Remarks at the second annual ABCDE conference in Europe on development thinking at the millennium by James D. Wolfensohn, President

 101430 Remarks at the Second Annual ABCDE Conference In Europe On Development Thinking At The Millennium by James D. Wolfensohn President The World Bank Group Paris, June 26, 2000 Mr. Prime Minister, Mr. Fabius, Mr. Josselin, Ministers, Ladies and Gentlemen, I am very happy to participate in this conference on Development and to jointly host the event along with the French government. Welcome to Paris. I thank Mr. Muet as well as my colleague, Jean-François Richard, for their work in organising this event. I would also like to say how pleased I am to welcome a number of people whom we cannot see: they are joining us through the Global Distance Learning Network from Benin, the Ivory Coast, Ethiopia, Uganda, Thailand, Singapore, the Dominican Republic, Mexico and Brazil. Thanks to remarkable advances in technology, the aforementioned countries joined to form the Network last week. The system will gradually be extended to form a global community. I was asked to talk about 50 years of development, as well as to comment on the World Bank’s work today in relation to development thinking. As a non-economist who is still learning, I am naturally somewhat reluctant to speak in front of such a distinguished group of economists, practitioners, members of civil society and those who constantly remind me that they know better than I and the World Bank know! Nonetheless, I will attempt to give a bit of background as to where we currently stand and where we intend to go. I Broadening our View of Development The words of Prime Minister Jospin have clearly articulated virtually everything I wanted to say. They reflect not only France’s leadership in the field of development thinking, but also the coming together of the various strands of development thinking to which I have been exposed in the last five years, and which have been emerging over the last 15 years. From Economics… Just two days ago, I was speaking at Trinity College in Cambridge, as my friend, Amartya Sen, sat in the audience. The previous evening, Amartya showed me how Lord Keynes had advanced the notion of non-interventionist economics. I was also able to learn more about the works of Arthur- Charles Pigou, particularly regarding his attention to development economics. I was also able to remind myself of the words of a current economist, Joseph Stiglitz, who is present today. Reviewing the last 50 years of economics, he stated that our approach to development had perhaps grown too economic-oriented. Had I stated this, my view would have seemed antagonistic. Since Mr. Stiglitz made the statement, it is seen as highly intellectual! I will simply say that I agree with him: a focus that is too economically-oriented will not lead to a more equitable society. In his remarkable speech, Joseph spoke about the last four decades of development, during which the main focus was economic. The objective was to increase capital stock and to improve the allocation of resources. It was believed that these changes would lead to higher income and, hopefully, higher sustained growth rates. Less developed countries were portrayed as being identical to more developed countries, except that they were less efficient in allocating resources. He then spoke about economists of the Left and Right, explaining how they differ. Economists of the Left attributed the underlying problems to market failures, while those of the Right assumed that governments were at the root of the problem. They claimed that, once governments withdrew from the situation, markets would naturally manage to efficiently allocate resources. Joseph is speaking later today and will have the opportunity to share his ideas on his own. He will explain the move to the Washington Consensus (in which he does not believe, incidentally) as well as his views on today’s society. …to the Individual The Bank, commentators from all horizons and the Prime Minister of France agree with Amartya Sen’s view that development is freedom. He explained this in a remarkable series of lectures, which were later captured in a book (Development as Freedom). Mary Robinson, with whom I spoke last week, described development as rights. Thus, the individual has returned to the forefront. The purpose of development is more than a statistic on GDP growth, but to positively impact on the life of individuals. We have not adopted the system used by the Kingdom of Bhutan, which likens development to happiness. II Today’s Poor Today, people are the true ends of development. We, at the Bank, have tried to fully understand this idea over the past few years. That desire was at the root of our study, "Voices of the Poor". We decided that, if we were to deal with development, the best solution would be to talk to poor people and find out how they viewed the world. Did they measure their lives in terms of GDP capital or in terms of other criteria? Not surprisingly, we discovered that the poor use the same reasoning as all of us; they have the same human needs. They strive for a sense of well- being, and want to ensure their own security as well as that of their families. They want to live without fear and know whether they should trust in the police or in the criminals. They want access to justice and a means of expression within society. They want to be safeguarded from catastrophe: when the head of a household earns only USD 1 per day, there is no solution when he falls ill. When families cannot rely on their savings, they have no choice but death. They want society to know that corruption, through which top-level officials steal millions, affects them more. Given that most of those families have only USD 1 or 2 per day, they cannot afford to pay for services. Thus, once again, they must make a choice between eating and not eating. One cannot fail to be moved by such statements. One head of household in Egypt stated, "When my children want rice, I tell them that it is boiling until they go to sleep. There is no rice." This is the subject of your meetings. While it is legitimate to hold economic debate on policy and argue whether growth will lift the entire population, we must recognise that, heretofore, growth has not lifted all humanity. As the Prime Minister stated, we need to take an integral approach to development. He spoke of coherence and complementarity. That is indeed the direction in which we are headed. III Planning the Future Naturally, we are certain that strong macro-economic policy and growth are important, if not essential. However, while it is necessary, it is not sufficient alone. Therefore, we are addressing our attention to those structural and social issues that parallel the more traditional approach of macro-economics and growth. We have not given it up; we regard it as central. We understand that there is a need for proper policy. However, we have moved on and realise that policy alone will not suffice. Examples of this abound: as the Prime Minister stated, three billion people on the planet live with less than USD 2 per day, while an additional 1 billion must manage with less than USD 1 per day. A Different Social Breakdown Even more importantly, we must look at the next 25 years. By 2025, the world’s population will have grown from 6 billion to 8 billion. An additional 2 billion people will be present. Of those, 96% will be born in developing countries. In 25 years, the planet will be home to 8 billion people. Our constituency of developing and transitional economies will no longer include 4.8 billion people, but 6.8 billion. The Europe that France is to lead shortly will remain the same size, except for the effects of immigration. This leads to yet another new notion. Our traditional view of the world, in which there exist "developed" and "developing" countries, is no longer valid. We live in a single world. We must learn to think in those terms, not only when considering economics, but also when broaching on the topics of public debate, global warming, biodiversity, deforestation, water deficits, fishery depletion, maritime security, peacekeeping, global communicable diseases, prevention of natural disasters, biotechnology, labour rights, immigration and peace. The issues of poverty and inequity do not affect development economists alone. They will determine whether there is peace on the planet. It is critical that the so-called developed world recognises this when considering the developing world, whether the issue at hand be debt forgiveness or continuing focus. These are not a luxury. I recently visited Turkey, just before coming to Germany. Germany is home to 2.5 million citizens of Turkish origin. In France, immigration is not unknown. As we look around the world, we witness the coming together of developing and developed economies. This is true in every field: trade, finance, migration, crime, terrorism, etc. It is not simply the economics of development which are at stake, but the very existence of a peaceful planet. Poor Countries as Assets That is why we are trying to broaden our own approach. First and foremost, we must all realise that the issue of poverty cannot be conceived as one of charity. We cannot think that, "we, in the developed world, will help ‘them’, who are poor" by giving them a handout. We must develop new methodologies, in which the poor are not a liability, but an asset. According to my own experience, based not on economics but on observation in over 100 countries, the people with the greatest strength and capacity are the leaders in slums and villages. They know better than we what needs to be done. They have the ability to lead and change our society, provided we can engage them. IV A Broad, Comprehensive Approach The World Bank is trying to create a comprehensive approach to development, known as the Comprehensive Development Framework. Some Ministers have drafted Poverty Reduction Strategy Papers, aligned with Debt Reduction Strategy. The OECD, meanwhile, is working on the Common Ground project. We are all coming together to conceive of a broader approach. In the forthcoming World Development Report, the authors have redefined development as "opportunity, empowerment and security". At the practical level, we are trying to engage the governments as leaders. The democratic governments—where they exist—are clearly leading the initiative. The other governments, provided they are flexible and open to democracy and equity, can also play a crucial role. We will also work with civil society and with the private sector, where the flow of funds and technology now far exceeds any resources provided by traditional overseas development assistance. Ten years ago, the former was half the size of the latter; today, the former has grown to five times the latter. Naturally, we also aim to bring together multilateral and bilateral agencies. In our eyes, development entails the establishment of comprehensive, honest legal systems and effective, transparent financial systems. It implies attacking corruption, developing education, granting access to healthcare, creating infrastructures (water, transportation), developing rural and urban strategies, focusing on the environment, and giving crucial attention to culture. We need to deal with all of these issues. They play on one another. Just 24 hours ago, I was meeting with the economic teams and President Putin in Moscow. The new economic plan, which will be introduced to the Duma on Wednesday, is not based on budget and fiscal balance alone. It is an action plan that deals with capacity building in the government, regulatory reform, legal systems, justice systems, cleaning up the financial system, attacking corruption, educational strategies, health strategies, rural strategies, etc. This is not because the Russian leadership wants to please the World Bank, but because it has just experienced ten years of transition during which the framework and strengths were lacking. It knows that there is no hope for an equitable society unless this is introduced. I have now reached the time limit set by the conference organisers. I wanted to tell you more about the impact of technology. One cannot examine any form of new economics unless one takes into account the enormous potential that technology brings. One cannot hold a discussion on economics without bringing technology into the picture. I will have to leave that topic to another speech. In closing, allow me to say how much I appreciate our partnership with the French government. I wish you well in your deliberations.