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Financier and philanthropist George Soros and Kennedy School economist Jeffrey Sachs told an overflow crowd at the ARCO Forum Wednesday evening that globalization isn't working for billions of the world's people. Both Soros and Sachs, early advocates of debt relief for developing countries, said greater effort must be made in closing the gap between rich and poor societies.
Enormous gains have been made by societies engaged in technological innovations, but these societies account for only one-sixth of the world, said Sachs, director of the Center for International Development. In contrast, more than a billion people are "falling off the edge of survival," he said. Three million people die each year from vaccine-preventable diseases. While many countries are struggling financially, the very poorest countries have so little in resources that they live outside the world economy. "They just suffer and decline," said Sachs, who has been an economic adviser to countries around the world.
Sachs told the audience that response to the plight of those in the developing world has been shortsighted and inadequate. In trying to understand what to do with people with such different challenges, "we have tried to fake it," he said. "We don't want to think about disease-carrying mosquitoes, so we talk about tax reform and civil reform.... Our response has been, just pull yourself up by the bootstraps, and if you're having any difficulties, call the IMF." The IMF (International Monetary Fund) is effectively running these countries, said Sachs, who compared the organization's treatment of Third World countries to that of Great Britain toward its colonies a century ago.
Soros, author of Open Society: Reforming Global Capitalism, concurred that there currently exists an uneven and unacceptable playing field among societies. When poor countries default on loans, said Soros, the IMF steps in and forces these countries to repay the original loans by incurring further debt. "In the IMF's efforts to bail out the creditors," said Soros," it has forced the debtors to absorb the cost. Instead of bailing out, the emphasis should be on bailing in," he said.
Investors need incentives for investing in developing countries, and developing countries need help in making the transition from an inefficient economy to a more open economy, said Soros. "The IMF is not suited to carrying this out."