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Good Governance, Market Economy Go Hand in Hand

South Korean President Kim Dae Jung and World Bank President James D. Wolfensohn

Wolfensohn applauds Kim’s opening address in Seoul at the Democracy, Market Economy, and Development conference

Fighting poverty needs to be given highest priority because it determines so many other aspects of other people’s lives, said Wolfensohn


The drive to build free market economies must be balanced with more attention to the human side of economic development and more participation in government, world leaders said this weekend at a Seoul conference on the links between governance and development.

South Korean President Kim Dae Jung, whose government co-sponsored the meeting with the World Bank, captured the debate in simple terms in his opening address on Friday.

“Democracy and (market) economy are like two wheels of a cart, and both must move together and depend on each other for forward motion,” said Kim.

Building on the analogy, World Bank President James D. Wolfensohn said that if one wheel represents economic numbers, the other must be about people.

“I would like to focus on the right wheel, which considers the social and human aspects of development,” said Wolfensohn.

Fighting poverty, he said, needs to be given highest priority because it determines so many other aspects of other people’s lives.

Other key social aspects that need to be addressed include:

  • Including all groups in society to minimize the gap between the rich and poor;
  • Eliminating corruption so it cannot erode society and limit investment opportunities;
  • Transparency as a tool to fight corruption, and;
  • Knowledge to make sure society is well equipped to meet the demands of the future information economy.

“Mid to long-term sustainable development depends on the effective implementation of these ideas,” he said. “To reinforce the social changes, clear and transparent legal, justice, financial and social systems are required. Partnerships among governments, international institutions, NGOs, and people from all levels of society need to be formed to craft effective plans and reach the desired goal.”

Leading Experts Take Part

The idea for the Seoul conference, which took the theme Democracy, Market Economy and Development, came about after private talks between Wolfensohn and Kim. The two-day meeting featured active participation by some of the world’s leading authorities on democracy and development, including Professor Amartya Sen, the 1998 Nobel Laureate in Economics, and World Bank Chief Economist Joseph Stiglitz.

In his lecture on Democracy and Social Justice, Sen addressed the idea of “Asian values,” stressing that a key part of the development process in Asia and elsewhere is to develop and strengthen a democratic system.

“The argument that ‘Asian values,’ with an emphasis on discipline, are contrary to democratic ones can be thoroughly refuted by examining the many writers in the region through the centuries. Even to assume a unified ‘Asian values’ disregards the breadth of philosophical ideas that have been expressed in this region,” he said.

Democracy is significant in three major ways, said Sen:

  • Its intrinsic importance for enriching human lives by guaranteeing freedoms,
  • Its instrumental contributions which make leaders accountable to those governed, and
  • Its constructive role in the creation of values and norms.

Meanwhile, Stiglitz said broadly participatory processes promote truly successful development.

“Openness, transparency, and good governance are important for the private sector as well as the public sector,” he said in his keynote address on Democratic Governance and Development. “Governments and markets must act as complements. Quality of government is affected by quality of political process, which is in turn affected by transparency and dialogue. Lack of openness, participation and good governance lead to lack of competition in the political arena affecting the quality of government.”

Conference Meant to Start Overdue Discussions

In an op-ed in Friday”s International Herald Tribune, Presidents Kim and Wolfensohn said the Seoul conference aimed to start a long-overdue discussion on the effects of governance on economic growth.

“The global economy must be open to all people if it is to endure,” Kim and Wolfensohn wrote. “Politicians can no longer ignore the manifest urgency of building economic development in parallel with an environment of social and human justice. People simply will not support a world economy which is exclusively about growth rates and private capital flows. It must be about more than that.”

A panel of distinguished leaders addressed the Seoul conference, including former Japanese Prime Minister Yasuhiro Nakasone, who suggested East Asian nations form an East Asian Financial Committee to further develop democracy and the market economy.

“Most East Asian nations have placed greater emphasis on development and maintaining law and order than on allowing their citizens to participate in the decision-making process,” said Nakasone. “However, due in part to their greater level of development, East Asian nations increasingly recognize that a system lacking the involvement of their people in its decision-making process cannot survive for long.”

Former Philippine President Fidel Ramos told the conference that the market economy, democracy and development must be achieved together and that each element reinforces each other.

“Changing from authoritarianism to democracy was the easy part. The harder task will be to make democracy work for all people. The same goes for introducing a market economy. Introduction is easy, making the market economy work for all is the challenge,” said Ramos.

Former Costa Rican President Oscar Arias Sanchez stressed that global citizens must demand democracy, responsible military spending, and eradication of corruption to improve the state of human development.

“While the world has made unprecedented strides to foster human development in the last 50 years, this trend will only continue if the world declares human development to be the main agenda of the political, social and economic institutions,” said Arias. “Currently, poverty and extreme suffering exist alongside tremendous wealth, and if this state of inequality continues, armed conflict will be inevitable.”

Helpful Links: To read the press release on the opening statements by Presidents Kim and Wolfensohn, click here, and to read their joint op-ed in Friday’s edition of the International Herald Tribune, click here.

For more on the conference and the statements from each of its participants, go to the conference’s official website at

For more information on the Bank’s work on governance, click here.

To see the Bank’s East Asia website, click here.

Also, click here for the Bank’s participation website.

For more information, contact Farrukh Iqbal in Washington at 202-458-2467.

For these excerpts, click below:
South Korean Pres. Kim Dae-Jung
World Bank Pres. James Wolfensohn
1998 Nobel Laureate Amartya Sen
World Bank Chief Econ. Joe Stiglitz
Political Leaders Session

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