An interview with James Wolfensohn

As the World Bank and the International Monetary Fund gather for their annual meetings, I spoke to James Wolfensohn, the former World Bank president, about the direction of the institution he led and his own recollections. His memoir, A Global Life, has just been published. In the book, Wolfensohn details his early history, his selection as Bank president by President Clinton, his somewhat distant relations with the Bush administration, and his focus at the Bank on debt relief and corruption, in particular.

On governance changes at the World Bank and the IMF:  "In terms of the trend both when I was at the Bank and subsequently it’s very clear that the Bretton Woods arrangements have been severely shaken by economic realities since that time…there is, I think, an irresistible move  now to look again at the methodology of governance in those two institutions. And we’ve seen of course the big first round of change in moving from the G-8 to the G-20, which is the same underlying pressure and therefore it would not be surprising if you saw a continuation of those discussions with the appointment somewhere in the next few years of the leadership of the Fund and the Bank. It certainly would not surprise me if the pressure from the shareholders was such that we didn’t automatically have a European and an American."

On whether states may bypass the World Bank:  "I have no inside information whatsoever. But just in reading the statements made by various government officials and reading the tea leaves in terms of the problems that Bob Zoellick has had in raising money for [the International Development Association] and for joint activities on the part of the Bank, it looks as though many of the sovereigns are now looking at the possibility of changing the balance, of utilizing their funds for development and doing more directly as distinct from focusing solely on the Bank. And so it would be my bet that there will be a reexamination of the role of the Bank, perhaps less of the Fund….[T]he great strength that the Bank has it that it does have 10,000 people who actually know something about these countries. While I think theoretically there is a case to be made as to why [lending] should be reviewed and done directly it would be my hope at least that they would continue to value the 10,000 people at the Bank because there is a huge reservoir of knowledge. They may change the structure at the top but I think it would be a real weakening of the international functioning of the system if they were to somehow try to bypass the contribution that the Bank can make…[A]fter, all the countries of the world own the bank, so it’s not a competitive situation, it’s one of their investments."

On the role of China:  "China never borrowed less than $3 billion a year during my tenure. They were the most significant client. They used the Bank not just for money but for the know-how. I believe and still believe that the Chinese government puts great weight on the experience of the Bank in terms of development. At least when I left, there was clearly a change in the financial dimensions of China, which now has over two and a half trillion in reserves—when I got there they needed money from us, so it’s been an unbelievable change. But I do not believe that the Chinese discount the knowledge that there is in the Bank. The Chinese build their own knowledge base and have gained a lot in experience but there are still vast areas of china that need development skills. When I last was involved in it, the Chinese executive directorship at the Bank was very well staffed with excellent people and unless it’s changed, which I do not believe it has, China is taking a very active role in both monitoring and helping to set directions for the institution. The chief economist is Chinese and that’s a huge change and very symbolic."

On addressing corruption:  "The Bank had never used the word ‘corruption’ at all until I got there, and the reason for that was, as the general counsel pointed out to me, that quite a number of our shareholders represented were not immune from corruption in their governments. What [the Bank staff] didn’t want to do was tackle the ethical considerations before a board where maybe some of the members were not wholly compliant with ethical standards. But what I did was to say ‘look, it is simply nonsense to not take notice of the fact that if you have corruption in your projects and if there is corruption in the framing of national strategies, you’re going to lose a hell of a lot of a money.’ It’s not something that an institution like the Bank can be neutral on. Maybe we can’t succeed in attacking the issue but to pretend that it doesn’t exist and not talk about it is whimsical."

On the Millennium Development Goals: "I thought they were laudable objectives; my concern was whether there would be great distress at not achieving goals which were going to be very, very hard to meet…It’s important to talk about women’s education, to talk about health, and to talk about halving the level of poverty. And there’s a good chance, by the way, that we’ll reach the goal on the halving of poverty, but that’ll be because of China significantly and to an extent India. But what is happening is that you’re still going to have a very heavy involvement in Africa and a few other countries in Latin America and Asia. All in all, I thought the MDGs were a very positive initiative and at least it focuses people on it. We just had this UN meeting and it forces heads of government to come out and talk again about development…To get heads of state to focus on development at all in an economic period like the one we’re in now—to get the rich heads of state to focus on it—is bloody difficult because they’re all worried about their own economies. To have a structure that reminds them constantly that their predecessors committed to a set of goals and that it’s on the agenda for review is unassailably positive, whether they’re achieved or not."

On the future national political trajectories of Fund and Bank leaders: "My knowledge of Bob [Zoellick] and Domi
nique [Strauss-Kahn] is that they’re both working their tails off to try to make the Bank and the Fund successful. If they subsequently went on to senior national positions I would have thought it would be an advantage. You would then have someone in those national governments who had a better understanding of these international institutions. My observation on most people in national governments is that they have very little interest in and very little knowledge of the multinational institutions. If, by chance, the rumors are correct and the evolution is in keeping with the rumors, it would be tremendous to have a couple of people that are active in the core group of international leadership who happen to know something about the Bank and the Fund. I don’t know that that’s happened before…[but] I don’t see the slightest evidence that they’re using their positions with regard to their own political futures."