The past year has brought with it signs of hope and progress, but it has also brought signs of concern in the fight against global poverty.

On a positive note, new data this year show that the number of poor people continues to fall. The proportion of people living on less than $1 a day decreased from 40 to 21 percent of the global population between 1981 and 2001. Development indicators are clearly improving in countries that have laid good foundations for growth. In Europe, for example, we saw Slovenia graduate from Bank borrower status and join the European Union along with nine other Bank member countries.

The progress, though, is uneven across the globe. Growth in East Asia has meant that there were 500 million fewer people living below $1 a day in 2001 than in 1981. The number of poor people has also fallen in South Asia and in the Middle East and North Africa, though less dramatically than in East Asia. However, the absolute number of poor people has risen in Africa, Latin America and the Caribbean, and Europe and Central Asia.

This year the Annual Meetings of the World Bank and the International Monetary Fund (IMF) were held in the Middle East for the first time. In Dubai, where we met in the shadow of conflict and loss, I stressed that the world I see today is a world out of balance. Of the 6 billion people in the world today, 1 billion people in the wealthy countries account for 80 percent of the world’s gross domestic product while the other 5 billion have 20 percent. While rich countries spend $700 billion a year for defense and transfer $325 billion to their agriculture, they devote just $68 billion to development assistance.

These global imbalances are reflected in the daily lives of poor people around the world. Two billion people have no access to clean water, 115 million children never get the chance to go to school, and some 38 million people, more than 95 percent of them in developing countries, are HIV-positive, with little hope of receiving treatment.

It was only four years ago, in 2000, that world leaders gathered at the Millennium Summit in New York and committed themselves to cut poverty in half by 2015. They agreed on Millennium Development Goals for health, education, women, and the environment. At our Spring Meetings this year, the Bank launched the first Global Monitoring Report, which highlights the policies and actions we all need to reach those goals. The report, a joint effort with the IMF, sounded an alarm bell: most of the goals will not be met in most countries by the 2015 deadline.

So the world is at a tipping point: either we in the international community recommit to delivering on the goals, or the targets we set in a fanfare of publicity will be missed, the world’s poor will be left even further behind, and our children will be left to face the consequences.

During the next 25 years, about 2 billion more people will be added to the global population, but only 50 million of them will be in the richer countries. The vast majority will be born with the prospect of growing up in poverty and becoming disillusioned with a world they will inevitably view as inequitable and unjust. Terrorism is often bred in places where a fast-growing youth population has no hope.

We cannot ignore the rise of this more youthful world. In the past year, I met with youth from all over the world at places as varied as Tsinghua University in Beijing and Brandeis University in Massachusetts. These young people are not only the future—they are the now. Almost half the people of the world today are under 24 years old. Nine out of 10 of these young people live in developing countries. A billion of them will need jobs in the next decade. An ever-increasing number will leave their home countries to find work.

We need to face these realities, and we need to act on three issues in particular.

First, world trade talks—which can reduce agricultural protectionism and thus poverty in developing nations—must be pushed forward. Developing countries would gain nearly $325 billion by 2015 as a result, enough to lift 140 million people out of poverty.

Second, aid flows need to rise well above current commitments, and they need to be used more effectively. Although some increases have been made in recent years, almost a doubling of current development assistance levels will be required to meet the Millennium Development Goals. It is essential that donor countries fully replenish the International Development Association (IDA)—the fund that delivers proven results for the world’s poorest nations.

Third, we must push forward in relieving the debt burdens of the poorest countries by providing a larger proportion of additional aid in the form of grants rather than loans.

For these actions to be successful, the bargain between rich and poor nations struck at the Monterrey Conference in 2002 must be more effectively implemented. The developing countries must do more to reform their economies and cut out corruption, and the developed countries must back those reforms with increased support.

In the global fight against poverty, the World Bank is—and should be—playing a central role. The Bank’s strategy continues to focus on the two pillars for poverty reduction: empowering people and improving the investment climate. These pillars support the Bank’s Country Assistance Strategies and are reflected in the Poverty Reduction Strategy Papers of poorer countries and the development strategies of wealthier ones. The Bank continued its client-oriented approach this year, supporting development of Poverty Reduction Strategy Papers in low-income countries that receive IDA credits, and doing more to tailor its lending instruments for middle-income countries that borrow from the International Bank for Reconstruction and Development (IBRD). We are also continuing to work with countries experiencing weak policies, institutions, and often internal conflict through a special initiative known as Low-Income Countries under Stress. Donor partnerships are critical to success.

The Heavily Indebted Poor Countries Initiative gained momentum this year, with progress toward its goal of cutting poor countries’ debt to manageable levels. Twenty-seven countries—two-thirds of those eligible—are now participating and are receiving debt relief that will total more than $52 billion from all creditors over time. With our partners, we are working to move beyond debt relief to debt sustainability.

On the AIDS front, the Bank joined with the United Nations Children’s Fund; the Global Fund to Fight AIDS, Tuberculosis and Malaria; and the Clinton Foundation to provide generic drugs at a fraction of the current cost. We are also working with partners to develop HIV/AIDS prevention programs in countries with high risk.

One highlight of the year was the development conference we cohosted with the Chinese government in Shanghai, the culmination of nine months of studying development experiences. Leaders from developing countries shared their successes and failures with other leaders. We learned that feeling good about individual projects is not enough. We learned that we must “scale up” our development efforts. It is not 10 schools we are trying to help build. It is 10,000 schools. It is not 5 bridges we are trying to help construct. It is 5,000 bridges. It is not thousands of people we are trying to support. It is billions of people.

We at the World Bank believe that the disadvantaged of the world should be seen not as objects of charity but as assets in the fight against poverty. We believe overcoming poverty is a moral, social, economic, and security imperative. We will continue to state this view loud and clear as we work tirelessly to support all who seek to achieve the Millennium Development Goals.

James D. Wolfensohn