It is a privilege to join you this morning for what I hope will be the first of many very rich conversations about how the United States can best contribute to the shared objective of ending extreme poverty.
Two weeks ago, I was in the Middle East, where I had the opportunity to visit the Church of the Nativity in Bethlehem.
History isn’t history until you have been to Bethlehem.
In fact, two thousand years ago—when Jesus was born in that spot—the population of the world was just 300 million people. Most of them lived off the land in a condition they did not call subsistence or extreme poverty—but that is what it was.
Since the dawn of humanity, extreme poverty has crowded at the heels of progress—stifling hopes and undermining growth across the centuries.
Today, we stand within reach of a world that was simply once unimaginable: a world without extreme poverty.
In the United States, with a dollar-and-a-quarter in your pocket, you can buy a bottle of water or a pack of gum.
But for 1.2 billion people around the world, this is all they live on every day.
No matter how much you adjust for the relative price of local commodities, a dollar-and-a-quarter is a desperately meager sum—and with it families must make daily choices among food, medicine, housing, and education.
Every decision is a trade-off with potentially catastrophic consequences. Do you buy medicines for a sick parent, provide an evening meal for your children, or put a few pennies away towards a new roof or next year’s school fees?
This is what we call extreme poverty.
For families who endure it, water is as much a luxury as a necessity. School is a privilege. And birth rates are very, very high—a dangerous hedge against the awful reality that your children may die from diseases we could easily prevent.
Extreme poverty is not a precise measure of income or food consumption per day. It is more powerfully understood as the denial of basic freedoms and basic human dignity.
Now, we know it doesn’t have to be this way.
From 1990 to 2010, the number of children in school grew to nearly 90 percent, and around two billion people gained access to clean water.
More than 45 new democracies came into existence, including 13 in Sub-Saharan Africa alone.
Child mortality rates have fallen by 42 percent and poverty rates by 52 percent.
And lest you think this is a phenomenon largely confined to China, consider what happened in 2005, when—for the first time on record—poverty rates began falling in every region of the world, including Africa.
We now have a roadmap out of extreme poverty that is driven by broad-based economic growth and clear, transparent democratic governance.
In September 2010, the first-ever Presidential Policy Directive on Global Development recognized these fundamental elements as “the only way to accelerate development and eradicate poverty.”
Now, I know it is easy to be skeptical.
But since 1999, the total number of extreme poor has declined by nearly 50 million people every year, on average.
Projections of what we can achieve by 2030 do differ, but most experts believe that reducing the number of people living in extreme poverty to 200 million people—roughly 3 percent of the globe in 2030—is an extraordinarily ambitious but achievable target.
Particularly since achieving this goal requires the type of inclusive growth that creates significant opportunity for prosperity for those living at $2 or $3 or $4 a day.
That is why President Obama called on Americans in his State of the Union address to help eradicate extreme poverty in the next two decades.
This vision was powerfully echoed in the final report of the High-Level Panel on the Post-2015 Development Agenda, led by UN Secretary General Ban Ki Moon and the leaders of Indonesia, Liberia, and the United Kingdom.
With Dr. Kharas serving as its lead author, the report outlined a limited number of measurable goals to focus the efforts of the entire global community on this great moral aspiration.
Now, we often think of development simply as paying for infrastructure and services in developing countries, whether it’s building roads or delivering vaccines.
And America has a proud history of development assistance—from the Peace Corps volunteers who have served abroad to the Overseas Private Investment Corporation’s efforts to mobilize private investment from American businesses.
Today, the United States serves as the largest bilateral donor in the world.
But we know we cannot pay our way out of extreme poverty.
Instead of trying to deliver results with our dollars alone, we need a new model of development that creates public-private partnerships that deliver measurable results.
This model is grounded in the reality that political leadership and policy reform are essential preconditions to driving investment to the regions and sectors where it will have the biggest impact on reducing extreme poverty and ending the most devastating consequences of child hunger and child death.
President Obama’s Power Africa initiative is one great example.
For most of the world, electricity allows businesses to flourish, clinics to store vaccines, and students to study long after dark. But for more than 600 million people in Sub-Saharan Africa, these opportunities simply do not exist.
Power Africa encourages countries to make energy sector reforms—while connecting entrepreneurs to investment opportunities that are created by those reforms themselves.
This model builds on the New Alliance for Food Security and Nutrition—launched by President Obama at the G8 Summit at Camp David—in which country policy reforms are tied to donor and business investments to modernize food systems and address hunger and nutrition sustainably.
It also builds on the Child Survival Call to Action through which country political commitments are creating the planning and investment framework for companies and donors to partner to end preventable child death.
The defining feature of each of these presidential initiatives is the coupling of country reforms with private sector commitments and donor investments.
And throughout the world, the results of these global partnerships are becoming increasingly clear…
In Ethiopia, DuPont is building a seed distribution system to reach 30,000 smallholder maize farmers and increase productivity by 50 percent. After the Ethiopian government liberalized its seed sector, and USAID provided supporting infrastructure investments.
In Tanzania, we’re bringing off-grid energy to thousands of farmers in the nation’s most fertile region in the south. After the government committed to policy reforms and local banks participated in a loan guarantee with the Development Credit Authority.
And in the Philippines, we have joined with Qualcomm to strengthen the results reporting process at clinics and hospitals using 3G technology. Again, after the government allowed for certain types of technological advances and structured a pathway forward for public-private partnership.
These types of partnerships form the foundation of a more strategic and smarter approach to development.
And aid agencies, multilateral development banks, corporations, private foundations should all be assessing themselves and transforming themselves to accelerate their ability to participate in this new model of development.
But also know that even as we do that our job will only get more difficult as we make progress—a point Homi made in his opening comments.
Today, India and China do account for nearly half of the world’s extreme poor.
That won’t be the case for long.
By 2020, extreme poverty will primarily become concentrated in countries like the Haiti, Nigeria, Liberia, and the Democratic Republic of the Congo.
That is because even as we’ve seen great development gains in some areas, we’ve hardly seen the needle move in other nations.
There’s a reason for this: conflict is essentially development in reverse.
Fifteen years ago, experts seeking to shape policies to end poverty often criticized—sometimes with very good reason—the nexus of security and development.
Some argued that development should be independent of efforts to improve security or development efforts should be concentrated only in those areas with good policy environments.
Fifteen years from now, the effort to end extreme poverty will largely have failed or succeeded on whether development policy and practice can serve alongside efforts to usher in peace, security, and stability.
There are reasons to be cautious. The overlap of extreme poverty, extreme ideology, and extreme corruption makes for a very difficult operating environment.
But there are also reasons to be hopeful. Our experiences in Afghanistan and Somalia contain successes and failures from which we can learn and adapt.
In the last several years, countries around the world came together to strike a New Deal for Engagement in Fragile States.
Instead of assessing progress as we would in Indonesia or Ghana, these countries are taking the lead in defining a new set of indicators that track the transition out of fragility—measuring everything from diversity in electoral representation to the incidents of sexual violence.
Migration patterns and remittances increasingly sustain many of these fragile economies, and we see adventurous sources of private capital actively seeking high risk, high return investments in some of the toughest parts of our world.
Peace is a precondition to long-term development. But development must take hold quickly alongside security to maintain stability and ensure that the effort to end extreme poverty succeeds.
As the lead partner in ensuring global security enables global prosperity, the United States is uniquely positioned to help lead this final fight to end extreme poverty.
From the devastated streets of Port au Prince to the refugee camps in the Horn of Africa, the United States has also served as the world’s leader in humanitarian aid and assistance.
No where is that more clear than in the Philippines today, where our disaster response team—civilian and military—have already reached tens of thousand of people devastated by Typhoon Haiyan.
We will always respond in times of urgent need. It is one of the most profound expressions of who we are as the American people.
But emergency aid is not a long-term solution.
In just the last ten years, the global community has spent $90 billion on humanitarian assistance in just nine countries—responding essentially to the same disaster again and again.
This is the fifth time since 2009 that we have been called to respond to a significant typhoon in the Philippines alone.
We know we cannot prevent droughts or hurricanes from happening, but we can work much harder and more strategically to ensure these shocks don’t devastate families or set back hard-won development gains.
That is why the United States has helped rally the world behind a new emphasis on resilience. Although our work is still in its early stages, we are already starting to see important results.
In Ethiopia, by using new underground water mapping technology, we helped discover a new aquifer that will give a million people access to water over the next two years.
And in Nepal, our resilience partnership draws on geospatial data to help to prepare Kathmandu in advance of a sudden earthquake.
As climate conditions continue to get harsher, our efforts to shape our humanitarian mission into one that builds resilience for vulnerable people ahead of time—whether through climate-resilience seeds, weather-based index insurance, or flood-plain sensitive urban design—will be critical in the fight against extreme poverty.
Embracing President Obama’s call to end extreme poverty is not about pursuing one set of activities at the exclusion of all others—or going about achieving this task alone.
It is about creating pathways of partnership, security, and resilience for the world’s most vulnerable people.
It’s a recognition that we are at our strongest when we bring the generosity and imagination of the American people to bear on the greatest challenges of our time.
Earlier I shared with you my experience visiting the Middle East. The reason I was in Bethlehem was to join Secretary Kerry for the announcement of $100 million infrastructure program to construct roads, schools, and clinics across the West Bank, including repaving a critical road into Manger Square.
As Secretary Kerry noted in that setting, these investment demonstrates that the Middle East peace process is not an end in and of itself but rather a path towards unlocking the human potential of all of the region’s people.
American development policy will always have the responsibility to advance our core foreign policy goals and objectives—including supporting the transition from conflict to peace from Kabul to Colombia to Kampala.
In the process, we will continue to match our core investment priorities in food, health, power, education, and water to the task at hand.
We will continue to prioritize transparent, democratic governance and help countries pursue regional and global economic integration—as those are the paths of prosperity for all people at all levels of income.
And we will continue to replace our aid and assistance with the development of strong, accountable local institutions.
You know, a half a century ago, as President Kennedy stepped forward to lead the United States at the height of the Cold War, one of his first acts as President was to outline a bold vision of peace through development—of American prosperity through ending poverty abroad.
Today, as we renew our commitment to that basic objective, as we embrace President Obama’s call to partner with others to end extreme poverty, we know we will advance these priorities with a new understanding.
With an understanding that a new public-private model of development can achieve broader results than public investment alone—with a focus on mutual accountability with ourselves and all of our partners.
And with an understanding that to achieve this goal, all of these results are overtime increasingly going to have to come from the most fragile environments and the most disaster-prone communities all around the world.
America stands ready to address that challenge. Not simply with development investment alone, but by marshaling all of the resources of our policy, our government, our trade, our economy, our universities, and our innovators to help contribute to an extraordinary moral objective: the end of extreme poverty.
So we look forward to learning from your panel and those of you here. I look forward to experts in this field overtime shaping better and newer ideas as to how we use our commitment and our capabilities to deliver a success that we will all someday be very, very proud of.
Homi Kharas: Raj, thank you so much for an absolutely wonderful speech and thank you for giving us a few extra minutes of your time. I know you have to leave really soon.
I mean I don’t want to go through all of the new things that were there but you really have spelled out something which is quite a new model of development. You talked about resilience, which I think is something quite new. You talked about the links between peace and development, which is something quite new and then about the more traditional linkage between policies, governance, reforms, and resources.
But what I wanted to start with was your- this sense of US leadership of other allies in this goal. I mean this is something which is, first, enormously important. I think we all know that if the U.S. doesn’t lead, things don’t happen in this world, so I really thank you for that. But it also seems to me to be something that is a strong statement that the US wants to work with others and really embrace this goal of ending poverty.
Tell us a little a bit about how you’ve come to that conclusion and why the President has taken that route to ending poverty rather than the more direct routes of US actions.
Rajiv Shah: Well, thank you, Homi. I think President Obama’s basic beliefs in this space have been made very, very clear. That America is safer and more prosperous when we address and create a just and globally integrated world. And the President has said in so many different settings—from the Presidential policy directive to major foreign policy addresses—that over time we know that keeping those long term objectives in mind and leaning in to them, not just with the use of American government resources but with the convening power and the clarity of American business, with the innovation and expertise in American hubs of innovation like Silicon Valley and the Research Triangle Park, and with Americans, young people and students, that we can play a very big role.
We cannot achieve this goal by ourselves. We all know that. And in fact as we look forward we know that it’s a real fight every day to maintain development resources and the standing of development institutions.
But when the President gave that speech he made ending extreme poverty a major foreign policy objective of our country. Many of us that than then work in that cone have a responsibility to do the best we can to deliver against it.
In this case, the best we can do is to hold hands with partners, try to ensure that the world has a focused approach, do everything we can to support the outstanding report of the High Level Panel, and continue to recognize that there are some areas where American plays a unique role in leading like resilience, like in fragile states, and like with a public-private model that can be applied to certain sectors like energy and agriculture. So we just try to do the best we can with those resources.
Kharas: So you were very balanced I would say in your speech, as always, between the sense of optimism. You know you talked about what science and technology can bring the new partnerships with the private sector. But yet also these notes of caution about the impact of climate change, of other shocks, of conflict, etc. On balance, where do you come out? Are you optimistic? Are you cautious?
Shah: Look on balance, I’m very optimistic. I think it’s telling. Look at Pakistan. A few years ago, we were all lamenting the very difficult challenges in that political relationship and their development prospects. But when they got hit with a climate related flood, they had an opportunity and we were able to work in partnership and they kind of improved their core underlying agricultural economy. When it looked like their central bank reserves were very low, remittance incomes, largely from the Gulf, flooded in and kept things balanced.
Now retrospectively, when you look over the past five years, and I think the data will still be coming out, I think what you’ll end up seeing is a lot of extreme poverty reduction in a period of time when the general narrative was one of challenge and strife. I think that’s just telling. It’s telling that there are a lot of forces at work here and if we coordinate, organize ourselves, and remain focused, we can deliver against this goal.
Let me tell you why I wanted to share some points of skepticism. I think this community of policy experts and leaders has some new thinking to do. You have to help create some new pathways- the kind of mid-1990’s David Dollar work that I learned to appreciate so dramatically, probably doesn’t have the insights in it anymore to deliver the kind of poverty reduction we want to see in the places we know we need to see it, between 2020 and 2030.
If I were a young development economist that had training, I would be very excited. There are lots of new challenges. The basic mindset that security is independent of development, and we should be cordoning ourselves off as opposed to embracing the tools and capabilities of our partner-much-larger-agencies and enterprises I think is no longer as effective if what we’re talking about is progress against this goal in fragile states. I think a lot has gone on in the last few years. But we are looking to you all as experts to help clarify what that means for how we operate in these settings. And I am optimistic.
Kharas: Great, well David has joined us here at Brookings, so I’ll tell him that he needs to update his thinking on all of this. So what is all of this going to mean for you? For USAID? I mean, yes there is new thinking and new approaches, etc. What are the couple of big things that you want to see in terms of new directions for the Agency?
Shah: Well, I don’t know that they’re necessarily new, as their going to be much more sophisticated and clear in how we address these. And we want to hold hands with experts to understand how to best deliver progress.
But the three areas I tried to highlight in the speech would be the answer to that.
We believe that there is this new model of development that is emerging. It still has to be proven at scale. And seeing that through in agriculture and power and understanding its applications to other sectors of work will be a continued area of focus and challenge.
Second is this focus on fragility and really understanding it, knowing how to measure fragility. Understanding when you can be hopeful and when you can be cautious about making large investments in fragile environments. Understanding how to fight corruption in fragile environments—even as you want to make rapid gains in health and welfare—are challenges we’re grappling with. Americans disproportionately- I think relative to most other development partners although this gap has narrowed over the last few years- America makes disproportionately larger investments in fragile environments.
So we look to you all as a community of experts to help us do that well. I think that’s going to be an asset and not a detriment as we look to the fight to end extreme poverty.
And then finally this work in resilience. It is probably not possible—although experts like you will have to answer this definitively—to end extreme poverty so long as the same very low income communities get hit with the same major catastrophes over and over and over again, and so long as we keep providing a large amount of emergency assistance without building the kind of core resilience. What it takes to build that resilience, how far you can go providing nomadic communities in Somalia and Ethiopia with access to livestock markets in the Gulf, for example, that remains to be seen. I think these are important areas of learning and exploration, and we need to do an even more focused job of delivering on the resilience agenda.
Kharas: Well Raj, thank you, I know you’ve got to run.
Shah: Thank you.
Last updated: April 21, 2015