 Additionally, the Nobel Conference has combined policy, experience, intellectual achievement, and a commitment to the betterment of human time. The first of Jeffery's tax combines all three elements in one career. He decided that the New York Times magazine is, quote, probably the most important economist in the world. Since 1986, he served as an economic advisor today to East European and developing countries. He has worked with several Latin American governments to end the runaway inflation that plagued this region for up to 30 years. Based on his advice, Bolivia reduced its inflation rate from 40,000 percent a year to 10 percent a year. In East Europe, he worked with several governments to institute viable free market institutions after the fall of communism. As a scholar, Professor Sacks published over 100 scholarly papers and 12 books on macroeconomic policy and economic development. His more recent interest includes the transitions of market economists in East Europe, international financial markets, and economic growth. In his current work, he has criticized the policy of the IMF in first world countries with respect to the poorest countries in the world. He challenged the IMF to open their proceedings to public review, and this is focused on the needs of the Zion community to the welfare of the poorer countries in the world. The Westin Society and the Advocates Research and Development designs to promote the health of the poor as well as the wealthy in the world. In recognition of his academic skills, he has received many awards in honor. He is a fellow of the World Economic Society, a member of the American Academy of Arts and Sciences, and the Harvard Society of Fellowes. From his current position as Director of the Center for International Development, he directs that of the Economic Competitive and Economic Development. The third ideal of this conference is to encourage the betterment of all mankind. This ends after sacks have become active in the Jubilee 2000 movement. This organization has lobbied Western governments and the banking communities to write off the non-performing loans of the poorest countries. Various religious leaders including the Pope have endorsed this action. Clearly, Professor Sacks gives his academic skills to promote policies that help the poorest in the world. Let's give him a warm welcome to lead off the stage of today's conference. Hope I didn't ask you no questions. Dr. Barnett, leaders of the Great College, ladies and gentlemen, let me say how honored I am, how thrilled I am to be with you today at this wonderful symposium. And one that with the great deal of foresight, given that this was a topic chosen several years ago, is very central in our minds today. We have a lot to talk about in the next couple of days. Globalization involves nothing less than the entire world and all of us. And so, as your opening speaker, I can offer you only certain limited perspectives on a vast tangent. My concern this morning will be about one fundamental aspect of the global theme today. And that is the profound inequality of income and the profound inequality of other aspects of material life, whether it's a state from sickness, life expectancy, opportunities for schooling, access to medical care, to clean water, to shelter, the vast inequalities that confront us in the world and that seemingly are widening today, not diminishing, despite the undoubted marvels of science and technology that could potentially address these problems. It is accurate to say that the divisions between the wealthy and the poor in the world are greater than at any time in human history. We know that pretty reliably because it's important for us to keep in mind that starting about 200 years ago, one could say that essentially the whole world was poor. During the last 200 years in an epoch of extraordinary economic accomplishment that economists have labeled the era of modern economic growth, a part of the world became fantastically unimaginably rich. We're living in one blessed place of that rich world. But a vast part of the world did not share in that economic growth. And because of the prolonged and persistent differences in economic development patterns between the high performers and much of the rest of the world, the gaps today between the rich and the poor are unprecedented in scale. Now, some have felt that globalization, per se, could resolve these problems or at least diminish them. There are those who have felt, and I am sympathetic to their views, as I'll explain, that globalization on the whole provides the best opportunities for the poor to achieve improvements in material life on a sustained basis looking into the future. There are, of course, others who think that globalization is, per se, the cause of this inequality, and I will take issue with that alternative view. But whichever side one is, one finds oneself on in that debate, one thing is clear, and that is the globalization has not been sufficient in the past 20 years to narrow the gaps between the richest and the poorest, or even, most strikingly, to enable the poor to achieve forward progress in living standards in large parts of the world. We'll see momentarily that some areas of poverty in the world have made great strides in the last 20 years. It is not a uniform picture in our vast world experience, but that there are other large parts of the world where it is fair to say that not only have the poor not experienced enough of a boost to narrow the gap with the rich, but indeed the poor, and often the poorest of the poor in the world have experienced absolute decline in material well-being during the past generation. It's often said indeed, sometimes a little bit as a cliche, that hundreds of millions of people are clinging to the edge of survival, that they're living on the very edge of subsistence. I wish the news were even that good, ladies and gentlemen, because it is undoubtedly true when we care to look that literally millions of people every year are going right over the edge, not in terms of falling into absolute poverty, but rather dying of absolute poverty. Millions of people are dying preventable deaths every year because of their impoverishment, and I will review some of these startling numbers with you in a moment. These are people most hidden from view. These are people that don't merit even the small, according to our editors, the small items on page D17 of our newspapers. It's not news events, it's the real life and death of our planet today. Globalization is not reliably solving these problems. We are here in part because we have a moral commitment to solve these problems. That ethical commitment is the starting point, I believe, but it is not the ending point because we need to understand deeply what the underlying material processes are on a global scale to understand what might realistically be done to raise the material well-being of the poorest of the poorest, to come up with approaches that are likely to work and that can at least do better than the approaches that have been chosen by powerful institutions like the International Monetary Fund or the World Bank during the past 25 years, and in my view have demonstrably not worked. So in addition to understanding where we are in the world in terms of global inequality and in terms of the state of the poorest of the poor, we really need to understand how we've arrived here. What are the underlying economic mechanisms that are enabling our country to achieve unprecedented dynamism, unprecedented gains of wealth at the very same time that a billion or more people in the most desperate condition in the world are suffering absolute declines in even their most meager standards of living? I will try to explain that as best as I understand it. This is a research program or a research agenda that is as wide as economics itself. But I'll share with you my own reflections on this after many years of research and ongoing research. At the core, I will try to describe for you what I regard as a fairly accurate if oversimplified three-way classification of growth processes in the world. I guess there are those that divide the world in two and those that divide the world in three. My children tell me I relentlessly divide the world in three, so here you have it. I believe that it's important for us to understand that there are three kinds of growth processes at play in the world. For the rich countries, the economic process can be described by a bit of jargon that economists use called endogenous growth. Endogenous, of course, means something that comes from within. And endogenous growth is a process of economic progress where the essential source of the progress comes from within the society itself. And in economic thinking in the past 40 years, the stress has been on the role of ideas, science, and technology as being the main driver of economic progress in the long term. And it's called endogenous growth in the sense that the science and innovation and commercialization of technology is arising from within the economic system itself, in large part but not exclusively because of the profit motive that inventors or large corporations engaged in research and development can expect to earn when they bring new products to the market. Endogenous sometimes vastly oversimplified the world by thinking that there's only one model, so they don't divide the world either into two or three but assume that there's one essential model. And I think that this is not right in the sense that endogenous growth is a phenomenon very much restricted to a small part of the world by my estimation about one sixth of humanity, about one billion people out of the sixth billion on the planet. Now there's a second model of growth that I will highlight which can be called catching up growth. Catching up growth is a phenomenon of poorer countries that are in a process of economic integration with richer countries, often with their richer neighbors. And what economists have observed for hundreds of years when they've looked carefully is that when a poor region fits next to a rich region and when the two regions are connected by market forces, the poorer region has certain possibilities of rapid growth to narrow the proportionate or the absolute gap with the richer countries. What kind of advantages? Two main ones are stressed, although there are many others. One kind of advantage is that the ideas and the technologies developed in the rich markets can be brought into the poor countries. The poor countries can buy the technology. They can buy the capital goods. They can buy the routers for Internet or they can buy the new telecom switches to leak fraud in their communications system. Or they can buy other technologies that are appropriate in the form of capital goods. Or maybe they can license the technology so that they can use the technologies for home production. Or maybe they can attract the technologies through attracting multinational companies to produce in their countries. This, I think, is an extremely powerful way of catching up. So while many of the people with whom I share a common concern and greatly sympathize that have been protesting globalization, think that the multinational firms are the source of the trouble. I view the multinational firms largely as a key part of the solution because the multinational firms can produce the technologies or bring them through foreign investment to the poorer countries. And I believe that this process is now reliably underway in the case of Mexico under the North American Free Trade Agreement with the United States and Canada. It's early days, but I'll predict to you that we will look back over the next 20 years and see astounding progress of Mexico both in economic and political terms, democratization combined with tremendous economic progress under the force of the catching up phenomenon. My problem with the multinational firms is something different. It's that when they direct their foreign direct investment flows to poor countries, about 80 to 90 percent of those flows, especially of the kind that transfer technology, are directed to just a handful of developing countries. To Mexico these days, to Singapore, to Korea, to Malaysia, to Poland, they are bringing development for those countries. But the problem that I want us to focus on is the fact that for a large part of the world, indeed for the largest part of the world, the poorest countries of the world, a large proportion of the population are not the beneficiaries of catching up growth. For one reason or another that I'll try to explain, many of the poorest parts of the world are not only not suffering from globalization, in any real sense they're not even part of globalization. Their biggest problem is that they're left alone and utterly neglected by the processes of catching up. Now I promise you that there are two forces of catching up. One is the inflow of technology. The other is the inflow of capital. In a well-run, poor neighbor of a rich country, there are typically large profits to be earned by bringing in capital to, quote, take advantage of the low-wage labor next door. That's not exploitation. That's a process that will raise the wages of those workers that are put to work in the poorer countries. And those two forces of technological inflow and capital inflow, often linked in the form of foreign direct investment itself, are extremely powerful vehicles for catching up growth. And it's why I believe Mexico has been achieving about 6% to 8% growth in the last three years, really since NAFTA came into its own. Ah, but there's a third kind of growth, and that's the one that I'm particularly interested in today. And it's actually not even growth at all. I call it a growth process, but it's a process of retrogression. Many of the poorest places in the world, virtually all of Sub-Saharan Africa, large parts of the Andean region, parts of Central American mountainous regions, parts of Central Asia, parts of landlocked East Asia, are not experiencing catching up growth. They are experiencing something that could be called the Malthusian trap. Now, Malthus, remember, was the moral philosopher and economist at the beginning of the 19th century that really gave economics the appellation of the dismal science, an appellation that Macaulay, the English historian, applied to Malthus' writings. Malthus said that the world as a whole was condemned to poverty, because every time there would be a technological advance to lift humanity a little bit above the poverty line, the forces of population growth would enter, population would expand, and the expansion of population would drive down the living standards once again. So Malthus was a pessimist indeed, believing the population growth would inevitably outrun technology. In broad global firms, I think he got two things wrong. One is that he certainly underestimated the power of technological change because never before in world history when he wrote in 1802 had the world experienced rapid sustained technological change. Like all great academics, he wrote just on the cusp of change which rendered his writings not unimportant or useless but wrong. That's the fate of many of us. The other thing that he failed to understand was that in rich countries, as income standards rose on the fuel of technological advance, families would naturally limit their fertility choices so that there would be such a sharp reduction in voluntary fertility that population growth would slow and even end in what are now many of the richest countries of the world. And in many of the richest countries, particularly in Western Europe, the forecast at least now is for absolute declines in the level of population. So the combination of rapid technological change and self-limiting fertility as income rises undid the Malthusian analysis except in places that cover about one and a half billion people in the world, if not more because in those places the fuel of technology is not working. We are not seeing technological advance either within the countries or in diffusion from the rich countries. And there are no powerful forces at play that are rapidly enough limiting population growth. It is the greatest irony of the world that the very hardest places in the world to achieve economic growth today, the ones where populations are suffering the misery of malnutrition, the misery of lack of healthcare, the misery of lack of access to water are also precisely the places with the most rapid population growth today. That is the Malthusian trap and our biggest task is to understand how to get out of it and how the rich countries can do much more than they've done to help the poorest of the poor get out of this trap. You'll recognize the world, I trust. This is a world map that is color-coded by the level of income per capita. The economists summarize inaccurately but not terribly inaccurately the state of material well-being by the gross national product per person in a country or a region. We then adjust that number, say the dollars per person in the country according to the price level in the country on average to get what's called a purchasing power adjusted measure of gross national product per capita. That is an attempt to make an internationally comparable measure of well-being in terms of purchasing power. It is not perfectly correlated with other variables that you might be even more interested in like life expectancy or nutrition standards and the like, but it is very highly correlated with it so it can stand in as a not bad single index of where we are in the world. The darker the country, the richer the country. And for us to understand the difference of rich and poor, looking at this map I find takes me about halfway to where I want to go. Why? Well, the first thing you see is that the rich countries such as ours or Western Europe or the Korean Peninsula, Japan, and Oceania they constitute a very small part of the world. About 15% of world's GNP, I'm sorry, about 15% of the world's population, about one billion of the six billion. The rest of the world is at varying degrees of incompletion. There's another factor which I want you to notice though which I think is the telltale sign which we need to ponder. I find it hard to believe and certainly my statistical past tell me that it is not a mere coincidence. What do you notice about the geographical location of the rich countries? Well, I've added two lines to give you a hint. The Tropic of Panser which is 23.45 degrees North latitude. The Tropic of Capricorn which is 23.45 degrees South latitude. What you will notice quickly is that all of the rich countries in the world that you can see from there are outside of the tropics. They are in the temperate or in the case of Minnesota the cold zone. There are essentially no rich countries in the tropical region. Well, there are two but you can't see them. There's Hong Kong, not a country but an economy. And there's Singapore. And those two city states are exceptions that will help me to prove the rule that I'm going to promote in just a minute about the problems of the tropics. Those two city states have a population of about 10 million people right now out of the rich countries population of 1 billion. So you could say that the tropical zone have about 1% of the population of the rich world. Another way to say it is that all of the tropics with almost no exception is impoverished. The tropical population being a third or a little bit more of the world's population but only a tiny fraction being in the rich countries and all the rest being in the poor countries. There's another fact which is a fact but a little bit harder to see on the map. Oh, by the way, I could add a corollary to that proposition. The corollary is if you are in the temperate zone you are rich or you're a former communist country about the only way to live in the temperate zone and be poor is if Stalin's troops got to you or if Mao did a job on you. Other than that, it's almost impossible to be have such bad luck to be temperate and rich for a reason that I'm going to stress but the main reason I can give you a hint is that the benefit of temperate zone technology were almost bound to come to you in the last 200 years except if there was an iron curtain blocking them from coming in and that's why almost all of the temperate zone is rich. Now, the second point that is a little harder to see but it's very powerful. Actually, I think to say it here I have to say now that I think about it although maybe not so bad in Minnesota. Being close to a coast is a big advantage in economic development. Now, being close to a coast or sea navigable river is good enough. So, I guess you qualify on the second count close enough. We have in our continent the great fortune of the Mississippi river system and the great lakes waterways which bring even Minnesota to coastal prominence for much of the rest of the world though and for a great part of sub-Saharan Africa all of the country south of that line for this region for a lot of Central Asia there are no navigable rivers that can bring ocean going vessels into the interior of these great continents and the people that are living remote from seaports are also typically living remote from international trade. In our country, the interior of the continent is much less densely populated than the coast but the income standards are about the same. In other parts of the world where not only are you landlocked but within one narrow political jurisdiction so you can't easily migrate to another country being in the interior of the continent is often devastating to economic development. The lesson is the most desperate parts of the globe ladies and gentlemen are tropical landlocked countries Chad, Niger, Mali, Rwanda, Burundi Central African Republic these are not in the hit parade of the fastest growing countries in the world they are really among the most desperate places because they have two powerful counts against them the tropics for reasons that I'll emphasize in a couple of minutes and their non-coastal or hinterland location I think we should also pay respect to that country that's in Pakistan if you're wondering it has the misfortune I have to say of being the only double landlocked country in the world that means it's the only country all of whose neighbors are landlocked as well very tough place to achieve economic growth now another way to look at this is this bar graph which shows the average income of different latitude slices in the world when you start out in Canada and all similar latitudes around the world we'll catch a stock home in there as well you have a very rich part of the world we'll come down to Minnesota in the next latitude band and much of the rest of the United States in the 40s come down on average to the 30s the 20s the equatorial region and then climb back up the southern hemisphere to the high latitudes in the southern hemisphere back up to New Zealand and Australia and you can see that the income levels on average are very much related again as I showed you to whether you're inside the tropics or outside the tropics we do not have as we commonly say a north-south divide in the world this is a misnomer we're having north and south against the middle divide in the world and our language I think misdirects us to some of the problems it is not the north and the south it is the temperate zone and the tropics which is the true geographical gradient in the world I love that picture because it's pretty but what it also is is a map of climate zones in the world we don't have time to dwell on them except to say that from a formal statistical analysis it's possible to take climatic zones and map them with income levels so that the impressionistic evidence I'm giving you can be quite rigorously assembled on the basis of so-called geographic information system data and that's what we've been doing for many years at Harvard what we've discovered very powerfully is that the green region and the blue region if you're next to a green region so don't worry are much higher incomes than the red region here which is the equatorial humid tropics this is where the rainforests of the world are or this pink region which is the so-called wet, dry tropical region or savanna region or monsoon region so green from a point of view of economic development green is beautiful I have to say all of the green regions of the world today are either rich or very fast growing if they are poor like China because of historical and political factors when those historical and political barriers are lifted the green regions grow extraordinarily fast because in part they have certain intrinsic advantages and because they can also take technology being developed in the other rich green regions the dark green regions are very nice the Mediterranean region the southern coast of Chile, Perth, Australia and so forth because that's where all the good wine in the world comes from that's the Mediterranean climate with sunny summer weather and wet temperate winters now what is all of this one last picture if you combine two maps the temperate zone map that is the green and blue regions and overlay it on all of the parts of the world that are within 100 kilometers of a sea coast or of a navigable river including the Mississippi river system and the Great Lakes system in the United States obviously the coast of the United States Western Europe and so forth if you overlay those two dimensions you find something which for me is a very powerful sign these shaded areas which include Sao Paulo and Buenos Aires which include temperate zone coastal Australia which include the Yangtze river delta and river valley of China as well as southern China, Taiwan South Korea, Japan these regions are where all of the rich countries of the world are today all of them except for Singapore and what's more these little slivers of inhabited land area the shaded areas constitute 8% of the inhabited land area of the world that 8% includes 22% of the world's population and at least 52% of the world's GNP produced in those few shaded areas that's the stunning fact about the concentrations of wealth in the world now, what's happening? do we really have to believe in the highly discredited notion of geographical determinism? no, by no means but we do have to understand that the temperate zone and the tropics are highly distinctive in their ecology and in their 200 years of growth performance let me say a word about the ecology first the tropics are defined by one central fact of course and that is that there is no freezing winter and I think that the evidence suggests overwhelmingly that the world's most effective public health intervention ever invented is winter it is an extraordinarily powerful mechanism for an annual house cleaning of a myriad of pathogens which in the tropical world take millions of lives and cause billions of person days of pain and suffering when they don't take lives and even lifetime debilitation a case that we've been studying at great length is malaria malaria is a disease of course caused by a protozoan the falciparum of protozoan plasmodium falciparum it's transmitted by a particular species of mosquito the anophylene mosquitoes it's got a complex life cycle one part of the life cycle is that if I have malaria and I'm bitten by a mosquito that mosquito then transmits the disease to another sufferer but the key to understand about malaria I've learned is that the process of transmission is a complex biological process that takes about two weeks inside the mosquito there is a life cycle transformation of this plasmodium falciparum inside the mosquito from a sexual stage to a non-sexual stage protozoan life cycle life stage it takes about two weeks but alas for the protozoan the lifespan of the mosquito is also about two weeks the protozoan is in a race against time I don't want us to get overly sympathetic with it but it is in a race against time to complete its life cycle before the mosquito dies because only then can the mosquito be infected now it happens biologically that the warmer is the ambient temperature the faster is the transmission the faster is the life cycle change you need essentially an 18 degree centigrade ambient temperature for malaria transmission that's the bottom line there have no doubt been cases of malaria in Minneapolis but never in the winter never endemically and one didn't need a huge WHO-led eradication campaign to end Minnesota's malaria and you didn't really need it even for the American South because it was seasonal, not endemic and not what public health specialists call holo-endemic which means intense year-round transmission so that everybody is parasitemic everybody's carrying the parasite one huge difference of the tropics and temperate zones is disease burden which is fantastically high in the tropics not because or only because the public health system doesn't work because of poverty but because of the climate itself especially for the so-called vector-born diseases carried by the ticks, mosquitoes and so forth or the so-called water-borne diseases like helmets, the worm infections like ankylostomiasis, hookworm which has more than a billion people probably in its grip in the world right now you need warm temperatures for transmission of such diseases people in the tropics inherently suffer a vastly greater disease burden this has multiple ramifications one ramification is that throughout history the death rates in the tropics have been staggeringly high and even today you find 150 to 200 live births children under the age of one dying before their first birthday in the poorest countries from infectious diseases maybe 2 million from malaria or malaria-related illness others from diarrheal disease and so forth one of the things that families do when so many children die is have very large numbers of children even when they're extremely poor in fact the evidence is that they have more than enough to actually offset the probability of infant and child death in the sense that they are looking for security they're looking for old age security they want to make sure that a child, a son often survives to the old age of the parents they may require five or six children to have a high enough probability that even one son will survive why do I say son because in many of these societies of course the gender inequalities remain enormous in part for the very reason I'm talking about that women spend their entire lives having, adult lives having children the problem as a result is that in these high disease environment societies one is finding the irony of very high mortality and morbidity combined with very rapid population growth right now and this is adding tremendous stress to the environment and to living standards particularly because these people live in rural areas in subsistence agriculture and the amount of arable farmland per farmer has been falling in Africa for the last 20 years when these farmers were not even producing a sufficient diet for their own households to begin with and so the situation is worsening along Malthusian terms there's a second element about the tropics that is equally pertinent and that is that winter also is an absolutely marvelous help to farmers I think I can say I will ask the experts in the room but one of the things that happens in cold climates is that the winter not only also annually destroys the cycle of pathogens and pests but it also preserves much of the organic waste material of the crops that serve as a kind of fertilizer base for the next spring planting traditionally especially in low income areas in the tropics however where it's year round high temperatures organic material is very very rapidly mineralized into the soil and then because of the torrential downpours the organic materials are leached from the soils taken down to the rivers or out to the ocean and the main characteristic of tropical soils is their infertility depletion and even their technical incapacity often to hold fertilizer because of the low caffeine exchange capacity which is a function of the high temperatures and rapid mineralization of the soils what's the conclusion? it's a double whammy for the tropics the double whammy is that not only is the disease burden higher and the population growth more rapid but the agricultural productivity is very low particularly for annual crops for the staples like rice or maize and of course wheat is not even grown in the tropics except in upland areas so the biggest problem in tropical agriculture is tropical food production and that's one of the main reasons why average caloric intake in Sub-Saharan Africa is around 2,050 calories per person now compared to around 3,400 calories per day per person in the rich countries and it's been falling in much of Sub-Saharan Africa the tropics in other words bears a terrible burden that is not born in the temperate zones now you might ask though well that's always been true Professor Sacks but you told us at the beginning of the talk that 200 years ago everybody was poor what is best evidence is that about 200 years ago the tropics was poorer than the temperate zones but maybe only two thirds of the level of income of the rich countries there was a gap but it wasn't so wide many of the advantages that the rich countries needed to produce for temperate zone riches had not yet been discovered even home heating to allow for population increase in the cold climate was inadequate when it had to be based on fuel wood rather than coal or other hydrocarbons so the rich countries seem to have been in the lead and were more densely populated in the temperate zones than the tropics larger cities and a more sophisticated economy but they weren't wildly in front but what happened was another factor not just the inherent biological and climatic differences but the fact that in this world and especially in our modern capitalist age there is one fundamental process that potentially makes the rich richer and that is technological change the technologies developed in the temperate world in the last 200 years have been the major source of income growth in the rich countries as opposed for example to mere saving and accumulation it's the development of new processes and new technologies that all the evidence suggests is the major long-term driving force now the reason that the rich get richer and the gap tends to widen in some cases is that technological innovation is what economists call an increasing returns to scale activity that means that as Adam Smith famously said in a slightly different context it's limited by the extent of the market the idea is the following if you or I want to make an invention and market it to do the research and development is a one-off process we have to make the discovery and then figure out how to turn it into a commercializable product by getting some good engineering once that's done, the hard part's done then we can mass produce for the big market the bigger the market the easier it is to cover that one-time fixed cost of research and development it doesn't pay to innovate for a very tiny market if after you've done all that hard work you can only sell to a small market but if you have a huge market out there then innovation is glorious because that one-time fixed cost of R&D can be spread over a vast market here's the rub if the temperate zone world is richer than the tropical zone world it is much more able to sustain a kind of market-based innovation process what we call endogenous growth the rich get richer because the rich country market being large and rich gives a big signal to our companies whether it's Microsoft or Merck or Monsanto to invest a billion or two billion dollars a year into research and development to produce new products those new products make us richer the even larger market creates a new mechanism for another turn of the cycle and there's another thing as well which is that another increasing returns to scale aspect of innovation is the fact that ideas are the best source of new ideas ideas hybridize, they recombine to create new ideas so if you're an innovative milieu you will produce more ideas than if you have ten inventors sitting separately that's why we have universities I presume in part because there's an increasing returns to scale to putting the researchers together and cross-fertilizing the ideas this gives another advantage to the temperate zone compared to the tropics not only did the temperate zone provide a much much larger market for innovation but it's also had that tremendously rich core of inventors now it's not as if the tropics doesn't produce great scientists but watch closely where do the great scientists of the tropics end up they end up in American universities or European universities or large corporations and so forth a process we call brain drain it's less serious now than it used to be because in a world of high communication even when the brains drain they tend to recycle back to their countries regularly and also cross-fertilize the home country more than they used to but the point I'm making is that a vast gap opened up between the temperate and the tropical world in terms of the amount of innovation let me tell you how striking it is don't take out your telescopes to see this but I'll look at it by one count that I've used for this the tropics include about 41% of the world's population they produce about 19% of the world's GNP but in the United States when we look at where patents were issued to the country of the inventor tropical inventors had just 3% of the patents issued to them in other words the temperate zone is producing about 97% of the patents issued in the United States and the same thing would be true in Europe and other locations now how serious a problem is that? for certain kinds of technology it doesn't matter where it comes from you can hook up a computer in a tropical building in a tropical location as well as in a temperate zone location without too much difference a cell phone is going to work in either place but if you're after medical research believe me it makes a difference how much are our companies investing in malaria research? the answer is almost zero how much are they investing in trypanosomiasis, oncocirciasis, schistosomiasis almost zero how much are our companies investing in R&D for tropical agricultural systems? almost zero when Monsanto gets a new product, a new biotechnology product and it's adopted in the developing countries where is it adopted? it's adopted in Argentina or in temperate zone Brazil or in northern Mexico it is not adopted in the tropics because by itself the temperate zone agronomic technological systems cannot simply be moved to the tropical locations so if you are in a temperate zone you're fine even if you're not an inventor or an inventive innovative society you can use a lot of the technology but if you're in the tropics and no one's producing the technology outside it's also not being produced inside and you can't just take what's on the shelf from the United States and solve your technological problems in critical areas which critical areas in health, in agriculture, in energy use in environmental management, in construction all of those are ecologically specific activities where technologies do not easily cross the eco zone barriers now let me quickly draw some implications of this first, for the rich countries globalization is marvelous the United States is surely the biggest beneficiary of globalization in the world because the United States is surely the most innovative society in the world pound for pound right now and when the markets widen in the world that churns up the juices of innovation in this country because the economic returns to innovation are enhanced and the benefits of an expanding market come to fruition and that's what we're living through right now countries like Sweden, carried by Ericsson or Finland with Nokia or other high technology companies in the temperate world are huge beneficiaries of globalization so the first point is it's no accident that globalization and the American economic boom have combined they are related I don't want to say that NASDAQ necessarily is going to hit 20,000 or that the Dow is right where it is there are aspects of our boom which are probably more bubble than boom but it's also true that we are true deep beneficiaries of globalization and not, ladies and gentlemen, because we're exploiting the rest of the world but because the larger market is a fuel for innovation now there's another part of the world which is close enough to us in ecosystems, close enough to us in geography close enough to us in transport costs that that part of the developing world can be a big beneficiary of globalization as well there is no doubt that the most significant development experience of the last 20 years by far in the world is the positive experience of drastically reduced poverty in mainland China as a result of the globalization of the Chinese economy poverty in China has fallen by hundreds of millions of people a country of 1.3 billion people 20% of the world's population has had the fastest growth in the entire world and there's no doubt that it's the result of globalization why do I say no doubt? because the main fuel of Chinese economic growth has been the most extraordinary export boom in history which has enabled China to use its foreign exchange earnings to buy a generation worth of technology to raise living standards in China a lot of it bought from us exports have gone from 20 billion dollars a year in 1980 at the end of the Maoist era to 200 billion dollars a year last year a tenfold increase in one generation absolutely astounding parts of India are experiencing the same particularly in southern India Mexico is very likely to experience the same Costa Rica is experiencing the same Morocco and Tunisia are experiencing the same Egypt arguably has a good chance to experience the same Poland, Hungary, Czech Republic, Slovakia, Slovenia, Croatia the border central European states are also experiencing this kind of catching up growth we can't say globalization is a disaster for them it's their key to rapid growth through the catching up process of adopting the technologies developed largely from the outside bringing in foreign capital and achieving export-led growth but that brings us of course to the last area the poorest of the poor that are in the Malthusian trap do not have the benefits of globalization they are not suffering from globalization they are not suffering from globalization they are suffering from their utter exclusion from the processes of technological advance which have gripped so much of the rest of the world so that people are suffering in shocking ways absolutely mind-boggling ways that we can hardly imagine here by being so left utterly behind in the world we're not doing it to them but we're not solving their problems or even helping them to solve their problems in any adequate way let me say briefly because the time is running that what we've been trying to do has been deeply insufficient so willfully neglectful in my view that I would classify it as immoral from a political point of view if I can use the term and we'll have our theologians to help us out but totally inadequate to really understand the problems of the poorest of the poor what has been the Washington attitude Washington by which I mean all the administrations I'm totally bipartisan on this doesn't matter whether it was the Reagan administration Bush administration or Clinton administration they've all done the same thing which is almost nothing and I include the international monetary fund in the World Bank in this their view has been to lecture the poorest countries to say why aren't you enjoying globalization open up your markets and all good things will happen oh yes terrible problem about all those mosquitoes and for 20 years the lecture has continued with no results whatsoever because the problems that those countries are facing are not the problems that Poland faced coming out of communism but in the center of Europe they are not the problems that Mexico faces with the 2,000 mile border of the United States they are problems of tropical ecology that are fundamentally rooted in disease burden in agricultural systems that are too weak to support healthy populations and in the lack of technological progress directed at those people and in the meantime for 20 years we've been trying to collect debts from the very poorest people in the world and if you don't think we're doing it today to this moment the international monetary fund is asking the Nigerian government a country where the average income is about 75 cents per day where life expectancy is probably now about 45 years where the HIV AIDS pandemic is rife where malaria is holo-endemic we're asking the Nigerians to pay us this year in debt servicing 1.6 billion dollars when the public health budget is 300 million dollars we're asking them to spend more than 5 times more in servicing debts to the richest countries than they are managing to raise for domestic public health and that's what the rich countries have been doing for 20 years you also may think that we're giving a lot of foreign assistance but let me put you out of your concern or try to get you into a different kind of concern the United States in truth has given up on foreign assistance and I'm hardly exaggerating we have what we call a foreign assistance program half of it goes to the Middle East that's fine but that's not for development that's for the Middle East peace process a little bit more of it goes to the IMF and the World Bank I'll just pass on that and then a bit goes to pay experts here often to stay here and write reports and the tiniest tiny amounts go to the poor countries how much is the US given for the least developed countries of the world those are the poorest 48 countries in the world with an average income of less than a dollar a day and with 600 million people in them how much are we giving every year $700 million right now so we're giving about a dollar for the poorest people in the world how much does that matter compared to our income let me put it to you this way we are now a $10 trillion economy $10 trillion per year not to mention, okay I will $7 trillion of capital gains in the stock market since January 1, 1996 we are not even managing one hundredth of one percent not even one hundredth of one percent of our annual income for the world's poorest people that's what's happened we want to give them lectures but we don't want to give them help one of the results of this is that even the most the barest minimum of access to life-saving technologies existing technologies do not reach the poor it's estimated that 2.9 million people right now are dying every year for lack of access to vaccines that exist life-saving vaccines for diseases we barely even think about anymore you know nearly one million children die every year from measles in the world and the vaccines for pennies could be achieved but UNICEF and others haven't had the money until the Gates Foundation came up with a billion dollar grant this past year to increase the vaccine coverage 400,000 are estimated to die of tetanus Homophilus influenza type B what we call the Hib vaccine which is now part of the regimen for our children takes about a million lives in the developing world every year though the technology is available to save those lives but the money is not available because when a country is at $250 per year income even if it could get 2 or 3% of GNP for public health you're talking about $7 or $8 per person per year we're spending $4,000 per year per person in this country so the poorest countries can't afford to meet the most basic needs of the population to keep them alive without more help from us we need a fundamentally new approach to how the rich countries relate to the poor countries it has to be based on understanding the ecological context and technological context of impoverishment it needs, I believe, three fundamental components the first is a social component in which the rich countries spend tens of billions of dollars a year but so as not to scare you that's just tens of dollars per year from each of us tens of billions of dollars per year to help address the pandemics of HIV AIDS malaria, tuberculosis, diarrheal disease, acute respiratory infection helmetic infections and so on which are killing millions of people unnecessarily in the developing world and are helping to promote this Malthusian disaster which I discussed the money is needed to help these countries meet even the most basic educational attainment goals universal primary education isn't enough for anything anymore but it's not even achieved in the poorest of the poor countries and it can't be achieved without more help from the rich countries a second goal is what I call connectivity Poland is connected to the European Union Mexico is connected to the US that kind of globalization is highly beneficial for the poor countries because it enables catching up growth we need to find ways to overcome the utter marginalization of Africa which participates in the world economy in only the most rudimentary form of selling a few primary commodities like coffee, tea, cocoa and the like almost all of which have been suffering what's called a terms of trade decline that is a fall of real prices over the past 50 years including the most recent years these countries have to be connected in more novel ways we don't want to shoo Nike away from the developing world by calling it sweatshops we want Nike there helping to create jobs we want Intel present we want our American companies helping to create meaningful jobs to help the most desperately poor people get out of the subsistence or less than subsistence life in the countryside and into a process of technological improvement the third area that we desperately want is for the rich countries to help to steer the science and technology which is at its most glorious fulfillment in all of modern, all of human history to help steer science and technology to address the pressing problems of the poor and the distinctive problems of the poor even the HIV AIDS viral strains of Sub-Saharan Africa are distinct from the viral forms in the United States the clades or subtypes are different if we're going to get a vaccine for Sub-Saharan Africa it has to be prepared for Sub-Saharan Africa malaria, tropical agriculture, managing soil degradation managing long-term climate change science is utterly needed and it so far is utterly neglectful of the poorest of the poor because science like so many other human activities follows the market in significant part we need new tricks this year I proposed to the Clinton administration a mechanism for a tax incentive for companies that can deliver a malaria vaccine or an HIV AIDS or TB vaccine President Clinton has adopted the proposal submitted to Congress before the Ways and Means Committee and maybe we'll pass through the budget this year if we ever have a budget but the notion is to give market-based incentives to get the job done from the rich countries my last point for the last minute can we make it can we succeed in this I think there's no doubt that even with our best efforts millions of people will die before we get our act together the shocking neglect of the AIDS pandemic for example is going to be a true black mark on our generation that we stood by while 50 million people contracted the virus before the rich countries did almost anything to help the poor countries address the problem despite the fact that 95% of the cases or maybe because 95% of the HIV infections are in the poorest countries this is a shame of our generation I believe and even if we got our act together in the incoming administration and did wonderful and miraculous things millions of people will suffer unnecessary death there is utterly though within our means and within our technology the capacity to do vastly better we should recognize though in closing that the challenges are going to get harder not easier in many ways we're facing increasing demographic pressures we are facing collapsing societies in many of the world's poorest regions we are facing growing ecological disasters both locally and internationally locally many of the poorest places in the world because of the population pressures are seeing a level of soil degradation loss of water table exhaustion of water aquifers and so forth which deeply threatened the societies on the global scale because of the rich country contributions to anthropogenic climate change the evidence though still very limited the evidence suggests that our pumping greenhouse gases into the atmosphere while it may make Minnesota and Boston mildly warmer and we might not complain too much about that could have devastating consequences on the tropical regions of the world where extreme weather events disaster drought prolonged El Nino La Nina cycles and so forth could undermine the agricultural livelihoods of hundreds of millions of people will we make it in the end I think the question fundamentally more than a technological or an economic one is an ethical question whether we can find in our humanity and in our society the will to understand and address ourselves to these problems thank you very much at this point we'll call our panelists to the front for this we have Professor Cobb and Michael Solman coming to us from Stockholm Sweden as the executive director of the Nobel Foundation at this point we'll also have usher circulating throughout the audience and we'll collect any questions that you might have so in about two or three minutes here we will reconvene to hear the remarks of our panelists and we'll deal with your questions at that point good morning again if you'll please take your seat we will have the responses to the lecture this morning by the other members of the panel and then we will address as many of the questions that have been submitted to us that the ushers are now collecting as possible so if we may have your attention please a bit of quiet we can get back under way with that portion of the program my name is David Reese I'm an associate professor of economics and management and the chair of this year's conference and I'll be moderating the question and answer portion of the program at this time I'd like to call on the panelists who are present at this time to respond to the lecture given by Jeffrey Sachs with the questions or comments that they may have if I may call on Michael Solman at this time well thank you very much it's an amazing experience to listen to to Jeffrey Sachs he is the kind of modern time Montesquieu but I doubt Montesquieu was as eloquent as you are the question which pops up in my mind is that the description of the situation and the analysis and the recommendations are so convincing so what do the people say who are not convinced what kind of counter arguments do you encounter in the Washington Consensus or are they just indifferent? I believe that we could be at a moment of significant change finally in the United States actually I think in a way the U.S. has fallen into disregard almost by accident and of course partly by wishful thinking U.S. policymakers wanted the world to be inexpensive from the point of view of the U.S. so we hoped that globalization would be sufficient to start raising the growth rates of the poorest countries and I think we were willing to take the risks wrongly willing to take risks to find out whether that was the case ever since the end of the Cold War America has been very much concerned with its own issues and the economy's stupid was definitely the right electoral message but I don't think it was the right global message as I stressed as I've been testifying in Congress repeatedly in the last year or two I find that there is a sense that yes indeed a $10 trillion economy with $30,000 average per capita income could manage to do more for the world and when one shows that we could hardly manage to do less even opponents of foreign aid have been responsive so the short answer is I don't think that this is set in stone but I think that there is a potential and it's my working hypothesis right now that with a change of administration and a fresh look in a new century we may actually have a kind of sea change in what America is ready to do maybe sea change is too large but to go from $4 per American for the poorest people in the world up to $30 per American per year I think is an achievable goal and that's what I'm aiming for Thank you, Professor John Cobb Since I'm the theologian here and Jeffrey said I had something to say about the moral issues let me say this is one of the finest sermons I've heard for a long time and I'm deeply grateful I told Jeffrey Hive I don't think we really agree on everything but I'm going to ask a question more out of puzzlement or clarification you are very enthusiastic about globalization you are very unenthusiastic about the Washington Consensus the two came into being together so far as I can understand historically so clearly what you mean by globalization is something very different from what the actual globalization has been for the last 20 years it seems to me that the record of the actual globalization we agree is dismal and so it's a theoretical globalization that you are for rather than some real historical event that has actually occurred I believe according to most recent reports that even the rate of growth in most countries this is certainly not true of China but China has not been part of the system of globalization imposed by the Washington Consensus it's done its development in an extremely different way I wouldn't take it as my understanding of what globalization has been doing but according to these recent reports almost everywhere else growth rates have been actually slower in developing countries in the past 20 years under globalization than they were in the preceding 20 years under a system of internationalism so I'm really puzzled at what it is you are so enthusiastic about thank you especially because I gave a whole lecture without defining any of my terms so you give me an opportunity to say a word about that by globalization I mean the increased integration of national economies in trade, finance, production and institutional harmonization now, that's a mouthful but I mean basically the fact that the national economies in the world are coming closer together through the flows of goods, ideas, capital and also in general are sharing basic standards of how to engage in trade or finance by that standard I think globalization is highly beneficial for the rich countries very beneficial for the class of catching up countries which I mentioned which includes 30 or 40% of the world's population and has not helped the poor countries the poorest countries almost at all as I stressed I don't think that it's hurt the poor countries particularly but it hasn't helped them nor has the advice of the IMF and the World Bank so if you define globalization as what the Bretton Woods institutions do to the poor countries in the world I can't express any ounce of enthusiasm either because I think that those institutions were wholly unequipped intellectually, temperamentally and politically to address these problems politically because these are institutions that are owned by shareholders the governments but while there are 182 members of the IMF there are only three that really count that's the United States the European Union and Japan they have a majority vote when you add it up and the rest of the world doesn't so the IMF is mainly a surrogate for the rich countries and the way the rich countries have treated the poorest countries I think has been inexcusable so globalization is a big process it involves how the US and Europe relate it involves how China and India relate to the world it also involves the question of the poorest and by parsing it out I think that even for the poorest countries increasing economic integration is potentially an extremely powerful way to proceed in fact I see no other alternative we don't want the poorest of the poor countries having to reinvent 200 years of technology we want them to be able to use the technology even if we increase our aid they will have to buy a lot of the technology that they need no question about it through foreign exchange earnings the only way that they'll be able to do that is by being export promoting so in general I see no alternative and for 60% of the world roughly or 50% at least globalization has been quite beneficent in general but our problem this morning is of the poorest countries for which it has not done almost anything useful if you view it from the point of view of IMF and World Bank I think you can say it's been harmful at least in its neglect and misdirection question from Professor Sacks submitted by a member of the audience the tropical countries already face challenges in production of crops as noted how can the encouragement and forced inducement of export crops like coffee is not viewed as exploitative when cannot read that word of those countries could be allowed to engage in food subsistence crops production I think the gist of the question is probably clearer the question is whether the cash crop emphasis of the poor countries is directly harmful of them because it takes away the ability to produce food I think the deeper problem truly is that the productivity of food production is extraordinarily low if you look at the amount of calories or proteins per hectare or per farmer in Sub-Saharan Africa it's not a living level in many parts of the continent it's very hard to farm in tropical Africa as in many other areas of the tropics water is a critical barrier that high temperatures mean that the evaporation and transpiration of water is higher than the precipitation so you're always in water deficit drought has been a killer problem repeatedly long-term climate change is probably making things worse soil fragility is profound so it's not just coffee versus food production whether you're growing cassava or millets or sorghum or upland maize it's not sufficient to feed a significant part of the population we need new technology now one very important thing to note there's a lot of evidence that the rate of return to research in Africa in agriculture is actually very high there aren't solutions is that we don't put very much money into finding them we have an international network called the consultative group for international agriculture research which is 18 worldwide tropical research centers in agriculture funded by the rich countries the total level of funding for all 18 institutions has been running at about 330 million dollars per year recently Germany cut its contribution inexplicably in my mind but compare 330 million for all 18 institutes with Monsanto's annual R&D budget of about 800 million dollars almost three times the worldwide tropical research we just don't have the scale of effort biotechnology in my view is enormously promising especially vitamin or nutrient enhanced foods like vitamin A rice which was recently announced in Switzerland and there's a chance for vitamin enhanced maize coming soon for drought resistant salinity resistance temperature resistant crops also so called nutraceuticals where vaccines are put into bananas and so on there's a lot that can be done but it costs money to do an effort and the level of effort is tremendously low I have a group of questions addressing a similar theme I'll try to combine them into a single question that will address just of each of these almost all of the poorest of the poor countries are governed by violent absolute dictatorships it looks like taking from the poor of the rich countries and giving to the rich of the poor countries how do you begin to undo this another on this theme please address the instability of governments and rival factions in the poorest countries of course miserable governance is both a cause and an outcome of poverty sometimes by raising living standards and having better fed people the violent conflicts over land can be eased so we should view politics and economic outcomes as mutually dependent not simply politics causing bad outcomes as we usually do we usually blame everything on corruption not on the poverty itself but having said that let me also stress a very very important point for you ladies and gentlemen Africa is not monolithic in its governance it is not one dark continent of disaster to use old cliches there are indeed democratic hard working honest leaders in Africa trying to do their best against absolutely horrendous conditions let me name a few for you President Mohai of Botswana is an esteemed economist who led the country to gain economic performance but now presides over a population nearly half of which maybe 40% is HIV positive the country is literally dying he lacks resources utterly to address this problem even to take care of the sick this isn't a problem of governance it's a problem of disease the president of Tanzania is running for reelection after having been democratically elected and managed through very hard work to increase school attendance and at least modestly some healthcare but at miserably poor standards so President Mkappa is a leader that one could work with is very impressive and couldn't be put under that overall umbrella President Obasanjo of Nigeria many of you probably know of him because he was a commander and chief of the armed forces 30 years ago the one that was the only military leader in Nigeria who inherited the position and immediately announced a return to democracy and successfully engineered the return to democracy went into retirement became one of the world directors of transparency international the leading advocacy group for clean government has been on the boards of many of the crucial health and education worldwide efforts led an unprecedented conference for malaria control in Africa last spring which I helped him work on where he had 19 heads of state in Africa spending the day talking about malaria the urgency of malaria control in Africa and he's now gearing up for an aid summit in Africa he's a wonderful gentleman the country is in disaster-ish shape disaster-ish shape but if we don't help people like that we're going to condemn ourselves to always saying there is no one good around because we need to have that kind of understanding that it is not uniform and that there are people that urgently merit and deserve our help and we should be very attentive when those rare cases perhaps come or maybe not so rare cases when we look but he can't do it so or Mkapa or Mohai cannot do it without our help we have a couple of questions that are directed to Professor Sacks involvement with the transitional economies in the former Soviet Union in Eastern Europe so perhaps we'll address a couple of those questions now what hope is there for Russia if none what is your what is your program and perhaps at the same time evaluate the situation in Ukraine let me tell you a surprising factoid I think it's a fact but if it's not a fact it's close enough to one to be true if you want to get the best I don't know whether it's still true but it was true a year or two ago if you want to get the best predictor of how the transition economies have done since 1929 taking the 26 or 27 countries of Central and Eastern Europe and the former Soviet Union the single variable that I found to be overwhelmingly the most powerful predictor was the number of kilometers from Frankfurt the closer the country to the western markets and to the EU the better the performance I a little bit bemoaned that fact since I was Poland's economic advisor in 1989 and 90 and thought I did wonderful things except to find out that Poland already had a border with Germany so they didn't need me at all the Baltic states have outperformed the country's farther away because the Baltic states of course are close to Scandinavia are close to Germany Poland has done extremely well Slovakia even when it was very poorly governed by Mr. Metscher was actually making economic progress because it's also a 30 minute cab ride from Vienna to Bratislava distance matters a lot in the world still even in our internet world because when Volkswagen wants to invest it looks to Mladow-Boleslav rather than to to Irkutsk so it looks next door in the Czech Republic or when ABB wanted to invest it went to Poland first so all of those forces of catching up growth are much more powerful for the neighbors than they are for the distant countries geographic determinism is dangerous though it certainly does not predict the collapse of Yugoslavia in any neat way there are demons that are can afflict societies that don't have to do with geographic isolation there is no geography particularly that explains Serbian disaster of the decade but geography has made a huge difference Poland was always going to have a better chance than Russia for quick turnaround no doubt about it now it's important to understand why very briefly and there are things at play one is the economic facts of geography and economic facts of transport costs FDI trade and so forth foreign direct investment in trade which are powerful powerful forces in catching up the other is politics the central European countries on the border of the European Union are getting much more help than the countries farther away and they also have a carrot or an enticement which is far more powerful and that is membership in the EU that has been the great organizing principle of economic reform Poland ran its revolution on the slogan the return to Europe as an economic advisor all I had to do was tell them take away the things that don't look like Europe and you'll be fine so like the sculptor who wants to sculpt the elephant just chip away everything that doesn't look like the elephant and this has been the great stabilizer the great gyroscope the great organizing principle in Eastern Europe even if the EU has been incredibly slow inexplicably slow in all of this for Russia it's quite different Russia never knew where it wanted to head it is as they often said it's not a European country it is a Eurasian country it straddles Europe and Asia its politics are different as is true of all large countries the so called five stans Turkmenistan, Kazakhstan, Kyrgyzstan Uzbekistan and Tajikistan are about the most landlocked regions of the world by sheer distance so they're even more isolated from all of this so all of this is to say that the combination of proximity and help was critical for the success stories Russia had neither proximity nor did it really get help I have to say very much in quantitative terms and I had long arguments with the US government which I didn't really fully appreciate for many years of what was happening where I argued that Russia should get the kind of help that Poland got stabilization fund, debt relief and so forth because economically it needed it the same way Poland did I have to say that it took me almost 10 years to understand there wasn't a chance in the world that I was going to succeed in any of this advocacy because there was a lot of Washington that didn't want Russia to succeed particularly that wanted it just to go down quietly without a bang so to speak and that there was no great urge to bolster Russia the same way that there was a great urge to bolster Poland as the outer flank of western Europe and this really I didn't appreciate I have to say because I went into Russia thinking like an economist and perhaps from a global perspective thinking Russia was not the Russia of the past and we should do everything to try to ease the burden and I was simply whistling in the dark I have to say in retrospect I ended up leaving as advisor to Russia after two years things didn't get better after I left they didn't necessarily get worse because of it I think I was mostly irrelevant I have to say to the whole scene but in any event Russia became a highly corrupt and quite violent to society for many years and Russia had one thing also that the other Russian economies did not have they had an incredible amount to steal especially in the natural gas and the oil sector you had the weak state lack of clear goals lack of political consensus lack of civil society able to monitor what the government was doing and a lot of quite valuable assets that could be ripped off pretty quickly and all of a sudden in 1995 two years after I stopped being advisor the oil and the gas sector were somehow substantially privatized with an estimated hundred billion dollars of hydrocarbon reserves passing hands with no money showing up in the treasury quite an extraordinary phenomenon and it's been tragic I think for the Russian people I haven't been for the last four years so I'm not the one to ask Michael Solman is really one of the world's authorities and I'm sure he's going to tell you about it I'm out of date I still am licking the black and blue marks of the early 90s when I had much more hope for what could be accomplished thank you very much we appreciate these questions from the audience we will break the conference at this time for the next lecture thank you