symposium

0 Comments | Insight on the News, May 22, 2000 | by Mats Karlsson, | Kenneth R. Timmerman

Q: Is the World Bank still needed in today's global economy?

Yes: The World Bank is leading the fight against poverty in the developing world.

If we want to shape our future, it is abundantly clear that we need to act not only nationally and locally but also globally. In such a world, the World Bank is not only still needed, but needed more than ever. The world's population, which measures 6 billion, will become 8 billion in just 25 years. More than 95 percent of this new population will be born in developing countries.

In 1944 at a conference at Bretton Woods, N.H., leaders from allied countries around the world met to help shape the postwar world. The world's economic ministers had in their minds the experience of the Great Depression and the two world wars, as well as a firsthand knowledge of the consequences of failing to take similar action after the First World War. Nearly 60 years of relative global peace is the ultimate result of the foresight and, more importantly, the political will of these leaders.

From the outset, the World Bank was designed to provide loans, guaranteed by the United States and other countries, to help Europe and Japan rebuild from the ruins of war. Later, as countries in Asia, Africa and the Americas joined, the World Bank invested resources in these regions to promote economic development.

In addressing these challenges, the World Bank has contributed to remarkable progress. It is easy to forget, but Japan -- now the world's second-largest economy -- received loans from the World Bank into the 1960s. Other nations whose economies are growing stronger still need World Bank financing to strengthen their education, health and social-security systems, among others.

Over time, the bank's focus shifted from rebuilding industrial economies to fighting poverty in developing nations. Life expectancy in the developing countries has increased from 55 years in 1970 to 65 years in 1997. Incomes have doubled. Infant mortality has been reduced by half in the same period of time. The proportion of children attending school is now three-quarters, up from half in 1970. More people know how to read and write than ever before in human history.

This progress reminds us of what can be achieved by a combination of political will, capital and human ingenuity. We can create a world free of poverty.

More to the point, we now realize that the challenges during the coming 50 years, while dramatically different than those facing our predecessors, will be just as difficult. As in 1944, the decisions we make about institutions and policies regarding development will require both great insight and political will. Now, just as then, the consequences of our actions will determine whether our children live in peace.

What role, if any, should the World Bank play in our world for these coming generations? I believe that the World Bank combines rare qualities that would have to be reinvented or found elsewhere if they did not already exist. It has an international convening power and a unique role as catalyst, convener and coordinator, which helps leverage both its own resources as well as those of other development partners in official capacities and, increasingly, the private sector.

As private capital takes an increasing role in financing development, the World Bank also has unique experience drawn from more than 50 years of experience tackling development problems: from irrigating crops to setting up pension systems and regulating private banks. It delivers this expertise not just from its Washington headquarters, but from more than 100 offices around the world. These characteristics become extraordinarily important in an increasingly global economy. In recent months, the term "globalization" has provoked as much concern as it has promise. However, the real debate should be about a balancing of interests in the global economy -- and especially how we ensure equity in this digital world for its poorest members. Private capital markets can efficiently identify winners and losers but cannot ensure equitable and transparent market systems, an open and responsive government, a sound banking system, a fair judiciary or a thriving civil society.

It simply is a fact that, despite some notable successes and good work by those committed to development, wealth created by global economic expansion has not sufficiently reached the poor. In Brazil, the poorest 20 percent of the population earn just 2.5 percent of the country's income -- while the richest 20 percent control nearly two-thirds of the country's wealth. This is not an unusual case. Such ratios are found in countries as diverse as Colombia and Niger, South Africa and Russia.

Meeting the needs of these poorer populations will not be achieved by money alone, and neither governments nor the private sector can close the gaps that exist -- between rich and poor, between the educated and the uneducated, between those who have adequate health care and those faced with death on a daily basis -- without effective collaboration among public and private donors, aid agencies and civil society.