[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                   THE ROLE AND EFFECTIVENESS OF THE 
                 WORLD BANK IN COMBATING GLOBAL POVERTY 
=======================================================================

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 22, 2007

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 110-33

                              -------

                     U.S. GOVERNMENT PRINTING OFFICE

37-209 PDF                 WASHINGTON DC:  2007
---------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office  Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
DC area (202)512-1800  Fax: (202) 512-2250 Mail Stop SSOP, 
Washington, DC 20402-0001





















                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            RICHARD H. BAKER, Louisiana
CAROLYN B. MALONEY, New York         DEBORAH PRYCE, Ohio
LUIS V. GUTIERREZ, Illinois          MICHAEL N. CASTLE, Delaware
NYDIA M. VELAZQUEZ, New York         PETER T. KING, New York
MELVIN L. WATT, North Carolina       EDWARD R. ROYCE, California
GARY L. ACKERMAN, New York           FRANK D. LUCAS, Oklahoma
JULIA CARSON, Indiana                RON PAUL, Texas
BRAD SHERMAN, California             PAUL E. GILLMOR, Ohio
GREGORY W. MEEKS, New York           STEVEN C. LaTOURETTE, Ohio
DENNIS MOORE, Kansas                 DONALD A. MANZULLO, Illinois
MICHAEL E. CAPUANO, Massachusetts    WALTER B. JONES, Jr., North 
RUBEN HINOJOSA, Texas                    Carolina
WM. LACY CLAY, Missouri              JUDY BIGGERT, Illinois
CAROLYN McCARTHY, New York           CHRISTOPHER SHAYS, Connecticut
JOE BACA, California                 GARY G. MILLER, California
STEPHEN F. LYNCH, Massachusetts      SHELLEY MOORE CAPITO, West 
BRAD MILLER, North Carolina              Virginia
DAVID SCOTT, Georgia                 TOM FEENEY, Florida
AL GREEN, Texas                      JEB HENSARLING, Texas
EMANUEL CLEAVER, Missouri            SCOTT GARRETT, New Jersey
MELISSA L. BEAN, Illinois            GINNY BROWN-WAITE, Florida
GWEN MOORE, Wisconsin,               J. GRESHAM BARRETT, South Carolina
LINCOLN DAVIS, Tennessee             JIM GERLACH, Pennsylvania
ALBIO SIRES, New Jersey              STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire         RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota             TOM PRICE, Georgia
RON KLEIN, Florida                   GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida                 PATRICK T. McHENRY, North Carolina
CHARLES WILSON, Ohio                 JOHN CAMPBELL, California
ED PERLMUTTER, Colorado              ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut   MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana                PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida               KENNY MARCHANT, Texas
JIM MARSHALL, Georgia                THADDEUS G. McCOTTER, Michigan
DAN BOREN, Oklahoma

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 22, 2007.................................................     1
Appendix:
    May 22, 2007.................................................    39

                               WITNESSES
                         Tuesday, May 22, 2007

Beckmann, David, President, Bread for the World..................    10
Eizenstat, Ambassador Stuart E., co-chair, Atlantic Council 
  Commission on Transatlantic Leadership for a New Global Economy    13
Stiglitz, Dr. Joseph E., professor, Columbia University, and 
  Chair, Columbia University's Committee on Global Thought.......     5
Wade, Dr. Robert Hunter, professor of political economy, 
  Development Studies Institute, London School of Economics and 
  Political Science..............................................     8

                                APPENDIX

Prepared statements:
    Beckmann, David,.............................................    40
    Eizenstat, Ambassador Stuart E...............................    44
    Stiglitz, Dr. Joseph E.......................................    53
    Wade, Dr. Robert Hunter......................................    67


                   THE ROLE AND EFFECTIVENESS OF THE 
                 WORLD BANK IN COMBATING GLOBAL POVERTY 

                              ----------                              


                         Tuesday, May 22, 2007

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 3 p.m., in room 
2128, Rayburn House Office Building, Hon. Barney Frank 
[chairman of the committee] presiding.
    Present: Representatives Frank, Velazquez, Watt, Sherman, 
Scott, Green, Cleaver, Moore of Wisconsin; Bachus, Castle, 
Paul, Gillmor, Garrett, Neugebauer, and Marchant.
    The Chairman. The hearing will come to order. I apologize 
for the delay. We had votes scheduled at just the wrong time 
and I thank the panel for indulging us. This is the first in a 
series of hearings, and I do want to say--because obviously the 
World Bank has gotten somewhat more attention of late than it 
had previously. But I will say that this hearing began in a 
conversation that Dr. Stiglitz and I had at Davos in January. 
We have long had an interest here, the ranking member and 
myself, with two of the four members, along with a former 
colleague from Iowa, and our current colleague from California, 
who pushed hard for the debt relief at a time when there was 
some resistance to it.
    This committee's concern and the concern of many of the 
members with a more effective use of the international 
financial institutions for the fight against poverty is long 
standing, and I do want to say that this is not an 
opportunistic hearing. I will say as an elected official, 
though, that I do not mean by that to denigrate opportunism as 
a mode of operation. I don't want to be saying something that 
could be used against me later. But in this case we really had 
been thinking about this for some time, and this is the first 
in a series of hearings we are going to have about the role 
that the international institutions, financial institutions, 
can play in the war against poverty. I think it is important to 
reaffirm that it is possible, through thoughtful action, to 
reduce poverty. Not to abolish it or eliminate it--we are not 
in the miracle business--but to substantially reduce it.
    I believe, as do many others, that we have existing 
institutions which are, (A), imperfect and, (B), indispensable, 
and therefore it is our job to do what we can to improve them 
without going after them in a most negative way. When I first 
began involved in this we had the campaign called ``50 Years Is 
Enough.'' Well, we now know that 60 years is too little, not in 
terms of duration, but in terms of activity, and there are some 
very important issues that we plan to deal with.
    On the question of the Bank, there was a legitimate set of 
concerns about what role the IMF should be playing as things 
have evolved from when it was first set up. There were problems 
of excessive conditionality. Many of us, on the Democratic side 
in particular, have been concerned about what appears to be a 
bias against the rights of workers that has crept into some of 
the activity. There is a question about how you fight 
corruption effectively, and how you fight corruption in a way 
that does not make people who live in corrupt countries double 
victims of corruption--victims first when people steal money 
that was meant for them, and victims again when people then 
withhold any further money from them. We need to be able to 
sharpen that fight against corruption so that we go after those 
who are really the problem.
    There is the question of the extractive industries, of the 
failure of mineral wealth to benefit the large numbers of 
people whom it ought to, and all of those are things we are 
going to study on an ongoing basis.
    I have 2 minutes left in my statement, and I am going to 
yield it to the gentleman from California, and then in a step 
that the parliamentarian tells me is okay, I am going to give 
up my second 5 minutes. The ranking member and I have 10 
minutes each, and we both agreed not to extend the time. I 
appreciate that because we do have a little bit of a 
truncation. I am going to divide my 5 minutes up among the 
witnesses because I don't know that all of the testimony will 
be summarized within 5 minutes. And at this point I recognize 
the ranking member, the gentleman from Alabama.
    Mr. Bachus. I thank the chairman. I welcome our panel, and 
I am going to make my remarks very brief because if I realize 
anything, it is that our four panelists all know more about 
this subject than I do, so I am going to spend my time 
listening.
    I would make one comment. Dave Beckmann--who is one of the 
panelists--and I worked very hard on debt relief, and his book 
``Grace at the Table'' was one of the books that inspired me to 
become involved. And in that book, one of the questions asked 
is, what will the United States and our generation be 
remembered for? Will it be--if we are leaders in the world, or 
we are to display leadership, what do we do with that 
leadership, what influence do we have? And I think it is 
becoming more and more apparent to all of us that it is in our 
best interest to improve the plight of people all over the 
world. Global poverty is a threat not only to the citizens of 
the poor countries, but it is a threat to the rest of us, as 
well.
    And I will close with this one fact, prior to the Taliban's 
takeover in Afghanistan, according to many of the world 
surveys, Afghanistan was the poorest uneducated country in the 
world. Almost none of the young women in Afghanistan had ever 
seen a school and about 75 percent of young men had never set 
foot in a classroom. And it was into this vacuum that the 
Taliban came. And as we know, they filled that vacuum with 
something that was really a threat to all freedom-loving 
people. When they told the Afghan people that you are not 
educated--you are not capable of educating your children, you 
can't afford to do it, so we will educate them. And they taught 
the young children in Afghanistan really a doctrine of hate, 
and it didn't isolate that situation to Afghanistan. It affects 
all of us. And throughout many parts of our world today, that 
same doctrine, those same forces are going into countries where 
there is a lack of education and infrastructure, and they are 
taking advantage of that. As opposed to nothing happening in 
that country, in those countries, what is happening in those 
countries is dangerous, which is actually far worse than 
nothing happening.
    So I think it is definitely in not only in the best 
interest of those countries, but in the best interest of our 
own national security to see that those countries are stable 
and that they have that basic education and as a consequence, 
as we know, different rights and freedoms are respected.
    Thank you, Mr. Chairman.
    The Chairman. I now recognize for 2 minutes the gentleman 
from California, Mr. Sherman.
    Mr. Sherman. Thank you, Mr. Chairman. The world goes gaga 
because one guy at the World Bank gets $195,000 for his 
paramour. The press ignores the fact that the World Bank is on 
schedule to disburse $1.3 billion--a substantial portion of 
which is American money--to the Iranian government, and that 
some $270 million was disbursed to the Islamic republic during 
Wolfowitz's short tenure. The Administration has substantial 
clout with the World Bank purchased at the expense of the 
American taxpayer. It used it first to install Wolfowitz, then 
to back him as he tried to back the World Bank out of family 
planning, and then finally used up every bit of clout in an 
all-out effort to help him save his job.
    The Administration has done nothing to try to stop the loan 
agreements or the disbursements. Now it is true that the 
Administration voted against the loans, but they were required 
to do so by law. So perhaps we should consider ourselves 
blessed that no one in the Administration was willing to commit 
a crime in order to assist the Islamic Republic of Iran. Not 
only do these laws provide resources to the government of Iran, 
they also give it the Good Housekeeping seal of approval. How 
can we convince the Iranian people that they will be cut off 
from the world if they continue to develop nuclear weapons when 
they are getting money from the World Bank, some of it ours?
    In addition, governments stay in power by bringing home the 
bacon. We know how to stay in office, that is why we are 
sitting up here, and it is by bringing home the bacon even 
though it is not halal or kosher. The Islamic republic is 
bringing home the bacon from the World Bank, part of it ours.
    We will go back to the Floor of the House, I hope, and vote 
for foreign aid as I have again and again and hope that our 
constituents don't realize that a portion of that foreign aid 
is going to a government that is developing nuclear weapons.
    I yield back.
    The Chairman. The ranking member of the Subcommittee on 
Domestic and International Monetary Policy, Trade, and 
Technology, the gentleman from Texas, is recognized for 3 
minutes.
    Mr. Paul. Thank you, Mr. Chairman. Of all the elements of 
the Bretton Woods system, perhaps the most enduring has been 
the World Bank and its associated institutions. Although highly 
regarded in some circles, the Bank has been a significant 
failure in helping the residents of poor and developing 
nations. Like many bureaucracies, the World Bank has constantly 
attempted to reinvent itself and redefine its mission. Some 
critics have referred to this as mission creep. It is the 
reaction of self-interested bureaucrats who are intent on 
saving their jobs at all costs. The noninstitutional elements 
of Bretton Woods, such as the gold backed dollar standard, have 
gone by the wayside, but the World Bank and IMF soldier on.
    What is most annoying about the World Bank are the 
criticisms alleging that the Bank and its actions demonstrate 
the negative side of free market capitalism. Nothing could be 
further from the truth. The World Bank is not an organization 
devoted to capitalism or to the free market but to state-run 
corporate capitalism. Established and managed by a multitude of 
national governments, the World Bank promotes managed trade by 
which politically connected individuals and corporations enrich 
themselves at the expense of the poor and the middle class.
    Western governments tax their citizens to fund the World 
Bank, lend this money to corrupt third-world dictators who 
abscond with the funds, and then demand repayment, which is 
extracted through taxation from the poor third-world citizens 
rather than from the government officials who are responsible 
for the embezzlement. It is in essence a global transfer of 
wealth from the poor to the rich. Taxpayers around the world 
are forced to subsidize the lavish lifestyle of third-world 
dictators and highly paid World Bank bureaucrats who don't even 
have to pay income taxes.
    The World Bank has outlived its intended purpose. Capital 
markets are flush with money and well-developed enough to lend 
money not just to national governments but to local and 
regional development projects at competitive market rates.
    In the aftermath of Mr. Wolfowitz's departure, much will be 
made of the question of his successor when the questioning 
instead should be directed toward the phasing out of the 
organization. And I yield back.
    The Chairman. The gentleman from New Jersey is recognized 
for the remaining 2 minutes.
    Mr. Garrett. Thank you, Mr. Chairman, for holding this 
hearing today. I thank the witnesses in advance. While the 
World Bank was created with the direct mission to make loans 
and grant loans to low- and middle-income countries to reduce 
poverty and promote economic development, and that is an 
admirable goal and one I support, unfortunately the World Bank 
has become, as many have said already, a bloated bureaucracy 
that is increasingly moving its focus away from its core 
mission. Desmond Lachman, a resident fellow at the American 
Enterprise Institute, states, ``By extending its mandate, the 
Bank has not only lost focus of its primary goal of poverty 
reduction, but has also made it difficult to hold the Bank 
accountable for its core activities.'' He goes on to say that 
it might be in the World Bank's best interest to narrow its 
focus, suggesting that ``These narrow goals might include the 
eradication of debilitating illnesses like malaria, feeding the 
hungry and supplying clean water.''
    Another way that I believe the World Bank has ventured away 
from its original charter is by focusing too much of their 
resources on making loans to middle-income countries such as 
China and India. These countries already have access to vast 
amounts of private investment capital and should no longer need 
the World Bank's help in financing infrastructure improvement. 
Approximately 50 percent of the loans made in 2006 went to just 
five countries, China and India included.
    Mr. Chairman, I believe the World Bank is an organization 
that is still trapped in the 20th century and has not moved 
forward with the times. Studies have shown that its past record 
shows that it is a failure in many of the countries it has been 
involved in. New York University concludes, studies show, that 
those countries that have been the largest recipients of World 
Bank loans have performed no better, and oftentimes worse, than 
those countries which did not receive the Bank's favor. And to 
make matters worse, those countries like China, India, which 
have ignored the Bank's nostrums, comfortably outperform those 
countries like Russia and Argentina, which were more receptive 
to the world advice, as has been stated.
    Finally, I do applaud outgoing President Wolfowitz for 
trying to rein in the out-of-control corruption within the 
organization. The anti-corruption agenda has been a primary 
objective of this Administration, but I do hope that whoever 
his successor comes in line that he will continue to focus on 
this important problem.
    And with that, Mr. Chairman, I yield back the balance of my 
time.
    The Chairman. I thank the gentleman. I thank all of the 
members for their cooperation. We will begin with Dr. Stiglitz. 
I have 5 minutes remaining and I am going to yield a minute-
and-a-quarter to each of the witnesses, so each witness will 
have 6.25 minutes. This is useful stuff. That may not seem like 
much, but it is when you start talking. So each witness will 
get 6.25 minutes. I will tell the timekeeper. Dr. Stiglitz.

   STATEMENT OF DR. JOSEPH E. STIGLITZ, PROFESSOR, COLUMBIA 
   UNIVERSITY, AND CHAIR, COLUMBIA UNIVERSITY'S COMMITTEE ON 
                         GLOBAL THOUGHT

    Mr. Stiglitz. Thank you very much for holding these 
hearings. I want to agree with the sentiment that you expressed 
in the beginning, that America and the world have a strong 
interest in contributing to reducing poverty and promoting 
growth in the developing world. Aid can be an effective 
instrument in achieving these objectives.
    The multilateral institutions, of which the World Bank is 
the premier lending institution, play an important role in this 
global effort. For a variety of reasons, assistance 
administered through the World Bank and other multilateral 
institutions can be even more effective in achieving our 
objectives than assistance provided by the United States 
directly. This is especially true at the current time, when 
American credibility, especially in the developing countries, 
has sunk to an all-time low.
    The question is, is the World Bank today playing the role 
that it should be playing? And if not, what can be done about 
it? Even before the recent turmoil within the institution, 
there was considerable concern about its direction. Large 
numbers of its senior people have departed in the past 2 years. 
The most important asset of the institution is its staff, its 
human capital, and it will take years to replace what has been 
lost.
    I want this afternoon, however, to focus on broader, though 
not totally unrelated issues: How the World Bank should conduct 
its business, what the development agenda should be, and what 
the United States can do to help ensure that this happens.
    It is in our interest that the World Bank remain strong, 
credible, and effective. The Bank has greatly emphasized good 
governance in corruption, but the Bank can only be effective if 
it is seen as having good governance itself. There has to be 
confidence that there is not corruption in the corruption 
agenda, that there is not a hidden political agenda with 
corruption in some countries being overlooked, while in other 
countries there is a policy of virtually zero tolerance.
    Finally, part of democratic values is due process. The 
implementation of a corruption agenda itself must conform to 
the highest standards. With the resignation of its president, 
the question is the choice of successor and, most importantly, 
the process by which this is done.
    Good governance and the commitment to basic democratic 
values requires that the head of the institution be chosen in 
an open and transparent process. It should be the most 
qualified person for the job regardless of race, gender, or 
nationality. It is in America's interest that the head of the 
institution not simply be chosen by the President of the United 
States.
    There are other important changes in the governance of the 
World Bank and other multilateral institutions that will 
increase their effectiveness. These require careful balance, 
more democratic accountability, and strengthening procedural 
safeguards.
    There are reforms to the governance of the Bank, the need 
for which the present scandal has highlighted. I want to 
comment briefly on them. On the positive side, the review 
process shows that the Board could exercise its fiduciary role 
even in a very difficult situation where the largest 
shareholder was not fully supportive, by setting up a committee 
that included four members from developing and transition 
economies. In spite of the pressures that were brought to bear, 
22 of the 24 directors concurred with the finding of the panel 
and, realizing that the wellbeing of the Bank required that the 
President had to go, supported that action.
    On the negative side, it is clear that the president of the 
World Bank had enormous elements of discretion in making 
appointments, in circumventing rules, in suspending loan 
programs, and in directing bank programs, with insufficient 
checks and balances in place and insufficient oversight. Some 
of the systems designed to provide the checks and balances are 
clearly flawed, with offices that might receive complaints 
about presidential abuses actually reporting to the president. 
Fears of retribution against whistleblowers or those raising 
complaints were not totally unfounded. The powers of the 
president had previously not been abused in this way, but the 
fact they could be abused also highlights a fundamental flaw in 
governance.
    Reform will require careful balancing. There needs to be 
more accountability of the World Bank, both to the Board and to 
other stakeholders, including donor countries, but this has to 
be done in ways that avoid excessive politicization of the 
institution. The Bank has created one of the most talented and 
qualified bureaucracies around the world; bureaucratic 
procedures have been put into place that ensure that by and 
large they attract and choose highly qualified applicants. But 
left to themselves, the bureaucratic safeguards could lead to 
an entrenched bureaucracy pursuing its own agenda or 
insufficiently flexible to adapt to changing circumstances, 
including new learning about the costs and benefits of 
privatization and liberalization, new attitudes about country 
ownership, or new agendas, such as those concerning worker 
rights.
    The Board, working with the president, must establish what 
the Bank's overall agenda and priorities will be. As I argue 
below, this agenda must be more balanced and more consistent 
with our own values and our own practices. While the Bank is 
likely to continue to be focused on promoting growth and 
poverty alleviation, it is inevitable that there will be 
changing views on how that can most effectively be done.
    The Board, and not just the president, must play a central 
role in constructing and approving this agenda, and then 
ensuring that the president and the staff of the Bank implement 
that agenda in an effective and consistent way. At the same 
time, the checks and balances and safeguards against abuses by 
the president of the World Bank have to be strengthened. In the 
text, I provide details on how that might be done. There are 
problems in both internal and external governance that I 
discuss in the text.
    International economic institutions like the World Bank are 
at some distance from direct accountability. To address this 
problem, at least three actions are required. Responsibility 
for the World Bank should shift from Treasury to USAID or 
should be shared with USAID. This is a practice followed by 
many other countries, and it is essential if the developmental 
perspective is to remain paramount in dealings with the World 
Bank.
    Second, there needs to be more parliamentary/congressional 
oversight. The appropriate form of this oversight will need to 
be worked out. A committee of the parliaments/congresses, 
including donor and recipient countries, could be formed to 
review the agenda and procedures and to discuss widely 
perceived grievances.
    Third, there needs to be more transparency and public 
oversight of decisions, both before and after they are made.
    These reforms--and there are many other reforms in 
governance which I have discussed elsewhere--are, I would 
argue, as much in the interest of the United States as they are 
in the interests of the world as a whole.
    No system is perfect. A president determined to evade the 
set of safeguards put into place may still be able to do so, 
even after those are strengthened. Humans are fallible and so 
are the institutions that they create.
    I want to turn to more specific aspects of the World Bank 
agenda, beginning with corruption. Fighting corruption requires 
more than just speeches; it requires a comprehensive agenda 
that includes the development of policies that reduce the scope 
for corruption. There are ways that the United States and other 
advanced industrial countries can contribute to the fight 
against corruption, most notably strictly enforcing anti-
bribery laws, eliminating bank secrecy, not just for terrorists 
but also for tax evasion and corruption, and demanding 
transparency in payments to governments by, for instance, using 
the Tax Code to enforce the Extractive Industries Transparency 
Initiatives.
    Successful development requires, however, more than just 
attacking corruption. Aid effectiveness can be undermined not 
just by corruption but by incompetence or by the absence of the 
appropriate complementary policies. It requires a comprehensive 
development agenda.
    There also needs to be country ownership of development 
policies, programs, and strategies. Excessive conditionality 
undermines this and development effectiveness. While the 
conditions that have been imposed have been reduced, in many 
cases they still remain excessive.
    IMF cross-conditionality is especially problematic, and 
even as up-front conditionality has been reduced, new forms of 
hidden conditionality have been introduced through the IDA 
allocation formulae. These formulae fail to deliver aid to 
where it is likely to be either most needed or most effective.
    The challenge to the World Bank and other aid agencies when 
confronting a country with poor governance is to find 
alternative delivery mechanisms for aid. It is bad enough that 
the people in these countries are suffering from poor 
governance. To be doubly punished by denying aid would seem 
unfair, especially if there are alternative ways by which 
assistance can be provided, especially in health and 
education--investments in the youth of these countries. The 
problem is that the conditionalities that--
    The Chairman. You will need to sum up, please, Dr. 
Stiglitz. You need to sum up.
    Mr. Stiglitz. Okay. The problem is that the 
conditionalities that have been imposed in the past have in 
some cases actually reduced aid effectiveness. Moreover, these 
imposed policies represent values that are contrary to those 
that are held by the vast majority of Americans. The disparity 
between what we require of others and what we do ourselves 
further undermines the credibility of the institution and aid 
effectiveness.
    Thank you.
    [The prepared statement of Dr. Stiglitz can be found on 
page 53 of the appendix.]
    The Chairman. Next, Dr. Robert Hunter Wade, who is a 
professor of political economy at the Development Studies 
Institute, London School of Economics and Political Science. 
Dr. Wade.

  STATEMENT OF DR. ROBERT HUNTER WADE, PROFESSOR OF POLITICAL 
 ECONOMY, THE DEVELOPMENT STUDIES INSTITUTE, LONDON SCHOOL OF 
                ECONOMICS AND POLITICAL SCIENCE

    Mr. Wade. Thank you. I want to step back from the concerns 
that Joe Stiglitz was talking about and address the current 
deep crisis of relevance that the World Bank is facing. The 
Bank's market has changed fundamentally in the past decade, but 
the Bank continues to operate in much the same way and with 
much the same products as a decade ago. The change in the 
Bank's market was dramatically symbolized just last week while 
the U.S. and European governments were fighting over President 
Wolfowitz's future. At that same time, the African Development 
Bank held its annual meeting not in Africa, but in Shanghai. 
This event will be looked back upon as a milestone in the 
history of the 21st century.
    The main message of my testimony is that the World Bank can 
potentially add much more value to the solution of some of the 
world's most urgent problems than it has been doing and, 
secondly, that the U.S. Congress and the next Administration 
can help the Bank do so by signaling strong support for a 
revived World Bank.
    In the immediate future, that signal of strong support 
means supporting the current Administration and selecting a 
first-rate candidate as the next president, a candidate with an 
excellent record as the leader and manager of a large complex 
organization. That criterion would knock out some of the names 
on the current short lists.
    And secondly, congressional support means the Congress 
paying over the still outstanding U.S. payments on the IDA 14. 
Looking beyond the immediate future, the Congress should 
support the World Bank in taking more of a leadership role in 
several genuinely global areas. In its traditional products of 
aid projects and economic advice to governments of developing 
countries, the World Bank's market has changed in the sense 
that it now faces a whole array of new competitors supplying 
much the same kind of products, such as China and Korea, which 
have become big sources of financial assistance to poorer 
countries, such as private consulting firms which have 
developed superior skills in many of the Bank's traditional 
areas of expertise, such as banking and finance, and also such 
as the Gates Foundation and other private philanthropic 
foundations which have become big players in this financial 
assistance game.
    But given all that, the Bank still retains a big 
comparative advantage over these other entities, which is based 
on its combination of: (A), intergovernmental guarantees; (B), 
its own large revenue base; and, (C), its global reach. This 
combination makes the World Bank almost unique. And in 
particular, I suggest that the Bank should take a leading role 
in addressing one of the biggest specific issues of our time, 
which is how to get economic growth with much less by way of 
carbon emissions, how to decouple economic growth from carbon 
emissions.
    The Bank has a lot of experience in formulating economic 
policies, translating them into investment plans, and 
translating the plans into investments on the ground, and it 
should use this general experience to take the conclusions of 
reports like the IPCC reports and the Stern report and then 
translate those general conclusions into what they mean for 
specific countries, such as China, India, Bangladesh, Brazil, 
and so on, and then to help those governments work out country 
programs focused on decoupling their economic growth from their 
emissions. This task would be a relatively new task for the 
Bank and it would require the Bank to develop new financing 
instruments in order to accelerate the take-up of 
environmentally friendly technologies. For example, the Bank 
could establish a carbon fund, a fund which would, for example, 
allow a developing country such as China or India to borrow 
from the Bank for a power station and to choose a state-of-the-
art technology for that power station, a state-of-the-art 
technology, reduction technology, even though that technology 
is more expensive. But with this fund, rather than the 
government of the country having to bear the incremental cost, 
such a fund could be used to accelerate the uptake of climate 
friendly investments in the power sector, in transportation, 
railways for Africa, for example, in forestry and land use 
practices, and in still other sectors.
    Some of the finance for this fund could come immediately, 
tomorrow, straight from the World Bank's current reserves. The 
World Bank currently has $36 billion in reserves. It needs only 
$25 billion in order to retain its all-important AAA credit 
rating, so the balance between--or much of the balance between 
the $25 billion that it needs and the $36 billion in reserves 
that it has could go into such a climate stabilizing fund. This 
fund could also receive grants from OECD governments, from 
private foundations and the like.
    This is just one small example of how the Bank could be 
playing a significant catalytic role in addressing 
international environmental issues generally and climate change 
in particular. To do this, to reposition itself in this way, it 
would have to undertake some pretty big internal changes and to 
develop some new streams of revenue. I leave the details of how 
I think the Bank could do these two things to the written 
testimony.
    The bottom line of what I am saying is that even though, if 
we were starting fresh in 1944, we would surely not start with 
the present World Bank. But the present World Bank is what we 
have to work with, and I suggest that the present World Bank 
does need U.S. support to reposition itself in order to fulfill 
the valuable role that it is almost uniquely able to play in 
the world.
    And just to address directly Mr. Paul's point about how 
capital markets, private capital markets are now growing to the 
point where they can take care of all the tasks that the World 
Bank might do, I suggest that in this area of meeting these 
genuinely global problems, providing what economists call 
global public goods, capital markets, private capital markets 
are not going to do the job. For that job to be met, there is 
plenty of scope for a multilateral public institution like the 
World Bank.
    Thank you.
    [The prepared statement of Dr. Wade can be found on page 67 
of the appendix.]
    The Chairman. Thank you, Dr. Wade.
    Next, Mr. David Beckmann, the president of Bread for the 
World.

  STATEMENT OF DAVID BECKMANN, PRESIDENT, BREAD FOR THE WORLD

    Mr. Beckmann. Thank you, Chairman Frank, Ranking Member 
Bachus, and members of the committee. I am honored by this 
opportunity to testify before you on the role of the World Bank 
in overcoming world poverty.
    The world is making progress against poverty. The Bank just 
announced that we are now down below 1 billion people in the 
world who are living in what it calls extreme poverty. That is 
still a terrible number, but in 1980, they estimated that the 
number was 1.5 billion. So we live at a time where we can see 
dramatic progress against hunger, poverty, and disease, and the 
World Bank is playing a critical role in that great liberation.
    I have a relatively positive view of the World Bank, and it 
is built on 30 years of working with the Bank in various 
capacities. I worked in the Bank for 15 years in operations, 
and then I was a speech writer for the president of the Bank in 
the early 1980's. Then I led the Bank's engagement with civil 
society around the world. In the late 1980's, it was a fringy 
idea that the Bank should not just deal with governments.
    I have been at Bread for the World for 15 years. I think 
you know that Bread for the World is a large citizens' movement 
that organizes people and churches across the country to lobby 
Congress on issues that are important to poor people around the 
world and also in our own country.
    At Bread for the World, we have continued to focus on the 
World Bank, and in the early 1990's, we did our part to try to 
get the Bank to focus more explicitly on poverty reduction, and 
to make the Bank more transparent and accountable. At the end 
of the decade, we chaired the legislative coalition for the 
Jubilee campaign. On all of those issues, this committee has 
played an important leadership role, and, in fact, the Bank 
today is more focused on poverty than it was when I worked 
there.
    It is more accountable and more participatory than it used 
to be, and I think the Bank's leadership of the debt reduction 
initiative in general has been just excellent in reducing 
impossible debts, and doing it in a way that really has 
fostered economic growth, especially among poor people. Right 
now, Bread for the World is campaigning to change the U.S. farm 
bill in ways that would be good for rural America and rural 
Africa, too, and some of the analysis behind that campaign 
comes straight out of the World Bank.
    It is hard to figure out the World Bank. It is a 
complicated institution. But I have been feeling different 
limbs of this beast for 30 years, and I have come to a deep 
appreciation for the Bank. Now any institution has its 
weaknesses, but I want to highlight five strengths. First, the 
World Bank is focused on reducing poverty. You can see the 
effect of that most clearly by where the money goes. If you 
compare the Bank to, say, AID, the Bank's aid money goes much 
more to low-income developing countries. The Bank does all 
kinds of things. It may be working on policies that facilitate 
the private sector, to develop capital markets, but staff 
always have to link that back to the overarching purpose of 
poverty reduction.
    A second strength is that the Bank has improved and adapted 
over time. Dr. Stiglitz has criticized the Bank, and I think it 
is clear that the Bank listened to that criticism and has made 
some adaptations so it is a stronger institution now. He is 
probably not satisfied with all that they have done, but it is 
clear that they have listened to him and have made some 
adaptations. That is one example.
    Third, the Bank is an extraordinary center of knowledge. 
Even when I don't agree with the Bank, I check what they are 
thinking.
    Fourth, the Bank's governance structure works fairly well. 
It is a compromise. The governments that put in the most money 
get the most power, but all the governments that are members 
get to sit at the table and be part of the discussion. And it 
seems to me that, remarkably, most decisions are made on the 
basis of reasoned debate.
    And finally, the Bank evaluates itself. The independent 
operations evaluation department concludes that three-quarters 
of the Bank's operations are satisfactory, so there is a lot of 
room for improvement. But I don't know of any other institution 
in international development that is so self-critical and so 
open to learning from its own experience.
    Now, looking to the future, I would highlight three 
recommendations. First, I think the binding constraint on 
progress against world poverty is still a lack of political 
commitment in developing countries and also in the 
industrialized countries, and there are things that you can do 
that build political commitment over time. For example, you can 
set up institutions--strengthen non-governmental and 
governmental institutions that represent the interests of the 
poor. The Bank does a lot to build political commitment, and I 
would like to see a systematic review of what it is doing to 
deal with this fundamental constraint and what it could 
appropriately do to provide stronger leadership.
    Second, I would recommend that the Bank not adopt a bunch 
of new initiatives right now. In my judgment, Jim Wolfensohn 
launched more new initiatives than the Bank could effectively 
absorb. The Wolfowitz controversy has really caused some 
damage, so I think the Bank should focus on implementing the 
priorities that are already in place, notably, continuing the 
turnaround in Africa, changing the Bank's role in the middle-
income countries, and curtailing corruption.
    And then finally, the new president of the Bank needs to 
get all of the Bank's diverse stakeholders, notably the Board 
and staff of the Bank, to start working together again. I think 
the way to do that is fundamentally to focus on the mission, 
because the Bank's mission of reducing poverty is compelling to 
all different kinds of people. As the chairman and ranking 
member of this committee show, this is a mission that people of 
different political persuasions are drawn to. Virtually all the 
governments of the world say that they want to reduce poverty.
    I am a minister of religion as well as an economist, and 
all of the world's religions and ethical traditions know that 
what is happening in the world to reduce extreme poverty is 
sacred business. The transition that is happening at the World 
Bank is a turning point not only for the Bank, but for the 
world's progress against poverty.
    The Chairman. Sum up, please, Dr. Beckmann.
    Mr. Beckmann. I think it is incumbent on all of us to play 
our various roles to strengthen the Bank and to make it a yet 
more effective instrument in overcoming poverty.
    [The prepared statement of Mr. Beckmann can be found on 
page 40 of the appendix.]
    The Chairman. Thank you. And finally, our once and future 
witness, I know his face is familiar to many of us in a number 
of capacities, but he is here today as the co-chair of the 
Atlantic Council Commission on Transatlantic Leadership for a 
New Global Economy. Stuart Eizenstat.

STATEMENT OF AMBASSADOR STUART E. EIZENSTAT, CO-CHAIR, ATLANTIC 
COUNCIL COMMISSION ON TRANSATLANTIC LEADERSHIP FOR A NEW GLOBAL 
                            ECONOMY

    Mr. Eizenstat. Mr. Chairman, and Ranking Member Bachus, I 
am appearing as co-chair of a bipartisan commission with Grant 
Aldonas from the Atlantic Council, looking at ways in which 
Europe and the United States can transform all of the 
international financial institutions in light of the major 
changes that have occurred in the world's economy. I will focus 
on the World Bank, and to some extent, the IMF.
    The international economy has undergone radical changes in 
the past 50 years, with economic power shifting south and east, 
but the World Bank and IMF have not sufficiently taken this 
into account. Today, China, India, Brazil, Russia, and other 
emerging countries represent 45 percent of global GDP, 40 
percent of world exports, and 65 percent of the world's foreign 
exchanges. And yet they have much less of a central role in 
global economic governance than their economic importance 
dictates.
    Another major change is the remarkable growth of global 
private financial markets increasingly available to developing 
nations without the time delays and conditionality from the 
World Bank and IMF. For example, in 2005, the amount of private 
debt and equity flows to sub-Saharan Africa, one of the poorest 
places in the world, dwarfed the amount of money spent by the 
World Bank. Another development is the new entrants into 
overseas development assistance, particularly from China, which 
is building infrastructure projects all over the world for 
political and economic reasons, not to benefit the countries 
involved, with no conditionality, using oftentimes their own 
workers, not the indigenous workers, to build the very projects 
they are funding.
    All of these changes impose significant challenges for the 
World Bank and the IMF, including the desire of emerging 
economies to have more input into their governance. At the same 
time, our Commission strongly believes that the Bank and the 
Fund continue to be highly relevant. No other private or public 
institution, for example, can do the kind of macroeconomic 
surveillance as the IMF to prevent future global crises. And 
for the Bank, over half-a-billion people have risen above the 
poverty line over the last decade. While there are many reasons 
for that, the Bank's programs have played a role.
    In addition, private lenders want their borrowing country 
clients to belong to the IMF and World Bank, and the World Bank 
still has a major role in long term financing for 
infrastructure. I was doing work for BP on the BTC pipeline in 
Azerbaijan, Georgia, and Turkey. There is no question but that 
having gotten World Bank financing in part for that project 
elevated the social and environmental standards of the project.
    No private capital will finance many of the projects that 
are now financed through the world's IDA program. It is the 
world's premiere poverty focused aid agency, with 81 of the 
world's poorest countries, 40 in Africa, IDA-eligible. IDA has 
a greater capacity to deliver developmental assistance on a 
larger scale and in more sectors than any other agency in the 
world, and certainly than the private sector. No other private 
or public institution can address complex cross-sectoral issues 
like IDA, like, for example, linkages between 
macrostabilization and banking sector reform. Nevertheless, the 
World Bank faces challenges which require significant reform.
    And permit me to summarize briefly our Atlantic Council 
Commission's recommendations. Number one, the top leadership of 
the World Bank and IMF should be chosen on the basis of merit, 
not nationality. Since their creations, this has been a 
monopoly for Europe and the United States--Europe for the IMF, 
the United States for the World Bank. This is antiquated and 
unfair. It doesn't recognize the growth of African, Latin 
American, and Asian countries. And moreover, with the special 
focus of the World Bank on development and poverty alleviation, 
it doesn't produce leaders who have the expertise in those 
areas. Indeed, it can lead nations to go the other way, like 
Chavez is trying to do, by creating a new body called the Bank 
of the South.
    With Paul Wolfowitz's departure, President Bush can send a 
powerful signal to the world that he is turning a corner on 
American unilateralism by throwing open the contest to the 
entire world and supporting the best candidate, regardless of 
nationality. That would turn the tragedy of the Wolfowitz 
incident into a plus for America's image in the world and for 
the future management of the world economy.
    Second, the World Bank and IMF governance should reflect 
actual economic power and influence. Emerging economic powers 
in Asia and Latin America are seriously underrepresented in 
voting power and board representation. If developing countries 
and emerging economic powerhouses are to take these 
institutions seriously, they must be given a genuine leadership 
role.
    And we recommended, therefore, in our Commission, two 
reforms to rectify this imbalance. First, European 
representation should be consolidated into two seats, an EU 
Euro zone, and an EU non-Euro zone seat. European countries are 
highly overrepresented, with 7 directorships out of the total 
of 24.
    Second, we recommend that the U.S. and European 
representation be rebalanced in terms of voting shares. Third, 
there is serious confusion and overlap in the World Bank and 
IMF programs, with inadequate consultation and coordination. 
The Bank and the Fund have responded to changes in the 
international environment by reaching out beyond their 
mandates. Since they work in many of the same countries at the 
same time, this leads to inefficient overlap in their programs. 
We found that there was insufficient coordination between 
staffs, often going to the same countries at the same time. 
This costs public assets, gives conflicting advice to recipient 
nations, and fails to meet the needs of members.
    For example, the Fund's financing activities in low-income 
countries have moved beyond their core responsibilities, and 
overlap with the Bank's work in development finance. The Fund, 
for example, is moving into areas beyond their core capability, 
like civil service reform, land and energy sector reform, 
privatization, and judicial reform that are the Bank's 
responsibilities. We recommend to rectify this the following: A 
clear delineation of responsibilities between the Bank and the 
Fund, each focusing on their core strengths, not based on the 
income of the recipient countries. We felt, for example, that 
the IMF should gradually withdraw from providing long-term 
baseline financing in low-income countries, and focus instead 
on short-term balance of payments financing and global 
imbalances.
    Next, the Atlantic Council recommended closer coordination 
between the Fund and the Bank by double-hatting executive 
directors. It does not make sense, at a time when there is a 
lack of cooperation, Mr. Chairman, to have separate executive 
directors serving for the board of the Bank and for the Fund. 
By appointing the same person to serve as an executive director 
at both, you assure greater coordination and collaboration and 
reduce duplication of programs.
    Third, even with this, we think that is not enough, and 
that there should be an eventual merger of the organizations no 
later than 2030. The Malan Report suggests a number of ways to 
achieve greater collaboration, but these simply will not 
achieve the degree of coordination without a merger. There are 
simply inherent overlaps only a merger could alleviate. For 
example, the Fund needs to take into account the sectoral level 
and composition of public funding, which is within the Bank's 
responsibility, to achieve macroeconomic stability. Their work 
overlaps and duplicates of necessity. This means that the IMF 
and the--
    The Chairman. We will need you to sum up, Mr. Eizenstat.
    Mr. Eizenstat. --Bank should be under the same roof. And 
last, greater accountability. The way to achieve greater 
accountability is to follow a recommendation of the Meltzer 
Commission for an independent performance audit, or even 
better, a group like the GAO, the Government Accounting Office, 
inside the Bank for continuous evaluation of its programs. 
Also, the emphasis that both Jim Wolfensohn and Paul Wolfowitz 
placed on anti-corruption efforts is essential for sustainable 
development. The World Bank estimates there are a trillion 
dollars a year paid in bribes to all countries. The approach 
may be open to debate, but the necessity is clearly there.
    [The prepared statement of Mr. Eizenstat can be found on 
page 44 of the appendix.]
    The Chairman. Let me apologize to the witnesses, but ask a 
favor of them. We have some votes that are going to take 
probably about 40 minutes. I would hope the witnesses could 
stay. If you have to get back and out of town, I understand 
that. If you are from Washington, the day's probably shot 
anyway, so you might as well hang out. This is a very important 
hearing. We have had very good testimony. I promise you this 
committee plans to stay with this. If you can stay, I 
appreciate it. I plan to come back. Some others will. We will 
have maybe another hour when we come back. And if not, 
obviously you are entitled, you were already here, you thought 
you were at 2:00. But I just want to thank all of you.
    If you can stay, this has been very insightful. I promise 
you your time is not going to be wasted. I think you are going 
to find this committee engaging very seriously with the range 
of things that you said. So we are going to recess for about 40 
minutes, but we are going to come back. And if you can stay, I 
appreciate it, and thank you.
    [Recess]
    The Chairman. I am going to begin with some questions. As I 
listened to the testimony, I believe there is a piece of 
legislation here, maybe several. For example, the President 
could appoint the same person, I assume, to be the ED, but we 
could also change the law to make that an appointment. That 
could be done statutorily. Dr. Stiglitz had a number of 
legislative suggestions, and I think we can work with those. 
There are some restrictions, obviously, in terms of members of 
the Bank staff themselves testifying. But one of the things 
that I did in 1993, when I chaired this subcommittee, was to 
convene a meeting of parliamentarians who were interested in 
the World Bank. I am going to indulge both myself and the 
ranking member, and we can make this more of a conversation, if 
that is acceptable to everybody. One of the things that struck 
me when I was first a member and then when I became 
subcommittee chairman was the point that Dr. Stiglitz talked 
about, that these important institutions, and you all talked 
about the political and economic and social aspects of them, 
but they are run entirely by finance ministries. Neither the 
diplomatic side nor the social justice side are involved, and 
the parliamentarians were excluded.
    I remember at one point suggesting during the Clinton 
Administration that we invite the State Department to testify 
on some things, because some members had some concerns about 
this. And the Treasury Department was very unhappy about that 
and reacted, I thought, unfortunately, in a kind of turf way. 
Well, we are not going to deal with that anymore. And one of 
the things I did was to convene a meeting of parliamentarians 
from 25 countries or so. There were some people very 
interested. And we had a meeting in this room and it seemed, in 
my mind, to be the beginning of a parliamentarians group. We 
did have officials of the Bank and the IMF come before us, 
because it was not any one parliament. That is when we began 
talking about what we had already begun to work on--the 
inspection panel and some other things.
    Unfortunately, from my standpoint, from a number of 
perspectives, that meeting was the first and the last, because 
I called that meeting in the summer of 1994 as chairman, and 
presided over it in December of 1994 as the lame duck, soon to 
be ex-chairman. But I think there is a great deal of 
bipartisanship in the respect I mentioned. I said that Mr. 
Bachus and I, Mr. Leach, and Ms. Waters, worked closely 
together. And we are going to get back in this business in a 
serious way. So let me just ask a couple of these questions, 
and then I would share the time with my colleague.
    Let me ask Dr. Stiglitz, Dr. Wade correctly pointed out the 
challenge of trying to promote growth without increasing carbon 
emissions. And obviously, the World Bank seems to be one of the 
forums in which we can deal with that, because you have the 
problem--Dr. Stiglitz talked about it in his testimony, and 
others have talked about it--obviously, you have this dilemma 
of how do you treat the disparity in carbon emissions between 
the rich countries and the poor countries? And clearly great 
growth will come there. What is the ratio? How do you meet the 
argument that no, you can't just treat everybody equally when 
they start so unequally? It would seem to me that the Bank 
would be a very important place in which we could do this, 
including the environmental fund. Is that still functional? And 
that could be a piece of it.
    But another one that I am particularly interested in is 
important domestically and also internationally, and I will ask 
Dr. Stiglitz, and that is equally important is to show that we 
can make growth compatible--that growth does not mean 
increasing inequality. And there is the question of equality or 
increased inequality, since nobody is talking about equality in 
this system, but what degree of inequality you get. There is 
inequality between and among countries. But it seems to me 
increasingly here that unless we can deal with inequality 
within countries, we will not have the political support we 
need to try to diminish equality between nations. And I have 
talked about a bargain between business and some of us on the 
liberal side. I think we are beginning to see the possibilities 
here, but it is still in the early stages. Trade and 
immigration are two areas where there are the beginnings of 
compromise between liberals and the business community, two 
elements that I think would be in the interests of what we are 
trying to promote, but there is a lot of resistance to them by 
people who are still skeptical that they are not going to get 
burned.
    Now one of the areas that did strike me was a kind of 
cultural lag or is it the vampire reappearing? There had been 
this view, we had hoped that the World Bank and the IMF would 
stop trying to impose a particular kind of political economic 
orthodoxy, the Washington consensus, on countries, and we did 
seem to be making progress. It seemed that the picture of Mr. 
Camdessus standing over the president of Indonesia with his 
arms folded would not be repeated. And it wasn't--obviously, it 
was a picture taken out of context, but it came at a time when 
there were these attacks.
    Some people have argued, and I would ask all of you who 
watched this, that the Bank and IMF, to some extent, but the 
Bank particularly, is slipping back into that, that we are 
seeing a kind of conditionality that represents a set of 
particular policy choices, in this case, ideologically 
conservative ones, but ideologically, liberal ones could be as 
much of a problem both because they interfere with the notion 
the countries are really deciding what to do. But also for any 
of us because they, in my judgment, exacerbate some of the 
problems we have had of growth and inequality.
    Are we getting back into the kind of conditionality, Dr. 
Stiglitz, that you complained about, and we thought was 
receding?
    Mr. Stiglitz. Yes, I think there is some concern about 
that. One of the things I emphasized in my talk that we have 
become aware of in recent years is that in the IDA allocation 
formula, there were some hidden conditionalities. That is to 
say, the formula that determined who got aid was based on how 
well countries were doing on certain measures, and how well 
they were doing in those measures was, in effect, determined by 
how well they were doing in conforming to the Washington 
consensus policies.
    One of the ironies is that a lot of these measures are 
about good governance, and part of good governance is being 
transparent, but the measures themselves were not transparent, 
so there is almost an internal inconsistency. But when they 
became transparent, we realized the extent to which they were 
actually advancing some of the old-style conditionalities.
    I think the point that you raised is correct, that there 
has been a step backwards, that there had been a reduction in 
the set of conditionalities. There is a sense that in the last 
couple of years conditionalities have increased, or at least 
pressure has increased. What is particularly of concern is the 
fact that there are a number of conditions that have been 
imposed that are very inconsistent with the way that we, in 
fact, conduct economic policy in the United States. For 
instance, we have a central bank, a Federal Reserve, that 
focuses on inflation, unemployment, and economic growth. There 
is a three-partite macromonetary policy. One of the conditions 
that is often imposed, particularly with IMF cross-
conditionality, is that central banks in other countries are 
supposed to only focus on inflation. The conditionalities 
require that they don't pay any attention to employment or to 
economic growth.
    As another example, something which in the past has been a 
great deal of trouble and is still, to some extent, is that the 
IMF and the World Bank push privatization of Social Security. 
The United States had a big debate about privatization of 
Social Security. Different people came out with different 
views, but the country as a whole came out on the side that we 
didn't want to privatize Social Security. Thus, the question 
is, are we forcing other countries to do something that we 
rejected, in the sense that a very significant fraction of 
Americans said no, this is not the right economic policy. 
Incidentally, as an economist, I also thought that 
privatization was a bad economic policy.
    The third topic that I talked about in my written testimony 
is this issue of worker rights and worker conditions. There is 
a lot--
    The Chairman. Which I put into the country policy example.
    Mr. Stiglitz. Exactly. The point is that they put on things 
like labor market flexibility, which is often a code word for 
letting labor wages go down and unions being weakened, but 
nothing was said about core labor standards, so there was 
nothing to balance the debate. My view is that there should be 
discussions about the pros and cons and an awareness of the 
economic and political arguments, but labor market flexibility 
should not be demanded as a matter of conditionality.
    The Chairman. Thank you. I find that flexibility is often a 
quality that people find very desirable in others. Any of the 
other panelists? Mr. Eizenstat.
    Mr. Eizenstat. Well, I was in the Administration as Under 
Secretary of State at the time of the Asian financial crisis, 
and I certainly saw some of the negative impacts of the 
conditions that were imposed and the manner in which they were 
imposed. And we ended up trying to pull together programs to 
ameliorate some of the cuts in social programs. At the same 
time, I think we shouldn't go to the other extreme and think 
that IDA or other grants and loans should be made without 
conditions. That is exactly what the Chinese are doing. There 
need to be conditions to assure that the funds are properly 
used--transparency, anti-corruption, good macroeconomic 
policy--or the money simply goes down a hole. So I think that 
there needs to be a proper balance.
    I would also say that for all the mistakes that were made 
during the Asian financial crisis, and there were mistakes 
made, that those countries did bounce back very quickly, and 
they now have, in many cases, current account surpluses, and 
good macroeconomic policies, much better than they did before. 
They are much more alert to exchange rate problems, in part 
because of the conditionality. So I would urge that we not 
throw the baby out with the bath water when we talk about 
conditionality and just look at what the Chinese are doing with 
no--
    The Chairman. That is a fair point. I think it is something 
of a distinction to some extent, and I am talking a procedural, 
substantive one. The conditions you talk about are procedural, 
but not in a superficial sense, transparency and honesty. I 
think that is an appropriate overall balance. I think the kinds 
of conditionality to which I have objected and others, they 
were both too specific and too ideological, that you--that 
those are the kinds of conditions you want to avoid, that you 
want to recognize a legitimate set of policy choices, but yes, 
I think we should be clear that doesn't mean that you ignore 
whether the money is just being wasted, whether there is 
corruption, or whether there is a lack of any kind of openness 
to let you know that.
    Any of the others? Yes, Dr. Wade.
    Mr. Wade. In 2005, the World Bank published a 350-page 
report called ``Economic Growth in the 1990's: Learning From a 
Decade of Reforms.'' So this was the Bank's effort to write 
down what had been learned from the experiences in the 1990's. 
And the main conclusion of this 350-page report was that we 
have learned that one size does not fit all. We must be more 
pragmatic in the kind of advice that is given, more contingent, 
make it more contingent on country circumstances, and so on. On 
the basis of this report, some economists declared that the 
Washington's consensus is dead; nobody believes it anymore. I 
think that is quite misleading, because if you look not at what 
the World Bank says in its reports, but at what country 
directors say to their counterparts in government, they still 
tend to be pushing a rather hard, and I have to say quite 
ideological, version of the Washington consensus.
    The Chairman. And inappropriately, so you would say.
    Mr. Wade. Yes, inappropriately. The idea that there must be 
completely free trade, just sort of get the government out, 
privatize everything that can be privatized, and so on, a hard 
version of the Washington consensus. So that is where you have 
to look. And that is--and when you look there, you see that 
bank country operatives are still pushing this agenda.
    The second point I want to make is that quite a lot of the 
thrust for sort of homogenization of a one-size-fits-all kind 
these days, and since the Asian crisis, is coming from the IMF 
in the forms of the codification of standards of good or best 
practice in banking, in financial regulation, in corporate 
governance, and in data dissemination. These are universal 
standards, they are comprehensive standards, and the IMF's 
business now is undertaking surveillance of all economies to 
see to what extent these economies are complying with these 
standards. And that, I think, has some quite worrying negative 
consequences, as well as some desirable.
    The Chairman. What is the enforcement? Is it that the Bank 
then picks up on the IMF standards and enforces them? Because 
the IMF by itself, absent a crisis, do they have any 
enforcement on those? What is the enforcement mechanism?
    Mr. Wade. No. There is some formal enforcement through IMF 
conditionality and also cross-conditionality with the Bank, but 
the main enforcement mechanism is an informal one through 
market signals. That is, the idea is that this information of 
compliance with the standards is made available to market 
participants, and they will then react and will be more 
favorable towards countries that comply more and will punish 
countries that comply less. That is the mechanism, the main 
mechanism.
    The Chairman. Yes, Mr. Beckmann.
    Mr. Beckmann. Can I address the first comment you made 
about governance, and how to get social concerns, equitable 
growth, and how the governance--
    The Chairman. When we get down to five members, you can 
pretty much do whatever you want. Since you stayed so long, we 
owe you.
    Mr. Beckmann. Well, just on that, the governance of foreign 
assistance within the U.S. Government is a mess. We haven't had 
a reauthorization of foreign assistance since 1961, so the U.S. 
Government has been making its development assistance and 
foreign aid policy through the appropriations process in an ad 
hoc way, and that has been debilitating. The Bush 
Administration's response to some of the debilitation of AID 
has been to start new agencies, so we have now the MCA and 
PEPFAR and AID. And then the MDB's; the U.S.'s representative 
within the multilateral banks is from Treasury.
    I think we ought to have a cabinet-level department, as the 
U.K. does, a Department of International Development. It 
wouldn't work, as Dr. Stiglitz suggested, that the MDB's should 
be governed from AID; AID is too low in the bureaucracy. And 
now especially, it is really dominated by the State 
Department's objectives, so that doesn't really work. But I am 
hoping that in 2009 we are going to see a comprehensive 
reauthorization of foreign assistance. Fundamentally, what is 
needed is for the President and the Congress of the United 
States to agree on what they want to do with all of our foreign 
aid, whether it goes through IDA or through AID. What do we 
want to achieve? And to get the job done, we will need a more 
integrated institutional structure. That would mean that this 
committee would need to work with the International Relations 
Committee.
    The Chairman. Right. It is interesting. In the Senate, this 
jurisdiction is with the Foreign Relations Committee, where you 
might logically argue it belongs. I am very interested in this, 
so I am very happy that somebody, it seems to me quite 
mistakenly, said, ``Oh, the World Bank, that is a bank, so it 
will go through the Banking Committee.'' That is why we have 
it. I am not giving it up with any--
    Mr. Beckmann. This committee has actually done a great job 
on World Bank issues.
    The Chairman. Thank you. I appreciate it. But we have 
already collaborated with--it has gone back to being called the 
Foreign Affairs Committee now--with Congressman Lantos and 
others, and we will continue to do that. Thank you.
    Let me turn to Mr. Bachus now.
    Mr. Bachus. I thank the chairman. In fact, my first 
question was going to be, is the World Bank a bank? And you 
sort of hit on that, but let me just sort of change it around a 
little bit. I will just start--I want each of you to answer 
this. What do you see was the purpose and the function of the 
World Bank in 1944 and what is its function and purpose today? 
And has it changed? If you will, touch on economic growth, 
economic development, and also poverty reduction, and poverty 
alleviation, and how they go together. Professor Stiglitz?
    Mr. Stiglitz. Sure. Remember that in 1944 it was called the 
International Bank of Reconstruction, and then they added the 
word ``and Development,'' so it really began with helping 
Europe reconstruct. But fortunately, they added ``and 
Development,'' and that has become the major focus. But it has 
gone from just a question of lending for development projects 
to a much broader focus, not just on development, but on 
poverty alleviation in developing countries. And that clearly 
is its focus. Some questions have been raised about capital 
markets. The fact is that capital markets are not going to be 
focused on poverty alleviation. They are not going to lend to 
the poorest countries. They are not going to lend for education 
or health. A little bit sometimes, but they just can't go into 
those areas. Thus, there is a vast need there.
    Now, I think one of the things that has changed is a 
recognition that what separates developing and developed 
countries is not just money, but also knowledge. And with that 
has gone a change from being just a bank which lends money, to 
being sometimes called a knowledge bank, with a broader set of 
objectives.
    Mr. Bachus. The technical expertise and knowledge.
    Mr. Stiglitz. Exactly. There is an advantage of being a 
global institution that in principle is trying to learn from 
all the experiences, failures and successes all over the world, 
and then transmit that knowledge. It hasn't always done it as 
effectively as it should. It has come in, I think, often with 
blinders. But the idea of having an international institution 
that would learn from all over the world and then transmit to 
the whole world what has been learned, that principle seems to 
me one that makes a lot of sense.
    Finally, I want to pick up on something that Dr. Wade said 
that I think is important. As the world has become more 
integrated, we have also become more interdependent; that means 
there are more areas where we need to act together. The World 
Bank is an important institution for acting together in areas 
that we call global public goods or global externalities, such 
as global warming, where there is an international interest in 
addressing this problem: It will affect all of us. How to help 
the developing countries do what they ought to be doing is at 
the current juncture potentially one of the most important ways 
that we can work together. If I were saying what are the new 
items in the agenda, that is one of the items that ought to be 
listed.
    Mr. Bachus. Okay. All right. Dr. Wade? Anything? Mr. 
Beckmann?
    Mr. Beckmann. Yes. If you go back to the charter of the 
Bank that was written in 1944, it talks about economic 
expansion. There is a reference to labor conditions; that is 
the way they talked about poverty. And there is a strong 
reference to promoting international trade. That provides a 
clear statement of what the Bank meant to do when they set it 
up, and those purposes are still relevant. The Bank still is 
promoting economic expansion, paying attention to labor 
conditions, and promoting international trade, but in the 
1990's, the Bank adopted a new mission statement, which is 
pretty simple. If you go into the atrium of the Bank, up on the 
wall it says, ``We dream of a world without poverty.''
    There has been a real evolution in the Bank's mission over 
the decades. When Robert McNamara was president of the World 
Bank, the mantra was that we promote economic growth and 
poverty reduction. And in the 1990's, there was a further 
shift, an agreement among the nations of the world that what we 
want this institution to do is to end poverty. I know that is a 
dream you share, and I find it to be a very exciting and 
compelling dream. What the charter says is still quite 
relevant; if you want to end poverty, you have to have economic 
growth, attention to labor conditions, and trade.
    Mr. Bachus. Sure. Okay.
    Mr. Eizenstat. It is an excellent question. Let me just add 
to what has been said. I think the biggest change that has 
occurred since 1944 has been the remarkable growth of private 
capital and the access that developing countries have to that 
private capital. In 2005, for example, in sub-Saharan Africa, 
not in middle-income countries, you had almost $25 billion in 
new equity flows, compared to $3 billion in net disbursements 
by the World Bank. But having said that, I think what that 
means is that to deal with the issue of poverty alleviation, 
which is now the goal of the Bank, you need first closer 
collaboration between private sector donors and the World Bank 
on what kinds of projects each will fund. Because for poverty 
alleviation you do need infrastructure, you need electricity, 
the things that business needs to invest. You need an open 
investment climate, you need an open trading climate, or you 
are not going to the economic growth.
    At the same time, you also need, as Joe and Dr. Wade were 
indicating, you need to have an institution, and that is what 
IDA particularly does, it focuses on things that the private 
sector won't do--energy security, communicable diseases, global 
warming, and refugee resettlement in developing areas where 
that is a drag on growth. And that is where the Bank should be 
placing its expertise. But it needs to work more closely with 
the private sector, which is willing to fund infrastructure 
projects and other things that also contribute to growth. And 
that lack of collaboration, I think, is a significant barrier 
to poverty alleviation and to achievement of the Bank's new 
mission statement.
    Mr. Bachus. One thing Mr. Beckmann said, and I don't know 
if the others agree with him, he said the expertise, the 
technical knowledge of the World Bank was probably one of its 
greatest strengths and values. Do you also--how would you grade 
their expertise and their knowledge of being able to supply 
that expertise? Dr. Wade?
    Mr. Wade. I think it is true that in the past 10 to 20 
years, private consulting firms have developed expertise in 
some of the areas that the Bank has long been in which excels 
that of the Bank. The Bank, I think, is no longer competitive 
in a lot of areas within banking and finance, probably within 
areas of private sector development. But on the other hand, 
there are some current activities that the Bank is in where the 
Bank's expertise is exceptionally high relative to anyone 
else's. There are many. But one of them would simply be 
resettlement. Resettlement of people who are involuntarily 
ousted from a project, a reservoir project, for example. But 
there are many others.
    But my worry is, looking forward, that the Bank on the one 
hand has an opportunity to take a leadership role in the 
international environmental issues that I was talking about, 
but it seems to me--including climate change--but is not yet 
very well staffed up to take that role. But this is an obvious 
direction of expansion. As other players become more active in 
areas where the Bank was traditionally strong but is no longer 
so strong, the Bank's root of expansion, its comparative 
advantage is in these more strictly global issues, which nobody 
else is as well placed to deal with. But the Bank is not very 
well staffed up yet in those areas. So it has to expand in 
those areas and cut down in some of the more traditional ones.
    Mr. Bachus. Mr. Scott, if I could have 2 more minutes or 
something if that would be possible? I note the chairman took 
about 12 or--said we were going to have a little more--
    Mr. Scott. [presiding] Two more minutes.
    Mr. Bachus. --relaxed atmosphere. The Administration is 
looking for a new president. Now Mr. Stiglitz, I read in the 
BBC, one of the articles, that you said they ought to be 
looking for an economist that understands development. And I 
would agree with that. What else would you add to that, any of 
you? Now, would you think that a passion for global poverty, or 
at least some expertise in that field would be at least a good 
qualification?
    Mr. Stiglitz. Of course. The major thrust that I think all 
of us agree on is helping countries grow and reducing poverty, 
and that requires a certain kind of expertise. That is why I 
said it was important to have somebody who knows economics. I 
also will argue that you need somebody who can work with all of 
the diverse constituencies of the Bank, both the contributing 
countries and the countries that you are giving aid to. The 
staff of the Bank is very important. This picks up with 
something that Dr. Wade talked about in his remarks, which is 
that you have to have somebody who has the confidence of the 
staff, the donors, and the countries.
    One of the reasons that I suggested we ought to really 
think about how the head is chosen is because that process is 
going to affect that confidence. No matter who that person is, 
if he comes in through a process in which people have 
confidence, it is more likely that he will have an easier time 
of it.
    Mr. Bachus. Okay. Thank you. Ambassador Eizenstat has to 
leave in just a minute, I am told, so I appreciate you being 
here. I appreciate your grandson's patience while you 
testified. But Dr. Wade or Mr. Beckmann?
    Mr. Wade. Yes. I just wanted to add one thing to what Joe 
said. It seems to me really critically important, especially in 
the wake of current events, or recent past events, that the 
head of the organization have had--has an excellent record in 
running a large and complex organization. It is not enough 
simply to be sort of an academic expert economist in poverty 
reduction or something of the kind. You have to have had 
experience in running a large and complex organization. That 
seems to me to be a more important criterion probably than 
anything else.
    Mr. Bachus. Okay. Thank you.
    Mr. Beckmann. I think one criterion is clear, unalloyed 
commitment to the mission. There have been questions raised 
about Paul Wolfowitz's personal loyalties, or his political 
loyalties coming in in an inappropriate way. What we have to do 
now is to get people working together--working and working 
together again. That includes the staff of the Bank, the Board 
of the Bank, but also the Bank has diverse shareholders all 
over the world--people who disagree as much as people in this 
committee disagree with each other and who are spread all over 
the world. So I think the next president needs to be somebody 
who is just straight in terms of being committed to the purpose 
of the Bank. It is that purpose that can draw all these folks 
together. And then I do think management, having experience in 
managing a large and complex organization is important. I think 
knowledge of development is important, real expertise in the 
area of international development.
    Ability to be a diplomat is clearly important. I think we 
have just seen that, in fact, we are not going to have the kind 
of international selection process that Dr. Stiglitz talked 
about. I don't think this Administration would go along with 
that. And we have just seen that the Board of the Bank wasn't 
willing to take on the Administration, so there is not the 
political will there to move to a completely different kind of 
process. But the Administration needs to put forward a 
candidate or candidates who are clearly qualified, and there 
needs to be some kind of process of consultation so that the 
next president can go into the Bank with support from the whole 
Board.
    Mr. Bachus. Thank you. Let me just close with a comment. 
You know, I think you are going to have to have a person who is 
a real diplomat, who knows how to work for people, particularly 
in that just last month they announced the anti-corruption 
strategy, and you are going to have to do that with a lot of 
diplomacy.
    The Chairman. Thank you. The gentleman from North Carolina.
    Mr. Watt. Thank you, Mr. Chairman. And I thank the chairman 
and ranking member for convening this hearing, which has been 
very interesting and informative. At some level, however, I 
guess the question of at least the conditionalities and the 
Washington consensus have kind of an academic component to them 
except for the obvious conditionalities of transparency and 
more process-related things. Sometimes the Washington consensus 
I agree with, and sometimes the Washington consensus I disagree 
with. When I agree with it, I want the World Bank to move in 
that direction. When I disagree with it, I probably don't want 
it to move in that direction.
    But that is kind of an intellectual academic discussion, 
and I would like to try to take this to a more practical 
discussion, because I don't think you can get there from here 
without doing some of the concrete things that you all have 
suggested.
    As long as the United States is dictating who the 
leadership of the World Bank is, we basically will be setting 
the Washington consensus, whoever that person in the White 
House is who is sending that person there. How, as a practical 
matter, do we get from that posture to a position where the 
most qualified, the most--all of these criteria that you all 
talked about that you would want in a leadership is able to be 
named? How exactly is the naming process done now? I mean, does 
the Board have the authority, if they were willing to confront 
the president, to say we reject the notion that this person has 
to be a Washington former cabinet person or this person or that 
person? Or I mean, what is the process for getting us from 
where we are now to where it seems like everybody on this panel 
would like for us to get? Because I don't think you can change 
the conditionalities unless you change the leadership and 
change the attitude of the United States toward what this is 
all about. Anybody who wants to take a shot at that. That is 
the only question I have, interestingly enough.
    Mr. Stiglitz. The rules give the discretion to the Board to 
make the choice. It is nothing more than a convention, and it 
is an old boys' agreement that Europe gets to appoint the head 
of the IMF and the United States gets to appoint the head of 
the World Bank. There is nothing constitutional, so there 
wouldn't have to be any change in legislation. It is just the 
Board's decision. Now, the problem is that in the case of the 
World Bank, the United States does not have a veto power. It is 
the largest shareholder, but the Europeans as a whole have many 
more shares than we do. This means that they have many more 
votes. But there is a reluctance to engage in confrontation, so 
there is a sense in which one can ask the question if they knew 
that--
    Mr. Watt. How do you move that?
    Mr. Stiglitz. Okay. There are a couple of possibilities. 
One of them is that if Congress made a strong statement and 
said, we disagree with that, it would obviously have a big 
impact. If they said this president, this appointee, or this 
process does not have their support, that they think the old 
boys' route does not make sense, while it may have made sense 
in 1944 but doesn't make sense in the 21st century, I think 
that would have a very big impact. I have talked to a number of 
the European Ministers of Development and they feel the same 
way that I do. They are nervous about a confrontation, having 
just had a confrontation. If one changed that balance and said, 
look, we actually agree with you, I think it might give them 
some energy to address that.
    On the second issue, you can have more effect than you have 
on even the conditionalities. For instance, Congress instructed 
the American representative, the ED, to vote against cost 
recovery, which is this euphemism that the poorest kids in the 
world have to pay tuition. As a result of that, eventually the 
IMF and the World Bank gave up this requirement on cost 
recovery. I think that it is a delicate balance of this issue 
that I talked about. You don't want to have excessive 
politicalization of the process, as it is a multilateral 
institution. On the other hand, there are certain areas where 
you can say, look, we think there is a global consensus on 
conditionality.
    Mr. Watt. I am focused less on the conditionalities than I 
am on the more practical, and Mr. Eizenstat seems to be having 
heartburn over some of the things that you said.
    Mr. Eizenstat. I was Deputy Secretary of the Treasury--
    Mr. Watt. So I better get him at the counter.
    Mr. Eizenstat. I was Deputy Secretary of the Treasury when 
the head of the IMF was being chosen at that time, and the 
United States, in effect, vetoed the first European candidate, 
Ciao Koch-Weser, who was, I think, perfectly qualified. But it 
is more than what Joe indicated about lack of confrontation; it 
is mutual back-scratching. That is, it is not just that Europe 
doesn't want to confront the Administration now because of the 
whole Wolfowitz thing. It is that if they do, then they will 
lose the monopoly on taking the IMF post, and they need the 
U.S. vote for that.
    So it is a mutual back-scratching between the United States 
and the European Union to keep this process going. The question 
is how to change it. I think that, you know, it is something 
perhaps to interject in the presidential campaign. It is 
something to get Congress and the European parliament to act 
on. It is one thing for the development ministers, Joe, to say 
that they want that, but when you talk about the political 
ministers, the finance ministers, the foreign ministers, and 
the prime ministers, they don't want to give that up. So you 
need to build support by the parliaments, particularly, I 
think, the European parliament, and the United States.
    The second thing is on conditionality. Again, I saw this 
absolutely firsthand during the Asian financial crisis, where 
there were conditions like the cost recovery and things that 
were really unreasonable. But I think it is more than what the 
chairman called just process. One would be loathe to, in my 
estimation, to say that the World Bank could do its job unless 
you were also encouraging the country to open up their 
investment climate so that you could have foreign direct 
investment and know that you wouldn't have your profits 
expropriated, that there was an arbitration process. You would 
be wasting money if you didn't have an open trading 
environment, if you didn't have a good macroeconomic policy and 
good monetary policy and good governance policies. Now that's 
part of the Washington consensus. I think it was taken too far 
in some instances. But again, I am not prepared to say we 
should throw the baby out with the bath water, because I think 
those are all preconditions to economic growth and poverty 
alleviation, along with investing in public goods.
    The Chairman. Just briefly on that good macroeconomic 
policy is what, roughly, at this level?
    Mr. Eizenstat. Well, I think good macroeconomic policy, 
first of all, is having a transparent budget, one that's--
    The Chairman. That is procedural, not substantive?
    Mr. Eizenstat. That is substantive. It means running fiscal 
deficits that have some rational relationship to GDP, that 
don't expend so much that you inflate the economy and make your 
currency non-competitive in terms of your products. Having an 
exchange rate that allows your products to be competitive on 
the world market. And one of the reasons I am sure everybody on 
this panel would agree on the Doha Round is to open up the 
markets of--
    The Chairman. I agree with that.
    Mr. Eizenstat. I don't consider macroeconomic--
    Mr. Watt. Even on that, there is a connotation that goes 
with opening up markets that basically allows corporate--the 
corporate community a free run that doesn't always enure to the 
benefit of the country or the people in that country. So at 
some--I mean, to a point, I agree with you, but there are 
limits to that, too, unless you are going to put some 
constraints on that that make sure--I mean, I think what China, 
for example, is doing in Darfur is outrageous. You know, it is 
building like mad, but I don't see any benefit that the people 
of Sudan are getting from it other than the corrupt leadership 
there.
    Mr. Eizenstat. Let me give, if I may, one concrete example. 
It was mentioned here briefly. One of the best things Tony 
Blair did was promote the so-called EITI, which is an Energy 
Industry Transparency Initiative, in which mineral companies 
and oil companies investing in poor countries have to publish 
what they pay to those governments.
    Now, I had a specific instance with BP and the BTC 
pipeline. And Azerbaijan, which has significant corruption 
problems, is part of the EITI now, and deserves great credit 
for doing so. And that is being published, what BP and the BTC 
consortium pay to that government is being published and is 
audited. What is not being done is the next step--and here 
again, I think Congress has a role--and that is while you are 
publishing the inputs into the Fund, the government is not 
required to publish what they do with it. And that is the other 
half of it.
    So you are certainly correct that just having foreign 
investment is not enough, but the EITI was a very powerful 
weapon to at least take a step to ensure that this investment 
begins to help the people, and not just the companies or the 
corrupt leaders.
    The Chairman. Let me just say that to Mr. Eizenstat, I 
think you are underestimating the extent to which the 
objections to the Washington consensus went beyond what you are 
talking about. I think there is a genuine consensus, it is not 
just a Washington consensus. I think the Washington consensus, 
as many of us talked about had a more specific, very free 
market ideology beyond the more general level you are talking 
about, for instance, the labor and other kinds of things.
    It did seem that the Washington consensus got much more 
specific, and to be honest, you, as a Democrat who served in 
the Administration of Bill Clinton, I thought that there was a 
point in which there was a real disparity, as Mr. Stiglitz 
suggested, or said, between the policies of the Clinton 
Administration which were being pursued at home, and those it 
was pushing abroad.
    I think politics stopped at the water's edge, it seemed, 
before Bill Clinton liberalism. And he was Franklin Roosevelt 
until he hit the water and he became Ronald Reagan in terms of 
some of what got pushed. I think that got turned around some, 
but I do think we can differentiate.
    But, Mr. Beckmann or Dr. Wade, do you want to talk about 
that subject? Or we can go to Mr. Scott.
    Go ahead, Mr. Beckmann.
    Mr. Beckmann. One thing that is good about the Bank's 
governance is that there is a real recognition of the 
distribution of economic power in the world--where the money 
comes from--so that in the councils of the Bank, when a 
decision is made to do something on debt reduction for poor 
countries, there is a good chance that there is actually going 
to be money and power behind the decision.
    Just like the Security Council recognizes that some 
countries have a lot more power than other countries, and if 
there is going to be a decision about the direction of the 
United Nations, those powerful countries need to be part of the 
decision.
    In the councils of the Bank and the IMF, the countries that 
have more money, that put more money on the table, have more 
power. I thought Ambassador Eizenstat made a good point about 
the need for adjustments over time. There is no excuse for 
presidents of the World Bank who are not very well qualified; 
we need a qualified person in that position. It can't just be 
an Administration official that they are trying to move 
someplace.
    But I think there is something to be said for moderation in 
moving toward a more democratic, egalitarian governance of the 
Bank. The way we have it now--and it is partly by having an 
American at the top of the Bank and a European at the top of 
the Fund--those institutions have been able to mobilize money 
to do things for poor countries, whereas other institutions 
that are governed in a different way sometimes don't have money 
or power to do anything. They may have more democratice 
processes, but they are not sufficiently ground in the 
political realities.
    The Chairman. Mr. Scott.
    Mr. Scott. Thank you very much, Mr. Chairman. First off, I 
want to extend an extra welcome to Mr. Eizenstat. We both share 
the Atlanta connection, going back to the early days when we 
both had more hair and it certainly wasn't as white as both of 
ours are, and in our starting out with then-Congressman Andrew 
Young. And you moved on up and served President Jimmy Carter 
and President Bill Clinton, and I followed your career.
    I just want to take a moment to welcome you. It is a 
pleasure to have this opportunity to interchange with a long-
time friend, and to all of you, certainly this has been a very, 
very informative hearing.
    Let me start by taking a look at the situation that I think 
presents an opening for us here with the situation involving 
the resignation of Mr. Wolfowitz, because I think, in the 
course of accountability and transparency, here lies an 
opportunity.
    I noticed when, I think Mr. Watt asked a question relative 
to this, you, I think--someone, I think it was you, Mr. 
Stiglitz; I hope I pronounced that right--referred to the 
reason we have an American at the helm is because normally you 
have an American at the helm of the World Bank and we have a 
European at the helm of the IMF, and that--but it is a little 
bit more than that, I think, in--a little in addition to that. 
And, in fact, when it was first started, it was because of the 
fact that the United States was a key guarantor of the bonds 
and put the World Bank in a much more reliable financial 
position.
    Now we have an opportunity. There is some discussion that 
it is not democratic to have that there and that maybe there 
would be added transparency if we chose not to have an American 
there for the first time.
    What would we lose in terms of that financial stability to 
move forward on--that having an American at the helm of the 
World Bank presents, compared to any added transparency or 
accountability one might achieve by not having an American at 
the helm?
    Anyone up here, I would like to have your comments on that. 
Would we lose anything? Gain anything?
    Mr. Stiglitz. In financial terms, it would make absolutely 
no difference. The Bank has built up what might be viewed as a 
large endowment. Dr. Wade referred to that.
    It has a very conservative financial model that lies behind 
it, and it would likely continue that. So long as it continued 
that, the so-called ``backing'' that might come, extra backing 
that would come from having the President come from the United 
States, has no significant value.
    You also have to remember that much of the money that the 
World Bank gets today is raised from the markets in a real 
sense, and it is based on that endowment and a track record.
    To give you just one other example, some of the regional 
development banks, like CAF, which is an Andean bank, are able 
to borrow at very low interest rates because they are well 
managed. So as long as the Bank is well managed, then I think 
it will not have any real trouble raising money. The democratic 
advantages that we can talk about, and the ability for it to 
convey effectively the message that it can be trusted, will 
actually enhance its effectiveness.
    Mr. Scott. Do you think this is an opportunity we should 
seize and that it would be in the best interests of the Bank, 
going forward on some of these issues, that we not have an 
American at the helm?
    Mr. Stiglitz. Very much so. I think it is in the interest 
of the Bank; I think it is also in the interest of the United 
States that the way presidents are chosen is changed.
    Mr. Scott. Is that the consensus? Does anyone have a 
different opinion?
    Mr. Eizenstat. I think it is. This was an essential feature 
of our Atlantic Council report.
    May I just add one caveat to that? I agree with everything. 
This was in our report. I think it should be based on merit 
without nationality. It would be good for the Bank, good for 
the United States, but--the only ``but'' is the congressional 
reaction. That is, you would need to have a leader in addition 
to all the other attributes that we mentioned, who could come 
up to Capitol Hill and convincingly argue when there needed to 
be an IDA replenishment when the United States needed to be 
goaded into paying its fair share. There is a question of 
whether Congress would receive a non-American in the same way 
that they would an American.
    Now, I have to say that since we are behind on a lot of our 
payments anyway, that may not be the most major factor. But in 
a serious vein, it would be important that whomever is chosen--
and I do think it is on the basis of not nationality, but 
merit--be able to relate to the Congress and deal with the 
Congress and not just be Secretary General of the U.N., who has 
sort of a Third World agenda and is not sensitive to the major 
stakeholders and payers of the system.
    Mr. Scott. Thank you.
    Another line of questioning, if I may continue: Does the 
World Bank plan to implement improved strategies to reduce 
poverty in countries by aiming strategies only on boosting 
overall growth, as it is evident that this strategy may miss 
opportunities to reduce poverty?
    For example, I understand the reasoning behind focusing on 
sectors with growth potential, allowing for relatively quick 
payoffs. However, my question is, do these strategies impact 
poverty reduction in the most efficient way?
    While you are thinking about that, there is a recent report 
in the Washington Post which is entitled ``The Persistently 
Poor,'' and a report has come out where it really strikes a 
mixed message. If I may share, Mr. Chairman, just so you, as 
you are thinking about this, this is where this question comes 
from. It is written by Mr. Peter S. Goodman, and it came out 
late last year, in case you read it.
    It says, an internal report criticizes the World Bank's 
efforts on poverty despite an intensified campaign against 
poverty. World Bank programs have failed to lift incomes in 
many poor countries over the past decade, leaving tens of 
millions of people suffering, stagnating or declining living 
standards, according to a report that was released by the 
Bank's autonomous assessment arm.
    Are you familiar with that report? It says among 25--
    The Chairman. Get to the answers now, Mr. Scott.
    Mr. Beckmann, do you want to start in the middle this time?
    Mr. Beckmann. The Bank doesn't just support growth. The 
Bank is also heavily investing in primary education, and in 
improving health systems.
    Now, in general what they are trying to do is to promote 
the productivity of poor people, so this is not a Mother Teresa 
kind of operation. What they are trying to do, even in the 
social sectors, is to help kids get a decent education so they 
can be more productive, and in very poor countries, there 
really is no other option. You need to have growth among the 
poor.
    But it would be a caricature of the Bank to say that it is 
driven by a growth-only model; I don't think that has been the 
case for a long time.
    I didn't read the article that you are quoting, but the 
Bank has had limited success in many of the poorest countries, 
especially in Africa. There has been a clear case where the 
Bank had a cookie-cutter liberalism approach--open markets, cut 
government--and for many African countries, that was just not--
    The Chairman. Mr. Beckmann, I assume you are talking about 
a kind of 19th century liberalism, not the way--
    Mr. Beckmann. No. Maybe 1980's liberalism.
    The Chairman. But in the 1980's, most people called it 
conservatism.
    Mr. Beckmann. That's right. And I think it is clear that 
some of the Bank's structural adjustment lending worked for 
countries like Turkey fairly well, but it didn't work at all 
for low-income countries, partly because you eliminate 
government programs. And the idea was that the private sector 
was going to spring out of the closet and take care of the 
problems, and there was no private sector capacity to replace 
public programs that were being dismantled. A lot of the 
poorest countries in the world have not succeeded in getting 
onto a growth path, and the Bank has been there and has been 
unable to change that.
    On the other hand, there have been improvements in 
governance and economic productivity in some of the poorest 
countries in the would: 15 African countries have reduced 
undernutrition in this decade; and 19 African countries have 
had elections this decade. The Bank is not in the business of 
promoting elections, but it is in the business of promoting 
transparency and good governance. And so some good things are 
happening also among the poorest countries, and I think the 
Bank has been part of that mix, too.
    Mr. Scott. Let me ask you this--if I may, Mr. Chairman--on 
that point, because I wanted to get at Africa because I 
believe, when you look at many of these other countries where 
you have had some success--but in Africa there has been a 
stubborn problem there.
    To what degree is the political instability, the violent 
regimes--I am reminded of scenes where even with food being 
dropped at an airport, the regimes were going to blow up the 
food, people coming in, trying to help the communities, were 
unacceptable.
    Sort of reminds me of that scene in the ``Apocalypse 
Now''--I don't know if you have seen that scene where Marlon 
Brando says, well, you know I remember this time--and they came 
and they had inoculated all these children against a vaccine, 
and then they left the village, and they came back, and he said 
he saw a very pathetic sight, he saw all of these inoculated 
arms cut off in a heap.
    And in some places within Africa, I am wondering what role, 
what impact does the violence and the instability of the 
political situation and the dictators in the regimes have in 
being a hindrance to your--
    The Chairman. Dr. Wade.
    Mr. Wade. I want to be a contrarian for a moment and to say 
that the World Bank has focused too much on poverty reduction, 
specifically poverty reduction, and on the social sectors like 
primary education, primary healthcare, and governance agenda.
    You will see almost nothing in World Bank publications for 
the past 20 or more years on how to develop manufacturing, how 
to develop industry, or how to improve technology. These kinds 
of things should be central in any discussion of how to get 
countries onto a growth path.
    As you suggested, many African countries are not on growth 
paths. Any discussion of how to improve rates of growth should 
be placed at the center of that discussion--how to improve 
manufacturing, industry, how to upgrade technology and the 
like--the Bank is almost silent. And it is silent even on 
university education as distinct from primary schools. The Bank 
only deals with primary schools; it won't touch universities. I 
think this is incredibly short-sighted.
    The Chairman. Thank you. And we thought there was an 
interesting article in the New York Times a couple of days ago, 
making just that point about African universities.
    Mr. Stiglitz and then Mr. Cleaver.
    Mr. Stiglitz. Both agree with the sentiment that Dr. Wade 
has put forward, but also note that there was, during the time 
I was there, a recognition of that. It was the beginning of a 
move, but it was very difficult, and it was moving against the 
prevalent thought, so--
    The Chairman. Internal resistance in the Bank?
    Mr. Stiglitz. Yes, and some from the outside.
    One of the reports of WDR that came out in 1998 was on 
knowledge for development. One of the points that we made was 
that we needed to move from just focusing on elementary 
education to focusing on secondary and universities. For a 
report like that, it had to get a consensus.
    In terms of the actual operations, there wasn't really the 
kind of change that should have followed upon that.
    The Chairman. Mr. Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman. I want to follow 
along with this kind of discussion. The World Bank came into 
existence in the post-World War II era to try to make sure that 
Europe was rebuilt and that many of the countries that had been 
devastated in the war were rebuilt.
    We are now in the post-9/11 world. And I know that the 
World Bank is not a political agency; it has no responsibility 
for dealing with the major political issues, at least not in 
the sense that we would traditionally view it. However, my 
concern is that in the post-9/11 world, when we look at the 
amount of the loans made in sub-Saharan Africa compared to what 
we are doing in other parts of the globe, it leads me to have 
some concern that poverty, just as it does in the United 
States, breeds all kinds of possibilities for tragedy. And my 
concern is that if we continue to spend the GDP at such a low 
level in sub-Saharan Africa, that we are in fact tilling the 
soil for some despot and for possible terrorism to spread. It 
is like opening a door, saying, please, you know, why don't you 
make overtures to Osama bin Laden or whomever.
    And so, is that the kind of thinking that goes on? And if 
not, don't you think maybe we need to think in terms of what is 
going on, or rather what is not going on, in sub-Saharan Africa 
with the World Bank? Anyone.
    Mr. Eizenstat. First of all, in this fiscal year, half of 
the IDA lending, about $5.5 billion, will go to Africa. So it 
is not an insignificant amount.
    Second, in answer to the previous question of Congressman 
Scott, you can't have economic development and growth when you 
have violence and political instability.
    Third, I fully agree with you. And I chaired another 
commission for the Center for Global Development on failed 
states and U.S. national security. If you have failed states--
Sudan and others, Somalia--they become a haven for terrorist 
groups, narcotraffickers, and others that directly affect our 
national security. So trying to invest in preventing those 
countries from becoming failed states is something that 
directly relates, in my estimation, to the issue of terrorism 
and may make it politically easier to try to convince Members 
of Congress and others to support Bank efforts in these kind of 
countries. Because I think, if they fail, they do become havens 
for the very groups that you are talking about that are a 
direct threat to the United States and their own security.
    Mr. Cleaver. Well, $5 billion is no small amount of money; 
I agree with that. Most of us would not have that in our 
checking account. But $5 billion compared to what is being 
spent even in the Middle East means it is dwarfed.
    Mr. Eizenstat. Yes, sir. But if I can give you the 2005 
figure, private debt flows to sub-Saharan Africa in 2005 were 
$3.8 billion; private equity flows in sub-Saharan Africa were 
$24.7 billion, dwarfing what the World Bank did.
    So there is a increasing amount of private-sector 
investment in sub-Saharan Africa, and what needs to be done is, 
the Bank needs to create the conditions in which those 
investments pay off and more private sector investments can be 
encouraged.
    So there is a lot of capital going in not just from the 
World Bank, not just from IDA, but from the private sector into 
sub-Saharan Africa.
    Mr. Stiglitz. I still feel that if you look very carefully 
at where the money is going in the countries, there are 
countries that have good macroeconomic policies and good 
overall frameworks that are not getting as much private-sector 
investment as they need. Many of the countries have a shortage 
of funds in education, health, and other social sectors where 
the private sector isn't going. One area where the lack of 
money has a very big, direct impact is, for instance, in those 
parts of Africa where there is a strong Islamic community. If 
we don't provide good schools, children will go to schools 
organized by others who will not give them a good education in 
terms of modern society; they may get indoctrinated into views 
that most of us would say are probably antithetical to the ones 
in which we would like for them to be indoctrinated.
    That is an example of where there is a strong imperative 
for us to be much more supportive of funds in Africa and 
elsewhere in the developing world.
    Mr. Cleaver. Mr. Beckmann.
    Mr. Beckmann. More money is going to reduce poverty. More 
U.S. Government and European government money is going to 
poverty reduction and going to Africa than, say, in 1999. In 
the late 1990's, we were fighting every year to keep Congress 
from cutting money for Africa. It was just brutal. If there 
were cuts in the foreign operations budget, it came out of 
Africa.
    Since 1999, that trend has been reduced. Bread for the 
World keeps a list of poverty-focused development assistance 
programs, including IDA, the Bank's concessional affiliate, but 
then also the Millennium Challenge Account and certain accounts 
at AID and so forth. The funding from that set of programs from 
the U.S. Government was $4 billion in 1999. It is up to $12- 
$13 billion for the current fiscal year.
    And the Europeans and the Japanese have also increased 
their funding for Africa and other poor parts of the world. 
That has happened partly because 9/11 made everyone aware that 
it is not smart to neglect misery in far-off places.
    We know exactly what you are saying. There needs to be 
further increases in funding. There also needs to be 
improvements in the quality of funding. Now that we have 
substantially more money focused on trying to reduce poverty in 
the world, we need to have substantially more attention to the 
institutions that are channeling that money, including the 
World Bank, and also including the agencies of the U.S. 
Government that are charged with this purpose.
    Mr. Cleaver. Thank you. I yield back.
    The Chairman. The gentlewoman from Wisconsin has been very 
patient, but I know has a very strong interest in this area, 
particularly in Africa.
    Ms. Moore. Thank you so very much, Mr. Chairman, and I 
thank the panel. I will get right to my questions. I want to 
start with Dr. Stiglitz.
    You indicated in your written testimony, you talked briefly 
about the extractive industries' transparency initiatives. And 
I believe that the ambassador gave us an example of something 
that Tony Blair did by requiring that payments to governments 
be published as a reform that had some legs.
    And I was disappointed in your paper that you didn't sort 
of delve into this extractive industries' transparency 
initiatives, what we can do, as policymakers, to stop some of 
the offshore banking, the--you know, the Swiss bank accounts, 
the secret investments.
    Can you just share some of your ideas, and perhaps others 
will have something to say on this point as well?
    Mr. Stiglitz. Yes. It is a good question and I spend a lot 
of time talking about that in my book, ``Making Globalization 
Work.''
    Ms. Moore. Yes. I am going to read that.
    Mr. Stiglitz. For instance, one of the suggestions in terms 
of the Extractive Industry Transparency Initiative is very 
simple. It used to be that companies got a tax deduction for 
bribes; governments were paying effectively half of the bribe. 
We could use the power of the tax system and say, you don't get 
any tax deduction if you don't publish what you pay.
    You have to make payments to governments transparent. If 
American companies or those from any of the other G8 countries 
give a check to a developing country for an extractive industry 
and they don't make it public, they should not get a tax 
deduction. That, overnight, could change things.
    Ms. Moore. Could it just be a part of the cost of doing 
business, that you don't get a tax deduction? The value of a 
tax deduction may just be the cost of doing business?
    I guess the point that I want you to confirm, the whole 
panel, is that part of the reason in a lot of our aid and 
assistance, the billions that we have given to some of the 
poorest countries in the world, is because the money never 
makes it into the mouths and hands, quite frankly, of the 
people because we are enriching the leadership at the top. And 
if they are getting paid billion-dollar bribes, or half-
billion-dollar bribes, and if the benefit of extracting oil and 
gold and so on and gaining mineral rights forever is the loss 
of a tax deduction, they may see it as a cost of doing 
business.
    But I love the idea of some transparency, which leads me to 
the following question--
    Mr. Eizenstat. Can I just intervene?
    If I may, Joe was right. Before the OECD convention, which 
I helped negotiate, Germany and France, for example, allowed 
tax deductions for bribes. The World Bank itself estimates that 
there are a trillion dollars in bribes paid each year to 
developing countries, so it is a major problem.
    We have an Antibribery Act that I also negotiated in the 
Carter Administration which applied to U.S. companies. The OECD 
Convention bans the extension of bribes by all OECD countries 
to developing countries. Our Antibribery Act is quite well 
enforced; the OECD Convention is not as well enforced by 
European countries. There is still a lot of bribery going on by 
European companies in the developing world. So one thing is to 
put more pressure on those countries to live up to the very 
convention that they have signed on to.
    And second, as I mentioned earlier, is extending the EITI 
so that it not only captures what is publicly paid into the 
fund, but gets the governments to publish what they used those 
funds for.
    Mr. Stiglitz. One more thing you allude to is the secret 
bank accounts. We could stop those secret bank accounts 
overnight. If we said, our banks can't deal with other banks in 
territories that don't conform to certain basic standards, they 
would shut down. In the Cayman Islands, this bank secrecy 
survives because of our tolerance. We have shut it down for 
terrorism; we have chosen not to shut it down for corruption.
    This committee could make legislation that would shut that 
down.
    Ms. Moore. Did you hear that, Mr. Chairman?
    The Chairman. Funny you should mention that, because that 
is very much under consideration.
    Ms. Moore. Thank you very much, Mr. Chairman.
    My next question relates to the--Dr. Wade, I think you 
really elucidated this point that the Bank, the World Bank's 
market has changed in the last decade, and indeed other 
countries are going to China and other places for financing; 
that very few companies or corporations will participate, 
private investment just will not participate where the World 
Bank or the International Monetary Fund is not involved; and we 
just have been sort of asleep at the switch, and that--really, 
that China and Brazil and other places are now getting that 
business. In fact, you talked about the African Development 
Bank meeting occurring in Shanghai.
    What are you proposing that we--you know, the World Bank 
does have the IDA. Are you proposing a change in underwriting 
criteria? What exactly are you suggesting for--and also, 
perhaps, we are lending to middle-class countries and not 
lending to the poorest of the poor countries.
    I think there has been a healthy discussion about 
conditionality and other sorts of impediments. So what--and I 
am asking others on the panel, too--but, Dr. Wade, I was really 
interested in hearing from you first since you spent a lot of 
time in your written testimony talking about the change in the 
market.
    Mr. Wade. Well, on the middle countries, this is the 
subject of a lot of discussion inside the Bank at the moment, 
and some people who take the Bank's poverty reduction plan, who 
take the Bank's poverty reduction mandate in a very narrow and 
literal way say, the Bank should simply pull out of middle-
income countries.
    But that is, I think, quite wrong, and especially when you 
consider that within 4 to 5 years, China will probably be a 
middle-income country, even though it has hundreds of millions 
of people who are poor by South Asian standards.
    The question, though, is how the Bank can be relevant in 
those countries which don't need so much cheap finance, because 
they can get access just to finance from world capital markets.
    But they have a strong interest in getting access to 
knowledge, and the question is, can the Bank do much more by 
way of developing new revenue streams in fee-for-service 
activities in middle-income countries where the Bank asks the 
government of China or Brazil or Russia what kind of studies 
those governments are interested in?
    For example, studies of railway organization, let us say, 
that might be a subject that these governments would want 
disinterested advice, not necessarily advice from McKinsey, 
because McKinsey or some other private consulting firm is not 
necessarily disinterested because it has various kinds of tie-
ups. But the Bank does have a reputation for being 
disinterested.
    And then the Bank's question is, how it is going to charge 
for that kind of knowledge? That is a very relevant question in 
middle-income countries. But it does lead to the further 
question of how, if the Bank does develop in this way of 
charging fee-for-service for bringing knowledge to bear from 
around the world on the problems or the tasks of specific 
countries, how will it differentiate itself from the private 
consulting firms? That is a very real issue that the Bank has 
to deal with.
    Ms. Moore. I appreciate that. I don't want you to stray too 
far from it, because I want others to be able to answer it. 
Because I guess the ultimate question that I have is, if we are 
not reaching the poorest of the poor, with the current World 
Bank problems, with our current underwriting criteria, what can 
we do to create products that will attract investment and 
change the World Bank products so that we can lend to more 
needy countries than we do presently?
    The Chairman. I have to make this the last answer. We 
have--the hearing room is going to be used at 6:30, and 
everybody has had over 10 minutes, so I don't think we have 
cheated anybody.
    Let me just take these last answers.
    Mr. Beckmann. I think what the Bank is doing is helping a 
lot of the poorest of the poor. And specifically, in Africa, I 
think there is a set of 15 or 20 countries that have really 
benefited from some trade liberalization and from more 
development assistance. They are working with the World Bank. 
Countries like Ghana, for example, are making progress both in 
terms of economic growth and for poor people.
    There is another set of countries in Africa. Many of them 
are plagued by violence, and where there is violence, the Bank 
has not had good instruments. One of the main initiatives that 
the Bank is pursuing is how can it be effectively involved in 
those countries, like the Democratic Republic of Congo, where 
there is violence.
    As you said, the poverty contributes to the violence and 
then, as Mr. Scott said, the violence contributes to more 
poverty. In those countries, the Bank is not doing very well.
    Chairman Frank, may I offer advice in terms of what the 
committee might do?
    The Chairman. Sure. I assume beyond letting you go home, 
which is what we are about to do.
    Mr. Beckmann. I think it is a tremendous advantage that you 
have, Mr. Bachus, as the ranking member. The combination of Mr. 
Frank and Mr. Bachus is extraordinary. Global poverty reduction 
is one of the only areas where there can really be bipartisan 
collaboration in this Congress.
    President Bush's record is a good record on development 
assistance, overall. So if this committee does something 
related to the World Bank, doing it in a bipartisan way would 
be good. I think you can encourage the Administration to send 
over a qualified nominee. I think hearings on debt relief, this 
committee--
    The Chairman. We have planned them, yes.
    Mr. Beckmann. --would be great, because I think it is a big 
success story and we ought to know what made it work.
    You are not going to like this, maybe, but I think you 
ought to give the Bank some space. There has been a mess and 
they have to repair that mess, so I would give them a little 
space.
    You are going to authorize the next IDA, so you can make it 
clear that you will want to see certain improvements in the 
quality of the Bank or they are not going to get the 
authorization of the next IDA.
    I would hesitate a bit to actually pass legislation that is 
going to bind the Bank and the Treasury in new ways at a time 
when there have been some obvious mistakes made. We need to let 
the new management of the Bank try to get people working 
together.
    The Chairman. We will take a look at it. We have tended to 
work in a bipartisan way here in a number of things, including 
not just the World Bank, but some of the other IFIs we have 
worked with.
    Our colleagues in the Appropriations Committee, I think 
made some real improvements in transparency. And I do want to 
reiterate the statement I made talking with Mr. Eizenstat. 
There is a genuine consensus. I don't know about procedural 
stuff, but it is deeply procedural; it is the basic rules of 
the game, and we have pushed towards that. Where we have held 
off are some things that I think are more ideological in the 
liberal/conservative sense.
    I will say this in terms of the Administration, and you 
mentioned it, I think; it is a good news/bad news story. Within 
the budget constraints, the Administration has been generous. 
But they created those budget constraints, and the budget 
constraints are a $500 billion war; and in my judgment, 
excessive tax cuts for very wealthy people, I think, do more 
harm than the relative improvement within that constraint to do 
good. But, yes, it has been bipartisan, and we intend to 
continue that.
    I will close by saying that I am going to be looking for a 
president, but I am generally reinforced in my view now that 
insisting that the next president of the Bank be an American 
expends a lot of American influence for no measurable gain. 
That is, we want a good president; we want a president who 
shares the values that are widespread in America; and we want a 
president who wants to do what America thinks is in the 
interest of the world. Whether or not he or she is an American 
is irrelevant.
    What I fear is that we will give up too much in terms of 
nationality; we will bind nationality by trading off policy. 
And so I am encouraged by what you said today, and I intend to 
ask some of my colleagues to join me in sending precisely that 
message to our colleagues.
    We want a good World Bank president. We want someone who 
will do the things we think most Americans would want that 
president to do, but that person doesn't necessarily have to be 
an American.
    With that, I really am very appreciative. This is making a 
very serious impression on matters where we intend to act. I 
thank my colleagues for staying. And usually we have seven or 
eight members who stayed after the last votes, which is what we 
have had. But we now do have a staff caucus, a staff briefing, 
that claims the room, and so I thank you all very much.
    Thank you.
    [Whereupon, at 6:30 p.m., the hearing was adjourned.]



                            A P P E N D I X



                              May 22, 2007

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

