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World Bank Calls For Boost In Economic Growth, Investment In Human Capital

World Bank
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Jim Yong Kim, World Bank Group President, has outlined three fundamental pillars that will drive momentum toward achieving the organization’s goals of ending extreme poverty by 2030 and boosting shared prosperity.

Speaking at the Brookings Institution on the eve of the World Bank/IMF Annual Meetings, Kim pointed to a new World Bank report that lays out how income inequality between all people in the world has decreased, and inequality within nations has been falling in many countries, both rich and poor. But inequality is still far too high, both globally and within countries. This constrains growth and breeds instability.

“This means that not only do we need to focus on growth, but we must also continue our work to reduce inequality – we have to make growth more equitable.”

“We will achieve these goals in three ways: One: accelerating inclusive and sustainable economic growth; Two: investing in human capital; and Three, fostering resilience to global shocks and threats.”

“Two goals, three ways to get there,” Kim stated.

Kim called for a major ramp up in infrastructure finance to boost economic growth, with far greater public-private cooperation on infrastructure investment. At the same time, with increasing reliance on private sector investments, the World Bank Group will have to increase its vigilance to ensure that privatization does not equal exclusion of the poor and marginalised.

“Our top priority is to end extreme poverty and boost shared prosperity, and our engagement with the private sector must be anchored in these two core values,” Kim noted.

On the second pillar, investing in human capital, Kim stated that making investments in the earliest part of people’s lives will make a big difference in countries’ ability to compete.

“Governments that do not invest early in a skilled, healthy, productive workforce are undermining their current and future economic growth,” Kim stated. “We need to help countries understand that investments in human capital are just as critical as investments in ‘hard infrastructure’ if they actually want to spur economic growth and compete effectively in the short, medium and long term.”

Kim stated that these investments will not only lead to inclusive economic growth but will also establish the social foundations that can act as a bulwark against instability, violence and conflict. If these investments in people aren’t made quickly, “not only is it a recipe for poor economic growth, but we will leave a large population of people living in countries where the traditional low skilled jobs are not available and who, often through no fault of their own, simply cannot compete.”

“To allow this to happen is to sow the seeds of future crises – crises that we can ill afford.  Indeed, one of the themes that came up repeatedly during the G20 leaders meeting is that we are living in a time of multiple overlapping crises,” Kim warned.

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To meet the challenges of these crises, Kim outlined the third pillar of the Bank’s approach: a much-expanded role in fostering resilience in client countries against some of the most severe shocks that threaten to roll back decades of their progress against poverty. Kim pointed to forced displacement, climate change, and pandemics as current threats.

On displacement, Kim noted that recently, at the UN, the Bank announced the Global Concessional Financing Facility for middle-income countries, which will raise about US$1 billion in grants over the next five years explicitly for Jordan and Lebanon, and an additional US$500 million in grants to help other countries address future refugee crises wherever they occur, including in middle income countries.

Concerning climate change, Kim hailed the extraordinary, collective effort that brought about the Paris Agreement. “During the COP 21 process our collective ambition was made clear. We left the meeting with ambitions that were even higher than when we walked in. We agreed that instead of keeping global warming to 2 degrees, we will try to keep it below 1.5 degrees Celsius.”

“The political victory of COP 21 has brought us so far,” Kim stated.

“But we now have to recover from the hangover of our COP 21 celebrations and get to the task of financing and incentivizing the actions that will keep global warming below 1.5 degrees Celsius.”

Regarding pandemics, Kim noted that if a pandemic as fast-moving and lethal as the Spanish Flu of 1918 struck today, we could face the possibility of tens of millions of people dying and a loss of as much as 5 percent of global GDP – or more than $3 trillion dollars.

Kim pointed to a new Pandemic Emergency Financing Facility that should be operational by the end of the year.  “What we’ve created is an entirely new pandemic insurance instrument linked to an entirely new pandemic bond.”

Kim also stated that if the World Bank Group did not exist today, we would have to invent ourselves. “But we do exist, and we’re ready, and we are fit for purpose to tackle the world’s most complex challenges.”

However, Kim said that investments have to be at the scale required to meet the challenges.

“We have to reach a new level of seriousness. When we do, then finally, our aspirations for the poor will meet the aspirations of the poor.”

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