James Wolfensohn appeared to have a strong sense of mission after he took over as president at the World Bank in 1995 at the nomination of then US president Bill Clinton. That undertaking was a noble sounding one: achieving a “world without poverty”. But during his 10 years in office Wolfensohn pursued it with something less than single-minded devotion as he sought to involve the World Bank in myriad other functions. To his critics, Wolfensohn has only one reminder: under his tenure $30 billion debt was forgiven for heavily indebted poor countries. In an interview with Emerging Markets, he points out: “What we were able to do was to allow people to borrow money and to use it for a purpose, and not to use it to repay other debts. That was a hugely significant change in those 10 years – huge.”
Yet by the time he left, the Bank had all but abandoned one of its core roles of financing infrastructure in the developing world, and had spread its wings into everything from HIV Aids and drug problems to money laundering and corruption issues. Countless other tasks were assumed, and Britain’s former development minister Clare Short was forced to remind Wolfensohn on one occasion that the Bank was not the only development agency in town. On this, the ex-investment banker is clear: “I think we broadened the agenda, but by design. What I tried to do was to make the institution more sensitive to local culture.”
Tailor-made interventions
“My own judgment was that you’d be much more effective in working with countries if you recognize that each country has its own history, philosophy and values, and you tailored your interventions to be comfortable with those values.”“There’s a big difference between going into a country and telling them what you’re going to give them, and going into a country and discussing with them what they need within the context of their local culture.” Wolfensohn spares no apology for those who thought his approach was too soft in the more hard-nosed world of traditional development economics and finance. “I will defend that permanently, not out of arrogance but because I saw it work.”
One of his principal achievements was to involve civil society much more closely in the affairs of the World Bank during the two consecutive five-year terms that he served as president. He “did a great job in putting the Bank back on the map in the way he mobilized political support, represented the Bank externally, and got the NGO Community, at least initially, very supportive,” says one-time World Bank managing director Caio Koch-Weser. But Wolfensohn was “weaker in delivering as a manager”, a former senior official told Emerging Markets. “He was not a good manager. He made some innovations with the NGOs, and also with Africa, and with the new types of projects he did in the social sector, but infrastructure was badly neglected.” Wolfensohn, for his part, points out that one of his first tasks was to “re-weight the institution at the top. The Bank became more internationalized. The Americans realized – in some cases reluctantly – that an international institution could no longer be dominated by rich countries, the post-World War II syndrome of the rich countries paying for the rest of the world.”
Not enough
Yet even with a renewed emphasis on poverty reduction under Wolfensohn, the World Bank did not make dent in the problem to match the claim that it had become an “overarching objective” of the institution, according to some critics. “Emphasizing poverty issues is quite appropriate, but the question is: have those institutions been effective in reducing poverty in these countries?” says former Japanese vice-finance minister Eisuke Sakakibara. “I think we did better than before, but the world has not done nearly enough. In my judgment, it is unarguable that the support given to those that are left behind is less than is necessary,” says Wolfensohn. T
he problem, he says, has been largely one of political will. He is damning about the loss of the development agenda to that of security: “$600 billion is spent just on Iraq just by the United States, which dwarfs the money spent on development. That’s a single country’s expenditure on a single issue.” The former Bank president recognizes that his tenure coincided with a period of unprecedented global economic change. “I was lucky to be there at a time when the economic potential of the developing world was starting to be recognized,” he says. “There really was a re-weighting of the international scene.”
One former senior colleague of Wolfensohn says that “some middle-income counties felt a bit neglected” by his overemphasis on poverty reduction in the poorest parts of the world. “We did work in middle-income countries, but the truth of the matter is that on the planet, you have 3 billion people out of 6 billion, living under $2 a day,” says Wolfensohn. “I thought that there was plenty to do with 3 billion people, and I have no apologies for addressing that question, which I remind you nobody else did.”
“If it’s wrong to try and focus on Africa, then I’m wrong, but we didn’t just focus on Africa,” he adds. “The projects in middle-income countries did not diminish, but I felt that there needed to be advocacy for the poor.”
This profile is one in a series of twenty, published in a special commemorative edition to mark the 20th birthday of Emerging Markets newspaper. The profiles canvass twenty of the figures who have had the most impact on the rise of the emerging markets over the past two decades.