ARTHUR BROOKS: Good afternoon ladies and gentlemen.
I’m Arthur Brooks, president of the American
Enterprise Institute.
And we’re delighted to welcome all of you
today to this event, entitled “Poverty to
Prosperity.”
So, this is Bill Gates.
(Laughter, applause.)
BILL GATES: Thank you.
MR.
BROOKS: With his wife, Melinda, he’s the
co-chair and co-founder of America’s largest
private foundation: the Bill and Melinda Gates
Foundation.
They work to reduce poverty and expand health
care overseas and to improve education here
in the United States among other things.
Previously, he was the chairman and CEO of
Microsoft, the world’s largest software
company, which he co-founded in 1973.
Most importantly, like me, he’s a native
of Seattle and somewhat of a Seahawks fan,
which is good.
But that’s not what we’re here to talk
about.
We’re here to talk about his incredibly
important work with the foundation, the work
that he’s doing here and around the world.
He shares so many of the priorities of the
American Enterprise Institute to build a better
life for people here and everyplace – people
who suffer from need, people who suffer from
disease, people who suffer from tyranny.
What can we do about these things?
Well, he’s asking the big questions and
he’s putting his own resources behind the
answers.
And we’re going to hear what he has to say
about his latest work.
So, welcome to AEI.
It’s an honor to have you and to be among
all of our friends here.
You just issued your annual letter for 2014.
I recommend that everybody read it.
It’s a very interesting piece of work.
It’s detailed, and it explodes a lot of
myths about poverty around the world.
And you offer an incredibly bold prediction.
You say that there will be almost no poor
countries remaining by the year 2035.
What do you mean by that?
MR.
GATES: Well, the primary measure, which has
all sorts of challenges, is GDP per person.
But it’s still – we don’t have a substitute
measure.
So just if you take that – World Bank classified
countries with over 1,200 per person per year
as moving up into a middle-income bracket,
so moving from low income to middle income.
And we have today 45 countries that are still
in that low-income category.
And what I’m saying is that, by 2035, there
should be less than 10, and they’ll mostly
be either places like North Korea, where you
have a political system that basically
creates poverty, or landlocked African countries
where the geography, the disease burden, the
disparate ethnicities mean that they haven’t
been able to bring together a government that
in terms of education, infrastructure, health
does even the most minimum things for them.
And so we’re on this rising tide that’s
not recognized.
It’s overwhelming how prosperity is spread
around the world, say from 1960, where there
were very few rich countries and a gigantic
number of poor countries.
Now most countries are middle- income countries,
and poor countries are much smaller.
Now, just saying that they’ll all move up
past that threshold doesn’t mean they won’t
have poor people within the countries; it
doesn’t say their governments will be fantastic,
but it will be a lot better on average than
it is today.
MR.
BROOKS: That’s an extraordinary thing.
We have a tendency to despair when we look
around the world, and we have a tendency to
say the world’s not getting better because
of the way that we see the news.
But you’re saying that’s a myth, right?
MR.
GATES: Yeah.
I think that a deep problem in perception
is that if you want something to improve,
you have a tendency to be bothered by the
status quo and to think that it’s much worse
than it is.
And that can be beneficial because you don’t
like, say, the level of violence in the world,
the level of poverty, the level of – number
of kids dying.
But if you divorce yourself from the true
facts of improvement and look at the exemplars,
look at what’s worked – if you get sort
of a general despair about is the world improving,
then you won’t latch on to those examples.
The Steven Pinker example, one of my favorite
books of all time, is that if you ask people,
“Is this one of the most violent eras in
history?,” they will say yes.
Overwhelmingly, Americans say yes.
Well, it’s overwhelmingly the least violent
era in history.
And so what it means is your disgust with
violence actually increases, and that’s
partly why we take steps and why within our
own society and the world at large it’s
come down so dramatically.
MR.
BROOKS: I love your optimism.
And so, based on your optimism, given the
fact that the world will have only a few poor
countries in the year 2035, what’s the Gates
Foundation going to be doing in 2036?
(Laughter.)
MR.
GATES: Well, there are a lot of diseases.
Over 80 percent of the difference of why a
poor child is 20 times more likely to die
than a child in a middle-income country, it’s
these infectious diseases.
It’s diarrhea, pneumonia, malaria.
And then there’s a few adult diseases which
are way more prevalent in poor countries – TB,
HIV.
And we’ve taken on as a central mission
– it’s a little bit over half of what
we do – to get rid of those diseases.
And so that will remain our priority until
we’re basically done with those.
And those are tough enough that I’d expect
us – it will take us 30 to 40 years to really
be done with those.
And then we will have a crisis because we
will have the problem of success and we’ll
have to say, OK, what is the health inequity
between
well-off countries and poor countries?
Is it, you know, obesity, heart disease, and
what interventions?
And even before 30 years are up, we’ll start
to think about this.
But right now, we’re sort of maniacally
focused in our health on those poor world
conditions because we see that between research
and getting things like vaccines and drugs
out there, we can basically save a life for
about $2,000.
But everything we do should be benchmarked
– if it’s not that effective, then we
shouldn’t do it.
So, you know, we’re pretty specialized in
making breakthroughs in those areas.
MR.
BROOKS: You’ve been involved in projects
all over the place, from eradicating polio
outside the United States to improving schools
in cities and even in rural areas around the
United States.
What do you consider at this point, given
all of the resources that you put into these
important projects, to be your most important
victory or your area of greatest success,
and what did you learn from it?
MR.
GATES: Well, we’ve had the most success
in global health.
You know, there’s over six million people
alive today that wouldn’t be alive if it
wasn’t for the vaccine coverage and new
vaccine delivery that we’ve funded.
And so it’s very measurable stuff.
And, in fact, if you applied a very tough
lens to our work, you can almost say, OK,
why are you even involved in U.S. education?
Well, we have a reason that you could say
is not all that numerical, which is that the
success that I had, that Melinda had, came
from the U.S. education system.
It came from the U.S. system of encouraging
innovation and business and, you know, protecting
the intellectual property.
And so we feel like we need to have – take
what we think is the greatest cause of inequity,
the greatest challenge to America’s continued
leadership in innovation, which is the failures
of the education system, that we need to be
dedicated to that even though the risk that
we might not have a dramatic impact is much
higher in that work than it is in any of our
health or agricultural or sanitation or financial
service work, which focuses on the poor countries.
You know, we feel that it’s critical that
America get improved education, but that’s
very hard work.
And, over the last 20 years, where government
spending in this area and philanthropic spending,
although it’s a tiny percentage, has gone
up dramatically, the proof in achievement
in terms of reading ability, math ability,
dropout rates, you know, kids graduating college,
there’s been hardly any improvement at all
despite massive resource increases that have
gone into the area.
So it’s critical, but it’s not easy and
there’s no proof that it’s necessarily
going to be dramatically better 10 or 20 years
from now.
MR.
BROOKS: So let me ask you about that intransigent
set of problems that we have in U.S. education.
And I understand that there are certain problems
that you can – you can eradicate the guinea
worm.
You can’t necessarily eradicate ignorance.
Here at
AEI we’re trying to improve the free enterprise
system.
That doesn’t mean we’ll be done at some
point.
I mean, that’s just the nature of social
enterprise as I understand.
Here in Washington, D.C., we talk about public
education all the time.
This is the capital of the free world.
We should have the best education system,
and it should be an exemplar to the whole
world.
I think we should – we should agree.
We’re pumping more than $18,000 per kid
per year in the system, and 15 percent of
eighth graders read at a nationally acceptable
standard.
So what do we do?
MR.
GATES: Well, it is phenomenal the variance
in how much is spent per student.
You know, Utah’s below $6,000 per student
per year.
A lot of states are in the $7,500 per student
per year (range).
You’ve got some that spend more than D.C.
– New Jersey would spend a fair bit more
– the Northeast as a whole is where the
biggest spending takes place.
And yet, there is no correlation between the
amount spent and the excellence that comes
out, you know.
Yes, Massachusetts is good, but if you take
the high-spending states as a whole, then
you get Pennsylvania, New Jersey, Washington,
D.C., mixed into that, and it doesn’t look
like there’s any correlation.
So it’s a very strange system.
Washington, D.C., on a relative basis, actually
has improved a fair bit over the last three
or four years – a combination of improved
personnel policies, shutting some schools,
letting the charter schools take a somewhat
higher share of the cohort.
It’s about the fourth largest of all the
districts in the nation, New Orleans being
number one in terms of the percentage kids
go to charter schools.
And the charter schools here on average are
quite good.
So, you know, there are some things that have
gone well, but it’s still an abysmal system.
And, you know, the fact that there isn’t
more of a consensus on what should we be doing
to the personnel system and using innovation
to, say, be almost as good as the countries
in Asia, it’s got to be a concern both from
an equity point of view and from an overall
country competitiveness point of view.
MR.
BROOKS: So if spending more money is not the
answer – I mean, it would be great if it
were, because as a rich country we can do
that.
But there are innovation ideas about choice,
charters, etc.
If it’s the disruptive innovations that
are going to make it happen, how do we inject
those ideas more systematically into public
bureaucracies, not just in schools, but in
government in general?
MR.
GATES: Well, if you look at the education
system, the amount of actual research that
goes on to understand why some teachers are
so extremely good, giving their kids more
than two years of math learning in a year,
and why the teachers who are at the other
extreme, giving less than half a year of learning
in a year – why we’re not taking those
best practices and at least trying to transfer
those into the other teachers by doing observation
and feedback, you know, having the schools
of education really drive for high-quality
teaching, it’s not a personnel system that
right now is focused on teacher improvement.
Teachers get almost no feedback.
They get almost no sense of, OK, I’m good
at this and I should share that with other
people.
I’m not very good at this, and therefore
I should learn from other people.
It’s very different than most other so-called
professions.
And, at the same time, technology is coming
along in terms of taking the classroom video,
and, you know, sharing it, having people commenting
on it, delivering personalized learning to
your kids so that you can assess where each
of them are and tune lessons according to
what they’re having the challenge with.
The opportunity is there, and that’s what
our foundation invests in.
It invests in studying the very, very good
teachers.
We took 20,000 hours of video and looked at
various measures, you know, what were they
doing differently?
And we created a lot of model districts where
there are so- called peer evaluators who are
in the classroom, observing, giving feedback.
And, you know, it looks like the results on
that are very good.
And so there are points of light that if we
could get it adopted permanently and scale
it up, it would start to move the dropout
rate and the math and reading achievement.
As you say, it’s tough, though, because
when we invented the malaria vaccine, no school
board gets to vote to uninvent it, whereas,
you know, if you make an advance on personnel
system – Senator Alexander, when he was
governor of Tennessee in the 1980s did a pretty
good system where people got feedback and
evaluation, and, you know, it looked like
it was starting to work pretty well.
And yet, it disappeared.
MR.
BROOKS: The malaria virus is not unionized.
Excuse me.
I’m sorry.
That’s not my place.
Please.
(Laughter.)
MR.
GATES: Yeah.
OK.
I certainly agree that there are various groups
that can stand for the status quo.
When you want to come in and change things,
they are worried not as much for the students,
but for the teachers.
So they can defend the status quo.
But if it was the case in America that the
less unionized places were like Singapore
and more unionized places were poor, and if
you had some direct thing, and you said, OK,
well, here it is, and now we can explain it,
that would be one thing.
That is not true.
Our education is very poor across the entire
country, and it does not correlate to unionization.
Massachusetts, pretty heavily unionized, they
do relatively better.
You know, some other places not unionized,
like – actually, on an absolute scale, OK,
take Arizona – it isn’t – there is no
single factor you can say that in the 50 states,
when that’s been removed – financial constraints,
union constraints – that something like
Asia is taking place.
MR.
BROOKS: Let’s go back outside the United
States just for a minute again.
You wrote in your letter that there’s a
lot of misunderstanding about U.S. foreign
aid.
Now, if you read what people are writing about
aid, there are a lot of critics who think
it’s
just hopelessly ineffective.
Some think it’s actually positively destructive.
What’s the misunderstanding about foreign
aid from your point of view?
MR.
GATES: Well, whenever we give foreign aid,
you have to, for any particular grant, say
what your goal is for that grant.
If you goal is famine relief, then you should
measure the grant by whether people have been
starved to death.
You shouldn’t go in and say, OK, did the
GDP go up?
If you’re trying to have a political friend
like, you know, you want Egypt to sign a treaty
and be a friend and that is your goal, then
you just – and you’re not measuring the
dollars according to human development – then
don’t come back later and say, oh, their
GDP didn’t go up or you didn’t achieve
human development.
So a lot of foreign aid, things are labeled
foreign aid, to take an extreme case like
sending money to Mobutu when he was the dictator
of Zaire, it was labeled foreign aid but it
was just kind of a joke that, you know, people
act like, well, yeah, that’s going to help
the people in that country.
Well, ha, ha, ha.
Now, because you don’t have that cold- war
imperative, a lot of the aid is actually trying
to uplift their health or agriculture, you
know, get these countries to self-sufficiency.
And so the aid community does a lot more measurement.
We’ve learned.
We have a lot more rich countries.
Korea was a huge recipient.
Now it’s turned around and is a very significant
donor.
So you have more rich countries giving to
far less poor countries – China, Brazil,
Mexico, Thailand, they were aid recipients
in varying degrees.
Now they’re no longer aid recipients.
India, the aid it needs is very targeted.
A very small part of it is GDP.
Within 10, 15 years, they won’t need to
be an aid recipient.
So this is a field that makes advances.
And when you label it aid, it seems mysterious.
When it comes to inventing the seeds of the
green revolution that avoided famine in Asia
or the smallpox eradication that was a U.S.-led
effort, that a disease that was killing two
million people a year hasn’t killed a single
person since 1979, when you look at that,
you say, well, was that worth it?
Well, I guess it was worth it.
There are so-called global public goods creating
seeds, medicines or – (inaudible) – vaccines
for these infectious diseases that the normal
market mechanism does not work; that is, it’s
not rational for a profit-seeking company
to do a malaria vaccine because there is – even
though it kills a million children a year,
the parents of those children don’t have
enough money to justify the research.
And so it’s a market failure.
Now, markets are extremely good.
They work – you know, they’re the best
mechanism we have.
The more you can use them, whenever you can
use them, that is – you know, that’s one
of the key mechanisms along with science and
government that have led us to be so much
better off than we are – than we were hundreds
of years ago.
But for the diseases that we work on, there
is no – the R&D would not show up except
for government aid and philanthropy.
MR.
BROOKS: Well, so your philanthropy is working
alongside government aid to be sure.
And you show that in your letter and we’ve
known that for a long time.
But there are a lot of people who believe
very strongly that the presence of philanthropy
like yours is evidence that the government
simply isn’t doing enough to help people.
And I’m going to quote Ralph Nader, who
once said that – that’s not a laugh line,
you people.
There’s a rowdy crowd here.
Ralph Nader once said, “A society that has
more justice is a society that needs less
charity.”
What do you say to that?
MR.
GATES: You don’t want to depend on charity
for justice.
Charity is small.
I mean, the private sector’s like 90 percent,
and government’s like 9 percent, and philanthropy
is less than 1 percent.
There are things in terms of trying out social
programs in innovative ways that government
is – just because of the way the job incentives
work – they’re not going to try out new
designs like philanthropy can and they’re
not going to have volunteer hours coming in
to leverage the resources like philanthropy
can.
So philanthropy plays a unique role.
It is not a substitute for government at all.
When you want to give every child in America
a good education or make sure they’re not
starving, that’s got to be government because
philanthropy isn’t there day in and day
out serving the entire population.
It’s just not of the scale or the design
to do that.
It’s there to try out things, including
funding disease research or, you know, academic
studies to see if something is more effective.
So I’d agree with that Nader quote.
If you want broad justice, you’d better
be doing that through government mechanisms.
MR.
BROOKS: Does that mean that we need less charity,
however, if we have enough justice?
MR.
GATES: Well, I guess if you have perfection,
then you don’t need charity anymore.
Charity plays a huge role in America.
Our universities, one of the reasons that
they are world-class is because there’s
a tendency of the graduates who do well to
give back to those universities.
And that is the envy of the world.
Every other country is trying to think, OK,
how do they get this magic cycle going where
they create successful people in their universities
and then they help make those universities
be a lot stronger?
In terms of various scientific ideas, you
know, Hughes Medical Foundation – there’s
just a whole ton of things – Rockefeller
Foundation, if you go back in time, they invented
things that the government research projects
were not moving into those areas, not doing
that work.
The March of Dimes invented the polio vaccine.
You know, the thing that we’re using to
go out and eradicate, make it the second disease
after smallpox that gets eradicated, this
is the oral polio vaccine.
That’s 10 doses, and this thing costs $1.30,
so 13 cents per kid.
That was philanthropic money, March of Dimes
money, that
caused both its predecessor called IPV, which
was the Salk shot (this is the Sabin oral);
they created those things, so philanthropy
has, you know, some amazing hits to go along
with lots of money that was probably wasted.
MR.
BROOKS: Now, there’s a related question
to my last one, which is the number of people
who talk about charity and free enterprise
as if they were in conflict.
They believe that capitalism, that people
who trust capitalism because they don’t
believe charity is a good solution to problems,
etc. – in other words, there’s an antagonism
between markets and nonmarket mechanisms that
are philanthropic, and how do you square those?
I think I understand, but I’d like to hear
your thoughts on that as well, given the fact
that you’ve been involved in one of the
most important capitalistic endeavors in the
history of our economy as well as the biggest
foundation in our country.
MR.
GATES: Well, once you get past basic research
and drawing the boundary of how much is government
funded and how do you define is a tricky area.
There is a market failure for research as
a whole, not just research for the poorest.
But, once you get past that, most innovation
is driven by private enterprise – the magic
of the chip, the optic fiber, software, the
magic of new drugs, new vaccines, all of that
stuff – how you come up with it, how you
make it safe, that’s happening in private
enterprise.
So, for our foundation, where we’re trying
to help the poorest, our relationship with
the pharmaceutical companies has been fantastic.
And it’s great – every time they’re
successful, they come up with a new drug,
they manage to keep profitable because of
that.
That’s great for us because it means they’re
going to have a little bit more understanding
to help us with our issues and a little bit
more on the way of resources, all totally
voluntary on their part to pitch in.
And so the private sector – you know, we’ve
got to bring private-sector agriculture in
all of these countries.
That is the ultimate sustainable solution.
Charity, as I said, won’t be there all the
time.
Government aid won’t be there all the time.
The question is how do you get them out of
the poverty trap?
You need – you know, right now 40 percent
of their kids don’t – in Africa, don’t
develop mentally so that they could ever,
say, be fully literate.
That is through malnutrition, treatable malaria,
a variety of health insults, they’re not
achieving anywhere near their cognitive potential.
And so do you need to go in and remove that
barrier, that friction, in order to get them
into a sustainable situation?
In Africa, and particularly the disease burden,
the way the geography works, the split of
ethnicities, it’s been given the toughest
problem: to create countries that are totally
self-supporting, you know, running a middle
income or above democratic-type system.
They’ll get there, but they, for a variety
of reasons will be the last – most of the
last – to achieve that.
MR.
BROOKS: Philanthropy can stimulate the mechanisms
of free enterprise, which will then become
self-sustaining and help these people well
beyond the scope of your foundation or any
bit of government aid?
MR.
GATES: Yeah.
Absolutely.
The poor farmers, the real solution for them
is to be farmers who are in the marketplace,
selling enough of their produce to diversify
the diet of their kids, to be able to buy
the school uniforms where those are necessary,
and even when a tough year comes along to
have saved up enough that they’re not starving
during the year where weather is working against
them.
MR.
BROOKS: People think a lot about leveraging
technology in international development.
We hear about that constantly, you know, the
big headlines like give every child a laptop,
etc. – and these are great ideas.
And what I want to know is from your point
of view, what’s the most exciting opportunity
for technology to change lives today?
MR.
GATES: Well, I think the greatest injustice
in the area of health.
And, you know, that’s my bias.
That’s the area that I spend time in.
And I think a child dying is an injustice
no matter where that takes place in the world.
And this is another one of those good news
stories that’s not well known.
In 1960, 20 million children a year under
five were dying a year.
Now we’re down below six million, and we
have over twice as many people in that age
cohort, so the rate reduction is pretty phenomenal.
And we can see a path – by working on diarrhea,
pneumonia, malaria – we can see a path to
get that over the next 20 years below three
million a year.
And, at the same time as you do that, you’re
not only reducing deaths.
You’re taking all these kids who survived
and yet don’t survive intact – that is
their brain never fully develops; their body
never fully develops.
And you’re reducing that quite dramatically.
And so I’d say health is a necessary condition
to get a country to have kids who, when they
go to school, they can learn to read, and,
you know, therefore, it’s the thing we’ve
chosen as the big priority and I think will
unlock the potential of these countries.
MR.
BROOKS: So a lot of us in this room are probably
looking at your incredible successes and thinking,
you know, if I could construct the world’s
largest foundation, I could do a lot of great
things.
But for the rest of us, who can’t do that,
you must have thought about how each one of
us can make a difference as well.
What kind of advice do you give to everybody
who wants to act philanthropically notwithstanding
the limits on their own personal resources?
MR.
GATES: Well, certainly, picking that cause
of inequity, whatever it is – you know,
pick a local charter school, pick a disease
that somebody you know was touched by, go
out to a poor country and see what’s going
on with the health or education there – you
know, all these problems require volunteer
hours, expertise, somebody who’s articulate.
And a lot of people get frozen just seeing
that the need is infinite and say, OK, when
I pick, will it be the best pick?
Well, there’s no sort of deeply rational
way we’re going to have time to enumerate
all the things you could work on, and, you
know,
compare all those factors and then jump into
that.
It’s best wherever you can get your passion
engaged to pick something and jump in.
For most people, the first philanthropic thing
they’ll do will be something in their neighborhood
where they can go and, you know, put their
hands on it, meet the kids at the charter
school where they’re volunteering their
time, meet the kids that they’re mentoring
and see the progress that they’re making.
If you could connect up with the poor countries,
the marginal impact of your time or even pretty
small resources is higher in many cases than
anywhere else you’re going to look, but
it’s harder to access that and figure out
how you’re going to, you know, stay involved
in a sustained way.
So as long as you’re engaged with something,
then throughout your career, maybe more time
will be freed up, maybe you’ll be able to
draw your friends into that.
And, if you’re lucky financially, then you
can apply resources against it.
And so the diversity – I mean, when de Tocqueville
came to the U.S. and saw all these nonprofit
things people were doing, he was amazed.
And other countries have not to this day gotten
the level of civil engagement that we’ve
gotten.
There are factors that show that it’s even
going down somewhat in America, that we’re
less unique in this respect than we’ve been,
and that’s unfortunate because it is a real
strength.
MR.
BROOKS: So you recommend that each of us given
whatever resources that we have do something
that we can touch and see with these particular
resources, thus giving us a sense of the good
that we’re creating.
And I appreciate that advice.
I want to turn now to some of our colleagues
here and start with one of our colleagues
from education.
Your foundation has generously made it possible
for us to do a lot of reform work on K-12
education and higher ed as well.
And so I want to go Mike McShane, who is over
here.
Mike has got a question that’s been coming
up all over Twitter and across our email hoping
that we would ask you this question.
Mike.
MIKE MCSHANE: Thank you so much.
Your foundation has been known for supporting
the Common Core curriculum standards that
have become increasingly controversial.
And the question that I have is, why?
What promise do you see of the Common Core
standards?
How do you see them as a lever for improving
the American education system?
MR.
GATES: OK.
So what is the Common Core?
It’s a very simple thing.
It’s a written explanation of what knowledge
kids should achieve at very various milestones
in their educational career.
So it’s writing down in sixth grade which
math things should you know, in ninth grade
which math things should you know, in twelfth
grade which math things should you know.
And you might be surprised to learn how poor
those – I’ll call those standards, but
to be clear, it’s not curriculum.
It’s not a textbook.
It’s not a way of teaching.
It’s just
writing down should you know this part of
algebra?
Should you know trigonometric functions?
Should you know – be able to recognize a
graph of this type?
And doing that very well is hard because there
are certain dependencies: if you teach it
in the wrong order; if you try and teach too
much at once, too much too early, which the
U.S. was doing a lot of that, it can be very,
very poor.
And if you compare – we have 50 of these
things and there was quite a bit of divergence.
Some states had trigonometry, some didn’t.
Some had pie charts, some didn’t.
So, ironically, what had happened was the
textbook companies had gone in and told the
committees that make these things up that
they should add things over time.
And so we had math textbooks over double the
size of any of the Asian countries.
And we had the ordering in almost every one
of our 50 – which is strange.
You think if you had 50, one of them would
randomly be really, really well ordered.
(Laughter.)
Some were more ambitious than others.
So, for example, being high; that is, having
the twelfth grade expectation be high, there
were a few like Massachusetts that were quite
good in that respect.
And so when kids from Massachusetts take international
tests or the SAT, anything, they do better,
better than the rest of the country.
And so often, when you see those country rankings,
they’ll take Massachusetts and show you
where it would be if it was a separate country.
And it’s way past the U.S., that now is
virtually at the bottom of any of the well-off
countries, with the Asian countries totally
dominating the top six slots now.
Finland had a brief time where they were up
high, and now they’re not even the European
leader anymore.
So a bunch of governors said, hey, you know,
why are we buying these expensive textbooks?
Why are they getting so thick?
You know, are standards high enough or quality
enough?
And I think it was the National Governors
Association that said we ought to get together
on this.
A bunch of teachers met with a bunch of experts,
and so in reading and writing and math, these
knowledge levels were written down.
And at some point 46 states had adopted that
curriculum, a variety of competitive curriculum,
now that small companies can get into it because
it’s not just doing a book for Florida,
and so the sort of barrier to entry that was
created by the large firms there goes away.
The idea that you – those committees rig
it so you can’t use the old textbooks, you
know, that idea will go away because in math,
this can have real durability.
Changing your math standards is not like some
new form of math that’s being invented.
And there has been in a sense a national expectation.
When you take the SAT test, it has trigonometry
on it, so if you’re in a state that doesn’t
have that, you’re going to get a low score.
And they use a certain notation in the way
they do math and certain states were different
than that, so you’re screwed.
If you move from state to state –
MR.
BROOKS: In the vernacular.
MR.
GATES: – you experience discontinuity because
of this.
And it’s made it very hard to compare things.
And this is an era where we have things like
Khan Academy that are trying to be a national
resource and yet they – you sit down, it
will tell you, are you up to the sixth grade
level?
Are you up to the ninth grade level?
Are you ready to graduate from high school?
And so this Common Core was put together.
If somebody – and states will decide this
thing.
Nobody is suggesting that the federal government
will, even in this area, which is not curriculum,
dictate these things.
States can opt in.
They can opt out.
As they do that, they should look at this
status quo, which is poor.
They should look and find something that’s
high achievement, that’s got quality.
And if they can find something that’s that,
if they have two they’re comparing, they
ought to probably pick something in common,
because to some degree, this is an area where
if you do have commonality – it’s like
an electrical plug – you get more free market
competition.
Scale is good for free market competition.
Individual state regulatory capture is not
good for competition.
And so this thing, in terms of driving innovation,
you’d think that sort of pro- capitalistic
market-driven people would be in favor of
it, but, you know, somehow, it’s gotten
to be controversial.
And, you know, states will decide.
Whatever they want to decide is fine.
But, at the end of the day, it does affect
the quality of your teaching, does affect
when your kids go to take what are national-level
tests, whether they are going to do well or
not do well.
MR.
BROOKS: Speaking of competition, let’s go
to competition outside of the United States
and the extent to which it helps people who
are poor.
And I want to turn to Paul Wolfowitz now.
PAUL WOLFOWITZ: Thanks very much for coming.
It’s terrific to have you here.
I have a quick comment and then the question.
The question is about trade.
But the comment is about this issue of waste
in foreign aid.
The amazing work that you’re doing in the
foundation, that the U.S. government is doing
with PEPFAR, other things demonstrate that
there are lots of ways to spend foreign aid
that are the opposite of wasteful; they’re
accountable, they’re measurable; they make
a huge difference in people’s lives.
But I would submit that there is a lot of
waste.
And I’ll give you just an example.
If you give $100 million to a government that
is so tyrannical that you really have no idea
what’s happened to that money, by your numbers,
that’s $100 million that could have saved
50,000 lives.
And I think you’ll have a stronger case
for foreign aid if you go after the things
that are wasteful as well as the things that
are good.
But here’s my question.
In talking about foreign aid, you correctly
say, we spend less than 1 percent.
We could afford to spend more.
In fact, we spend more in agricultural subsidies.
Well, the agricultural subsidies aren’t
just a waste of money.
They are making it harder for poor countries
to export the very products that their competitive
natural advantages would lead them to, which
is in agriculture.
I wonder what you think about our agricultural
subsidy systems and what its impact is on
the poor countries that you visit in terms
of their trade opportunities.
MR.
GATES: Well, we certainly distorted the market
in agriculture prices.
There are some cases where it’s fairly extreme,
like sugar.
And there are some cases where it’s more
modest, like the big – the big cereal crops.
In Africa – there’s a few things like
cotton, horticulture, where you can make a
clear case that the sort of dumping out of
the rich countries because of strange subsidies
actually is affecting their income.
They’re not yet as competitive in the big-value
crops as they need to be.
So we have a lot of work to do in Africa.
Africa right now can barely feed itself.
So the huge rise in productivity – it’s
called the green revolution, that was more
than a factor of two increase in Asian cereal
crops – that never happened in Africa because
it has a unique ecosystem, so even maize and
wheat in Africa are very low productivity.
That’s very fixable, both with conventional
breeding and with GMO-type breeding to give
much, much better seeds.
And so the effect of trade barriers once we
fix African agriculture, the impact of trade
barriers, then the numbers will get very,
very large.
And, you know, it’s just too bad that both
Europe and the U.S. sort of – and Japan
– compete to distort those markets.
And, you know, it doesn’t look like there’s
going to be any change in that.
Now it’s called mispriced insurance instead
of price supports, but it’s still money.
And, as you say, it reduces some level of
efficiency in terms of who should be providing
which products.
MR.
BROOKS: One of the most striking statistics
that I’ve seen as an economist comes from
a Catalan economist, his name is Xavier Sala-i-Martin
at Columbia University, who notes that since
you and I were kids, the percentage of the
world’s population living on $1 a day or
less has declined by 80 percent.
It’s just amazing.
This question is related to that and it comes
from our economist Michael Strain, who says
that the spread of free enterprise has dramatically
reduced the share of the world living on $1
a day or less, this standard that we’ve
had since we were kids.
Is that the right standard?
You’re looking at 2035 to wipe out at least
average poverty across all but maybe 10 countries
in the world.
What should the standard be?
What kind of measurements are you using, and
how should we be thinking about it to update
those measures?
MR.
GATES: Well, any single measure isn’t going
to capture what needs to go on.
The extreme poverty line now s $1.25 a day,
and the poverty line is $2 a day.
And you can certainly argue that they should
be a bit higher than that.
Also the way that GDP is measured in poor
countries is extremely random – not random.
It’s inaccurate.
The errors bars are gigantic.
There’s a book by Jerven called “Poor
Numbers” that just talks about – you know,
for example, for a subsistence farmer, what
are you putting into that GDP number, you
don’t have some market transaction.
And there’s a book by Charles Kenny, the
“Getting Better” book, that talks about
the fact that GDP misses a lot of things.
If something comes in, like a measles vaccine
or increased literacy, that improvement in
human condition doesn’t necessarily show
up in GDP at all.
In fact, there were radical advances in health
and literacy in Africa during a 30-year period
that its GDP per person moved not at all,
zero.
And so you want to put into a human development
index; you want to put in GDP; you want to
put in some health, maybe under-five mortality,
maternal mortality.
You’d want to put in something about education,
something about freedom.
And people like Mo Ibrahim have a variety
of, in his case, mostly governance measures
that I think are throwing light on these things.
There’s still some work to be done to capture
this.
GDP, if you have to pick one single thing,
I’d still say it is – it is the measure.
Even within rich countries, you do have relative
poverty.
And so the idea of do you worry about getting
enough to eat; if you have a medical condition,
can you expect to get treatment; there are
things like that that even if the economics
kind of look OK, you know, then you shouldn’t
be satisfied.
And so the field of economists giving themselves
a hard time about how weak these measures
are, I think over the next decade, there can
be a real contribution to how we look at well-being
beyond GDP.
MR.
BROOKS: Let’s talk about poverty right here
in the United States a little bit more.
And I want to turn to my colleague, Robert
Doar.
ROBERT DOAR: Thank you very much for coming,
and thank you for all that you do for people
around the world.
Poverty in the United States is often related
to employment and economic growth.
And I wanted to test your optimism a little
bit and ask whether you thought we could get
back to a 4 percent annual GDP growth in the
United States, and if so, how?
What would be the key things to make that
happen?
MR.
GATES: Yeah.
You know, I’m not a fan of the way time-series
adjustment for comparing GDP between various
points in time is done.
I think it meaningfully understates the rate
of progress.
If you take, say, how you get news, your ability
to get news, as far as the GDP is concerned,
the news business is down.
It’s employing less people.
It’s gathering less money.
And are you impoverished in terms of your
ability to search and read articles today
versus, say, 30 years ago?
Probably not.
You know, buying encyclopedias, you know,
I bought it – my parents bought a World
Book.
I read it.
You know, I had to learn the world alphabetically.
Very weird way to learn things.
You know, now, every kid who has Internet
access has Wikipedia.
And so whether it’s in the area of technology
or medicine or various things, you’re – there’s
a lot of a qualitative nature that’s not
captured in those things.
So whether the gross number goes up or not,
the rate of improvement in livelihood, you
know, I think will be very rapid in the future.
I do think tax structures will have to move
away from taxing payroll because society has
a desire to have employment.
Of all the inputs, you know, wood, coal plastic,
cement, there’s one that plays a special
purpose, which is labor.
And the fact that we’ve been able to tax
labor as opposed to capital or consumption,
you know, just shows that demand for labor
was good relative to other things.
Well, technology in general will make capital
more attractive than labor over time.
Software substitution, you know, whether it’s
for drivers or waiters or nurses or even,
you know, whatever it is you do – (laughter).
MR.
BROOKS: We wonder that too sometimes.
(Laughter.)
MR.
GATES: It’s progressing.
And that’s going to force us to rethink
how these tax structures work in order to
maximize employment, you know, given that,
you know, capitalism in general, over time,
will create more inequality and technology,
over time, will reduce demand for jobs particularly
at the lower end of the skill set.
And so, you know, we have to adjust, and these
things are coming fast.
Twenty years from now, labor demand for lots
of skill sets will be substantially lower,
and I don’t think people have that in their
mental model.
MR.
BROOKS: So aligning the incentives in our
economy to move away from taxing labor, moving
to something like a progressive consumption
tax is just a smart thing to do to stimulate
– to have an economy that’s better aligned?
MR.
GATES: Well, I think economists would have
said that a progressive consumption tax is
a better construct, you know, at any point
in history.
What I’m saying is that it’s even more
important as we go forward because it – the
distortion – I want to distort in the favor
of labor.
And so not only will we not tax labor, things
like the earned income tax credit, you know,
when people say we should raise the minimum
wage, I think, boy, you know, I know some
economists disagree.
But I think, boy, I worry about what that
does to job creation.
The idea that through the income tax credit
you would end up with a certain minimum wage
that you’d receive, that I understand better
than potentially damping demand in the part
of the labor spectrum that I’m most worried
about.
MR.
BROOKS: So something like a guaranteed minimum
income for people who are working full time
through an expansion on the EITC or a wage
subsidy seems like the right way to go.
MR.
GATES: Yeah, one of my favorite AEI papers
– I didn’t get time to look it up last
night –
MR.
BROOKS: He’s going to give us his top 10
list here.
(Laughter.)
MR.
GATES: No, it’s the – looking at consumption
instead of the income.
Because income’s complicated.
If I’m a student who’s, you know, making
no income, but I’m investing in my capabilities
– OK, my income looks funny.
If I’m a trader who had a bad year, my income
looks funny.
Consumption really is what you care about.
So when people say, hey, Mr. Gates, you should
feel guilty because you have so much money;
well, it’s not that I have money.
It’s my consumption I should – you know,
if I’m supposed to feel guilty, it’s my
consumption.
(Laughter.)
The part that is going to philanthropy really
is in a sense in the pocket of the poorest,
assuming that we’re smart about getting
it to benefit them.
And the idea that consumption should be progressively
taxed, I think that makes a lot of sense.
People have tried to do that by doing particular
taxes on luxury goods, some things like that.
That’s very – not very effective.
It’s sort of picking favorites type things.
But yes, consumption should be progressively
taxed.
And we should understand the consumption.
Inequality of consumption is more an injustice
than a number in a book is.
MR.
BROOKS: So inequality of consumption is the
real inequality we should be worried about.
I suppose you’d also say that inequality
of opportunity is that which is the greatest
affront to dignity.
I think I’m sort of paraphrasing –
MR.
GATES: Yeah, no, I agree with that.
MR.
BROOKS: Is that fair to say?
MR.
GATES: Yeah, absolutely.
Both measures, we should understand inequality
of opportunity and inequality of consumption
way better than we do today.
MR.
BROOKS: Right.
We’ve been doing a lot – we’ve had a
lot of interactions with dignitaries from
India.
We just had the Dalai Lama here a couple of
weeks ago.
And we’re going to have Sri Sri Ravi Shankar,
who is a very prominent guru, who has many,
many millions of followers here.
And we’re talking about Indian issues, in
particular, of late.
Sadanand Dhume is our scholar in Indian studies.
And he has a question about that country.
SADANAND DHUME: Thank you very much.
I have a broad question about India.
When you look at your engagement with the
country, what do you think it’s done well,
and where do you think it needs to do the
most work?
MR.
GATES: Well, India has a lot of very socialistic
policies having to do with labor and land
and – the fact that it has not risen as
a manufacturing power is an indictment of
its government policies.
That is, as China’s incomes went up, the
place that the world should have moved to
next, as the manufacturing hub of the world
absolutely should be India.
And that’s only happening to a very, very
tiny extent.
And it has to do with, you know, regulatory
complexities, infrastructure quality.
Now, you know, I’m optimistic about India.
We’ve put more into India than any country
in the world.
India benefits from a funny form of competition,
which is competition between the states.
And so, you know, when one state really gets
its act together, the other states tend to
feel jealous and they, you know, are kind
of looking at what policies led to that.
The states in the north that we’re particularly
focused on, Bihar, Uttar Pradesh should lead
in every human development number, as well
as income.
But the improvements – and we have a big
partnership with Nitish Kumar, who’s chief
minister in Bihar.
The new chief minister in Uttar Pradesh decided
that these health things that we care about
he’d get very involved with.
And so we’re seeing a very fast rate of
improvement there.
Vaccination coverage – we got polio.
The last polio case there was three years
ago, which is an amazing triumph.
We’ve taken the polio quality audit group
and we’ve turned it into a primary health
care audit group that’s looking at where
do workers not show up?
Where does supply chain not work?
Why don’t people go?
India’s health is very complicated because
they have a lot of these – a private sector
that’s very low quality.
And the government hasn’t figured out how
to get the private sector to be high quality.
And yet, they haven’t built the capacity
in the public sector.
But you know, things – time is on our side
in India.
It’s just frustrating, you know, they haven’t
adopted a few new vaccines.
That between – there’s two new vaccines
that will save over 400,000 lives per year
in just India alone.
And they’re being quite slow on that issue.
So India’s great.
And in 15 years, you know, we’ll probably
be out of India because its budget will get
bigger and it’ll allocate more of it to
health.
MR.
BROOKS: Why did the – what result – the
delays and actually the permitting and what
owes to that?
I suppose the virus has been unionized there.
MR.
GATES: The suspicion of – the bureaucrats
really like the status quo.
The way their career system works, you’re
much better off not to change things.
And so getting somebody to say, “Yes, we’d
like to spend more money on a new vaccine,”
knowing that there’s a crowd that’s going
to come in and attack that.
There’s a little bit of
conservatism.
And there’s an election coming up, hopefully
– you know – if you get close to an election,
you get particular paralysis in the bureaucracy.
Post the election, there’s a lot of optimism
that things will, both in terms of deregulation
and taking on new health initiatives, that
things will be even more aggressive.
MR.
BROOKS: Your work all over the world is in
so many facets and so many different areas.
And I asked you to survey the sample of things
that you’ve done to talk about the things
you were proudest of, the greatest successes,
what you’ve learned from that.
I suppose I should ask you also what was,
you think, in your view, your greatest failure
and what you learned from that?
MR.
GATES: Well, we fail all the time because
we back scientific approaches for creating
vaccines and drugs that fail.
We did a thing in education, which was changing
the high school size to be more like 400 than
1,500.
That actually – where we created a community,
where the adults and all the kids, they had
an expectation of what the kids were doing.
That actually had good results.
It raised attendance.
It lowered violence.
It actually raised completion rate about 15
percent.
What it didn’t do on any meaningful level
was raise the educational level of the kids
who graduated.
And so we called it college readiness.
But we had a view of what sort of the reading,
writing, math skills you’d have on graduation.
It hardly moved that at all.
And so when our goal was to get more kids
to have the income uplift that a four- year
degree provides you, it didn’t look like
we were – we weren’t going to get to what
we wanted to at all.
And so we step back and say no.
We have to get involved with helping teachers
be more effective.
We’ve got to learn about why the teachers
in this country are not being more effective.
And so that was a big change of strategy.
Some people call it a failure.
It’s a failure in the sense that our high
goals for four-year completion were not going
to be achieved.
The kids were all better off in the smaller
schools, measurably better off than they had
been in the gigantic high schools.
MR.
BROOKS: Now, the reason that that’s an encouraging
lesson is that you learned something and you
didn’t adhere dogmatically to what you wished
worked, but rather what did work.
Are you able to take this lesson to public
policymakers who tend to stay with the public
policies that they wish worked, but manifestly
don’t?
MR.
GATES: Well, public policy – we need more
people examining effective ways to achieve
public policy goals.
And it’s unfortunate that, a little bit,
the idea of making things more effective and
getting rid of things, those are, you know,
separate issues.
So there should be a, you know, a class of
people willing to say, OK, in terms of helping
with deprivation in America, could we, by
having less vertical programs, maybe achieve
that for – you know, even be neutral about
– for the same amount of money we spend
today?
And then, as a separate question, OK, you
know, is that – are we spending too little
or too much?
Because the complexity of improvement is high
– gathering data, trying different things
out, and political dialogue isn’t very good
at very complex things, a lot of the airtime,
instead of being about relative approach,
is about more or less, more or less.
You know, take health care costs.
Left, right, center – show me your best
ideas for bending the health cost curve.
Just getting rid of something, OK, is that
going to bend the health care cost curve?
What is the, you know, supply-demand equation,
the nature of the professional rules, the
nature of the innovation pipeline and the
incentives in the innovation pipeline?
I think there’s a dearth of ideas that are
being really discussed that relate to what
other than education may be the biggest, you
know, government budget issue we face, which
is are those health care costs going to crowd
out every other government function.
MR.
BROOKS: This is submitted from one of our
friends by email.
The Gates Foundation divides its attention
between philanthropic priorities here in the
United States and overseas.
There’s a real need and there’s a lot
of inequality, opportunity inequality and
consumption inequality, as you and I’ve
discussed, here at home.
So how – and this is, I guess, a question
about the execution of philanthropy – how
do you decide how you’re going to allocate
the resources between these competing needs
here in the United States and overseas?
MR.
GATES: Well, Melinda and I picked two things.
We picked what we thought was the greatest
inequity in the country that had created the
conditions that allowed us to have this outside
success.
And that was education, both K-12 and higher
ed.
And then we decided what’s the greatest
inequity globally.
And there we started.
And the core work is around global health.
And that’s expanded a bit.
Now, it’s got sanitation, agriculture, financial
services, three or four additional things
that are there to help uplift the poor.
So we – you know, we’ve got two centers
of activity.
And you do have to specialize.
And so far education has been our big domestic
– we did a few other things.
We put computers on libraries.
We do a fair bit of things locally in the
Seattle area, Washington State.
But the big thing has been education.
MR.
BROOKS: I want to turn now to my colleague
John Makin.
JOHN MAKIN: Do I ask a question?
(Laughter.)
MR.
BROOKS: If you could, put your statement in
the form of a question.
MR.
MAKIN: Yes, I would.
(Laughter.)
Well, we have two things in common.
We both spent a lot of time in Seattle, I
teaching at UW, while you were revolutionizing
the world.
And we also think a lot about economics.
But my question really has to do with the
relationship between the Gates Foundation
and the World Bank.
When I started to think about questions for
you, I looked at the World Bank’s budget
and I saw that they – I believe they lay
out around between $40 and $60 billion a year
on a wide range of topics.
So when you entered this field, did you feel
– did you believe – you probably did – but
how did you think about approaching it?
Would you be catalytic with respect to the
World Bank?
In other words, get them to do things that
– or do things yourself that they’re not
doing?
For example, the reduction in infant mortality,
which is certainly a big success story, really
was not underway for a lot of the time that
the World Bank had substantial resources.
Was that something that attracted you?
Do you think that you can be more flexible
than the World Bank in terms of moving from
one priority to another?
Really, how do you mesh with the World Bank?
Thanks.
MR.
GATES: Yeah, we do a lot with the World Bank.
I had dinner with Jim Kim – a long dinner
– last night, because we overlap a lot in
health and agriculture, and even areas we
don’t overlap.
We don’t do roads, but our agricultural
programs work a lot better when there’s
a road.
(Laughter.)
You want to get the inputs in and the outputs
out.
A road is a very clever way to do that.
(Laughter.)
And you know, it’s tragic.
Africa, both in terms of power infrastructure
that we need and roads is way, way behind.
And they’re – and Africa really is bumping
up on GDP levels that won’t go up unless
they solve those infrastructure problems.
They’ve got to solve the health problems.
They’ve got to solve the agriculture productivity.
You know, unfortunately economic advance requires
a lot of ends, a lot of things that come together,
including education and governance as well.
The World Bank numbers, though, you can’t
really compare them directly to our numbers
because those are loan numbers.
And so you have IBRD loans that are market
rate loans.
And you know, they tend – you know LIBOR
– they tend to be pretty competitive.
But it’s the IDA piece and sort of the forgiveness
part of that loan portfolio that is the really
significant overlap with what our foundation
does.
And there’re a number of actors out there.
UNICEF, in the childhood space.
The agency that did the most for child mortality
was a guy named Jim Grant during the 1980s,
where he convinced countries they needed to
raise vaccination rates.
And they were below 30 percent when he started.
And they went up to over 70 percent within
that decade.
So he probably saved more children’s lives
than anyone.
Now, there’s various inventors of vaccines.
There’s Deng Xiaoping.
There’s various people who did things that
saved a lot of children’s lives.
But he’d be certainly high on the list.
We – there’s an area we operate that World
Bank doesn’t operate in, which is upstream
research.
So the invention of the malaria vaccine, World
Bank does not put any money into that.
They don’t have people who know about that.
The only – the other big funder of that
is the National Institutes of Health, particularly
the National Institute for Allergy and Infectious
Diseases, Tony Fauci’s part of NIH.
They and over 80 percent of the infectious
disease research funding comes either from
us or from them.
So they are a deep collaborator there.
With World Bank, the thing that we’re super
excited about – there’s two things we’re
super excited about doing together.
One is fixing primary health care because
some African governments have done it well,
a lot have not.
And it’s basically a personnel system.
And we’re doing a report card, like the
World Bank Doing Business report card.
And we’re going to do that in the agricultural
space, which is really about how do you turn
your agricultural sector into – to make
it as market driven as possible.
Are you taking the latest seeds?
Are you educating your farmers?
Are your pricing policy, storage policies
such that your farmers are being uplifted
that the productivity and incomes are going
up?
So we have some ambitious goals of things
we want to do with the Bank.
We actually – a lot of funding we do is
through the Bank.
It shows up because we create – like our
polio account gets graded through the Bank.
So they ended up facilitating things.
They have a lot of IQ.
And Jim Kim has stated the goal that he wants
to unlock that IQ in a more technical advice
way, not just connected to the loans.
Now, that’s an ambitious goal.
That goal’s been stated before.
So you know, now, he’s trying to drive that
even further.
So they’re a very good partner.
WHO, UNICEF, the CG ag research group.
There’s a lot of partnering involved in
this, the development world.
MR.
BROOKS: We’re out of time.
Before we finish, I just want to say it’s
an honor to – on behalf of all of my colleagues
at AEI – to share an objective of a better
world, particularly on behalf of those who
can’t fight for themselves and that aren’t
here represented today, but we are their intellectual
and action representatives.
What you’re doing is truly important.
We endorse it, and we appreciate it very much.
Before Mr. Gates leaves, I would like to ask
that you all stay seated, so that he can get
out.
But of course, join me in thanking him for
joining us.
(Applause.)
MR.
GATES: Thank you.
(Applause.)
(END)
