[Congressional Record Volume 143, Number 143 (Wednesday, October 22, 1997)]
[Senate]
[Pages S10911-S10915]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
JAMES D. WOLFENSOHN OF THE WORLD BANK GROUP
Mr. STEVENS. Mr. President, not many Americans--in fact not many
human beings--have the opportunity to bring about permanent change in
our world. Even if a person has the opportunity, it is seldom that
change can be brought about in a time span of only 3 years. A
distinguished exception to this is the president of the World Bank
Group, James D. Wolfensohn. Under
[[Page S10912]]
President Wolfensohn's wise guidance, the World Bank Group is
facilitating global changes through the application of systems and
knowledge developed in the United States.
Jim Wolfensohn, formerly president and chief executive officer of his
own corporation, chairman of the board of trustees of the John F.
Kennedy Center for the Performing Arts, and executive partner at
Salomon Bros., recently delivered his third yearly address to the board
of governors of the World Bank Group.
After reading this compelling statement twice, I concluded his
message should be available to all who wonder if our citizens are
applying the lessons of enlightened free enterprise in their business
and personal lives throughout the world. I envy Jim Wolfensohn. He is
truly making a difference in this world. It is my pleasure to commend
his remarks to the Senate, and I ask unanimous consent that his
statement entitled ``The Challenge of Inclusion'' be printed in the
Record.
There being no objection, the statement was ordered to be printed in
the Record, as follows:
The Challenge of Inclusion
(By James D. Wolfensohn)
I am very pleaded to welcome you to these Annual Meetings
of the World Bank Group and the International Monetary Fund
(IMF). I am also delighted to be in Hong Kong. This beautiful
and bustling city, which I have visited regularly for forty
years, exemplifies the openness, dynamism, and optimism of so
much of Asia today. And so does our meeting here in this
magnificent conference center, where everything has been done
impeccably. I would like to express my thanks to our hosts,
the government of China, and the authorities here in Hong
Kong. It is impossible to imagine greater courtesy,
generosity, and efficiency. We look forward to your continued
progress.
China's success has been truly remarkable. Less than a
generation ago, eight in ten Chinese eked out an existence by
tilling the soil for less than a dollar day. One adult in
three could neither read nor write. Since then, 200 million
people have been lifted out of absolute poverty, and
illiteracy has fallen to less than one in ten. China is our
largest borrower, one of our most valued shareholders, and
home to more than a quarter of our clients. I am delighted
that our partnership continues to strengthen.
This is the third time that I address you as president of
the World Bank Group--the third time I have the opportunity
to express my deep gratitude to my friend Michel Camdessus,
whose collaboration over the past two and a half years has
been so invaluable to me. We work ever more closely together,
and I continue to benefit from his great experience and
judgment.
From the beginning, one of my priorities has been to take
the pulse of development firsthand. I have now visited almost
sixty countries. I have met with governments,
parliamentarians, and the private sector. I have talked with
national and international nongovernmental organizations
(NGOs) on subjects ranging from women's issues to the
environment, from health to the impact of macroeconomic
reform.
Wherever I go, I continue to be impressed by the people we
serve--by their strength, their energy and their enterprise,
even in the most abject conditions. By the hundreds of
thousands disadvantaged by war, by the millions of children
without families condemned to live on the streets, by the
disabled shut out from any kind of social support. By the
plight of the poorest.
Today our clients number 4.7 billion people in over 100
countries. Three billion live on under 2 dollars a day. A
billion three hundred million live on under 1 dollar a day.
One hundred million go hungry every day; 150 million never
even get the chance to go to school.
But whether they live on the plains or in the valleys,
whether they live in slums or isolated villages, whether they
speak Hindi, Swahili, or Uzbek, they have one thing in
common: They do not want charity. They want a chance. They do
not want solutions imposed from without. They want the
opportunity to build from within. They do not want my culture
or yours. They want their own. They want a future enriched by
the inheritance of their past.
I have learned that people are the same wherever they are--
here in this room and across the world. We all want the best
for our children and our families. We all want peace and
economic and physical security. We all want to live in a
supportive community. We all want personal dignity.
This was vividly brought home to me six months ago when I
visited a large water and sanitation project that the Bank is
supporting in the favelas of Brazil. The project, which is
now self-sustaining, brings together the local community, the
private sector, and NGOs.
With my host, the vice governor of the state of Rio, I went
from one makeshift home to the next, talking with the women
who live there and who used to carry the water on their
shoulders from the bottom of the hillside to their dwellings
at the top. One after the other, they proudly showed me their
running water and flushed their toilets and told me how the
project had transformed their lives.
And as we walked around, more and more of the women came up
to me displaying pieces of paper showing charges and receipts
for a few reals a month. I watched and listened to this until
the vice governor said, ``What they're showing you, Jim, is
that this is the first time in their lives that their name
and address have appeared on an official notice. This is the
first time their existence has been officially recognized.
This is the first time that they have been included in
society. With that receipt they can get credit to purchase
goods, with that receipt they have recognition and hope.''
As I walked back down the hill from that favela, I realized
that this is what the challenge of development is all about--
inclusion. Bringing people into society who have never been
part of it before. This is why the World Bank Group exists.
This is why we are all here today. To help make it happen for
people.
The State of Development circa 1997
Where are we in terms of ``making it happen'' in 1997? In
many ways, this is the best of times for developing
countries: Output grew last year by 5.6 percent--the highest
rate in twenty years. Foreign direct investment exceeded $100
billion--the most ever. Private capital flows now total $245
billion--five times official development assistance. And
developing countries are projected to enjoy continued strong
growth over the next ten years.
Social indicators are also improving. Life expectancy has
risen more in the past forty years than in the previous four
thousand. And freedom is blossoming. Today nearly two in
three countries use open elections to choose their national
leadership and 5 billion people live in a market economy--up
from 1 billion ten years ago.
There is also much good news regionally: Reform programs in
Eastern Europe and Central Asia continue to advance, and
prospects for accession to the European Union now look
promising for several countries in the region. There is real
progress in Sub-Saharan Africa, with new leadership and
better economic policies. Gross domestic product (GDP) grew
4.5 percent in 1996, up from 2 percent two years ago.
In the Middle East and North Africa, despite political
problems, efforts continue to boost regional trade and
investment, improve competitiveness, and expand economic
opportunity. In Latin America countries have emerged from the
tequila crisis, with their earlier gains against
hyperinflation fully intact.
In East Asia, despite recent turbulence in financial
markets, we still expect long-term growth and poverty
reduction to be strong. And in South Asia, home to 35 percent
of the developing world's poor, growth rates over the past
several years have approached 6 percent.
This all adds up to much to celebrate--but there is also
much to lament. Yes, the glass is half full, but it is also
half empty. Too many people are not enjoying the fruits of
success--
Here in East Asia, where, despite the ``miracle,''
inequities between rural and urban areas and between the
skilled and the unskilled are becoming more widespread.
In the countries of the former Soviet Union, where the old
and the unemployed have become more vulnerable amidst the
turbulence caused by the transition from command to market
economies.
In parts of Latin America, where problems of landownership,
crime, drug-related violence, unequal access to education and
health care, and enormous disparities in income hinder
progress and threaten stability.
And in many of the world's poorest countries, where
population growth continues to run ahead of economic growth,
eroding living standards.
And the deeper tragedy is that the glass is almost totally
empty for too many. Indeed, for too many, it is the worst of
times, as huge disparities persist across and within
countries.
In too many countries, the poorest 10 percent of the
population has less than 1 percent of the income, while the
richest 20 percent enjoys over half. In too many countries,
girls are still only half as likely as boys to go to school.
In too many countries, children are impaired from birth
because of malnutrition, inadequate health care, and little
or no access to early childhood development programs. In too
many countries, ethnic minorities face discrimination and
fear for their lives at the hands of ethnic majorities.
What we are seeing in the world today is the tragedy of
exclusion.
The Challenge Ahead
Our goal must be to reduce these disparities across and
within countries, to bring more and more people into the
economic mainstream, to promote equitable access to the
benefits of development regardless of nationality, race, or
gender. This--the Challenge of Inclusion--is the key
development challenge of our time.
You and I and all of us in this room--the privileged of the
developing and the industrial world--can choose to ignore
that challenge. We can focus only on the successes. We can
live with a little more crime, a few more wars, air that is a
little bit dirtier. We can insulate ourselves from whole
sections of the world for which crisis is real and daily but
which to the rest of us is largely invisible. But we must
recognize that we are living
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with a time bomb, and unless we take action now, it could
explode in our children's faces.
If we do not act, in thirty years the inequities will be
greater. With population growing at 80 million a year,
instead of 3 billion living on under $2 a day, it could be as
high as 5 billion. In thirty years, the quality of our
environment will be worse. Instead of 4 percent of tropical
forests lost since Rio, it could be 24 percent.
In thirty years, the number of conflicts may be higher.
Already we live in a world which last year alone saw twenty-
six interstate wars and 23 million refugees. One does not
have to spend long in Bosnia or Gaza or the Lakes District in
Africa to know that without economic hope we will not have
peace. Without equity we will not have global stability.
Without a better sense of social justice our cities will not
be safe, and our societies will not be stable. Without
inclusion, too many of us will be condemned to live
separate, armed, and frightened lives.
Whether you broach it from the social or the economic or
the moral perspective, this is a challenge we cannot afford
to ignore. There are not two worlds, there is one world. We
breathe the same air. We degrade the same environment. We
share the same financial system. We have the same health
problems. AIDS is not a problem that stops at borders. Crime
does not stop at borders. Drugs do not stop at borders.
Terrorism, war, and famine do not stop at borders.
And economics is fundamentally changing the relationships
between the rich and the poor nations. Over the next twenty-
five years, growth in China, India, Indonesia, Brazil, and
Russia will likely redraw the economic map of the world, as
the share in global output of the developing and transition
economies doubles. Today these countries represent 50 percent
of the world's population but only 8 percent of its GDP.
Their share in world trade is a quarter that of the European
Union. By the year 2020, their share in world trade could be
50 percent more than Europe's.
We share the same world, and we share the same challenge.
The fight against poverty is the fight for peace, security,
and growth for us all.
How, then, do we proceed? This much we know: No country has
been successful in reducing poverty without sustained
economic growth. Those countries that have been most
successful--including, most notably, many here in East Asia--
have also invested heavily in their people, have put in place
the right policy fundamentals, and have not discriminated
against their rural sectors. The results have been dramatic:
large private capital inflows, rapid growth, and substantial
poverty reduction.
The message for countries is clear: Educate your people;
ensure their health; give them voice and justice, financial
systems that work, and sound economic policies, and they will
respond, and they will save, and they will attract the
investment, both domestic and foreign, that is needed to
raise living standards and fuel development.
But another message is also emerging from recent
developments. We have seen in recent months how financial
markets are demanding more information disclosure, and how
they are making swift judgments about the quality and
sustainability of government policies based on that
information. We have seen that without sound organization and
supervision a financial system can falter, with the poor hurt
the most. We have seen how corruption flourishes in the dark,
how it prevents growth and social equity, and how it creates
the basis for social and political instability.
We must recognize this link between good economic
performance and open governance. Irrespective of political
systems, public decisions must be brought right out into the
sunshine of public scrutiny. Not simply to please the markets
but to build the broad social consensus without which even
the best-conceived economic strategies will ultimately fail.
the development community
How can we in the broader development community be most
effective in helping with the enormous task ahead?
It is clear that the scale of the challenge is simply too
great to be handled by any single one of us. Nor will we get
the job done if we work at cross purposes or pursue rivalries
that should have been laid to rest long since. Name calling
between civil society and multilateral development
institutions must stop. We should encourage criticism. But we
should also recognize that we share a common goal and that we
need each other.
Partnership, I am convinced, must be a cornerstone of our
efforts. And it must rest on four pillars.
First and foremost, the governments and the people of
developing countries must be in the driver's seat--exercising
choice and setting their own objectives for themselves.
Development requires much too much sustained political will
to be externally imposed. It cannot be donor-driven.
But what we as a development community can do is help
countries--by providing financing, yes; but even more
important, by providing knowledge and lessons learned about
the challenges and how to address them.
We must learn to let go. We must accept that the projects
we fund are not donor projects or World Bank projects--they
are Costa Rican projects, or Bangladeshi projects, or Chinese
projects. And development projects and programs must be fully
owned by local stakeholders if they are to succeed. We must
listen to those stakeholders.
Second, our partnerships must be inclusive--involving
bilaterals and multilaterals, the United Nations, the
European Union, regional organizations, the World Trade
Organization, labor organizations, NGOs, foundations, and the
private sector. With each of us playing to our respective
strengths, we can leverage up the entire development effort.
Third, we should offer our assistance to all countries in
need. But we must be selective in how we use our resources.
There is no escaping the hard fact: More people will be
lifted out of poverty if we concentrate our assistance on
countries with good policies than if we allocate it
irrespective of the policies pursued. Recent studies confirm
what we already knew intuitively--that in a good policy
environment, development assistance improves growth prospects
and social conditions, but in a poor policy environment, it
can actually retard progress by reducing the need for change
and by creating dependency.
I want to be very clear on this point: I am not espousing
some Darwinian theory of development whereby we discard the
unfit by the wayside. Quite the contrary. Our goal is to
support the fit and to help the unfit fit. This is all about
inclusion.
In Africa, for example, a new generation of leaders
deserves our strongest possible support for the tough
decisions they are making; they have vast needs and a growing
capacity to use donor funds well in addressing them. We must
be there for them. It is an economic and a moral imperative.
However, where aid cannot be effective because of bad
policy or corruption or weak governance, we need to think of
new ways to help the people. not the old technical assistance
approaches of the past that relied too heavily on foreign
consultants. But helping countries help themselves: by
building their own capacity to design and implement their own
development.
Finally, all of us in the development community must look
at our strategies anew.
We need that quantum leap which will allow us to make a
real dent in poverty. We need to scale up, to think beyond
individual donor-financed projects to larger country-led
national strategies and beyond that to regional strategies
and systemic reform.
We need approaches that can be replicated and customized to
local circumstances. Not one agricultural project here or one
group of schools there. But rural and educational country
strategies that can help the Oaxacas and the Chiapas of this
world, as well as the Mexico Cities.
We need to hit hard on the key pressure points for change--
adequate infrastructure in key areas, social and human
development, rural and environmental development, and
financial and private sector development.
And we need to remember that educating girls and supporting
opportunities for women--health, education and employment--
are crucial to balanced development.
In the struggle for inclusion, this all adds up to a
changed bottom line for the development community. We must
think results--how to get the biggest development return from
our scarce resources. We must think sustainability--how to
have enduring development impact within an environmentally
sustainable framework. We must think equity--how to include
the disadvantaged. We must focus not on the easy projects but
on the difficult--in northeast Brazil, in India's Gangetic
Plain, and in the Horn of Africa. Projects there will be
riskier, yes. But success will be worth all the more in terms
of including more people in the benefits of development--and
giving more people the chance of a better life.
The World Bank Group's Response
How is the Bank Group responding to the Challenge of
Inclusion?
Last year, I said that if the Group was to be more
effective, it needed to change--to get closer to our clients'
real needs, to focus on quality, and to be more accountable
for the results of our work. This year, I want to tell you
that it is happening. Not only is the Bank changing, but the
need for change is now fully accepted.
I know--and you know--that the Bank has tried to change
before. But there has never been this level of commitment and
consensus. We are building on the mission statement
articulated by my predecessor, Lew Preston, whose untimely
death prevented him from implementing his plans.
Earlier this year, we launched an action program--the
Strategic Compact--to renew our values and commitment to
development and to improve the Bank's effectiveness. I
believe the Compact is historic. Not because there is
agreement on every paragraph of the document; but because
staff, management, and shareholders--with terrific support
from our Executive Directors--are now united on the future
direction of the institution. And while we still have a long
way to go, and while change is painful--and some people are
undoubtedly feeling that pain--implementation is well under
way.
I really believe that this time we can succeed. And we will
succeed because of our truly remarkable and dedicated staff.
I do not believe a better development team exists, or one
with more experience in fighting poverty.
But the Compact is not primarily about our organization and
internal change; it is about our clients and meeting their
needs more effectively. To take this beyond rhetoric, we have
decentralized aggressively to
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the field. By the end of this month, eighteen of our forty-
eight country directors with decisionmaking authority will be
based in the countries they serve--compared with only three
last year.
We have speeded up our response time and have introduced
new products such as the single currency loan and loans for
innovative projects of $5 million or less that can be
implemented very quickly.
Working with Michel Camdessus and our colleagues in the
IMF--as well as with many other partners--we have prepared
debt reduction packages worth about $5 billion for six
heavily indebted poor countries under the HIPC Initiative.
Not bad for an effort that did not even have a name eighteen
months ago. And we are moving speedily ahead to help other
HIPC countries.
The New Bank is committed to quality.
We have put in place reinvigorated country management
teams, with 150 new managers selected over the last six
months, and rigorous training and professional development
programs have been introduced for all staff. The
International Finance Corporation (IFC) has also made
major changes in management and is decentralizing to the
field.
We have improved the quality of our portfolio, and as a
result our disbursements reached a record level last year of
$20 billion.
And the quality of all our work is being enhanced by the
progress we have made toward becoming a Knowledge Bank. We
have created networks to share knowledge across all regions
and all major sectors of development. Our Economic
Development Institute is playing a leading role in this area.
Last June in Toronto, working with the Canadian government
and many other sponsors, EDI brought together participants
from over 100 countries, for the first Global Knowledge
Conference.
My goal is to make the World Bank the first port of call
when people need knowledge about development. By the year
2000, we will have in place a global communications system
with computer links, videoconferencing, and interactive
classrooms, affording our clients all around the world full
access to our information bases--the end of geography as we
at the Bank have known it.
We are also promoting increased accountability throughout
the World Bank Group:
We have developed a corporate scorecard to measure our
performance. We are closely monitoring compliance with our
policies and are continuing to work to improve the inspection
process by making it more transparent and effective. And we
are designing new personnel policies that explicitly link
staff performance to pay and promotion.
We are also emphasizing accountability in the dialogue with
our clients. Last year, I highlighted the importance of
tackling the cancer of corruption. Since then, we have issued
new guidelines to staff for dealing with corruption--and for
ensuring that our own processes meet the highest standards of
transparency and propriety. We have also begun working with a
first half-dozen of our member countries to develop
anticorruption programs.
My bottom line on corruption is simple: If a government is
unwilling to take action despite the fact that the country's
development objectives are undermined by corruption, then the
Bank Group must curtail its level of support to that country.
Corruption, by definition, is exclusive: It promotes the
interests of the few over the many. We must fight it wherever
we find it.
But key to meeting the challenge of inclusion is making
sure not only that we do things right but that we do the
right things. Earlier, I mentioned the strategic pressure
points of change. Let me say a few words about what we are
doing in each of these areas.
Human and social development. We are mainstreaming social
issues--including support for the important role of
indigenous culture--into our country assistance strategies so
that we can better reach ethnic minorities, households headed
by women, and other excluded groups.
We are participating in programs designed by local
communities to address pervasive needs, such as the EDUCO
basic literacy program in El Salvador and the District
Primary Education Program in India, and these programs are
being replicated by other countries.
We are increasing our support for capacity-building--
particularly the comprehensive program initiated by the
African countries last year.
Sustainable development. In the rural sector, which is home
to more than 70 percent of the world's poor, we have
completed a major rethinking of our strategy. Lending is now
up after many years of decline, supporting innovative
programs such as the new market-based approach to land reform
in Brazil.
We are also supporting our clients' efforts to address the
brown environmental issues--clean water and adequate
sanitation--that are so often neglected but are so important
for the quality of the everyday lives of the poor.
And, through the Global Environment Facility, the Global
Carbon Initiative, and a new partnership with the World
Wildlife Fund to protect the world's forests, we are
continuing to advance the global environmental agenda.
The private sector. We are capitalizing on the synergies
between the Bank, the IFC, and the Multilateral Investment
Guarantee Agency (MIGA) and are coordinating our activities
under a single, client-focused service ``window.''
Across the Bank Group, we are building up our work on
regulatory, legal, and judicial reform designed to help
create environments that will attract foreign and domestic
private capital. We are using International Bank of
Reconstruction and Development (IBRD) guarantees to help
support policy changes and mitigate risk, and we are
expanding the product line of the International Development
Association (IDA) to help poor countries develop their
private sectors and become full participants in the global
economy.
Meanwhile, the IFC is working in 110 countries, and in more
sectors, employing more financial products than ever before.
Last year saw $6.7 billion in new approvals in 276 projects.
The IFC's Extending the Reach Program is targeting thirty-
three countries and regions that have received very little
private sector investment. Again, the goal is clear: to bring
more and more marginalized economies into the global
marketplace.
MIGA, too is playing an active and enhanced role. Last year
it issued a record seventy guarantee contracts for projects
in twenty-five developing countries, including
eleven countries where it has not been active before. I am
delighted that yesterday the Development Committee agreed
to an increase in MIGA's capital that will allow it to
continue to grow.
The financial sector. This pressure point has been brought
sharply into focus by recent events in East Asia. Here too we
are scaling up our work in coordination with the IMF and the
regional development banks for the simple reason that when
the financial sector fails, it is the poor who suffer most.
It is the poor who pay the highest price when investment and
access to credit dry up, when workers are laid off, when
budgets and services are cut back to cover losses.
But success in the financial sector requires much more than
the announcement of new policies or financial packages pulled
together when crisis hits. This is why we are expanding our
capacity for banking and financial system restructuring--and
not just for the middle-income countries, but taking on the
larger task of financial sector development in low-income
countries.
For those countries, home to the world's 3 billion poorest
people, IDA remains the key instrument for addressing the
Challenge of Inclusion. I will be coming back to you in due
course to seek your support for the twelfth replenishment of
IDA.
conclusion
I believe we have made considerable progress in putting our
own house in order in preparation for the challenges of the
new millennium.
1997 has been a year of significant achievement. We must
push ahead with this process. We must make sure that we
deliver next year's work program, that we strengthen the
project pipeline and increase the resources going directly to
the front line. And we must implement our recently completed
cost-effectiveness review.
But the time has also come to get back to the dream. The
dream of inclusive development.
We stand at a unique moment in history when we have a
chance to make that dream a reality. Today, we have
unprecedented consensus on the policies that need to be put
in place for sustainable and poverty-reducing growth. Today,
we have clear and unambiguous evidence of the economic and
social linkages between the developing and the industrial
worlds. Today, we face a future where, unless we take action,
our children will be condemned to live in a degrading
environment and a less secure world. All we need today is the
determination to focus on tomorrow and the courage to do it
now.
As a development community we face a critical choice.
We can continue business as usual, focusing on a project
here, a project there, all too often running behind the
poverty curve. We can continue making international
agreements that we ignore. We can continue engaging in turf
battles, competing for the moral high ground.
Or we can decide to make a real difference.
But to do that, we need to raise our sights. We need to
forge partnerships to maximize our leverage and our use of
scarce resources. And we need to scale up our efforts and hit
hard on those areas where our development impact can be
greatest.
We at the Bank Group are ready to do our part. But we
cannot succeed alone. Only if we work together will we make a
dent. Only if we collectively change our attitude will we
make that quantum leap. Only if, in board rooms and
ministries and city squares across the globe, we begin to
recognize that ultimately we will not have sustainable
prosperity unless we have inclusion, will we make it happen.
Let me end where I began: in that favela in Brazil: What I
saw in the faces of the women there, I have also seen on the
faces of women in India showing me passbooks for savings
accounts. I have seen it on the faces of rural cave dwellers
in China being offered new, productive land. I have seen it
on the faces of villagers in Uganda, able for the first time
to send their children to school because of the private
profit they can now make through rural extension schemes.
The look in these people's eyes is not a look of
hopelessness. It's a look of pride, of self-esteem, of
inclusion. These are people who have a sense of themselves,
who have a sense of tradition, who have a sense of family.
All they need is a chance.
Each one of us in this room must take personal
responsibility for making sure they get
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that chance. We can do it. For the sake of our children, we
must do it. Working together, we will do it.
____________________