September 17, 2018
PRESS OFFICER: Andreas Adriano
Phone: +1 202 623-7100Email: MEDIA@IMF.org
Good evening.
I am honored to join you tonight, for this inaugural lecture in memory of a remarkable woman—Dame Helen Alexander. I want to extend a special greeting to her husband Tim; her children Nina, Leo, and Gregory; and all of her family and friends gathered here this evening. Thank you Zanny for your kind invitation and thank you John for your gracious introduction. Let me also acknowledge Carolyn Fairbairn from the Confederation of British Industry, and all here from UBM and the University of Southampton.
Each of us cherish our memories, images, words of Helen. How can we describe her? Some of the words I hear often: fiercely intelligent, tenacious, meticulous, pragmatic, diligent, and utterly dedicated. I also hear: compassionate, fair, thoroughly decent, a fabulous mentor: a role model and someone who always put human relationships first, whether family or friends. We are all in her debt, because she gave so much. I have a personal debt to Helen because I once let her down.
When pondering this dual set of virtues associated with Helen—and having in mind some of the most pressing challenges facing the world that Helen tracked so closely—I thought it would be appropriate to focus my remarks on the Sustainable Development Goals (SDGs), endorsed by the community of nations in 2015 as a policy roadmap through 2030.
The SDGs lay out the contours of the world we want, and indeed need—a world free of poverty and deprivation; a fairer world; a world that respects natural limits. They represent the interlinked “5 Ps” of prosperity, people, planet, partnerships, and peace.
The SDGs are the right response to the great challenges of the 21 st century, the right antidote to the loss of trust in institutions of all kind, and, in some countries, the loss of faith in global cooperation.
Here’s the rub, though: turning these aspirations into concrete plans will not be easy. It will require those traits that defined the character of Helen—practicality twinned with decency.
The SDG agenda is an encompassing one. My focus tonight will be more limited—the overlap between the SDGs and the IMF mandate for global economic stability and economic prosperity that is both inclusive and sustainable.
Specifically, I will address four dimensions: (i) economic—helping the low-income countries achieve the SDGs; (ii) social—the importance of inclusion and equity; (iii) environmental—tackling climate change; and (iv) governance—the centrality of strong institutions.
1. Economic Dimension
Let me begin with the economic dimension—where I would like to focus on the particular SDG challenges of the low-income countries.
Consider some facts. Over a billion people have lifted themselves out of extreme poverty since 1990, in the context of greater integration. This is a remarkable achievement, unprecedented across the entire span of human history. Yet almost 800 million people remain mired in extreme poverty today.
With health too, child mortality has fallen by half since 1990, thanks in no small part to the Millennium Development Goals, the precursor of the SDGs. And yet, despite this massive reduction, almost 6 million children still die each year before their fifth birthday—and in nearly all cases, basic medical interventions could save their lives.
The same is true with education—great progress, but great gaps remaining. In sub-Saharan Africa, about a fifth of primary age children are not attending school. And too many of those in school are not learning. Across the world, 58 percent of students in primary and lower secondary school—617 million children—do not have basic proficiency in reading and mathematics.
According to UNESCO, world poverty would be cut in half if all completed secondary education. And given what we know about the future of work, how can anybody thrive in the modern economy without at least a secondary education?
As H.G. Wells once noted, "Human history becomes more and more a race between education and catastrophe."
I could make similar points about the economic effects of lack of access to the other material bases of human flourishing—healthcare, clean water and sanitation, clean energy, and availability of finance to help people protect themselves and get ahead.
I know Helen cared passionately about these issues. She understood the critical importance of education attuned to modern challenges, relishing her role as Chancellor of the University of Southampton. She loved seeing the excitement in the faces of the graduates as she handed out degrees.
On healthcare too, she was so proud of the cancer immunology center at Southampton. She ran the Race for Life every year since 2002, even in 2015, on the eve of major surgery. When people she knew were ill, she would always visit them in hospital.
We at the IMF appreciate that human capital is essential for growth and development. We are committed to supporting these SDGs by offering help on the macroeconomic side.
Specifically, we are estimating spending needs for five key sectors—education, health, water and sanitation, roads, and electricity—for both emerging markets and low-income countries. And we are exploring financing solutions.
Next week, I will be presenting these findings at a special session of the United Nations called by Secretary General Guterres. I will not preempt the results here, but I will say this: for the low-income countries in particular, meeting the additional spending needs will require a strong partnership between all stakeholders—countries themselves, but also official donors, philanthropy, and private finance. I am optimistic that this can be done.
There are some added complications to grapple with, however. The need to increase spending comes at a time when debt in low-income countries is looking increasingly precarious—40 percent of them now face high risk of debt distress or are unable to service their debt fully, up from 21 percent five years ago. On top of that, low-income countries are borrowing more on non-concessional terms, increasing interest service costs.
If implementing the SDGs is a race, it is increasingly an uphill one.
Ultimately, supporting the SDGs in the low-income countries must be a global priority. It is not only the right thing to do; it is the smart thing to do. It is not only about solidarity; it is about self-interest. For without sustainable development at home, the bubbling economic and social pressures—made worse by rapid population growth and growing environmental stress—will surely spill across borders, including through mass movements of peoples.
This is why partnerships are so important. What is required is a sense of co-responsibility for the common good—underpinned by that blend of practicality and humanity that defined Helen’s character. I can only imagine how she would have encouraged the CBI members when she was leading them.
2. Social Dimension
Let me now turn to the second broad dimension of the SDGs—inclusion, both in terms of income inequality and gender equity.
Income inequality has become one of the global economy’s greatest challenges. Indeed, some regions have seen remarkable progress in reducing poverty and expanding the middle class over the past few decades. And inequality has been reduced between countries. But not within countries.
Since 1980, the top one percent globally has seen twice as much of the gains from growth as the bottom 50 percent. Over that period, income inequality has been on the rise in most advanced economies. This is partly due to technology, partly due to global integration, and partly due to policies that favor capital over labor.
The implications are alarming, especially among these advanced economies. In these countries, rising inequality is contributing to the withering away of entire communities and ways of life; the unravelling of social cohesion and sense of a common destiny; and the growing tendency to replace deliberation with demonization, partnership with parochialism.
Naturally, this makes it much harder to reach agreement on the kinds of policies and partnerships needed for the SDGs.
It is also not surprising that IMF research has found that reducing inequality is associated with stronger and more sustainable growth.
A key issue here is that excessive inequality can undermine the idea of a meritocratic society, as a small minority gain privileged access to the many tangible and intangible benefits needed to get ahead—whether it is education, cultural enrichment, or well-placed connections. Such exclusion, whereby inequality of outcomes feeds through to inequality of opportunities, hurts productivity because it deprives the economy of the skills and talents of those who are excluded.
Again, I know this was something that Helen cared deeply about—a meritocratic society, a desire to make sure that everyone could use the opportunities available to them and fulfil their potential.
As Maxim Gorky once said, "Everybody lives for something better to come. That's why we want to be considerate of every man—who knows what's in him, why he was born and what he can do?"
When it comes to reducing inequality, our research suggests an important role for public investment in areas such as health, education, and social protection systems. Given the scale of the problem, the private sector also has a role to play. Indeed, as we face the challenges associated with the Fourth Industrial Revolution, we should urge business to think of new ways to strengthen and expand their economic and social responsibility.
And what about that other dimension of inclusion—gender equity?
The sad reality is that girls and women all over the world continue to face the daily indignities of discrimination, harassment, and too often violence as well.
Even focusing on the economic dimension alone, the news is sobering. About 90 percent of countries have some legal restriction on women’s economic activity.
This is another area where inclusion makes for good economics. Here in the UK, as Helen herself flagged in her famous Hampton-Alexander Review, eliminating gender gaps in labor force participation can boost GDP by 5 to 8 percent.
At the IMF, we have shown that this story is repeated all over the world. In sub-Saharan Africa, for example, we estimate that lowering gender inequality by 10 percentage points could boost growth by 2 percentage points over five years. We clearly need this growth boost to support the SDGs.
The beauty of this is that men need not lose out. By bringing more women into the fold, the economy can benefit from their talents, skills, unique perspectives and ideas. This diversity should boost productivity, and lead to higher wages for all.
How do we increase this participation? Especially in low-income countries, key interventions include reducing gender gaps in health and education, supporting financial inclusion, investing in infrastructure, and ensuing better access to clean water and sanitation. This creates a virtuous cycle—invest in the SDGs and boost women’s empowerment, which in turn lays the groundwork for broader SDG success. In advanced economies, policies such as parental leave and access to affordable and high-quality childcare can help a lot.
Another crucial dimension is the need to boost female leadership in the corporate world. Again, evidence suggests that this leads to better outcomes—one study shows that adding one more woman in senior management or to a corporate board raises the return on assets by 8-13 basis points.
In fact, just today, the IMF released a study—which we might say is in honor of Helen—showing that in the financial sector, a higher share of women on bank boards is associated with greater financial resilience. At the same time, we find that more women on banking supervision boards is associated with greater financial stability. Yet there is a long way to go—across the globe, less than a fifth of bank board members and only two percent of bank CEOs are women.
We know that more diverse views in leadership means less likelihood of sinking into the quagmire of groupthink and unconscious biases. More diverse views in leadership means more prudent decision-making and a greater focus on longer-term sustainability. I think it is clear that finance would benefit enormously from this greater diversity.
Helen understood all of this. I have already mentioned the Hampton-Alexander Review, surely one of her great legacies. In this, one of her main recommendations was to raise the share of women on executive committees of FTSE 100 companies to 33 percent by 2020, up from 26 percent. And she came to this conclusion with her legendary pragmatism—by “shining a light on the data.”
As she once said in an interview: "If we’re all from the same group, from the same kind of background, if we’re given a problem we tend to get stuck at the same place. If we have different backgrounds and different skills and different cultural heritage, we come out of problems more quickly."
Helen’s own experience shows that this is more than hollow words. In her two decades at the helm of The Economist—as Zanny knows well, on the 175th anniversary of that fine publication—she raised circulation from under 400,000 to almost 1.4 million a week. And at a time when print sales were declining everywhere.
So my fundamental point here is that if we are to succeed with the SDGs, we will need greater diversity in the business world—to raise economic dynamism and to help orient business and finance toward the longer-term investments needed for SDG success. Again, I am optimistic that this can be done.
3. Environmental Dimension
Let me now turn to the third SDG dimension—making sure that economic progress respects the natural limits of the planet. With each passing year, as heatwaves become habitual and storms become more frequent and ferocious, climate change casts a growing shadow over our well-being and especially the well-being of our children.
The moral is clear—if we turn on nature, nature will turn on us. In the chilling words of T.S. Eliot, "I will show you fear in a handful of dust."
Yet there are signs of hope. A few months after the SDGs were signed, the nations of the world coalesced around the Paris Agreement, committing themselves to reducing carbon emissions—with the goal of stopping global temperatures rising by more than 2 degrees Celsius over pre-industrial levels. This was a momentous achievement, a remarkable testament to the enduring power of multilateralism.
In turn, this commitment will entail moving toward a zero-carbon global economy over the coming decades. This will not be easy, but I am convinced that the world will be able to deploy its groundswell of global consciousness to take the actions necessary to secure our collective future.
What is the role of the IMF in this? We can help by offering advice on how best to nudge this energy transition along.
The best way to do this is to put a price on carbon. Carbon pricing comes with many advantages. It is easy to administer if done by integrating carbon charges into fuel tax systems. It provides the right incentives for all dimensions of decarbonization—better energy efficiency, shifting away from fossil fuels in electricity generation, and moving toward electrification in vehicles, buildings, and industrial processes. It can reduce dangerous levels of air pollution. Plus, carbon taxes can raise revenue of about 1-2 percent of GDP a year, which could be devoted to SDG priorities.
Yet we have a long way to go—even after China’s emissions trading system comes into force in 2020, 80 percent of global emissions will remain unpriced.
Adaptation to this new normal will also be important. Vulnerable countries will need to invest in areas such as coastal protection and more resilient infrastructure and agriculture. They will need to better manage risk—for example, through regional pooling schemes, contingency funds, and catastrophe bonds.
The IMF is committed to helping our member countries build more resilient policy frameworks. Our Climate Change Policy Assessments have evaluated climate strategies in some of the most vulnerable countries—including Belize, Seychelles and St. Lucia. We are also providing fast and flexible emergency funding to countries hit by severe climatic shocks.
Again, I know this was something Helen cared about deeply. She certainly understood the importance of sustainable practice in the business world. Not many people realize that she trained as a geographer and was proud of that!
4. Governance Dimension
Let me now turn to the fourth and final SDG pillar—good governance. In a real sense, governance is the foundation upon which everything else is built. If institutions are weak, the odds of SDG success are severely handicapped. This is why the SDGs call for “effective, accountable and inclusive institutions at all levels.”
This applies across the board—public sector and private sector, domestically and globally. It applies to both donors and recipients of official aid—to make sure that aid is delivered effectively and transparently, reaching the people who actually need it, without waste, diversion, or duplication. It applies to private corporations and to state-owned enterprises—to make sure that their investments take place transparently, on a level playing field, benefitting the citizens of the country.
Let me say a few words about corruption, a true economic and social plague.
By undermining trust and delegitimizing institutions, corruption makes it hard for countries to take the collective decisions needed to advance the common good.
Think about it. If some do not pay their fair share of taxes, governments cannot raise the revenue needed for SDG priorities. Even worse, the legitimacy of the whole system is undermined. At the same time, if corruption is rampant, governments might be tempted to spend money on projects that generate kickbacks but little social value—again, undermining the SDG agenda.
This is just the public sector. We also need the private sector to invest in long-term, sustainable projects that support the SDGs. But they are unlikely to do so if forced to pay a “corruption tax.” The genuine risks and uncertainty that come with any investment decision will surely be magnified by corruption.
The private sector is not always the innocent victim, of course. Corporations and investors are sometimes too willing to offer bribes. Financial sectors are sometimes too willing to accept dirty money.
Unsurprisingly, IMF research has found that corruption and weak governance is associated with lower growth, investment, and tax revenue collection—and with high inequality and social exclusion.
So what is the solution? Criminal enforcement is essential, of course, but on its own is not enough. Our evidence shows that successful anti-corruption initiatives are built on institutional reforms that emphasize transparency and accountability—for example, shining a light on all aspects of the government budget.
For this reason, the IMF is stepping up its engagement on governance and corruption, focusing precisely on strong economic institutions. And when we find corruption to be macroeconomic in magnitude, we will not shy away from saying so.
A related problem is the massive extent of tax avoidance and tax evasion. One estimate is that the wealth in offshore financial centers reaches 10 percent of global GDP. Again, this makes it really difficult to finance the SDGs.
As we all know so well, the values of good governance were Helen’s values. I cannot think of a single person with more honesty, impartiality, and integrity. In her many leadership positions, transparency and accountability were her lodestars. That is what people loved about her, what engendered such fierce loyalty from all who worked with her. It is what drove her remarkable success. There is a lesson there for all of us.
Conclusion
Before I conclude tonight, let me check if you have been paying attention.
I quoted Maxim Gorky and H.G. Wells. What do they have in common? Well, besides being great writers and storytellers, they were both lovers of Helen’s grandmother, the indomitable Russian aristocrat Moura Budberg! Clearly, Helen’s family boasts many generations of strong women.
It is on this theme of generations that I would like to end tonight. Because whether or not we succeed with the SDGs will define this generation’s legacy.
In the musical Hamilton—playing to such acclaim here in London—the main protagonist, Alexander Hamilton, ponders a key question just before he is killed in a duel. “What is a legacy,” he asks. He answers: “It’s planting seeds in a garden you never get to see.”
Helen Alexander left behind a remarkable legacy. She left us far too early, and she never got to see the full fruits of the beautiful seeds that she planted. But the next generation will- her children, her students, and all those whose life she illuminated with her charming and witty smile.
I hope we can all bequeath a similar legacy when it comes to the SDGs. We owe it to those who will come after us.
Thank you very much.
