James D. Wolfensohn
The World Bank Group
Banqueting House, London, November 17, 1998
Your Royal Highness, ladies and gentlemen, I only wish my parents were here to hear all that discussion, particularly in this wonderful hall and before such a distinguished audience.
This is a special day for me and I am very grateful to you, Sir, for the invitation to address this gathering. But before doing so, let me just comment on the fact that this is also a special period in the life of His Royal Highness and, given that I was not here for his birthday party -- I do not think I was asked but maybe the invitation was lost in the mail -- I think that I should say something from the international community's point of view, without trespassing too much on your privacy.
Let me say that, quite honestly, as a member of the international community and having come to know you in recent years, we are all tremendously grateful to you and deeply impressed by what you have done. I have just taken a look at some of the things that I know of: the Princes Trust, 20 years of dealing with the question of young people, 30,000 young people affected by these programs - programs that are now being extending overseas. Your Business in the Community Program, which you befriended in 1985, a program which today seems quite normal in terms of its focus on having businesses reach out into the communities to try and affect the lives of people and affect the social conditions in which they operate. Your work in Business and Environmental Programs in which this evenings lecture forms a part. You decided - before it was common that businesses needed to stretch out to the environment and recognize environmental issues as part of the mainstream.
I remember well your early words to me, speaking more on behalf of the NGOs that you chaired: Water Aid, Intermediate Technology Development Group, ActionAid. I think you were much affected then by their views of the World Bank, and I am thrilled that you have changed that for this evening! But you drew attention world-wide to these NGOs and to the civil society movement in Britain. Finally, the Prince of Wales Business Forum with which we have such a close association and where, frankly, you have helped us start a major program with the private sector. For that, your view of culture, of history, of architecture and your sensitivities, I just want to say "Happy Birthday" and I hope you have many more years doing this sort of work. (Applause)
The world has changed from a number of years ago. You should know that we at the Bank are concerned with this new world, this world of development and transition. The Bank itself deals not just with the globe; we deal with that part of the globe which is in development and transition: 4.7 billion people, 3 billion of them living under $2 dollars a day and 1,300 million living under $1 a day, and growing. In another 30 years there will be another 2.5 to 3 billion people in that group.
It is a world that has changed. It is a world that today is marked by democracy. Twenty years ago three out of four countries were non-democratic. Today only one in four countries is non-democratic. Today we have a world of 5 billion people that live in market economies. Twenty years ago it was 1 billion people. It is a world that is clearly on the move, but it is a world that we have to care for and a world in which there are many challenges. Those challenges are very real, most notably in the environment. Every second we lose an acre of forest; every day we lose 100 species; 75 million refugees have left forests that have been cut down.
It is a world, which in terms of its demographics, in terms of its movements, faces great challenges. We are going to have urban populations that will treble over the next 30 years. We are going to have food production that will need to double over the next 30 years, on the same amount of land. We have a world that is marked by pollution; 2.7 million people die every year from air pollution. In Latin America 15 million children die of lead poisoning every year from brain damage. 1,300 million people do not have clean water; 2 billion people lack sanitation.
This is a world of challenge. Yet it is a world in which we have achieved a lot. We have done a job in terms of trying to diminish poverty. We have created a great sense of opportunity. We have created a different environment for democracy.
So here we are faced with progress on the one hand and challenges on the other. It is a time when we really need to take stock as we come to the next millennium, a time when we should look at ourselves, a time when we should look at what we are going to leave our children, a time when we should, challenged by an Asian crisis, reassess what we are doing and how we are doing it.
Let me start with the Asian crisis. Let me just make some comments on where we are before we move to what we can do in terms of moving from "doing no harm to doing good", which someone gave me as the title for this lecture tonight.
In South-East Asia we had, as you know, very significant growth, We had, as you know, cut back poverty for over 300 million people, we had, as you know, illiteracy which in many of these cou7ntries had fallen 80 per cent down to 10 per cent. Greater health care, greater opportunities, greater education. And we believed that the East Asian Miracle was here to stay. It was there, it was an achievement, and indeed it is an achievement. It still is an achievement. But all of a sudden some 18 months ago in Thailand we discovered that there were weaknesses beyond the achievements, and that the base upon which all this had been built, the base of economic advancement, the base of financial security, was in fact built on very, very thin grounds.
We discovered that the financial systems did not work, that the transparency and the openness of their economies was not real, that it had led to excesses, excesses which caused a major financial crisis first in Thailand and then in sequence in Korea and in Indonesia, and with concerns today about Russia, Brazil and other countries in the world.
It was a concern that was passed on by the private sector. It was passed on by the private sector because two years ago $350 billion went from the developed countries to the developing countries, $120 billion of it in direct investment, the rest in investment provided by banks, to try and spur the advances in these economies. Two years later that $350 billion was $150 billion. $200 billion was lost in terms of liquidity for the developing countries - not lost just to Korea, Thailand and Indonesia - but lost to the developing countries. There is a sense that confidence is lacking. Business is not moving.
I have just come from Japan. Japan is in a different state than we have known it; it is in recession. We are all concerned about a revitalization of that economy, an economy that needs to be revitalized because of its importance in Asia. Japan is a $5 trillion economy, 25 times the size of Indonesia at $200 million; 25 times the size of the Russian economy today. We need this giant to move forward and we need adjustments in the economies of which we are speaking, and we are concerned about Russia and about Brazil.
What is it that we can do? What is it that the Bank and what is it that you can do? What is it that you should do? Why should you be doing it? Why is it that we talk to you about environment, about social responsibility? It is clear: it is clear that if you are interested in the future and if you are interested in peace and stability and in your own businesses, you have to be interested in things beyond finance. You have to be interested in the world in which you operate. You have to be interested in the social and structural considerations that go along with it because Asia's problems will not be solved by the writing of a cheque, however big. $57 billion for Korea will not solve the Korean problems alone; $20 billion plus for Indonesia will not solve Indonesia's problems alone. You need only look at the newspapers to see about the turbulence in the streets. You need only to think that 60 million people in Indonesia now live under $2 a day, that 15 million more people now live in poverty under $1 a day, to understand that, with this financial crisis, you have a social crisis of enormous proportions.
The issue for us to face in Asia, the issue for us to face in Brazil, the issue for us to face in Russia where you have 40 per cent of the people living in poverty is to look through the numbers, through the finances to the issues of the social structure and the environmental structure in these communities.
You cannot have peace and you cannot have growth and development if you have 60 million people living on under $2 a day without hope. You cannot have peace, you cannot have hope if you have great social inequity. None of you are likely to invest if you go to a country and you cannot walk outside the hotel for fear of being knocked on the head. None of you will invest if your plants are going to be ravaged. None of you will invest if you find that the social atmosphere in which you are moving is such that you never know what government you are going to deal with.
The issue of stability, the issue of growth, in these countries is an issue, which is not just about development; it is an issue, which is tied irrevocably to the social structure. What we are doing in Thailand, Korea and Indonesia is not just providing money; it is trying to deal with the issues and the structure of those societies, to try and ensure that you have a financial system which is transparent and that works, to try and ensure that you have a justice system that works, where property rights can be protected, where a legal system can give you results in some approximate time and not take ten years, where you can be protected if you own something, where regulatory reform is introduced so that you can reduce the amount of corruption that exists and so that you can get decisions quickly, so that you can have predictable tax codes. These are all things which do not make the headlines but which are an essential element in terms of both meeting crises and dealing with the issues of development generally.
With that, too, comes the issue of the environment because, when you have problems, the greatest sufferer is usually the environment. With poverty, people cut down the trees to warm themselves; with poverty they despoil the environment; with poverty, people do not think about the environment around them. So we are faced with an even greater challenge, whether it be in the jungles of Brazil or in the cities in Indonesia, whether it be in the countryside in Thailand; the challenge is there for us to face, not just for financial issues but the social issues, the structural issues, and the environmental issues.
It is not something that you can turn your back on. If you are investing and if you are interested in the international community, you are in it: it is not an option. I am not here to beg you to participate in issues of the environment or social issues. It is just transparently clear that it is part of the investment process; it is part of your being a global citizen.
The issue is: how do you then deal with it? We have taken a look at the Bank, as His Royal Highness has said, and we found an institution that did not look outside itself, that was somewhat over-confident, that did not listen terribly much, that tended to go into a country and dictate what it was that should be done, that knew the answers, that could indicate lines that a company should follow. Often we sent young people who insisted on seeing the President in the ten days that they were there to deliver a message, and then they left. Not surprisingly, the World Bank got a name that His Royal Highness gave to me when I came to the Bank, but that has changed. We are changing ourselves because we recognize that if one is to face the problems of modern development, you cannot face them alone.
We have learnt that the only way we can deal with these issues of development in a sensible way is first of all to recognize that we have a macroeconomics and a financial framework which is crucial but that we also have a social, structural and environmental framework which is equally crucial. If you have one, you have the other. It is like breathing in and breathing out. You cannot separate them. They are there together as essential elements in the development process.
Most of us who have experience in finance, and that was true of the Bank and is also true of many of you here, find it comfortable and convenient to look at financial balance sheets and to look at numbers. It is a quick way of looking at it, and that is understandable, but the other side was gone. You cannot make safe investments, you cannot bring about real development unless you deal also with the social, the structural and the environmental and that is what we have done to reorganize our own institution.
And we have said, "We can't deliver this alone. We have to deliver with other multilateral institutions. We have to do it with governments, we have to do it with civil society that has emerged with democracy and we have to do it with business". Business invests six to seven times as much a year as all the multilateral institutions put together. There is no choice but to work together.
So there is a partnership that needs to be forged and is being forged between the private sector and the other players in the international community. Together we can address this issue.
And so it is that in the seminars that have been held at Cambridge, many of the participants have been faced with these issues, faced with the reality of taking a different look at the way in which the development process works.
As I see Clare Short in the front row here, Clare fully understands this; in fact she lectured me on it this morning. We agreed on it. I am delighted that she is here and that we have such remarkable leadership with both Clare and the Chancellor on this process.
We are working to try and see how we can bring things together. Together with the Prince of Wales, we have set up a Business Partnership for Development, a partnership which is trying to say: how is it that we can work better together because we have not done this work in the past. We have set up four groups: a Natural Resources Group, a Water and Sanitation Group, a Global Road Safety Partnership Group -- why road safety? Because 700,000 people are killed every year on the roads, most of them in developing countries -- and a Global Partnership for Youth Development, which follows again one of the Prince of Wales's initial initiatives.
What are we doing? We are bringing together a major company with non-government organizations to jointly partner and jointly chair these exercises, so that together we can pick countries in the world and projects at a quite specific level to see how it is that we can gain experience from working with each other.
This is new territory. This is a new way of thinking. It is saying that as a business person you cannot do it alone. If you are venturing outside the country, if you are venturing into new territory, you had better be open to the local society; you had better have partnerships; you had better not come in, put some money in and think you know everything; you had better understand that you have to deal in an integrated manner with the country locally and the with the environment in which you are operating.
This is something new. It is not something, which comes naturally, but it is natural when you think about it. As people are enfranchised with freedom, as you have civil society becoming more active and as you have transfers of knowledge, people are no longer in the dark. We have wind-up radios that we give out in Africa. Clare and I each have one in our offices. If you turn a handle and you get two hours of radio listening. We even have a wind-up computer with a satellite.
In Latin America and Brazil with Conservation International in some of the Amazon villages we even have satellite transmission of videos. They cannot read but they use that to keep up with each other in the Amazon.
We ourselves at the Bank have converted ourselves into a knowledge bank. Every one of our offices in 100 countries by the end of this year will be linked by voice data and video. We will have more than 400 videoconferences a month; we will have 50 classrooms by the end of next year in countries in development. We already give university courses in Africa by satellite. This is not a world in which people do not understand what there is out there. This is not a world where people can be hoodwinked.
And my hope is that we can engage business in this new approach as well because the currency of development is not just money; it is knowledge; it is experience. For us the most important thing to do in terms of engaging the private sector is to learn from you what it is that you do, and have you learn from us and then make that available for the world in development.
This is not a pipe dream; this is today. This gives us an incredible opportunity to bring about changes in the globe in which we are operating. It is an opportunity for us to deal with issues of environment, to deal with social issues, to deal with economic issues, to deal with issues of education, of health and other essential elements in the development process.
As we come to the millennium, we should not focus on the nasty statistics I have given you; we should focus on the opportunities. The world is a rich place. It is a place of culture, of many cultures, it is a place where there is great experience, great experiences in the villages that we can learn from, great experience in the jungles that we can learn from, great experiences throughout the world that we can exchange. As we approach the millennium, it is time for us to look at a planet that we need to protect. It is a time for us to think of new ways about investing, it is time for us to think of new responsibilities that we have, not just for social and moral reasons but for reasons of good business. It is time for us to leave a world that is peaceful and prosperous for our children.
That is why I believe that the work that that has been done by the Prince of Wales Trust and in the Cambridge seminars is so constructive. But it is a message that should go to all, whether you are here from business, from civil society or from government. We have a challenge and we have an opportunity in this next millennium to either have a world that will be in conflict, full of inequities, with an environment that no-one can live in, or a world that gives a future for all our children and their children.
The challenge is ours and we had better respond to it.
I am very grateful to have had the opportunity of giving you these views. (Applause)