World Bank Group President: Access to finance pivotal to solving global problems
In Jim Yong Kim's view, the world is currently faced with three key challenges which need to be met in the next few years. His speech at the Goethe University highlighted access to finance as the key factor in successfully addressing these issues.
Speaking at the invitation of the Bundesbank, President Jim Yong Kim commented that the first great challenge is ending extreme poverty around the world within the next 15 years. He went on to state that the second task is preparing for the next pandemic which
"could be much more deadly than any we have experienced in recent years" while the third problem is battling climate change so as to preserve the planet for future generations. As he pointed out, there are some who would consider these challenges to be intractable and he admitted that they keep him awake at night.
Need to increase tax revenues
With regard to financing the battle against extreme poverty, he underlined that there is a much broader and richer set of options available to developing countries these days. First, all countries need to commit to mobilising more domestic resources, largely by increasing tax revenues. For instance, in some countries enterprises make sizeable profits without paying any tax there. Second, countries are working
"toward stopping huge amounts of illicit financial flows out of their nations". In this context, President Jim Yong Kim called on the world to work with these countries in stopping this form of corruption and to ensure that the captured funds are invested in better public services. Third and finally, he argued that
"overseas development assistance will have even more impact in many cases by leveraging private sector investments, especially in low-income countries".
In his eyes, there is sufficient capital out there to combat extreme poverty and now the onus is on institutions like the World Bank to work together with the financial sector to ensure that the available funds are properly invested. Quoting from his speech, 50 years of experience has taught the World Bank that its strategy to end extreme poverty can be summed up in just three words:
"Grow. Invest. And insure."
According to Jim Yong Kim, the best way of reducing poverty is to encourage economies to grow and generate jobs. He added that over the past 20 years, more than two-thirds of the progress made in eradicating poverty has been achieved through growth-induced job creation.
Here, he highlighted the urgency of investing in people's education and health, with an emphasis on getting children off to the right start. Referring to studies, he pointed out that improved health has been shown to increase an individual's earnings by an average of 25 percent. Moreover, he continued, investment in the education of children is of crucial importance. The figures indicate that giving young persons aged between 15 and 16 a good education directly impacts on a country's medium and long-term growth prospects.
Expanding protection against disasters
The final part of the World Bank Group's strategy is to insure. To this end, President Jim Yong Kim called for governments to provide social safety nets to protect people from falling into extreme poverty in crisis situations, adding that safety nets also need to be in place in order to protect against disasters and the rapid spread of disease.
Noting how ebola had revealed that the world is woefully ill-prepared for major pandemics, the Word Bank Group President cautioned,
"ebola is a virus that develops slowly, and the next pandemic could be far deadlier and move much more rapidly".
He went on to point out that access to finance is also pivotal to the task of fighting pandemics, which is why the World Bank Group has been working with partners on a new concept that would provide much needed rapid response financing in the face of an outbreak. The idea here is to speed up the mobilisation and leverage of public and private sector resources as well as market and private insurance mechanisms.
Setting financial incentives
Turning to the third challenge of climate change, President Jim Yong Kim stressed the need to take aggressive action to reduce greenhouse gas emissions and to forge ahead with the decarbonisation of the global economy. In his view, financial incentives like a carbon tax are essential to bring about a sustainable change in user behaviour.
As such, he expressly welcomed the attention paid to the last two challenges, in particular – pandemics and climate change – at the recent G7 summit presided over by Chancellor Merkel.
Underlining the need to take further concrete action to solve the three seemingly intractable problems addressed in his speech, President Jim Yong Kim invoked the words of Goethe, after whom the University at which he was speaking is named, warning that:
"Knowing is not enough; we must apply. Willing is not enough; we must do".