June 28, 2005 The Honorable John W. Snow Good evening, and thank you so much for having me here tonight. It is an honor and a pleasure to speak to this group; I look forward to our discussion. The timing for this visit couldn't be better. I recently returned from the G8 Finance Ministers meeting in The most notable achievement of our meetings was for the G8 nations to agree to support President Bush's proposal for 100% debt stock cancellation. It was about a year ago that we put this idea on the table, and there were many people along the way who were skeptical of our motives, or not convinced that it could be achieved – but, clearly, a year of hard work on this has paid off. When Prime Minister Blair met with President Bush, the To many people who have followed the G8 over the years, a focus on debt cancellation and development in The role of the G8 is to monitor and address the key economic issues of the day. Among the many issues we discuss, today there are two prominent challenges confronting the world's economic leaders – what I call the two great "growth deficits." The first "growth deficit" has to do with uneven rates of growth between the The second "growth deficit" has to do with lagging growth in the poorest nations of the world – most starkly evidenced in The G8 has an important leadership role to play in addressing both of these major challenges. * * * Let's look at the first challenge. We know that the global economy is performing relatively well with the strongest overall growth in decades, low inflation, low interest rates, and no apparent financial crises. But the pace of growth is unbalanced, and this phenomenon can be problematic. The But this strong growth presents problems when our major trading partners are growing slowly. Europe and Japan have posted chronically low levels of growth for most of the past decade, so that Americans with more disposable income are purchasing more goods and services from our trading partners than they purchase from the U.S. When combined with lower savings rates in the The G8 – and in particular, the G7 finance ministers – have worked together to execute plans to deal with these imbalances. Addressing imbalances in the global economy is a shared responsibility among the major economic regions of the world. The international economy performs best when large economies embrace free trade, the free flow of capital, and flexible currencies. Obstacles in any of these areas prevent smooth adjustments. At best, such obstacles result in less than maximum growth; at worst, they create distortions and increase risks. The Our actions alone will not be sufficient to unwind global imbalances. Simply put, large imbalances will continue if growth in our major trading partners continues to lag. European and Japanese GDP together exceeds that in the These economies must continue to adopt and implement vigorous and necessary structural reforms to establish robust rates of growth – both for the good of their own citizens and to contribute to reduction in the imbalances in the global economy. Greater flexibility in During my recent visit to The potential benefits for The G8 nations have taken an active role in addressing the issue of imbalances. The G7 Agenda for Growth calls on each of the nations to make structural reforms to increase growth – especially in * * * The second growth deficit confronting economic leaders in the G8 involves the conditions of improving living standards for the billions of poor people today who live on less than $2 a day. Many people are focusing this week on how wealthy nations can direct more development assistance to countries in But the role of the G8 today, following the mixed results of 50 years of development assistance, is not just to do more, but to do better – to continue to improve how development assistance is both delivered and received in order to ensure the biggest bang for each buck of development assistance. While headline writers and advocacy campaigns and rock concerts tend to focus on numerical targets for assistance, there is, unfortunately not sufficient attention paid to the conditions in which development assistance is delivered. And yet, this is not for lack of study and analysis – the World Bank has a library full of research papers citing the importance of good governance and sound economic policies. It is easy for people to focus on simple dollar targets, rather than the specific goals and results of assistance. Increased development assistance is vitally important. During this Administration, development assistance overall has nearly doubled and assistance to sub-Saharan In key sectors, Notably, Less than 18 months following the establishment of the MCC, four compacts have been approved valued at over $600 million and several more are expected in the coming months. Moreover, evidence indicates countries are already taking action to improve policies so they can become eligible for MCC funds. This fiscal year the But even with these dramatic increases in development funding, we have tried to change the focus both with our bilateral assistance and multilateral assistance away from simplistic numeric targets, and toward a greater focus on ensuring that assistance is well spent and goes into environments where it can have a great impact in lifting people out of poverty. Money alone is not the answer. One way we have worked to reform the way that assistance was to encourage the greater use of grants instead of loans at the multilateral development banks. As President Bush recognized, it is counterproductive to continually add to the already unsustainable debt burdens of poor countries. Combined with our landmark agreement to cancel debt, the increased use of grants within a clear debt-sustainability framework will ensure that poor countries do not find themselves again in the lend-forgive-lend trap. Sometimes the test for determining where to deliver assistance is aided by the use of non-traditional measures of government effectiveness. For example, one of the tests now utilized by both the World Bank and MCC measures how long it takes to start a business in a country. This simple measure tells a donor a great deal about a country's commitment to economic freedom and relative absence of corruption. If it takes 32 days to start a business in By working through the G8 we are also trying to focus more attention on other factors in growth-enhancing development – especially through a greater focus on private sector development. Here is an area that frequently sends many aid advocates scurrying for the exits, yet we know that the quickest way to lift someone out of poverty is to create a job. So we have focused greater attention on micro-lending programs for small and medium enterprises. Private sector resources also have a role to play and these resources dwarf traditional development assistance – specifically trade and remittances. President Bush considers it crucial that we complete the Doha Development Round to increase economic opportunity for all trading nations, especially developing nations. But even without global trade liberalization, Through the G8 we are also working to reduce the costs associated when workers send remittance back to their families in their home countries. This instant source of assistance from the My predecessor in this job, Secretary Paul O'Neill often pointed out that the funding we provide for overseas aid came from the taxes of plumbers and carpenters in I'm encouraged that as the leaders convene in Gleneagles next week for the G8 Summit that real progress is being made to address these important imbalances in the global economy. By working in concert we all stand to benefit. - 30 - |
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