EM: How concerned over you about the slowdown in the global economy and the impact that will have on your task of boosting development and tackling poverty?
JYK: We are always in close communication with our sister organisation, the IMF, and what they have said [in the WEO] we agree with. On one hand we are moving in the right direction and the actions that were taken by the ECB and [Federal Reserve chairman Ben] Bernanke have improved the investment environment a bit. But the investment projections and the fact that we have cut back on our expectations is a very, very serious concern. Our role is to make sure that in the context of moving in the right direction that some of the actions being taken are good. But with these lower forecasts for growth we have to make absolutely sure that the developing economies are not just responding to the short term changes and fluctuations. We are working with them on the fundamental issues of food security but most of all but to make sure that they are looking at the medium and long term plans for getting back on the path of growth. In the midst of all the economic crisis, there are some encouraging signs out there. Africa has grown by 5% and if you look back at over the last five years it is extremely important to note that almost half of global growth came from developing economies. We feel that our job in the face of the more modest expectations, we have to get more active in terms of helping the poorest countries but the middle income countries as well get back onto the path for growth. It is different for every country. We can't simply sit on our hands and wait for the situation to get better. Each of our member countries has to be aggressive in thinking of medium and long-term plans to restore growth.
EM: But many of those problems are coming out the developed world and particular Europe. Maybe the World Bank hasn't been so noisy about that. With eurozone policymakers coming to Tokyo do you have a message for them at these meetings?
JYK: The most important thing is that there have been a lot of promises made about reforms and about cuts to spending. Even now – and not just in the area of austerity – there are different things that the ministers have promised to do to restore growth. We would like everyone to go back and just do these things. If the ministers simply did all the things that they promised to do, I think we would be in a much better shape. They should do those things that they have promised to do and let's really drive forward to restore growth. We understand that there are political realities and we have said on many occasions we are ready to help anyone. I was in South Korea where we announced a partnership South Africa. We have not had the closest relationship with them over the last couple of years but in that particular country what they want to do to restore growth is to work with us to make sure that all the promises they have made to their people receive action and have better execution on the ground. But they are saying for them to restore growth we have to make those critical investments in our people and provide the foundations for future growth improving the educational system and building a better healthcare system that actually works and looking hard at their business environment to spur even more small- and medium-sized enterprise growth. So the messages are just do what you said and for the developing economies work with us and let's put in place robust plans for long-term growth
EM: Let me just ask you about the United States. There are real worries that if the US falls off the fiscal cliff it will create a double dip recession and then we are back to the question of your concern about the impact on the developing world.
JYK: Falling off the fiscal cliff would be terrible for the developing world – we know that. We are the middle of a very close and difficult presidential election. I am cautiously optimistic that after the presidential election we will find a way out. I know that there are intensive discussions going on right now and that American lawmakers are very much aware of the enormous global impact it would have if they can't come to an agreement. To me it reflects an issue that we talked about just this morning with Japanese lawmakers. They said 'we want you to go to Sendai because we want you to understand one of the great traits of the Japanese people and that's solidarity and social cohesion and our commitment to each other is very strong and that's going to be the basis of future growth'. I was just in South Korea, and you remember what happened during the the crisis of the late 1990s. This was one of the greatest tests of their social cohesion as what you saw was Korean citizens literally taking their jewellery and their watches to be melted down and creating $1 billion for the Korean treasury just to help with the balance of payments and to get the economy growing again. Very fundamentally this is a question of stability and cohesion. The Europeans are searching for it now and find ways to that the German people can feel some sort of solidarity with the people of Greece. This is a difficult problem but I would simply argue that it is critical for us to find a path towards that sort of solidarity. If we can do that I am even more optimistic that growth will be restored.
EM: Do you have anything specific in mind in terms of that finding solidarity such as the banking union or more action being taken by Germany?
JYK: It's really difficult for me to make specific recommendations for political action and we don't as a rule comment on internal political matters. But as president of the World Bank seeing the impact of a lack of solidarity around the rest of the world, the best I can do is to strongly encourage countries to find a path towards solidarity. My specific view is that there countries that have taken extraordinary measures to lay the foundations for social cohesion and solidarity. We believe that Koreans rallying around their treasury of all places in the late 1990s had a real impact. Now whether that is going to move countries in Europe, I'm not sure but I think it is my role to point out that there are examples and say 'please find your path to doing just that'.
EM: After being in power for 100 days can you say what your three top priorities are, and what you want to be judged on at the of your first term?
JYK: First of all, in many ways our fundamental mission is inscribed on the walls of the World Bank [building in Washington DC] as you walk in – our dream is a world free of poverty. We do the poverty numbers and we have the greatest expert understanding of poverty. Robert McNamara coined the term 'absolute poverty' and rallied the world around people living in absolute poverty. The question I have been asking our teams is what can we do to fundamentally change the arc of history in the sense of ending absolute poverty more quickly than it is currently predicted to end. The current predictions are 20 to 25 years. I am asking the question 'can the World Bank working in close collaboration with its partners, other development agencies and the UN system, can we end poverty sooner than it might have been ended'.It's our job to have a catalytic effect on poverty. The good news is that around the institution, the answer has been a very strong yes. That's why we came to work at the World Bank – we want to fight poverty and we want to make a difference in history. It's been my life's work, working in situations of great poverty and this organisation is embracing this fundamental mission.
Secondly, the question is how you do this and on that I think the jury is in. In our World Development Report 2013 we were very clear: 90% of all jobs are created in the private sector and everyone in the world wants a good job. If everyone in the world wants a good job and 90% of the jobs are created in the private sector, there is no question that what we have to do is to help countries boost prosperity by spurring growth especially in the private sector. There are all sorts of inputs that are needed: you have to provide healthcare, education, social protections – all the things that provide the foundation for economic growth. But fundamentally every country has to ask itself 'is the business environment conducive to the kind of growth that creates the good growth that everyone wants?'. We talk about this as shared prosperity and the reason we say is that there is overwhelming evidence that if you have economic growth and young people are not included you have situations like the Arab Spring. So growth in your GDP without inclusion is a fundamentally unstable position.
The third priority is that we also know that there are fundamental global public goods that we have to address. For example shared prosperity to me means prosperity that is shared with future generations. I am the first World Bank president trained in the sciences and have been doing an intense tutorial with bank staff on climate change. I thought I was up to date on this but being able to talk to some of the best climate scientists in the world through this new, what I have discovered is that it’s much worse than I thought. The consensus around man-made climate change is now absolutely overwhelming. There were research institutes created by climate change doubters to find data that would cast doubt. Those institutes have come out and said, my goodness it's worse than we thought. So now there is a consensus and as a president of the World Bank trained in the sciences I feel it is my role to tackle some of these issues around global public goods. We have to be much more serious about climate change. Moreover we have to integrate work on issues like climate change into our other objectives. So one of the things that we want to do is to really find ways of boosting the market for technologies, interventions that will lead to the mitigation and adaptation of climate change. There are some companies that have understood this – General Electric is one of them and is really good on climate change mitigation and adaptation. We really need to get companies and countries to see responsiveness to climate change as a source for future economic growth. I don't think we are going to get where we want to go simply by asking people to change their behaviour. That's really important but we have to see tackling climate change as a potential area of economic growth. If we can move the world economy in that direction we will both be pro-growth and tackle one of these critical issues. Climate change and the environment were not at the forefront of the World Bank's concerns 20 years ago but now I feel it is one of my primary responsibilities to speak loudly and clearly about what we know and to make it very clear what it means. We are living in a 0.8 degree world but we are 0.8 degrees warmer than historical averages but in 30 or 40 years' time it is very likely that we will be in a 2 degrees world – 2 degrees warmer. That means that my three-year-old son when he is my age is going to be living in a completely different world than we live in now. Dramatic changes to fisheries and land that is now arable for growing food is not going to be arable any more. End poverty? That's our absolute mission. We need to boost prosperity and work with countries, both in terms of the input to boost growth but also focusing on the business environment. Finally we have to tackle issues like climate change because we are the World Bank and we have a responsibility to tackle these issues for the entire world.
EM: That's a big list. Are you confident you have the resources given that may take you away from some of the income-earning investment? Or will you need an IDA-style refinancing from the public sector?
JYK: Right now, because of the current climate, we are not having discussions on capital adequacy. We had a very generous capital increase right before I took over the job – a very generous IDA16 replenishment. So right now we are not having the discussion about needing more money. I think though that the discussion that we need to have is that we need to make some choices. What I have talked about is three main issues and we have a huge organization where everything is related in some form or other to development. The question we are going to ask and we are going to ask it in a very pointed way is how does what you do within the World Bank line up with these three fundamental mission statements. I think we are going to have some choices about things that we do more of and things that we do less of and I am willing to have that discussion.
EM: Do you think that will lead to some form, of reorganization within the Bank. Have you brought McKinsey in?
JYK: I am personally leading the strategic reform plan and McKinsey is working on that. McKinsey has experience of leading a very effective and successful strategic process for IFC, our private sector wing. And because of that experience, we thought that could be useful for us. I am not coming in and trying to rearrange the organisational chart. That’s not my goal. We are starting with this fundamental discussion. What I have found at the Bank and it as a pleasant discovery is that our staff has a deep, deep passion for poverty eradication and that's not something that people who knew the Bank told me would be the first thing that I'd find. Because of the deep passion that we found for poverty eradication, we can have the discussion about reorganisation on that basis – not on the basis that we have got to cut back on our spending. I don't think is an effective way of making an organisation more effective. What you have to do is to start from first principles and then say that if that's our passion and what we want to do. How does our current organisational structure align with that particular objective. We are at an early stage of that conversation. I am a little bit surprised that after 14 weeks we are deeply into having that conversation. So far our leaders have come up with ways of thinking about what we call bending the arc of history to end poverty and have started to think about some of the changes that we might have to make. I intend to have this conversation with the entire organisation.
EM: Looking to the end of your term, can you be specific about the achievements and targets you can set now that you would be prepared to be judged against?
JYK: After 14 weeks there is no question that this is the greatest job in the world.
The most important thing that I would like to be judged on is have we been clear enough about the fundamental mission of the organization. Have we realigned our structures to reflect that fundamental mission statement? When I came in to this job, I had a very good job before I took the World Bank presidency – I took the job because I have been trying to fight poverty my entire life and I don't know of any other organization that can end be as effective at ending poverty other than the World Bank. We are not going to have ended it in five years but I would like the board to be able to say 'you really made the changes and those changes were good. Now we can see that this organisation is deadly serious about boosting prosperity and reducing poverty and you are tackling some of the most difficult issues like climate change that we can embrace'. At that point if I have done that I hope that perhaps that despite my nationality they would want me to do this job that Jim Wolfensohn told me was the greatest job in the world. After 14 weeks there is no question that this is the greatest job in the world. When I go home to my kids, and they ask 'what did you do today, dad?' I can say to them we spent the whole day trying to end poverty'. It doesn't get any better than that in my view. The other reason is that it is unbelievably effective staff. I have to say I have just been blown away by the quality of the staff we have at the World Bank and I come out of my meetings and I come away even more encouraged about what I can do. If the World bank is hitting on all cylinders and if we are organised in a way in which we are really going to tackle poverty and help each country become more competitive and boost prosperity and if we are at our very best then I am absolutely sure we can bend the arc of history.
EM: When we come to a selection process will you say there should be a public renouncement of the tacit agreement between Europe and Africa about who runs the World Bank and the IMF?
JYK: The selection process is based on the rules that have been around since the beginning. |I was part of the first election in the history of the World Bank. There were two other candidates and an actual vote and there was an opportunity to vote for me as the American candidate or to vote for the finance minister of Nigeria. How it will evolve over time who knows, but it is important to have open elections.