flow since the beginning of this decade have increased six-fold--the poorest countries in Africa have not succeeded in doing so.
So that suggested a two-part strategy. One, hopefully, there will be more money flows from the official community. The other one is asking the question how do we increase the attractiveness of these countries for private financial capital flows.
On this, I think there are two aspects. One of them is that better policies within these countries creating a better environment for private capital will succeed in attracting more capital.
The second one is letting the investment community know about changes in policies that have occurred, and so drawing their attention to the successes, of which there have been several in Africa, for instance. I mention, for instance, that several countries in Africa have actually seen their income start to grow significantly, and are pursuing quite good economic policies. Yet, in spite of that, they have not succeeded in attracting the level of private capital that you might have thought.
So one of the important roles that we think that we can perform is to draw attention to the investment community to these success cases.
MR. HAY: Let's leave it there, Joe.
We have got time for two more folks. Sorry.
The gentleman in the front here on the right.
QUESTION: Mark Egan at Reuters.
Mr. Stiglitz, given the rising poverty numbers, how would you like to reform or change the HIPC Initiative with that in mind?
MR. STIGLITZ: I think I share the view that many of us share, which is that an expansion of the HIPC Initiative in the way that the World Bank and others throughout the G7 have repeatedly noted would be desirable, and the issue here is really one of implementation, of bringing into play the basic framework, which has now been at work for several years, but it is already at the pace of actual implementation, and getting more resources because this does take resources.
MR. HAY: Lucky last question. I am sorry. This is from Uganda, and they ask: To what extent are regional insecurities and conflicts in the Great Lakes Region responsible for hampering economic developing countries and exacerbating or increasing poverty levels?
MR. STIGLITZ: Let me say that the studies that we have done at the World Bank show very strongly that conflict is one of the major sources of lack of development and of poverty.
On the other hand, it is also the case that low incomes are one of the major causes of civil conflict. That is to say, one of the studies that have recently been done, if you take a country with a given degree of heterogeneity, ethnic division, it is more likely that those ethnic divisions will play out in the form of civil conflict if incomes are low than if incomes are high. This seems to be an empirical regularity concerning the nature of civil strife.
So, if we can increase incomes, the likelihood of civil strife will be lower. On the other hand, given that there is so much civil strife, it makes the task of increasing income all the more difficult.
MR. HAY: Eric, did you want to add anything to that?
MR. SWANSON: No. I think that is precisely the point. We do not have data here on civil conflicts. We do have data on arms expenditures, though, which I think also play a role in holding back growth in some countries.
MR. HAY: I hate to cut it off, folks. I am sorry. That is all we have got time for this morning.
Thanks very much, indeed, for coming, all our friends overseas. Thank you very much, again, to you.
By the way, we will reply to your questions, but I think as and when we are off the dais.
[Whereupon, at 11:04 a.m., the press briefing concluded.]
