(00:00:00) the time 12 o'clock Good afternoon. I'm Ed shoe dean of the Hubert H Humphrey Institute of public affairs at the University of Minnesota and a member of the board of directors of Minnesota meeting. It's a pleasure to welcome all of you to Minnesota meeting today. We also extend a welcome to the radio audience throughout the Upper Midwest who are hearing this program on Minnesota public radio's midday program. Broadcast the Minnesota meeting are made possible by the law firm of open Heimer wolf and Donnelly with offices in Minneapolis. St. Paul and major cities in the United States and Europe. Minnesota meeting is a public affairs form which brings National and international speakers to Minnesota members of Minnesota meeting represent this communities leaders from corporations government Academia and the professions The next scheduled speaker for Minnesota meeting is dr. Martin feldstein president of the National Bureau of economic research and economic adviser to presidents Reagan and Bush. Dr. Fell Stein's presentation the scheduled for October the 26th. Minnesota meeting is pleased to present today's speaker Barber conable president of the World Bank who will address our group on the topic fighting poverty, encouraging growth and protecting the environment the world bank's agenda for the 1990s. It's a special privilege for me to introduce our speaker today for I served under Barber at the World Bank. What is Vita doesn't indicate? Is that he with virtually no prior experience with International organizations took on the difficult task of reorganizing and streamlining the World Bank. I'm not sure even he knew what a tough job that was going to be with all the international vested interest at play. But he saw it through and the bank is today are far more effective institution. Did it was prior to his arrival? Mr. Carnival also almost single-handedly convince the bank to begin addressing the complex environmental problems on the international scene. Prior to his arrival the bank had ignored almost completely those issues. Mr. Caramel began a five-year term as president of the World Bank group on July 1st 1986. Prior to that from 1965 to 1985. He was a well-respected member of the US House of Representatives from West New York State. In Congress, he served 18 years on the house Ways and Means Committee the last eight as its ranking minority leader following his retirement from Congress. Mr. Countable served on the boards of various multinational corporations, and on the board of the New York Stock Exchange. He is active in Foundation Museum and nonprofit work and was a distinguished professor at the University of Rochester. Following his presentation questions will be addressed from the audience as we have done in the past. Please use the cards at your table to jot down questions for discussion Steve Young an attorney with Ren trip and Weinstein and genma Rasik executive director of the Minnesota meeting will move among you to manage the question and answer session. It is now my pleasure to present to you Barber conable president of the World (00:04:08) Bank. (00:04:19) Thank you very much. Ed. I'd like to thank all of you for coming out to this shiny new Convention Center on such a sparkling day in this glittering City. (00:04:34) I know there are many things that you could be doing other than trying to delve into the Arcane problems of world development. (00:04:42) And I thank you for coming. (00:04:44) I'd like to thank Ed also for the very nice (00:04:47) introduction. Ed as you know was the head of our Department of Agriculture and rural development for some time I hope he didn't leave because I was reorganizing the bank. (00:05:06) I don't think so (00:05:07) because I know how near to his heart this part of the world is But the coin a (00:05:13) phrase. his (00:05:18) return here was the Humphrey Institute gain and our loss nice to see you again. Ed a nice to be with you all. I'm going to talk about the World Bank, of course particularly today, but I'm doing so not for any reason that then that I find (00:05:46) frequently I can anticipate some of the questions that might be asked (00:05:50) one of the most embarrassing moments of my life was in the company of a large number of Indian newspaper reporters to visit Mother Teresa's clinic in Calcutta. (00:06:05) And I said to her after having had a (00:06:07) nice extended and very pleasant discussion with that saintly woman. Mother Teresa, what can the World (00:06:14) Bank do to help you in your (00:06:16) work and her response was what (00:06:19) in the world is the World Bank? It was wonderful headlines in the wonderful headlines in the Calcutta paper the next morning and not the best publicity in the world for the institution of which I am the chief executive officer. The result is and I must say also that I find that in (00:06:43) in India as in many other countries the World Bank is much better known than it is in the United States. I'm constantly referred to here as former Congressman Barber conable. And well that's very (00:06:58) flattering to be remembered for previous success. I think the World Bank really is entitled to rather more recognition than (00:07:04) that. (00:07:07) It is a complex institution and I'm not really surprised that many people are a little confused about (00:07:14) it. (00:07:15) It is in fact a family of institutions. The largest part of the World Bank is the so-called International Bank for reconstruction and development, which was formed by a treaty (00:07:29) among some 50 countries that was negotiated out in (00:07:35) 1944 at Bretton Woods, New (00:07:37) Hampshire. And thus (00:07:40) the World Bank became a Bretton Woods institution. The other Bretton Woods institutions the IMF which complements our function both came into being then for the purpose of dealing with the problems of the Reconstruction of the post-war world. (00:07:55) The first loans we made were to France and to Holland and so forth. (00:08:01) By the mid-1950s. We were shifting our emphasis to development away from reconstruction. The ibrd then was the (00:08:12) sole member of the World Bank. It (00:08:18) is of course still the (00:08:20) largest part of the World Bank. (00:08:24) Lending this past year sixteen point four billion to Middle income countries countries that are credit worthy but have per capita incomes of less than (00:08:34) $3,000. (00:08:37) The money at lands is for the most part borrowed 90% borrow. The rest is flow back and a three percent contribution to our capital in cash by Our member (00:08:47) countries. The u.s. (00:08:50) Share (00:08:52) is (00:08:53) 3% of 18% Its current ownership of the World Bank. It used to own a lot more (00:08:58) but it's given it away because of fiscal pressures one sort and another (00:09:03) the us then contributes to the World Bank 70 million dollars a year under the (00:09:08) current capital assessment. (00:09:12) That's 70 million dollars is all the contribution of the American taxpayer to the institution and it is leverage to a degree where sixteen point four billion is (00:09:23) loaned to countries like Mexico and Argentina and Brazil and and all the middle-income countries of the world. In which of course the US has a very substantial interest. (00:09:38) That's the first part of the World Bank family. Then the second part is Ida the International Development Association. Ida was formed in 1960. And it was formed for the purpose of dealing with the problems of the poorest countries those that were not credit worthy and had per capita incomes currently of less than five hundred and (00:10:01) fifty dollars a year. Now (00:10:04) 90% of the item money goes to countries with per capita incomes of $400 and less think of that I find many American audiences simply can't conceive of a country in which the average (00:10:18) income is about a dollar a day (00:10:22) because most of those countries have their wealthy people to of (00:10:24) course, (00:10:26) but poverty is endemic and so pervasive and so (00:10:30) severe that all but three of the countries of sub-Saharan Africa are there India and China are included among these countries. And these countries have of course staggering numbers are numbers of people who live (00:10:45) in absolute poverty not having enough (00:10:47) to eat not even having any reasonable shelter, so Ida. (00:10:54) Is does not involve borrowed money like the ibrd. I told you 90% of the money was borrowed is borrowed in (00:11:00) every every Market of the world in whatever currency that Market deals (00:11:07) and we lend it out at a half percentage point above what it costs as far as the ibrd is concerned either uses appropriated money. It costs the us about a billion (00:11:17) dollars a year. (00:11:21) For loans that aggregate roughly four-and-a-half billion dollars (00:11:29) to the poorest countries of the world and it is (00:11:32) replenished by appropriation by the Congress on an annual basis on a replenishment that has a three year duration Ida, then is the part of our (00:11:45) family that deals with the poorest of the poor and I'll say more about that later because replenishment is coming up soon. (00:11:54) There is a third member of the World Bank family the IFC or International (00:11:58) Finance Corporation, (00:12:00) which does not lend to governments as Ida and the ibrd do but lens directly to the private (00:12:08) sector in the third world. (00:12:11) Anybody who is qualifies for an Ida or an ibrd loan also can qualify for loans by the IFC to the private sector in (00:12:20) that. (00:12:21) The IFC was formed in the early 60s. Also, it has recently gone through a major (00:12:27) spurt as there's been a (00:12:29) growing consensus that the private sector must provide more money for development. (00:12:35) And (00:12:37) currently lens or invests in (00:12:39) equity in Third (00:12:41) World Private Business about 1.3 billion a (00:12:45) year (00:12:47) this past year. We also formed fourth agency known as Miga the multilateral investment guarantee agency which guarantees or insurers investors in the third world against non commercial risks. This agency is just getting off the ground and it's Dimension is yet to be tested. (00:13:09) But it will we think encourage (00:13:12) flow of private Capital into development which previously has not been (00:13:15) tapped. (00:13:17) Now that is the World Bank family then let me talk a little (00:13:21) about the the World Bank as and its agenda. (00:13:28) Incidentally as you can see, we are not an inconsiderable force in development with a sums of money. I have mentioned being loaned last year. We had slightly over 22 billion dollars that was loaned in (00:13:42) total. To the governments and Private Industry in the third world. It is the largest single source of development money and (00:13:55) much of that is augmented by (00:13:57) co-financing of various sorts, which we try to (00:13:59) arrange to increase the impact of our (00:14:02) lending now (00:14:06) in the 1990s, we have of course constantly changing expectation of us the World Bank started out making one type of loan only that is loans for project (00:14:20) purposes (00:14:22) irrigation (00:14:23) rural development urban development schools health clinics road maintenance and so forth. (00:14:33) We found that many of our projects were (00:14:35) failing after reviewing our work over a period of years (00:14:41) because they were implanted in an economy that was itself quite (00:14:45) Robin. And (00:14:47) so we started making additional loans known as adjustment (00:14:51) loans the end of the decade of the 70s (00:14:56) fast dispersing loans conditioned on (00:14:58) economic reforms of one sort and another to (00:15:01) improve the economic efficiency of the economy, which was our particular concern. And these now constitute roughly 25% of our portfolio. In other words. We are still making 75% loans for infrastructure. And and only only 25% goes into the economic reform lending. However that has come to have a good deal of attention lately. If you read The (00:15:32) Wall Street Journal editorial page yesterday, you saw a man who felt that are lending in this respect was was a failure. I'd like to say that our lending is not a failure and in any business sense clearly, we made a billion dollars last year because of the the interest rate repayments. We have made a billion dollars for each of the last three years as a matter of fact, and and we (00:16:03) believe that we can find many examples of countries where in fact we've had major successes in improving economies and in many cases we can With some certainty that the economy would have been considerably less good had we not done the type of investment lending or policy (00:16:28) lending that we're talking about course, all our lending is in a global environment. And sometimes we have problems of trade restrictions. Sometimes we have problems of commodity (00:16:37) prices all kinds of externalities that affect the result (00:16:40) also. Now (00:16:44) external Finance then the lending that goes on from us and from Marco financiers to the developing World becomes a very important part of the potential for growth that we believe is the best antidote for poverty in the (00:17:00) world (00:17:02) growth is not an assurance (00:17:03) that poverty will be reduced you (00:17:05) can have economic growth that bypasses the poor and we (00:17:09) try to Target our growth in ways that will ensure that it be it be broadly distributed. (00:17:14) But we do know this that poverty is much more likely to be reduced in an environment of economic growth than in an environment of economic stagnation and so growth becomes one of the tools we try to use external Finance for investment is necessary. If you're dealing with a very poor country that doesn't have the savings or (00:17:35) resources to put into investment that otherwise would be needed (00:17:40) that however is a supporting Roll the most important thing continues to be the policies of (00:17:47) the developing country itself. If we were lending money (00:17:52) without worrying about being accountable for its use obviously we could lend money without being sure that it buys some valuable (00:18:02) asset like a road system or telecommunication system (00:18:06) or that it brings or (00:18:08) that without worrying about whether it brings about (00:18:12) economic reform, but we are accountable (00:18:15) for our money to Our member countries and the result is that we do have to worry about (00:18:21) policy and the policy that we're talking about is the (00:18:24) policies of the borrowing countries to which we land. (00:18:29) So this has (00:18:31) become (00:18:33) something of which we are increasingly important the policy environment into which we (00:18:38) loan loan has to be a good one (00:18:41) lately. There has been considerable concern about debt because Dad has piled (00:18:47) up. Through The Years not just us but too many (00:18:53) commercial lenders in the middle income countries too many official lenders in the poorest countries to the point where external Finance may be available, but it is being diverted into debt service payments rather than into in the kind of investment that can bring about economic growth. And so debt has become a concern and is a concern right now that makes news and that you hear a good deal about you've heard a lot about the Brady plan which is a plan to try to reduce debt in the heavily indebted middle-income (00:19:26) countries are euphemism for Latin America. (00:19:30) And and that is something that has been very much in the news. We believe that initiative is a valuable one. It gives us an option of using some of our resources in debt (00:19:41) BuyBacks that would reduce the amount of the stock of debt (00:19:47) and therefore the diversion of (00:19:49) money. That otherwise would go (00:19:52) into investment. There also is the problem of dead in the poorest countries that's official debt. For instance eighty percent of the debt owed by sub-Saharan. Africa is owed to official (00:20:04) sources to the Oda our official development. Aid branches of the of the developed world and their the (00:20:13) Toronto initiative Summit in Toronto resulted in some (00:20:20) agreement that that under certain terms (00:20:24) countries that were willing to go through adjustment. They were willing to accept economic reforms would also get some alleviation of their debt or Debt Service (00:20:34) burden from the countries to which they owed the major amounts of money. (00:20:39) So debt has been in the news. It also is something that is being dealt with at least (00:20:45) marginally there will still be a lot of debt left after all these plans the Brady plan and the and the Toronto initiative are (00:20:53) fully played out but at least it will help (00:20:58) reduce the diversion of money that's been going into debt service. (00:21:04) Now another element (00:21:05) that is brand-new and Ed referred to it is the concern about (00:21:10) environment. We are not an environmental agency where a development agency development means change change to some environmentalists is always (00:21:19) inimical. In fact, the most important aspect of development should be (00:21:26) that it take place in ways that are environmentally sound. We have found (00:21:34) and we would come to this conclusion (00:21:36) irrespective of political pressure (00:21:37) from our member countries. (00:21:39) We have found that we cannot (00:21:41) sustain Investments (00:21:43) that are not environmentally (00:21:45) sound (00:21:46) if they are destructive of the environment if they if they mind the soil by faulty agricultural practice if they erode the (00:21:56) rainforest because of (00:21:59) improper use of the rainforest or (00:22:01) it's it's a profligate cutting and burning (00:22:05) ultimately whatever you tried to do (00:22:08) for development in that area will not succeed. (00:22:12) And so environment is part of the process of sustaining development a new initiative (00:22:19) fairly recent initiative any way in the world bang. Now, let me say to the contrary notwithstanding there have always been environmentalist the World (00:22:27) Bank, but in the past three years we have institutionalized the inputs. In ways that will give some Assurance to people concerned about the environment that in fact, we are taking it into account in helping to plan the projects and the programs that are member countries are going to be carrying out with our money. And so we believe through this institutionalization (00:22:50) process. (00:22:51) We will have a much more coherent and (00:22:53) consistent (00:22:56) placing of environmental values in the development process. We've gone beyond that actually (00:23:03) in trying to deal with environmental issues. (00:23:07) For instance. We're not only added to our skills and not only an (00:23:12) integrated environmental considerations into our day-to-day work. (00:23:16) We've included environmental components in about a third of our fiscal year 89 projects, including half our energy and 60% of our agricultural projects. We've lent about 1.3 billion for a free-standing environmental projects or have plans to do that in the next three years. We're going to Triple our lending to forestry. We're creating a gas (00:23:39) unit to create a greater use of clean-burning fuel as you know carbon dioxide in the What is one of the mate is the major cause of greenhouse gases (00:23:52) energy conservation is something else that we're promoting through our energy loans. And so I want to tell you that we are trying to be responsive to not only to the sustaining of development. But to the great Global concern there is about the environment at this point and we think there are many ways in which we can do (00:24:09) it. No. (00:24:16) I hope nobody would think that that solves our environmental (00:24:20) problems. I think the environment is everybody's business (00:24:24) and I do find many Americans greatly concerned (00:24:28) about tropical rainforest who aren't aware that in this country. We are the worst polluters of the world. We we (00:24:41) pump 75% of the industrial carbon (00:24:45) dioxide into the atmosphere despite. That is the US and Western Europe do despite the fact that we constitute 8% of the of the world's population (00:24:56) in the u.s. We put 5 (00:24:58) tons of carbon dioxide in the air every year while the average for the rest of the world is less than a tonne per person. We put 5 tons per person into the atmosphere. We produce (00:25:12) here in the US 30% of the (00:25:14) CFCs, which are the worst greenhouse gas. The point is it is not enough to worry about the tropical rainforest, which is one of those lungs that helps exhale oxygen into the into the world's atmosphere it we have to accept some responsibility for ourselves here. (00:25:32) So environment is something that we're all going to have to have a (00:25:35) global compact on (00:25:36) the World Bank will be part of that that compact I want to assure you of that (00:25:41) and we'll try to do everything we can to ensure also that that (00:25:47) our member countries understand their responsibilities the necessity for their be incredible because since energy and prosperity are closely interlinked, (00:25:58) it would be (00:26:00) unreasonable to expect the (00:26:01) developing world (00:26:03) to observe or the profligate (00:26:05) use of energy that we have accepted for ourselves (00:26:08) without some kind of financial help to (00:26:11) avoid and to conserve energy in various ways now, (00:26:18) I've talked about these new things (00:26:21) that environment there are other issues that are new emphases that the World Bank such things as women and in development, (00:26:29) we have restated our poverty Focus, which we believe lots of people forget (00:26:33) about if if we were to ask (00:26:36) people what the global problem (00:26:38) was that needed to be addressed. I think everybody would say the environment not everybody would say poverty Hubert Humphrey wrote at one point the (00:26:48) ancient adversaries of mankind poverty hunger disease and ignorance are the allies of (00:26:53) tyranny. (00:26:55) improving the quality of (00:26:57) life means waging Relentless war against these ancient enemies (00:27:04) and I think Americans should be supportive of a Cooperative effort to deal with poverty for that reason alone because we all live on the globe together and and and (00:27:14) not only have humanitarian concerns about our fellow humans, but want to live in a peaceful world and I think Senator Humphrey put his Vice President Humphrey put his finger on that very well. (00:27:29) Now know where is is the connection between poverty? Individual (00:27:35) potential that is the quality of life for individuals and the (00:27:39) environment more dramatic than in the case of population. We have had population (00:27:45) programs at the World Bank for many years a matter of fact or the past five years. We spent roughly a half a billion dollars on population programs. (00:27:52) We believe the time has come to make a much stronger point about population there going to be a billion more people in the world by the year 2000. There are right now 900 million of them will live in the developing world and that means (00:28:06) 500 million of them are likely to have very uncertain lives and probably uncertain food as well as health conditions in which to live. (00:28:20) We are for that reason going to spend over the next three (00:28:24) years eight hundred million dollars on population programs. The problem (00:28:29) there is that you have to have the very strong support of the government that is involved many countries have Traditions even (00:28:39) religious Scruples against population programs. And (00:28:43) unless the government is willing to own the program and put it high among its list of priorities any amount of money made available for information or for health purposes for whatever you want to call (00:28:55) it is going to be wasted money. (00:28:58) So it is going to be a very difficult area but one in which we are going to try (00:29:02) to make a new and increased effort over the next few years (00:29:08) fighting poverty also means promoting sustainable agricultural (00:29:12) development. And by that I mean sound agricultural practices, we're doing a lot more than we used to in the way of extension service development the inputs of information into into agriculture that will (00:29:27) permit increased production without (00:29:31) major additional use of chemicals and pesticides and so forth. We're going to be putting an increasing emphasis as well on education. There are a hundred million children that never get basic education in the world every year a hundred million new children that come along that don't get that that basic education and unless we can can (00:29:54) deal with the human resources that can sustain development again, the process of problem of sustaining (00:29:59) development. Clearly. We're going to have serious problems. (00:30:03) Now let me before I quit just (00:30:05) mention another aspect of the world bank's work (00:30:10) what's in it for the United States? I think lots of people think well, it's nice to do (00:30:17) something for poor people and it's a we ought to be supportive of the humanitarian concerns, (00:30:23) but but that's about as far as it goes. In (00:30:26) fact, we do have a long-standing tradition of leadership generosity and humanitarianism and that is reflected in the (00:30:34) leading role. The US has played in the Bretton Woods (00:30:37) institutions. But I want (00:30:42) to say that US economic prosperity and this increasingly interrelated world is very closely tied with a fate of the of the ldcs of the less developed countries. (00:30:54) And and also with their National Security, (00:30:58) I think by helping the ldcs to grow the bank can impact the World Bank an impact on US exports to the third world, which is potentially a much growing Market than the developed world is I think it's important for you to understand that it even goes beyond that the the building up of (00:31:18) markets for us Goods (00:31:22) u.s. Procurement in 1989 alone on World Bank projects. That is the amount that American Business was able to contribute to goods and resources for the carrying out of World Bank (00:31:39) projects (00:31:40) amounted to one point four billion dollars, which is more than the total amount of the u.s. Contribution to the ibrd in the 43 years of its existence. In other words procurement in one year for American Business is more than the total amount (00:31:57) that's been contributed by the eye to the ibrd and money. So I think I think we're not only talking about a peaceful (00:32:08) world. We're not only talking about a world of growing prosperity and growing demand for (00:32:12) American Goods. We're talking about an institution which in some very specific ways is an American economic interest. I think it makes good (00:32:23) sense for the u.s. To support the bank. Now I mentioned that I was going to come back to Ida us (00:32:30) leadership is needed in Ida. They have (00:32:32) contributed over the years starting at 40% Now the last time we were down to 25 percent this year. It's being suggested the u.s. Despite having the (00:32:42) largest economy in the world contribute 22% (00:32:45) And other countries contribute to Ida on the basis of what the (00:32:49) US contributes (00:32:49) in other words if the u.s. Cuts back the other countries (00:32:52) will cut back also because of this sense that there has to be burden-sharing based on not only history but on the size of the economy (00:33:00) the 93 punishment is being negotiated at this (00:33:05) point and in Washington, it'll be finished in a conference in Kyoto next month (00:33:11) and the size of the u.s. Contribution is very much in doubt because of the fiscal (00:33:16) pressures the u.s. Is under (00:33:18) it is being suggested that the u.s. Contribute a hundred million dollars more instead of nine hundred and sixty five million, which they (00:33:24) contributed a year for the last three years to Ida to the poorest of the poor that they contribute a little over a billion (00:33:33) $50 about a hundred million dollars more. That's because to maintain the same purchasing power of Ida as (00:33:42) it was developed in (00:33:44) connection with Ida. (00:33:45) Eighth the eighth replenishment of Ida the (00:33:48) dollar having declined in the (00:33:49) past three years. They would have to add about a hundred million dollars of additional American money to come up with the same share globally. Now, (00:34:04) it's very much in doubt because of (00:34:05) gramm-rudman the (00:34:07) same (00:34:07) pot of money in the American budget namely Title 1 500 of the US budget document (00:34:16) has to be used for bilateral Aid at multilateral Aid and for the appropriation for the state department what you take away from one (00:34:23) has to come from somebody else. (00:34:26) And so there's a lot of wrangling going on within the (00:34:28) US government at this point is terribly important that we not work walk away from (00:34:32) the poorest countries of the world that we maintain our influence and I want to I don't want to say that the the (00:34:37) danger there (00:34:39) is that I too could become a less Central less significant part of the development process. (00:34:45) If (00:34:45) the US were to shrink its share the Europeans would divert their money into low May which the (00:34:51) u.s. Does not participate in its a European Community Aid for Africa for the most part (00:35:00) device and the Japanese would divert their money into the Asian (00:35:03) development Bank. (00:35:05) Thus the US would lose influence with the poorest countries of the world. (00:35:10) Something would be quite unfortunate because the other countries Japan and the Europeans (00:35:14) feel they have supported us strongly on The Brady dead initiative with respect to Latin America. Therefore, they are (00:35:20) entitled to have us come back and support their interests relative to Africa and Asia. (00:35:26) So we have a problem right now and I'm telling you about it only because you'll be seeing something about it in the papers over the next few few weeks. It has to be resolved quickly and it's terribly important. If we are to reflect what I believe is our traditional (00:35:41) concern about the poorest of the poor. (00:35:45) Well, the problems of development are (00:35:47) very challenging their daunting there. There's sometimes discouraging clearly the poor are still very much with us after 40 Years of hard work by the World Bank and other institutions after a lot of official Aid after the building up of major obligations and debts after tremendous efforts at organizing the the International Community, (00:36:13) but I don't think there's any challenge that could be more (00:36:16) meaningful and exciting than helping to improve the quality of life for hundreds of millions of people around the globe poor people who have a terrible quality of life. It is (00:36:27) difficult Eleanor Roosevelt happens to have been born just a hundred and five years ago (00:36:32) today. (00:36:33) She said you must do the thing. You think you cannot do. (00:36:38) It is uphill work, but it's staggeringly important. I want to tell you when you visit a village in Africa and look into the eyes of a woman who maybe is (00:36:50) 40 years old and has (00:36:51) lost three of her children to disease (00:36:54) and has five children (00:36:55) left (00:36:58) and she has just (00:36:59) got fresh water for the first time in her life to wash her family's clothes and prepare her family's food and to keep her family healthy when you (00:37:10) look into the eyes of such a woman then you realize this does come down ultimately (00:37:16) not to the statistics about macroeconomics not to the statistics about debt and the amount of the size of loans or anything (00:37:23) else but to an issue of the quality of (00:37:25) life for individual people. We could easily have been born somewhere else than in this glittering City. We could easily have been born into a tradition of underprivileged and poverty and have very little to look forward to (00:37:44) when you realize that the great bulk (00:37:46) of the world's people live under those circumstances. It comes back to a personal sense of the worthiness of the great Cooperative effort of development. We have to find some way to help these people improve the quality of their lives and that's what we're trying to do. Let's go to questions. Thank you. Mr. Carnival. Once again for our radio audience. This is a Minnesota meeting with Barber conable the president of the World (00:38:26) Bank and Jamie Rasik and I will be Fielding your questions here. I on this side of the room Jane on that. So if you have a question or a comment or you want to engage our guests in dialogue, please just signal with the hander and I and (00:38:40) we'll take your question or comment. Mr. Carnevale, if I could begin (00:38:47) the World Bank and the IMF. This is called a ringer. I'm gonna try to make it a little tougher the World Bank and the IMF we're part as you said at the Bretton Woods agreement great event at the end of World War II looking at a peaceful world after that war. Well, then we went into the (00:39:04) Cold War 40 Years of competition between the Free World using Market systems in the Communist World focused for (00:39:12) a while on Moscow that cold war seems to be coming to an end. Yeah. My question is in how many more months will the Soviet Union Poland Hungary Czechoslovakia People's (00:39:23) Republic of China become members of IMF (00:39:25) institutions. Would that be a good thing or a bad thing? A lot of them are already China has been a member of the World Bank since about nineteen eighty-one. And we have since that time loan them roughly 09 billion (00:39:39) dollars. (00:39:40) They we are currently in (00:39:43) suspension with China because it is quite uncertain what the events in Tiananmen Square are going to do to the economy in China. Clearly. They've lost a large part of the two billion dollars of tourist Revenue. They had previously (00:39:58) they've lost a lot of offshore Chinese (00:40:00) investment the a lot of the money coming into China was coming from the wealthy Chinese the didn't live on the mainland. (00:40:10) So we're making a reassessment of their economy. We're going to see how an (00:40:16) economic economic Congress scheduled for this month turns out we're going to look at at whether or not things have settled down enough there so we can have some confidence in the continuance of the reform that has been characteristic of China over the last several years. And then we'll make a decision whether to go ahead with it. (00:40:36) We have had as members of the bank for sometime (00:40:39) Yugoslavia and hungry. Poland joined the World Bank two years ago to the bank and the IMF you have to join the IMF before you can join the World Bank (00:40:50) Poland has not received any loans yet either from the IMF or the World Bank in part because they have not got their act (00:40:57) together. As you know, the new government is taking over their only recently (00:41:01) and they have not been able to put together the kind of program that could promised us (00:41:07) some degree of accountability and lending to them (00:41:10) but we assume that that is coming fairly soon with the new (00:41:13) government and we have prepared a number of project loans at least begin with (00:41:20) that that we can move to fairly quickly. Once we get the kinds of assurances that Poland is moving into the credit worthy column East Germany shows no interest as long as they get trade credits from West Germany Czechoslovakia has said they're going to join the World Bank, but have not taken the steps to do it yet. (00:41:40) Bulgaria is not aware of the World Bank exists (00:41:44) and Russia has set several missions to (00:41:49) ask technical questions. And so forth has spoken wistfully about it, (00:41:53) but probably does not have at this point the determination (00:41:57) necessary to develop a convertible currency, so they could join the IMF and become part of the World (00:42:03) Bank if they were to do so, it's very interesting question whether they would be as a borrower or lender because there's quite a bit of uncertainty about what the per capita income is in Russia given (00:42:12) the the vagaries of their their currency system. (00:42:19) So I don't know what's going to happen there and I wouldn't hold my breath that will take a little while for Russia to make up its mind and (00:42:25) it has a lot of digestive problems that have to it has to go through before it will be in a position to make that inquiry (00:42:31) the but the point is we do have some relations with these people we expect they will expand we think they will want at least People assistance from us in some of the economic issues that are going to be needed. They may very well want stabilization from the IMF also (00:42:48) as well as as possible at long-term economic Investments. It will be interesting to watch. Thank you Carnival question from Bob White. Yeah. Mr. Connell my question has with to do with how you reconcile the banks and for that matter the IMF when goals of dealing with the poorest of the poor with the goal of internal reform, one of the problems of one of the needs for reform has to do not only with financial but with with direct subsidies that are endemic in pots of developing countries one way to deal with reform is to cut down or remove some of those subsidies in Venezuela this year you had riots in Egypt a decade ago the same thing happened and the subsidies tend to get put back on regardless of the political consequences of That kind of upsurge. What does one do about the poorest of the poor who are naturally quickly and immediately affected one subsidies. Go (00:43:49) Bob, you asked a whole lot of questions there. You didn't just ask one subsidy is indeed a very serious problem much of the developing World performs, its economic activities through public Enterprise and public Enterprise as long as it has access to the public treasury doesn't have much incentive to be efficient. And the result is that that there's a tendency also public Enterprise owned by the people and therefore the politicians have a tendency to want to use the production of that public Enterprise in ways that will not be expensive for the people and so they subsidize it and it becomes a great black hole down which the resources the country are poured until that is where all the money goes maintaining a civil service that runs the so-called public. Eyes and and runs it in efficiently and and the result is the money isn't available for schools and for for health clinics and things of that sort and subsidy. We find frequently does not benefit the poor so much as it benefits some powerful interest group, like for instance a well organized civil service that represents half (00:45:00) the the employment of the country. (00:45:04) So so subsidy, you're right and putting your finger on that as a major part of the problem. How do you reconcile that you it's a difficult thing to do to handle the issue of subsidy. One of the first things we do is we try to encourage the great public Enterprises to be cut off from the treasury so that they have to either adopt sufficient economic efficiency in their practices, so they can survive or they'll go down the drain because they can't tap the treasury every time they have a little loss. So that's one of the first steps toward eventual privatization which becomes part of a market-oriented economic reform that will permit much more efficient marshaling of the assets that country and much more efficient public (00:45:55) investment. (00:45:58) Now, you're right that it's very difficult to do in the poorest countries where there may be a long-established practice of subsidizing food for instance. I want to tell you one of the most wasteful things you can do is subsidized food because the poorest of the poor in those countries usually are the rural poor and they do not have the advantage. They don't have the incentives to produce money for the market. If they don't get a reasonable price for it if they have price restrictions on what they're producing or if the price is fixed so that it can be the cost of the subsidy can be determined. And it is much easier to let the food price go up in order to get more production from the from the rural poor and to Target welfare programs to the urban poor so that they will have some sort of a safety net under them problem is the urban poor frequently are politically much more empowered than the rural poor are and so the chances are in many of these countries, you'll find ongoing practice of subsidy food subsidy or food price fixing it a low level rather than taking the correctives that could be done. Your Europe it is a very difficult thing. We try to take it by steps. We frequently are abused at the Press because we don't bring about overnight the reform of an economy. But we realize we are dealing with politicians in these countries and that they have to be led along and see and they have to see for themselves that it is possible to reform an economy and to take steps towards greater efficiency without creating severe hardship. However, the process of adjustment because there's always concern that it is going to be on the backs of the poor has recently been undergoing some Change the World Bank for instance has been adding a social factor in its loans insisting that any country that is adjusting its economy also receive as a high priority item in its borrowing program money for education and health so that the poor will not will be able to survive through the process. (00:48:19) Adjustment (00:48:20) that involves a (00:48:21) Reconciliation of the issues you're talking about. Thank you. We have a question from Rick Jackson. Mr. Carnival. Could you talk about the way in which the bank views the role of nonprofits or (00:48:34) non-governmental organization for mental (00:48:36) organizations in both International organizations as well as you seek to nurture them in the process of developing us (00:48:45) frankly. We have had very little relationship with nongovernmental organizations at all until fairly recently. We have had for probably five or six years anyway a council of non-governmental organization Representatives that advise the bank recently that has become a group majority of which are third world nongovernmental organizations rather than nongovernmental organizations located in Washington or in New York City or in London or in Paris. And that's a big Improvement. We have found however that we can use nongovernmental organizations and they can use us in a synergistic partnership because they frequently have a presence at the Grassroots that we do not have with our big cross-cultural bureaucracy. We're talking about a very large program for the world bank, right? We have only six thousand people on our total staff maybe 1500 Consultants at any given time and so obviously we do not of spend a lot of time out on a Hands-On basis dealing with the ultimate beneficiaries of our program. We're dealing with government officials for the most part if we can get the non-governmental organizations to be our eyes and ears out there among the people we feel that we can be a much more responsive organization. And so we are making a major effort now to identify projects and programs in which we can involve non-governmental organizations of one sort. And another one of the most encouraging things about development in recent Years has been the growth of the replication in the third world of the non-governmental organizations, which have their Genesis in the kind of plural society that we've got here in America. It is indeed reassuring to find in for instance very effective and sophisticated environmentalists in India, very important social welfare groups beginning to form up in Africa environmental growth in Latin America where there's been so much concern and and in fact, then the non-governmental organizations, we think are not only coming into their own as forces bearing directly on the governments of the third world rather than through the (00:51:05) international non-governmental organization Network, which (00:51:10) is quite (00:51:11) complicated and sophisticated. But but the developments in the (00:51:14) third world are very reassuring and And we believe that it is an going to be an increasing part of our program to involve them in trying to help us be more responsive. (00:51:29) Thank you a question from Ron Lewis. Mr. Khanna will did I understand you correctly that the the World Bank has formed a new insurance agency. (00:51:41) It's called multilateral investment guarantee agency it is it guarantees investors in the third world against non commercial risks. It is like opaque in other words and in an insurer of of investors who might be afraid to invest in the third world because of the unstable or are hostile political environment. Otherwise, (00:52:07) it sounds like the Savings and Loan insurance agency. And and if it relates to that at all my question is, how do you Prevent a fiasco down the road. Well, (00:52:23) I think you're aware that there are National Insurance agencies of one sort or another opic OPI. See for instance is such an agency in the United States. Most of the European Nationals have such guarantee agencies. We not only can insure against non commercial risks through Miga but can can Co insurer or reinsurer also so that it can be done in combination with other insurance agencies of a similar sort. Now, one of the major efforts of Miga however will be to advise third world governments about the kind of investment environment. They need to create if they are to attract foreign investment. So we become a technical assistance agency through this new insurance group as well. And I don't know how you can assure against a disaster unless you can be very Careful to be sure the Actuarial values are properly stated in establishing your contracts with the private investors. Now, there's another interesting aspect of Miga that is not available for the national (00:53:33) agencies (00:53:35) a a national of a country that has invested outside that country can ensure the return of his flight Capital against non commercial risk in his own country. If he applies for it in other words. This is one way of trying to encourage third world citizens who are wealthy and who want to play the New York Stock Market because they don't have any confidence in their own government to bring their money back because they will be protected against non commercial risks. Now that's such things as (00:54:10) refusal of the government to repatriate foreign exchange or expropriation (00:54:16) there any number a violation of (00:54:18) contract By a national government and so (00:54:20) forth. So it does involve a range of risks, but it also involves even the protection of the return of flight capital. I think I think it'll be an interesting experiment. I have to tell you that that it is moving quite slowly. We find the legal questions are very complex and we have to get very strong assurances from the countries in which these Investments are going to be guaranteed before we are willing to put ourselves in the position of a subrogee to two possible claims. (00:54:55) Thank you. Mr. Conduit satellite for a lawyer to hear a banker talked about the need for lawyers. We have a question from Professor Vern Rutan. Could you come back a minute to the relationship between the World Bank and the u.s. Bilateral assistance agency? Yes, you mentioned earlier that you both you both come out and get funds out of 150 account. As you know, the bilateral agency is suffered rather substantial declines in funding since the mid-80s and our contributions to many institutions, which we share for example, the consultant that the international a research system of which is headquartered at the bank u.s. Contributions drop from 25 percent to about 18 (00:55:35) you're talking about cigar there cgiar, right? (00:55:38) And (00:55:41) my sense is that with the with (00:55:44) relaxation of tensions between the u.s. And the USSR we can continue to see the bilateral Aid continue to decline is and is the (00:55:54) 150 account that much of a constraint. Yes. It is. It is a real constraint sir. I have to tell you because under a gramm-rudman you have a Next pot and what is paid into one cannot kind of to be paid in the other now, the bilateral Aid is is administered by such agencies as usaid and you're right. They have greatly reduced their contribution to the CGI are the consultative group on International (00:56:21) agricultural research that stands for which is a very important research group that that does seed and genetic and other research to try to improve the productivity of third world agriculture. (00:56:36) Now, they have reduced that and we've had to pick (00:56:38) up a substantial part of it (00:56:39) and we have done that we do that through our regular budget. So so the decline in usaid money is is obviously part of the overall fiscal pressure. However, I have to tell you the usaid money costs once It's cents on the dollar The multilateral Lending (00:57:05) costs in the case of the ibrd (00:57:08) 3 / 3 percent of eighteen percent of the total (00:57:11) lending program as I mentioned because so (00:57:16) little cash is paid in we think that's one reason why there should be a greater emphasis on multilateral lending and not on bilateral ending, but obviously we are not in a position to advise American congressman who frequently would rather vote money for something they can control then something which is part of a Cooperative organization like the World Bank the World Bank has a fifth 18% weighted vote in our board. I mean the US has an 18% weighted vote in our board. That's fine. If they can gather together enough votes to get 50 percent or more. Otherwise, they are outvoted. And so the u.s. Congressman are frustrated about giving money to us since they Feel they can't control it. All they can do is instruct the US Representative on our board to vote against something which they deemed not to be in the American interest that that creates all kinds of problems. Now, the reality is that there's a trade-off (00:58:17) between the two they (00:58:19) and and also on the (00:58:21) state department Appropriations, which are part (00:58:23) of Title 1 500 the US budget (00:58:25) act and that's the problem. That's one of the reasons why it's moving very the Ida Appropriations moving very slowly right now. (00:58:33) We have one question from dr. Anita (00:58:35) Pampas. Yes. I'm sure that one of the reasons people are reluctant to contribute money is a concern either that it's they needed at home or that they're not sure the money is being well spent what can you tell us about the impact of the funds that have been contributed in terms of actually improving the quality of life in the countries to which the money is sent. I would not pretend doctor for a minute that we don't make mistakes from time to time. We're a big bureaucracy operating doing what we know we do well which of the things we've done before and we're not always as responsive as we should be (00:59:12) I can tell you that as my (00:59:13) personal conviction having having visited a lot of World Bank projects and and observed the effect of a lot of programs that clearly we (00:59:22) are a positive force in a world which frequently has a lot of negative forces bearing on the poor. (00:59:28) And and thus although it's difficult to (00:59:31) quantify what that positive force does in terms of the quality of life. I personally am convinced that we must continue to try and try to be responsive try to be sure that we're meeting the demands that are out there and not the demands. We assume are out there that we that we adapt ourselves to changing conditions and that we insist on the borrowing countries establishing priorities, which will bear on the quality of life of their (00:59:58) people. Now I (01:00:01) can tell you there are many countries that have (01:00:03) graduated over the years. (01:00:06) Korea is about to graduate it still has a per capita income which qualifies it for. Ibrd. Lending would has great surpluses. (01:00:13) We're asking them to contribute to I to this year for the first time (01:00:17) the you look at the at the newly industrialized countries of the Pacific Rim almost all of them were borrowers of the World Bank in the past as a matter of fact, Japan. (01:00:28) It was a borrower the world bank until the early 1960s and is still repaying some loans to us at the time when it's become the second largest holder in the world bank. And (01:00:37) so you can find your success stories in Africa, even you can find some countries are doing much better than others countries like Ghana for instance in relation to its neighbors are our Mauritius, which is a is doing remarkably. Well Zimbabwe is doing much better than others and and and so forth. You can find the success stories and you know why their success stories normally it's because they have better policies than the others (01:01:06) and therefore there is a Nexus there between (01:01:10) the the availability of foreign resources and (01:01:14) the proper policies to (01:01:17) use those Investments (01:01:18) wisely. (01:01:20) All I can say is I personally am convinced that it is the only alternative To a world in which we simply let Darkness descend and the Staggering numbers of poor people did I mention the number of poor people are are in the world. There are about 90 million living in absolute poverty in Latin America. There are (01:01:44) 280 million living in absolute poverty in Africa there (01:01:48) about 600 million living in (01:01:49) absolute poverty in Asia by that. I mean, they don't get enough to eat (01:01:54) by that. I mean they have no real prospect prospect of advancing themselves because of (01:02:00) the circumstances into which they were born the caste systems or the or the economic environment in which they are trying to live. Well the point is you just can't abandon those people and I do believe that if you didn't have a world Bank you'd have to invent one. World Bank, president Barber conable at the Minnesota meeting prior to the question-and-answer session is topic was fighting poverty and encouraging growth and protecting the environment the world bank's agenda for the 1990s live broadcast of Minnesota meeting are made possible by Oppenheimer wolf and Donnelly providing commercial corporate litigation and international legal services to businesses in 40 countries around the world. That's our midday broadcast for today. This is Bob Potter. You're listening to knnow 1330 AM Minneapolis-Saint Paul. To find out what happened around the nation today. Listen to All Things Considered from National Public Radio in Washington every afternoon at four o'clock. All Things Considered offers, its thought-provoking reports analysis and commentary on Minnesota Public Radio. Well, they ran so long and Minnesota meeting. We went right through national public radio's news will get to take out here in just a second after I tell you that skies are Sunny around the area today temperatures are going to range from 70 to around 80 now four minutes after 1:00.