If the new World Bank President calls …

International Economy, The, Spring, 2005

It would of course be important that this refinancing not be done in a way that would threaten renewed crisis vulnerability in the short run. To my mind this means that the Bank should lend to each emerging market in its own currency (though indexed to its price level, so that an irresponsible country could not inflate its debt away). It could avoid exposing itself to exchange risk by borrowing through an Eichengreen-Hausmann bond (a bond denominated in a basket of indexed emerging market currencies, where the weights are similar to the proportions in which its clients borrow from it).

ANDERS ASLUND

Director of the Russian and Eurasian Program, Carnegie Endowment for International Peace

The World Bank has many specific advantages, such as a broad mandate for economic development, a world-embracing network, a strong staff, and substantial financial resources. James Wolfensohn's high public profile has given the Bank extraordinary good will, which the Bank can live on for years.

The Bank's fundamental problem is that its all-embracing mandate makes its objective function look like an octopus. Therefore, it has also an organization that looks like an octopus, but such a structure cannot work very well. The first challenge for the Bank is to concentrate sufficiently on a limited number of objectives so that the bureaucracy stays bearable. The Bank must sufficiently constrain its desire to be politically correct so as not to come to a standstill. The number of conditions connected with Bank loans must be restrained and limited to essentials.

Since 1990, the Washington Consensus has caused an appropriate focus on deregulation, macroeconomic stabilization, and privatization, which have prompted good economic results in large parts of the world. After a few years of wobbling about equality, the Bank should focus on the promotion of economic growth, which is the best means of defeating poverty. The intellectual challenge to the Bank is to find applicable ideas that can boost economic growth.

Governance has rightly been brought forward in recent years as a key issue for the Bank. A profound problem is to secure private property rights in the second and third worlds. Another issue is to contain corruption of state bureaucracies so that economies can grow. The eventual goal must be to minimize corruption. We now know that property rights are weaker in the third world and state regulation more ubiquitous. The key question is how to combat not market but state failure.

DANIEL K. TARULLO

Professor, Georgetown University Law Center, and former Assistant to the President for International Economic Policy

As you know better than anyone, you begin your presidency at the World Bank confronting a combination of uncertainty and skepticism in some developing countries, among the Bank staff, within the development agencies of many countries, and in non-official development policy circles. Your earlier experiences at the U.S. State Department and as dean of a distinguished graduate school of international studies have been, to put it mildly, overshadowed by your prominence as an architect of the Bush Administration's military actions.