[ppi] [ppiindia] [1] A New Year's Resolution (Jeffrey D. Sachs); [2] This can't go on forever - so it won (Joseph Stiglitz)

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A New Year's Resolution[1]=20

by Jeffrey D. Sachs [2]

=20

It is time for New Year's resolutions, and this year's are obvious. When th=
e millennium opened, world leaders pledged to seek peace, the end of povert=
y, and a cleaner environment. Since then, the world has seen countless acts=
 of violence, terrorism, famine, and environmental degradation. In 2005, we=
 can begin to change direction.

Knowledge, scientific advance, travel, and global communications give us ma=
ny opportunities to find solutions for the world's great problems. When a n=
ew disease called SARS hit China last year, the World Health Organization c=
oordinated the actions of dozens of governments, and the crisis was quickly=
 brought under control, at least for now.=20

When Bill Gates donated $1 billion to bring vaccines to poor children, he m=
ade it possible to protect tens of millions of young people from preventabl=
e diseases. When an agricultural research unit called the World Agroforestr=
y Center discovered that a certain tree could help African farmers grow mor=
e food, they introduced a new and valuable approach to overcoming Africa's =
chronic food crisis.=20=20

Unfortunately, such examples of international cooperation are as rare as th=
ey are impressive. With our knowledge, science, and technology, the horrend=
ous living conditions of the world's poorest people could be dramatically i=
mproved. Millions of people could be spared malaria, HIV/AIDS, hunger, and =
life in slums. The problem is not that we lack good solutions. The problem =
is that we fail to cooperate globally to put those solutions into practice.=
=20=20

United Nations Secretary-General Kofi Annan has honored me by making me his=
 Special Adviser on the Millennium Development Goals and asking me to lead =
a group of scholars and development experts in identifying practical steps =
to reach the goals by the target date in 2015. This effort, known as the UN=
 Millennium Project, will issue its report to Secretary-General Annan on Ja=
nuary 17, 2005. Our study, Investing in Development: A Practical Plan to Ac=
hieve the Millennium Development Goals, will be available for free around t=
he world at www.unmillenniumproject.org.

What we learned is easily summarized. For every major problem - hunger, ill=
iteracy, malnutrition, malaria, AIDS, drought, and so forth - there are pra=
ctical solutions that are proven and affordable. These investments, in turn=
, would strengthen the private sector and economic growth. Yet they require=
 global partnership between the rich and poor countries of the world. Most =
importantly, the world's richest countries need to do much more to help the=
 poorest countries make use of modern science and technology to solve these=
 great problems.

The US, for example, currently spends around $450 billion each year on its =
military, but less than $15 billion to help the world's poorest countries f=
ight disease, educate their children, and protect the environment. This is =
a mistake, because military approaches alone cannot make America safe. Only=
 shared prosperity can truly make the planet secure. The US should be inves=
ting much more in peaceful economic development.

Germany, Japan, and several other rich countries are also doing much less t=
han they should - and much less than they promised the poor countries that =
they would do. In 2002, all donor countries committed to "make concrete eff=
orts" to reach 0.7% of national income in development aid to poor countries=
. Germany, Japan, and the US, among others, remain far below this commitmen=
t.

The year 2005 will offer many opportunities for citizens around the world t=
o insist that their leaders keep their Millennium promises. After our repor=
t is issued in January, Secretary-General Kofi Annan will issue a report to=
 the world in the spring, identifying the practical steps that should be ta=
ken this year. Around the same time, an important commission on Africa will=
 issue a report to United Kingdom Prime Minister Tony Blair. Then, in July,=
 the UK will host the annual G-8 Summit of the rich countries.=20=20

Blair has promised that he will make the fight against poverty and long-ter=
m climate change the two priorities of the summit. In September, the world'=
s leaders will reconvene at the UN to decide on their actions during the co=
ming decade.=20=20=20=20

The rich and powerful nations often declare their leadership in the world. =
The US claims that it helps the world fight poverty, but instead spends its=
 money on weapons. Germany and Japan say that they want a permanent seat on=
 the UN Security Council, but neither has yet followed through on its own p=
ledges to help the world's poorest people. The world's poorest countries wi=
ll ask themselves why they should vote for Germany and Japan to have perman=
ent seats on the Security Council if they can't keep their promises.  =
=20

Nothing would be wiser for the world's rich countries than to fulfill their=
 pledges to the world's poor, hungry and disease-ridden peoples. Therein li=
es the path to sustained peace. 2005 is the year that words can become real=
ity, and that the world can begin to fulfill its hopes for our new millenni=
um. Let us make our leaders aware that we aspire to shared peace and prospe=
rity. Let us pledge that the rich and powerful should take real actions to =
help the poor, the weak, and the suffering.

=20


---------------------------------

[1] Copyright: Project Syndicate, December 2004. http://www.project-syndica=
te.org/commentaries/commentary_text.php4?id=3D1822&lang=3D1&m=3Dseries=20


[2] Jeffrey D. Sachs is Professor of Economics and Director of the Earth In=
stitute at Columbia University.

=20

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=20

This can't go on forever - so it won't [1]=20

Global economic forecasters tend to be upbeat. But not this year=20

Joseph Stiglitz [2]
=20
The beginning of each year is high season for economic forecasters. With fe=
w exceptions, Wall Street economists try to give as upbeat an interpretatio=
n as the data will allow: gloom-and-doom forecasts do little to sell stocks=
. But even the salesmen are predicting a weaker American economy in 2005 th=
an in 2004.=20

The biggest global economic uncertainty is the price of oil. Oil producers =
failed to anticipate the growth of demand in China. Supply side problems in=
 the Middle East (and Nigeria, Russia, and Venezuela) are also playing a ro=
le, while George Bush's misadventure in Iraq has brought further instabilit=
y.=20

High oil prices are a drain on America, Europe, Japan, and other oil-import=
ing countries. America's oil-import bill over the past year alone is estima=
ted to have risen by around $75bn. If there were any assurance that prices =
would remain permanently above even $40 a barrel, alternative energy source=
s would be developed. But we are now in the worst of all worlds - prices so=
 high that they damage the global economy, but uncertainty so severe that t=
he investments needed to bring prices down are not being made.=20

Meanwhile, the world's central bankers have been trained to focus exclusive=
ly on inflation. Many will recall how oil-price increases in the 1970s fuel=
led rapid inflation, and will want to show their resolve not to let it happ=
en again. Interest rates will rise, and one economy after another will slow=
. The march towards higher interest rates has already begun in the US and e=
lsewhere.=20

For the past three years, falling interest rates have been the engine of gr=
owth, as households took on more debt to refinance their mortgages and used=
 some of the savings to consume. Central bankers are hoping that this will =
not play out in reverse - that higher interest rates will not dampen consum=
ption. Hope may not be enough. House prices could well decline; at the very=
 least, the rate of increase is likely to slow down.=20

This is only one of the uncertainties facing the US economy. Clearly, some =
of the growth in 2004 was due to provisions that encouraged investment in t=
hat year - when it mattered for US electoral politics - at the expense of 2=
005. Then there are America's huge fiscal and trade deficits, which jeopard=
ise future American generations' well being, and represent a drag on the cu=
rrent US economy.=20

As one of my predecessors as chair of the Council of Economic Advisers, Her=
b Stein, famously put it: "If something can't go on forever, it won't." But=
 no one knows how, or when, it will all end. Indeed, President Bush 's elec=
tion promises include partial privatisation of social security and making h=
is earlier tax cuts permanent, which, if adopted, will send the deficits so=
aring to record levels. What, exactly, this will do to business confidence =
and currency markets is anybody's guess, but it won't be pretty.=20

As a result, an even weaker dollar is a strong possibility, which will furt=
her undermine the European and Japanese economies. Moreover, America's gain=
s will not balance Europe's losses: the uncertainty is bad for investment o=
n both sides of the Atlantic.=20

Europe, for its part, is finally beginning to recognise the problems with i=
ts macro-economic institutions, particularly a stability pact that restrict=
s the use of fiscal policy and a central bank that focuses only on inflatio=
n, not on jobs or growth. But there is a good chance that institutional ref=
orms will not come fast enough to lift the economy in 2005.=20

China - and Asia more generally - represents the bright spot on the horizon=
. It may be too soon to be sure, but prospects for taming the excessive exu=
berance of a year ago appear good, bringing economic growth rates to sustai=
nable levels that would be the envy of most other countries.=20

By contrast, the world's other major economies will probably not begin perf=
orming up to potential in the next 12 months. They are all caught between t=
he problems of the present and the mistakes of the past: in Europe, between=
 institutions designed to avoid inflation when the problem is growth and em=
ployment; in America, between massive household and government debt and the=
 demands of fiscal and monetary policy; and everywhere, between America's f=
ailure to use the world's scarce natural resources wisely and its failure t=
o achieve peace and stability in the Middle East.=20

=A9 Project Syndicate=20

=20


---------------------------------

[1] The Guardian, Saturday January 1, 2005. http://www.guardian.co.uk/comme=
nt/story/0,,1381645,00.html=20


[2] =95 Joseph Stiglitz is professor of economics at Columbia University an=
d a Nobel prize winner.





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