Remarks by USAID Administrator Dr. Rajiv Shah at the 2010 Annual Meeting of the Clinton Global Initiative in New York City

Tuesday, September 21, 2010
Subject 
Economic Empowerment

Remarks As Prepared

I want to thank Governor Granholm for her remarks. As a former Wolverine, I care deeply about Michigan’s progress, and I’ve been inspired by your leadership to usher in a new era of economic empowerment in cities like Detroit, Flint and Grand Rapids.

I also want to thank the Clinton Global Initiative for inviting me to speak today. As we gather this week to celebrate and sustain our progress toward achieving the Millennium Development Goals, we should acknowledge the role President Clinton, the Clinton Foundation, and CGI have all played in elevating development. That commitment has been critical to helping more than 400 million people escape extreme poverty.

But we should also remind ourselves that there is much work to be done, and that we will require a major change in our approach to make achieving the MDG’s by 2015 a reality, and bringing economic empowerment to all.

30 years ago, if you asked the leading development experts the best way to move people out of dire poverty, they would have given you a simple answer: invest in agriculture.

That answer was based largely on a qualitative glance at world history. Almost every country that has emerged as a developed economy has done so by increasing the productivity of it’s agricultural sector.

The theory behind this was economics 101. In agrarian economies, boosting agricultural productivity allowed farmers to grow and sell more crops, increasing their returns. But it also had the amplifying effect of lowering food prices. Since most of those in extreme poverty spend nearly 70% of their incomes on food, small decreases in price lead to dramatic gains in real income.

But investing in agriculture was really just the start on a path to progress. A productive agricultural sector provided opportunities for farmers to move into other fields, diversifying a country’s economic base. And as agriculture matured into agribusiness – as farmers left wheat fields to work in wheat mills – they developed technologies that could fuel economic growth in new sectors.

We now have the data to back up this theory. Thanks to the latest research, we know that economic growth that comes from increasing agricultural productivity is nearly three times more effective in raising the income of the poorest than increases in manufacturing or service productivity.

So it turns out, what we thought thirty years ago was true: investing in agriculture is the critical first step to breaking the shackles of poverty.

But then, why are we here today?

Why is it that today a billion people still live in extreme poverty?

And why has agricultural productivity stagnated in sub-Saharan Africa when it’s risen in literally every other developing country?

While the development community’s hypothesis was correct 30 years ago, there were major flaws in our approach.

At the time, the world was basking in the success of the Green Revolution. That success – perhaps the greatest development success of the twentieth century – saved hundreds of millions of lives.

But the Green Revolution only had limited reach in sub-Saharan Africa, and the poorest areas of South Asia, leaving those regions behind. The innovations of the Green Revolution were designed to boost irrigated agriculture throughout most of Asia; they weren’t amenable to the local conditions of Africa or the dry regions of South Asia.

But essentially, the reason a Green Revolution never took hold in Africa is because it was never really tried. By the time the world focused its attention on Africa in the 1980s, global development assistance devoted to agriculture had declined dramatically.

We believed that the problems of global agriculture had largely been solved, and that the private sector would step in to continue the progress we initiated.

USAID was as guilty of this as anyone – in just twenty years, our agricultural assistance to Africa declined 85 percent, despite no real signs of food security or productivity growth. Developing countries also pulled back, cutting their public spending on agriculture over time.

Before this administration took office, the US spent twenty times – I’ll repeat that, twenty times – as much on direct food aid as we did on agricultural development.

We focused nearly all our attention on getting people fed, rather than helping them feed themselves.

So now we have a situation where hundreds of millions of Africans and South Asians, the vast majority of them women, work as smallholder farmers in a state of extreme poverty and malnourishment.

For these hundreds of millions, we must provide more than food security. We need to lift them out of poverty and eventually out of agriculture into a more productive, diversified economy.

And we need to do so quickly.

Because over the last decade, impending and imposing global trends have changed the picture of global agriculture. Thanks to a boom in population growth, growing water scarcity, and the impacts of global climate change, the number of undernourished in sub-Saharan Africa could increase by 30 percent this decade, to nearly 650 million people. South Asia faces a similar trend.

And that projection doesn’t account for the potential of another spike in global food prices like we saw in 2008. What many of us in the Western world only experienced as a small hike in our grocery store receipts drove over 100 million people back into poverty and undernourishment, reversing gains that took decades to achieve.

We know what we have to do to increase agricultural productivity: we have to increase access to education, develop new crop varieties, provide essential inputs like irrigated water and fertilizer, and provide infrastructure that connects the rural poor to urban markets.

But remember, increasing agricultural productivity is not our ultimate goal. Our ultimate goal is increasing economic growth. That’s why we must work to evolve the agricultural sector of developing economies, creating the opportunity for farmers add value to the commodities and cash crops they produce.

I want to stress this point about adding value. As things stand, many African countries are unable to capitalize on the true potential of their country’s productivity.

Cotton is harvested in Uganda, but milled in China. Coffee is grown in Rwanda, but roasted in Italy.

And cocoa beans are harvested in Cõte d’Ivoire, then exported, refined and packaged overseas. Often these finished goods end up being sold back to Africa.

Producing finished goods is where the real profits lie, and it is exactly how economies diversify away from agriculture into more productive efforts.

Our efforts will ensure more of this value-added activity occurs in Africa. In Rwanda, USAID grant money led directly to infrastructure investments, developed coffee-bean washing stations, and trained farmers and tasters to roast high-end specialty coffee.

The investments paid off – farmers were able to sell their coffee beans at a premium, earning as much as $26 a pound. One variety of this coffee, “Blue Bourbon,” won the prestigious “Black Apron Award” from Starbucks. I urge you to try a cup (while you’re in New York; it’s featured at more than 5,000 Starbucks locations.)

That type of approach, where we use the power of agricultural productivity growth to transition toward long-term economic development, is the basis of new effort by the Obama Administration to combat extreme poverty.

The cornerstone of this plan is the President’s Feed the Future Initiative, a $3.5 billion dollar investment focused on fueling growth, designed to create lasting, sustainable gains in food security and economic empowerment. This initial investment has helped leverage an additional $18.5 billion in commitments from global partners.

Unlike past investments, Feed the Future will adopt a novel stance toward agricultural development, focusing on country-led agricultural strategies that are selective in their approach. We will partner with countries that we believe have a firm commitment to growth, and are best poised to experience the kind of change we seek.

Selectivity can occur within countries as well. In Ghana, we are working with the government, the World Bank, and the Alliance for a Green Revolution in Africa to prioritize the agricultural development in the North of the country.

The hope is this plan will develop this region into a breadbasket for both Ghana and the region by focusing on developing staple crops, doubling smallholder incomes, and using public dollars to leverage private investments.

And we will partner with the Ghanaian government to jointly track results and make course corrections to ensure we deliver the gains we seek.

But our renewed focus on economic growth and economic empowerment doesn’t stop with agriculture. We know that we also have to create a broader market environment where private businesses can flourish, working on policies as aggressively as programs.

We need to help developing countries create a bridge to trade and investment that can lead to real, lasting economic growth and diversification over time.

To build that bridge, we must partner with countries to focus on strengthening private markets, easing the ability of entrepreneurs to do business, and developing lasting public services and institutions.

We must also encourage greater trade and investment with developing countries. As Western economies continue to mature, investors will increasingly seek higher returns in nascent, risky markets in Africa and Asia.

We must work with partner governments to attract these investment flows, so that foreign assistance is eventually transformed into foreign investment.

This multifaceted approach reflects one of the hallmarks of the President’s approach to development: bringing all of the tools of the federal government to bear.

But we know this type of effort cannot simply be directed from the outside. It will require the firm commitment from both us and our partner countries to embrace a spirit of mutual accountability.

Countries must take responsibility for building the conditions necessary for the private sector to flourish. That means addressing corruption, smoothing out red tape and regulatory inconsistencies, and eliminating the bribe-seeking that can poison entrepreneurial activity.

But we are serious about that word “mutual.” Donors like USAID have to commit more seriously to evaluating our work, making sure our efforts really do build local capacity. We must incentivize our talent, directing them to our highest priority issues.

And we must also reform the way we procure contracts to increase competitiveness, and enable ourselves to partner with local enterprises and entrepreneurs.

This mutual commitment to accountability will help create an enabling environment for broader, truly transformative and truly empowering economic growth.

And make no mistake, that type of transformative growth is possible in Africa.

50 years ago, South Korea was a country on the brink: It was poorer than two thirds of the countries in sub-Saharan Africa and its people had an average life expectancy of 54 years.

But by investing in agriculture, and adopting an aggressive, export-led growth strategy, South Korea became one of the world's fastest growing economies for forty years.

Today it has joined the club of rich industrial countries, is the world's eighth largest exporter, and its citizens outlive those in the United States. On top of that, South Korea, once a major recipient of aid, now provides it.

South Korea’s emergence from dire poverty was a clear-cut economic miracle in a world where we witness too few. It has now become a beacon of growth, and an anchor for regional transformation.

That is what success will look like: the development of new regional anchors, engines of growth that can help power continents, not just countries.

If we can create a world where an African common market is larger than the economies of India or China, we will create not just a richer Africa, but a richer world.

If we prioritize agricultural investment; build bridges to broader economic growth; and take seriously the concept of mutual accountability; then we can generate the kind of lasting, empowering economic growth that ensures countries do not stay recipients of aid, but become donors.

Thank you.

Clinton Global Initiative 2010 Annual Meeting, New York City

Last updated: December 16, 2014

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