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World: Wolfensohn Not Satisfied With Global Growth

  • Robert Lyle



No new financial crises have hit the world in some time, the global economy is showing good signs of solid growth and more people are living in market economies than ever before. But World Bank President James Wolfensohn isn't at all satisfied. RFE/RL's Robert Lyle reports from Washington.

Washington, 29 September 1999 (RFE/RL) - It would be easy to take comfort in thoughts of a financial crisis passed, said James Wolfensohn Tuesday in his opening speech to the annual meetings of the International Monetary Fund (IMF) and the World Bank.

But, he said, the growth of the global economy hides the fact that per capita incomes in many developing countries are stagnating or going down, AIDS is an epidemic in Africa, and unemployment remains a serious problem in many countries.

Poverty is much more than a matter of income alone, Wolfensohn told finance ministers and central bank governors from 182 nations. It's a lack of a sense of wellbeing, of good health and even of safety. And corruption takes its biggest toll on the poor. In fact, said Wolfensohn, the causes of financial crises and poverty are one and the same:

"Countries may come up with sound fiscal and monetary policy, but if they do not have good governance, if they do not confront the issues of corruption, if they do not have a complete legal system which protects human rights, property rights and contracts, which gives a framework for bankruptcy laws and a predictable tax system; if they do not have an open and regulated financial system and appropriate regulation and behavior that is transparent, their development is fundamentally flawed and will not last."

Wolfensohn, who heads the World Bank, said studies have now proved that good governance brings higher per capita incomes, higher adult literacy and lower infant mortality, while bad governance -- the lack of accountability and transparency, the presence of corruption and crime -- is the number one impediment to development and poverty reduction.

"Weak governance threatens to marginalize countries and whole peoples from the economic mainstream. And it will keep them on the margins. For if lending is only effective in countries with sound policies and sound institutions, who will lend to the poor performers?"

Wolfensohn said the ideal is to encourage every country to have good policies and institutions, but he said the reality is that many don't and it will take a great deal to bring improvements.

What is needed, said Wolfensohn, is a new approach using coalitions which reflect the inter-related elements that make societies function effectively. He said coalitions between all the players -- multilateral organizations, governments, trade unions, religions, charitable foundations and private citizens.

This will require not only changing some of the formal rules of institutions, but some of the informal rules and norms as well. Most importantly, said Wolfensohn, it must be done on a global basis:

"Globalization can be more than the unleashed forces of the global market. It can also be the unleashing of our combined effort and expertise to reach global solutions. We need to build coalitions for change. Coalitions with the private sector which will bring investment, create jobs, promote the transfer of technology and skills and foster social responsibility. Coalitions with civil society and communities to mobilize the kind of grass roots support we have seen behind the debt campaign -- and to extend it to health, to education for all, to particupation and to poverty reduction."

Wolfensohn said there can be no satisfaction because the real challenge has barely begun. World population will reach $6 Billion people next month and fully half of those are currently living on under two dollars a day. It is time, he said, to act.

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