Wolfensohn of the World Bank

["John Gelles" <jjgelles@xxxxxxxx>]

	JAMES  WOLFENSOHN,  PRESIDENT  OF THE
	WORLD BANK DISCUSSES DEVELOPMENT
	         ON PBS' CHARLIE ROSE SHOW

	I had the pleasure of listening to James Wolfensohn,
	President of the World Bank, speak to a lay audience
	on PBS' Charlie Rose talk show.

	The gentleman said all the wise things about the need
	to combat poverty and raise living standards that any
	sympathetic listener could ask for.  His is a development
	organization, lending large sums for the long term,
	owned by 181 nations.  It practices institutional
	economics, in my opinion, and employs Keynesian
	principles where it can.  Unfortunately it cannot
	print its own money -- if it could, Wolfensohn would
	be the most powerful banker on earth, not just a
	caring person.

	On the web I found his biography. Read it, if you
	haven't, at
	http://www.worldbank.org/html/extdr/wolfbio.htm

	I also looked at his most recent speech in Tokyo.
	The speech is at
   http://www.worldbank.org/html/extdr/extme/jdwsp030199.htm

	I was unable to find a transcript of the lay
	presentation on Charlie Rose, but excerpts from
	the above speech will do to give you flavor of his
	thinking.  They follow my signature below.

	Everything Wolfensohn said to the TV audience
	(and below to a symposium), about fighting poverty
	around the world, seemed very right to me -- except
	for one idea he offered on TV:  He thought there
	was nothing more Japan could do today, after
	reducing the cost of essential borrowing to a zero
	rate of interest, to end Asian stagnation quickly.

		It seems obvious that the government of
	Japan could spend money to bring the environment
	in Japan up to the standards enjoyed by its great
	competitive institutions in industry, science,
	education, construction, etc.

		Instead of trying to induce private
	spending on junk, it ought to see the value of
	public spending on necessities.

		The more it spent on environmental
	necessities, the safer earth's environment would
	be and the more jobs and prosperity would be
	created in pockets of need in Japan.


	Wolfensohn spoke of the power of commercial
	interests around the globe to invest in profit
	making enterprise that spills over to employ poor
	people and raise living standards.

		He did not speak of the power of
	governments to invest in necessary projects --
	the peacetime equivalent of investment in war
	fighting -- that can instantly end unemployment
	and poverty.

		He was born in 1933 and so may
	be a few years too young to have been
	impressed by what Japan and other advanced
	nations can do if they leave operations to the
	private sector but develop economic strategy
	at the highest level of government.

		My guess is that socialism between
	1945 and 1990 gave government such a
	bad name that people forget how powerful an
	economy can grow by spending on its needs
	instead of just spending at the mall.

		John Gelles

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		EXCERPTS FROM

Foundations for a More Stable Global System
Remarks at the Symposium on
Global Finance and Development
(prepared text)

by James D. Wolfensohn
President
The World Bank Group
Tokyo, March 1, 1999

A stable financial architecture cannot be achieved without the proper
structural, institutional, social and human foundations needed to make a
modern market economy work. Without these underpinnings, our building will
collapse. It will also collapse if we are not joined in our labors by hands
and voices from every corner of the globe. Our architecture must be one for
developing countries too; a plan to include the most vulnerable and those
who, most recently, have felt the greatest pain.

Why do we want a stable financial architecture or, as I am arguing, a more
complex and inclusive foundation on which to build this and all the other
elements we need to sustain our world? Simply because we want to fight
poverty with passion, to establish equitable development, stability and
peace right across our world. I cannot think of it any other way, nor
believe it should be otherwise.


What do I mean by foundations?
If there is a single cross-cutting lesson that we have learned over the
past eighteen months and more, it is not simply one of getting the
macroeconomic numbers right or of ensuring transparency or of revising the
way in which capital flows are regulated. It is all of these and they are
important but it is also much, much more.

It is a lesson of how deep and complex our foundations need to be. It is a
lesson of how interconnected each and every element is in our building
process. And it is a lesson of how inclusive we must be in consulting not
just an elite group of architects but the widest possible spectrum of a
global society, each and every element of which now matters as never
before. If we do not learn these lessons - and now is surely the time to
show that we can - our foundations will be shallow and our house insecure
and at risk.

So it is not just a matter of getting exchange rates right or fixing fiscal
or monetary policy. As important as these are, in some ways they make up
the easy part of the agenda although I do not intend to trivialize them.
The hard part is recognizing what it takes beyond a macroeconomic fix and
then putting in place the real foundations.

I am talking about the institutional underpinnings of a market economy that
advanced countries take for granted. In the countries of the developed
world these took generations to put in place; they were wrestled out of the
lessons learned at the cost of financial and economic catastrophes. And
still these institutional underpinnings need constant maintenance and
improvement as the working of our world evolves and changes. And I do not
want anyone to take away from this thought the idea that the developed
world has it exclusively right. You need only consider the banking
disasters of the Scandinavian countries and of the US with the Savings &
Loans debacle to find examples of the fact that there will be crises as a
matter of fact. But what made them a little easier to handle in both these
instances were the institutional underpinnings that were in place, that
facilitated recovery and protected vulnerable citizens.

So let me get to my list and begin by naming first good governance, strong
public institutions and a system that fights corruption. If you do not have
good governance and you have corruption, your financial architecture will
not save you. And just as countries need this element, surely our
interconnected world is improved by getting this right.

Second, you need a strong legal system and a justice system able to
guarantee the execution of those laws. This applies equally to the laws
which allow a vigorous business sector to flourish as it does to the laws
which protect citizens, strong and weak alike. This is good for countries;
it is good for the world.

A third element, which relates most closely perhaps to financial
architecture proper, is a robust and well-regulated financial
superstructure in which there is supervision of banks, of capital markets,
of stock exchanges, of financial institutions that are not banks. This too
is good for all of us, internationally, in developed countries and in
developing countries. And financial sector regulation is of course only
part of the story here. Stability requires a sound corporate sector based
on strong corporate governance and legal systems and accounting systems
that work. No country is going to have a sound financial system without
company accounts that make sense, rules of company behavior and disclosure
that are applied, legal systems and bankruptcy procedures that work.
Governments, especially in the developing world, would do well in this
respect too to develop a private sector strategy that assists the efforts
of their business people as they go out into the world.

These are all elements of the mix for the foundations of a market economy
that will enable developing countries to multiply the opportunities of the
global marketplace. Equally, their absence will multiply the risks of
crises in the new financial environment.

And now my list turns to the social agenda and I do ask here that we get
beyond the set pieces that have us thinking of the numbers as "hard stuff"
and the social as "soft". I have traveled to too many countries now - 84 in
my three and a half years at the World Bank - and seen the images of
poverty too starkly etched to imagine that we can successfully relegate the
social to the second rung on the agenda.

Our social agenda should begin with those elements at the very heart of
ensuring an opportunity at all levels of society: a good health system and
an education system available to boys and girls equally, that is
unconstrained by the borders of a single country, that is linked to our
wealth of global knowledge. It is not at all soft to argue that these are
fundamental to our foundations and that it is not too much of a leap to
make a connection between decent health and education systems and the
stability we are all seeking to reduce the global risks of financial
turbulence.

There seem to me such obvious linkages, too, to all the other elements
needed to secure the equitable development of society. Like communications
systems, from the most high-tech satellite connections to the simple rural
road along which the farmer takes his goods to the market. Like clean
water, accessible clean water to free the millions of developing country
women who spend four to five hours each day fetching this commodity. The
same point can be made about power. Presently 2 billion people have no
access to power; 1.3 billion have no clean water.

The environment is a crucial element in our foundation that most seem to
accept now has both global and domestic implications. And so does the need
for urban strategies as cities grow to bursting beyond their capacity; and
rural strategies as countrysides feel pressure and food security threatens
in the years ahead. In the next three decades the world will have to double
its current food production. And lastly, and I mean this very seriously, as
we globalize let us also not forget our legacies, let us have strategies to
protect our cultures so that we might preserve their riches for our
children. There can be no real development without cultural continuity and
enrichment.

Having seen the path that contagion can take in the case of the Asian
crisis, following last August in Russia and now watching Brazil carefully
as we all are, countries have a stake in their neighbors? successes. And
beyond the immediate neighborhood, all countries have a stake in the
success of others. East Asia has shown us how events that started in a few
emerging market countries can have a truly global impact. This is a new
dimension to our world and demonstrates that managing the world economy can
no longer be a matter involving only a small number of advanced countries.
We have a number of fora in which we work together quite well and often a
lot better than the media would have us believe. But we need to make sure
that these meeting places of our planning and our work are truly inclusive.
Are we satisfied that the emerging market economies have an equal seat at
the table? And if not, let us fix that because there cannot be happy
outsiders in a global world.

And we need to show this face of partnership to the world. Each of us
brings distinct sets of knowledge and experience to the table. You just
cannot sensibly get good macroeconomic policy advice from one institution
and a good structural plan from another without a lively cross-cutting
dialogue. We have all seen the social pain created by policies applied in a
vacuum and we cannot afford that anymore. The cost is too high, the human
cost and we owe it to our children to tackle the complex issues in new,
broad and cooperative ways not envisaged in earlier approaches to financial
crisis.

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