Building a Solution for Real Progress on Hunger in Africa
Friday, October 16, 2003
Speaker: Dr. Peter McPherson
Introduction by Ambassador Quinn
I am especially delighted to be able to introduce our next speaker, because he is both a friend and somebody I admire enormously. Peter McPherson has three jobs, four jobs, I think, that I know of and probably four or five more, any one of which would be a full-time job for a normal person. He has just returned from being the Director of Economic Policy for the Coalition Provisional Authority of Iraq, a few minor things like the work of the Ministry of Finance, the Central Bank being established, outlining broad economic policy, creating a new currency, opening banks, monetary policy and distributing cash all over the country to pay 1.3 million government employees. Wow!
In addition to that, of course, he’s the President of Michigan State University. We had a delicate moment as we were coming in the door with Governor Vilsack, remembering how Michigan State beat the University of Iowa Hawkeyes, I think on the day of your return from Iraq, as I recall... He said he didn’t consider it “delicate.” And the Governor kind of looked at me and says, “How can you invite somebody...” I thought, well, I’m really in a lot of trouble for that.
And in addition to those jobs, he has also been heading up the Partnership for the Development of Africa and leading the effort to aggregate forces to bring them together and to help uplift Africa.
I knew Peter McPherson when he was the administrator for AID in the Reagan Administration, and we used to see each other outside George Schultz’s office, and I remember the dynamism. And I remember the ultimate test was what the employees and the staff said – and they all loved working for you, and they felt so proud to be part of AID at that time.
But most of all, the one thing I didn’t know and that relates to what we’re doing and to our laureate is that he was a Peace Corps volunteer in Peru and at that time providing work with 45 other volunteers and working with a start of a U.S. school feeding program in Peru at that time. And you know that Senator McGovern will be here later, who has helped pioneer school feeding programs as one of the ways of increasing nutrition for students around the world and the developing countries and those most in need and also keeping young women in school. I know that’s a great interest to our laureate and something that she’s going to speak about during her time here.
So it’s my great privilege and honor to introduce to you Peter McPherson.
DR. PETER McPHERSON
President, Michigan State University
Chair, Board for International Food and Development, USAID
Founding Co-Chair, Partnership to Cut Hunger and Poverty in Africa
Well, Mr. Quinn, my old colleague from the State Department days, good to see you and good to see how you continued to prosper with this organization here.
I congratulate my friend of many years, Cathy Bertini, for winning this award – more than justified. Her early identification of North Korea as a serious, serious issue and willingness to tackle it is just one of the many things.
Good to see the governor here this morning and his deep interest, strong interest in international food matters.
The Ruan family that has been so key – and I remember when that was put together. You need to have great families really be willing to make a sustained commitment. And this endowment... Endowments are wonderful tools; they can last generations, and so I’m so pleased that it’s developed.
And of course everybody’s wonderful friend, Norm Borlaug. I doubt whether he remembers, but one of my favorite things from AID days was the cover of the Fortune Magazine that I happened to run onto in the sixties with Norm Borlaug’s picture there, that I got Norm to autograph for me. I think he’s been an inspiration to so many people here, and the comment, “probably saved more lives than any man ever in history,” is so correct.
I bumped into many of you who said, “Now, Peter, what are you going to say about Iraq?” So I am compelled to talk a little bit about it. I principally wanted to talk about Africa, but let me just spend a few moments about Iraq. It was physically uncomfortable, but in fact it was quite exhilarating in most ways. Because security remains an issue, no question, but there are sweeping things being done.
The hospitals and clinics that are open, primary and university, five million textbooks, science and math, distributed in recent weeks to the schools for the opening. I can go on. But then of course in the economic area, the basic economic policy foundations, I don’t think any of us believed in May when we arrived that we could have gotten a number of things done. Security is the issue. But these steps are so important. Ken mentioned some of them.
The currency in many ways is not functional – two denominations worth a dime and five dollars to sort of transact all your business. We have a new currency issue today, yesterday, to be swamped over a three-month period. The monetary policies established will be afloat. The banks will close – they’re now largely open, and most of them you can draw a check and have the check be paid. You can have... small loans are being given. Foreign banks are now going to be allowed in that will compete with their sluggish, old, dominant, two big state banks.
And probably it’s interesting, and I suspect long term more important, is the Iraqi governing council adopted, agreed to a set of sweeping economic reforms, now about three and a half weeks ago. It got some coverage when the Minister of Finance of Iraq gave a very important speech at the World Bank IF meetings in... But what it does, what the Iraqis did was say, “Look, we’ve got to have jobs. We’ve got to have economic growth.”
And they looked around the region, and it’s a pretty closed region. Taxes are high, tariffs are high, foreign investment is largely restricted. In fact, in 2002 Iraq had $4 billion of foreign investment coming into the region. Latin America had $44 billion. Sub-Sierra in Africa, by the way, only had $7 billion.
But the conclusion was, we’ve got to open up this economy. And they concluded – I was the negotiator, if you will, with the governing council. This governing council is not a group that rolls over. I can tell you, I sat for hours, working on provisions with them of the investment code and so forth. But there’s 5% tariffs, maximum personal income tax of 15%, hundred percent foreign investment, including full repatriation, etc., sweeping.
Now we’ll see how it develops. But I feel great confidence that a number of areas are making sustained progress.
Let me talk about Africa. It’s appropriate, of course, to talk about Africa at this conference because Africa is the continent-wide development issue of the world. We all know this, and there’s a range of figures I could provide, but let me just point out that, in fact, malnutrition, the total number of people with malnutrition, is growing in Africa. Our 2015 goals, we’re falling behind schedule.
Per capita food production is in fact falling in Africa. The production per hectare by global standards is really very low. So I’d like to make a set of points here.
I’d like to point out why food increases production and why rural income is such a key thing. I’d like to point out focus on this has fallen off. I’d like to point out further that policy changes seem to be getting to be turned around, but it’s not clear; we need to track them to be sure it does. And I close my speech today by giving you some broad outlines – time doesn’t permit detail – of how I think. Assuming we’ve got the policy for support and the resources, we can, over a sustained period of time, do what we should do in Africa.
First – it doesn’t take persuading this group, but I think we need to continue to say: When a country has a large portion of its population in the rural areas, if you’re going to get overall growth not only in those rural areas but for the country, you’ve got to increase food production and rural income. I mean, it’s intuitive, we’ve argued it, we know it. But it frequently seems to be missed.
In Sub-Sierra in Africa, two thirds of the people live in rural areas, but yet, as I say, we seem to forget this principle. Now, there are a number of careful studies in recent years that really lay to rest any dispute about this. Digada, Miller, Barrett, Reardon and others have all laid out careful studies that show the way you get growth is to increase food production and rural income, and it has a multiplier impact. It’s really fairly simple, isn’t it? People produce more, they eat some of it, and then they sell some of it, and then they use the money to buy something. And so the multiplier goes.
We were putting, as a global community, a reasonable amount of money in Africa into agriculture, in the, oh, late eighties. But then it fell off. And it wasn’t just AID, it was the World Bank, it was OECD generally. And it also was in the context, by the way, of overall assistance to Africa. ODA, during the nineties, to Africa fell by about one third. In the ag area it fell dramatically. The World Bank’s money into agricultural production fell by 75%. AID’s fell by two thirds. Overall, it was roughly a reflection of the other donors. Incidentally, AID’s efforts historically have led up or down where many sectors went.
Well, these were so dramatic, and food has become such a huge issue in Africa that in recent years there has been a pushback. People have said, “Look – we’ve got to do more.” We can’t just focus on disasters. We’ve got to figure out how to get more production. This is a great figure that Andrew Natsios keeps on using about this year’s work in Ethiopia. We’re spending 50 times more on disaster assistance in Ethiopia than we are in increasing food production. People said we’ve got to do more.
Well, my friend David Beckmann is here, Bread for the World, who has done such a wonderful job getting the message out to policymakers in the political process. I was part of creating this organization, the partnership that Ken mentioned in the introduction, that was fairly unique in who we got involved. It wasn’t just Senator Dole and Representative Hamilton, political, powerful leaders in this country, but it was also the president of the American Farm Bureau said, “Look, we need more food production in Africa.”
It was also, we got several key African leaders, including several presidents of countries, all to be part of the founding group. And we had a conference in the State Department where these people all came together and said, “Here’s what we need to do.” That did, in fact, have a political impact.
Perhaps most importantly, the Africans themselves have begun to move to push to get more. In a conference in July of heads of state of Africa and the Africa Union, it was agreed that 10% of their discretionary budgets would go into food production increases. There’s another conference in February of heads of state that will follow through on this.
AID under Natsios clearly has changed their focus and their policy. The World Bank has begun to move in terms of certainly a strong statement with a policy.
Overall, you can see that people have decided – look, we spent too little through the nineties and into the early part of this century. And now we better do something about it. And the words are different, the personal commitments I know are there. But the money isn’t quite there yet. There’s lots of reasons, but it hasn’t dramatically changed.
The partnership, my organization, would be happy to be sort of a secretariat of tracking this. I think we need to get an annual report of what those figures are. We’re a tiny organization (...Howard is here, our executive director.), but basically is the instrument of other organizations. But I can see this is a function of tracking these numbers. That’s important to undertake.
Well, I don’t want to dwell too much on process and numbers only, because assuming you have the numbers, assuming you have the policy commitments from the key donor community, how would you do this? It’s a huge and complex problem, but I think its framework of how to do this is relatively clear.
And I think we’ve got to remember that we’ve gone through some terrible times where people thought you never could make progress. India, and let’s say 1950, or Latin America about the same time – who would have thought Latin America, despite its problems... I mean, remember, there were certain...
...until the 1950s. And the world has made much progress, and we really should understand that we can do something here too. But we should take the lessons from these now decades. They are lessons that seem to be easily forgotten as the crises emerge and we do things in a faddish fashion. But I think if we remember always, disaster assistance, delivery of certain healthcare and so forth important; what Jim Grant did with immunizations, and ORT changed the way we thought about that – key.
But at the same time we can’t forget growth. We can’t forget growth. And as the donor community, as people deeply committed to this, somehow or other it is too easy for us to forget growth as we deliver the absolutely critical medicines or the critical food in famine. To me, these are fairly straightforward concepts that in my little rural community out there in Western Michigan would have been understood as we work with our neighbors.
A central idea – poor people are fundamentally like us. I think it’s just too easy to think somehow or the other they’re different. I mean, they want their children to survive and prosper and have more than they do. They want to have a home, they want a better life.
One of my earliest experiences – it wasn’t in Africa but it was in Latin America where I was a volunteer, Peace Corp. volunteer... I can remember yet: Remember all the Indians coming down – this was early sixties – from the Andes, and their straw huts that the squatters put up there outside of Lima? And this guy who I was having a cup of coffee with had this sort of strange-looking house – a brick here, a brick there, but it was really quite big. It was quite a substantial thing after ten years. I said, “How did you do it?” I can see him yet, Jose, standing up and tightening his belt.
I mean, to me Jose is what poor people are for the most part all over the world – they’re all doing things for themselves. And our job isn’t to keep giving them goods and services. Our job is to lift burdens so that they can do for themselves what they want to do for themselves. The real resource in the developing world is the desire of people to get ahead.
And when you think about it that way, about what burdens need to be lifted, not to give them something but to have them be able to have opportunity, then the issues, I think, are reasonably clear. They’re complicated, of course, in their application, but we know that throughout history technology and education, economic policy, these issues are what have driven change – those things are what have given opportunities to people, lifted burdens.
Education and training – Ted Schultz, University of Chicago, 30 years ago did what still remains the definitive study on the return on investment of education and training.
Technology – Norm will tell us every time he has a chance, technology continues to be important. And I believe that biotechnology is an important tool that we can’t take away from poor people, really, because of the politics of all this. I congratulate CIOT and IFPRI and their biofortification organization, new effort that now has got some reasonable funding driving.
I hope that we will have a lot more of those kinds of efforts. Indeed, it seems to me not unrealistic to have some sort of fund. You know, Gates has done such a wonderful job on health. We need someone to fund a major pot of money where there can be competitive grants to drive this technology.
Well, education, technology are key, in my judgment, but so is policy. We need, after Cancun, they need to get back together. We’ve got to have a ... round that really reduces subsidies so as to allow the poor countries to be able to be in these global markets. The U.S. has put a very aggressive position on the table. As someone told me the other night, this is the executive branch effort. It won’t be easy politically on the hill, but it’s only possible if we can in fact get some global traction on this.
There is a range of areas and issues, from cotton in Africa, sugar and so on and so forth. But the Africans have some policy changes of their own. Their overregulatory structure, in many cases their legal systems. I can go on. But let me just conclude by saying the following:
We’ve got to make sure that the policy changes which the donor community have announced, are moving back into food production and rural income, get translated into dollars. Because we know that without food production and rural income increases, we’re not going to do the job in Africa. I think that’s just clear.
We’ve got some old fundamentals on how to have development work. You need some luck, you need to keep your eye open for the chance. But we know that training, technology, sound policies are the foundation to be able to make it work. And they’re not so sexy sometimes, and they take a generation to have the impact that you need, or more, but we’ve got to stick to them, and we can’t forget economic growth.
Ladies and gentlemen, it’s good to see all of you. It’s a wonderful conference. And congratulations for the people who put this on. Thank you.