September 20, 2003
Dubai, United Arab Emirates
MR. MILVERTON: Good morning, everyone. I'm Damian Milverton. I'm the Communications Officer with the World Bank. I'd just like to introduce the gentlemen to my right. Firstly, we have Nick Stern, who's the Chief Economist for the World Bank and has been since July 2000. On his right is his successor who will be taking over from Nick in October, Messr. Bourguignon, Francois Bourguignon.
I'll let Nick open things up, and then we'll take questions after about 5 or 10 minutes. Thanks very much.
MR. STERN: Thank you, Damian, and thank you all for coming.
What I want to say is just two things, really; one sort of comment about the Bank and the other to introduce Francois Bourguignon.
I leave the Bank with great admiration and fondness for the institution. I think it's doing an excellent job. I set out my thoughts on the Bank in an article in the Financial Times yesterday. So I won't repeat them there, simply to underline that this is a period of the history of the world that internationalism was the fundamental importance. We have to find international responses to international problems and challenges, and the greatest of all of these is the challenge of fighting poverty.
I think that a successful fight against poverty requires a partnership of the kind that was set out in Monterrey. I believe the Bank is playing its role in that partnership, and I've been proud to be part of that story. I'm leaving the Bank because of a call from my own country. I would have been very happy to stay at the Bank for a considerably longer period, but it's quite hard to decline when your country calls, and I'm looking forward to the job I should be doing in the U.K. Treasury.
I'm absolutely delighted that Jim Wolfensohn, the President of the Bank, has asked Francois Bourguignon to be my successor, and I'm similarly delighted that Francois has accepted. Francois is an outstanding economist, who's led the way in the profession in many aspects of development economics, particularly I would draw attention to his work on understanding and measuring poverty and its relationship with inequality and its relationship with economic growth. Francois has been the leading figure in the development economics community on those subjects.
He's also enormously experienced in living and working in developing countries. So I shall be advertising as Francois Bourguignon's predecessor and hoping some of the reflected glory will arrive, as it were, backwards.
So, Francois, most of this, the purpose really of this meeting is to introduce you. So perhaps you could say a little bit about yourself.
MR. BOURGUIGNON: Great. Thank you very much, Nick. The first thing that I would like to say is that it is very nice to be your successor, but it is also very hard to have you as a predecessor. You have done a fabulous job during these years that you've spent in the Bank, and I simply hope that I will be able to continue on your footpath, but I'm sure that things will certainly be easier, taking the job from you.
Now, about my background, very, very quickly. I think that my commitment to development economics and research started a long time ago in Chile, where in those days in France you could choose either to do your military service in the army or to go to serve abroad. And of course I have chosen the second option, and I was fortunate enough to be sent to the University of Chile.
It was thought that I should take with me the most elementary statistical books because, you know, in those developing countries the level of education was not the same as in our glorious France. And I found the department at the university, where everybody had a Ph.D. from the best universities in the world, and I learned a lot in research with them. And since then, I've been interested by issues concerned with development, concerned very much with distribution, with poverty, with inequality, and ever since I've been working in this area.
Then, I switched to the academic career. I have taught for some time in Canada. Then, I went back to France, and I spent most of my research career there. I also funded a research institute called Delta, which depends on the Ecole Normal Superior and the Ecole des Hautes Etudes en Sciences Sociales, where we now have one of the best groups of economic researchers in Europe.
With time and with age, I became more and more interested by true economic issues, rather than academic economic issues, and fancy modeling. And I was closer and closer to the policymaking world, both in developing countries, as in developed countries, in developing countries through a lot of consultation work I've done with the World Bank, in many occasions with UNDP, with ILO, with most of the international organizations doing some advising work with several governments, and also in France, because I was very much interested by taxation issues and redistribution issues in France.
And I was very lucky to be on the team that Prime Minister Jospin, in 1997, put together. And I served on this Advisory Committee for a while, and then I could discover what really economic policy was and the role that economists and academic economists could have with politicians. And I found this experience extremely rewarding, extremely interesting.
And then at that stage of my career, I thought that it would be a good idea to jump, on the other side, to be really more on the economic policymaking field. And then when I was offered to take the leadership of the Research Department at the World Bank a few months ago, I was asked by Nick, and I was very happy to come to the Bank and to work with Nick as my direct boss and having the responsibility of the Research Department.
But just before I came, I learned that Nick would be leaving, himself, and I was wondering who would be my next boss, and I didn't know that I would be my own next boss.
MR. BOURGUIGNON: And so I'm very happy to join the Bank, I mean, to be in that position in the Bank. I understand that it is really going one step forward. As the Director of the Research Department, I was in my world, I was in a research environment, which was very similar to academia, and moving to this position of Chief Economist. It is clear that I am moving toward more work being done in economic advising, strictly speaking, and representing what is going on in the World Bank in terms of research and evolution of ideas on the one hand, but also the reaction to the evolution of the world and to the difficulties which may arise on the economic level in the various countries in the world.
It's a real pleasure to take this job. It's a real challenge, and I simply hope that I will be up to the challenge.
MR. MILVERTON: Thank you very much, Francois and Nick.
I'd like to invite your questions. As per the usual protocol, please give us your name and your affiliation, and I just might add if you could silence any cell phones that you might have on your person as well, just to make things a little smoother.
So, please, Anthony.
QUESTION: I'm sorry, Anthony Rowley, Emerging Markets. The World Bank began life as a bank primarily financing infrastructure. It then moved into structural adjustment and all kinds of things. It's moved the focus toward poverty reduction. It seems to have become very unfocused in many years in recent years. Where would you like to see the focus shifting to, if that's the right expression, in order to have the most impact on development? And I don't simply mean on poverty reduction. I mean on development as a holistic concept.
MR. BOURGUIGNON: Okay. I believe that the poverty reduction objective is synonymous of development. I know there are many definitions of development which encompass many dimensions of the evolution of societies. But as an economist, and I believe in the Bank because of the economic perspective taken by the Bank, it seems to me that there is a very strong association between poverty reduction and development.
From that point of view, I believe that the objective is important and will and should remain the main focus of the Bank. And to a large extent the reason why I was happy to join the Bank is precisely because the focus had been several years now precisely on poverty reduction, which always seemed to me the fundamental thing or the fundamental objective in development.
This being said, obviously poverty reduction must be understood in a very broad sense. If we want to reduce or to fight effectively poverty we must be concerned not only by measures which will have a direct impact on the poverty which will relieve very directly poverty. They are obviously extremely important. But also interested by measures which will modify the whole economic system in which people live which will reallocate resources, which will modify the whole path of the macroeconomy because this will have, of course, an impact on poverty.
So I would look at the evolution of the Bank and the view that we have to development in those terms. The long run objective is definitely to eliminate poverty. But in order to do that we must have a strategy which is with various facets. Some of them have to do directly with microeconomic poverty reduction programs. Others have to do with more general growth-oriented policies. Others may have to do with a long run strategy called choices for specialization in international trade, et cetera. But there is--I don't see any contradiction in all this.
For example, there is right now a new interest by the Bank for infrastructure issues. But if you compare to what was the position, the attitude of the Bank with respect to infrastructure a few decades ago it was fundamentally different. Now we are looking at infrastructure simply because we want to make sure that building infrastructure will indeed contribute to poverty reduction directly as with, let's say, water supply, sanitation programs, or indirectly because we are constructing ports or roads which will facilitate trade, et cetera. But this is really part of the same philosophy, part of the same goal.
MR. MILVERTON: Yes, this gentleman on the left.
QUESTION: I'm from UNI from India. You know, in India we have a 5 percent-plus growth rate, but what is often felt is that the poverty reduction is moving at a very slow pace and inequalities remain large. There are obviously institutional and structural factors involved in this. Given the vast experience in dealing with poverty and inequality, what advice would you give to the Indian government so that we move faster on the poverty programs, on poverty reduction?
MR. BOURGUIGNON: It is very difficult for me to talk about India sitting close to one of the world's specialists of India, so I would like maybe Nick to answer, or maybe Nick will want to say a few words on this.
It strikes me that inequality may not have been the main problem or main difficulty in India up to now. I mean, there certainly is a relationship between inequality and poverty and we may imagine that if we could, from the day to the next reduce inequality, at the same time we would be certainly diminishing poverty.
Now the problem with this is that reducing inequality is something very difficult which will take a very long and which will have some impact on the economy and in some cases may have negative impacts. Some other cases, may have a positive impact. So in countries where you have a very high level of inequality, it is certainly an option to try to consider that this should be a goal for a long-run policy to diminish inequality. And this is certainly something which is to be considered in Latin America in particular or in some African countries.
In the case of India, I don't think that in the case of figures, India has never been among the very highly unequal countries in the world. And there have been changes over time in inequality, but the distribution has not changed in a radical way.
So I would suggest that in the case of India the main goal should be overall growth, overall gains in efficiency, in productivity with, obviously, no change in the present distribution which will guarantee that everybody is sharing in a more or less equal or proportionally to his or her initial situation, the gains from growth.
But I don't think that this kind of very strong redistribution policy aimed at reducing inequality is called for at this present time in India.
MR. STERN: I think that India's growth rates in the 1990s in the last few years have indeed been very encouraging. Now India has seen really an acceleration in the kind of growth rates of 3, 3.5 percent we got used to, to something over 5. And I think it's a very important step forward, and it comes from policy reform and more open economic policies, reducing the effects of the license raj and so on, and I think that's a very important step forward.
The challenge, I think, is to keep that growth going, and also to try to make that growth more inclusive. The rural areas in India have not done so well. The northeastern states in India have not done so well. So I think it's important to keep that rate of growth going, but also to look for policies that are going to bring in those groups that have been excluded, or haven't participated so strongly. And I think in doing that, rural infrastructure will be a very important part of the story, water, roads, power, and so on. And I think that reform of governance in some of the lagging states will be very important too, because some of the problems, as you know very well, have to do with weak governance, corruption, and so on, in those states that are not moving so fast.
So I think it would be a combination of a continuation and deepening of the policies that have been followed up now for growth, together with more specific concentration on rural areas and in the weaker states.
MR. MILVERTON: Yes, Julie?
QUESTION: Julie Ziegler from Bloomberg News.
I'd like to know your opinion on what your recommendations would be, given the failure in Cancun, what should be done to sort of jump-start trade talks?
And the second question is, is it your opinion that rich countries are solely to blame for the stalls in the trade talks now?
MR. BOURGUIGNON: Yes. I mean, the first thing I would like to stress is that Cancun was certainly not a success, but it is not the end of the story. I mean, there is still some time for negotiation, and we have obviously to do all what we can to make sure that eventually we get to some agreement.
Now, who is responsible for this? It's always very difficult to find who is responsible for a lack of agreement. When you have two persons who cannot find an agreement, it is very difficult to say that this is due to Person A or to Person B. So I'm not sure that it is really the right interrogation to have to look for responsibilities.
Now, one thing is absolutely obvious, that in the core of the agreement of this debate, there is what is at stake for developed countries is quite important, in particular, in all of this debate on agricultural issues, we know very well that in developed countries, at least in the EU and in the U.S., there is a very heavy political weight of the agricultural sector, and you cannot, from one day to the next, make decision which will have very hard implications for these people.
So the problem, I think the time that is needed is really for developed countries to see a way of dealing with that evolution. There are many people who are in those countries who are convinced that this is the way to go. There is a transition to be thought of. There are possibly tools or economic innovations to have in order to facilitate the transition, but this may be done, and we have simply to hope that this process will be started before the end of the round.
QUESTION: Just going back to that, I just want to get clear, you think that an agreement can be reached by the end of the Doha Round?
MR. BOURGUIGNON: I believe that, yes, some agreement may be reached. Whether it will be a full agreement and that this will be fulfilling the expectations of everybody, it is not totally clear. But I would be really very surprised that after the dynamics have been set into motion, that the whole thing simply stops and that nothing happens at the end.
Now, really, I'm quite optimistic, and I really believe that, from that point of view, international organizations, and particularly the World Bank, have very much to do to make sure, indeed, things will not stall.
QUESTION: (Off mike.) (Inaudible.)
MR. MILVERTON: Sorry. Could you just wait for the microphone and then identify yourself, please.
QUESTION: (?) from Pakistan.
You have been running poverty reduction programs all over the world, but I think the results need to--could be improved upon if you concentrate on a new strategy for the delivery process because the delivery process is not giving the results that were being aimed at, even in Pakistan.
MR. BOURGUIGNON: May I simply ask you what you call the "delivery process"?
QUESTION: The way the funds are utilized in those countries and whether really the aim of the program, is it being achieved or not?
MR. BOURGUIGNON: I'm not sure I would fully share this view. Certainly, very much has been done, very much emphasis has been put on those poverty reduction programs. But to a large extent, there has been a big change in the way this was run; precisely, trying to make sure that there was no leakage or less leakages in the delivery process and to make sure that those programs were reaching the right people, were run, were managed or partly managed by the right people.
Very much of the actions I've seen around me that I could observe in the World Bank over the last three years, the goal is precisely that. The goal is really for people to appropriate themselves, those poverty reduction programs, in a way which was certainly not indicated before. So you may be dissatisfied, in some cases, or you may know examples where the delivery has been far from perfect. We all know cases like that, and it will take a very, very long time before, indeed, the process is made fully efficient. But I would say that one of the big emphases over the last years has really been precisely that; precisely to make sure that this money, those funds, those facilities would reach the right people and that those people would have something to say on this. So probably many cases were not totally clear on what is the best way to reach that goal. The goal may be reached in an imperfect way, but the line, I mean, the long-run view is different than this one.
MR. MILVERTON: Yes?
QUESTION: Paul Malin (ph), Meetings News.
There was, during the '90s, a sort of quite a split between the way the French development establishment saw particularly rural reform in Africa and cotton sector and so on, and a much more market-liberal approach being pushed here from Bretton Woods. What's your sort of personal perspective on that? And do you think you've begun to--is there some sort of viable middle way that's begun to emerge or do you think there's still a split between what you might call the "continental" view of these things and the Bank and so on?
MR. BOURGUIGNON: Maybe the reason why I'm around is a sign that there is a kind of meeting or a regrouping of positions on all of this.
I believe that in Continental Europe or in France, in particular, the views have very much changed over the last 10, 15, 20 years. It is thought that at some stage the view we had of the development process was very much inspired by our view on the planning and the fact that reforms had to come from the top, without very much consideration for the bottom.
And this literal tendency that we have, I call that the "engineer bias," to simply ignore the market and ignore the price system, and ignore economic incentives, this has dramatically changed over the last decades, and I don't think that there is any fundamental difference today, in terms of the philosophy of development aid between the agencies in France or in other countries in Europe and international organizations, like the Bank, or with agencies in other countries, like in the U.K. or elsewhere.
There is, I think, a consensus on the fact that we must use the market, and the market forces, as much as possible. And in some cases, because there are, unfortunately, market failures, we have to get in, and it is also the case that in many development issues, almost by definition, there are market failures. I mean, the market forces are not able to exercise themselves, and they shoot with all of their strength, and this is the reason why there must be intervention.
But this old philosophy I think of being very directive has changed. I mean, we are simply looking everywhere for the most efficient way of promoting development.
MR. MILVERTON: Let's take two more questions.
QUESTION: One of the main obstacles facing the poverty reduction strategy in the developed countries is the (?) countries' reluctance to open up their markets to the developing countries. In some countries the subsidy being given to cows, for example, exceed that for the aid given to developing countries. So do you have different approach over the coming period to convince or get developed countries to change their strategy?
MR. BOURGUIGNON: The first thing, I don't think the subsidies are even to the cows. As far as I know, they are given to the farmers who raise the cows.
MR. BOURGUIGNON: No, this is certainly the typical issue and one field in which progress has to be made quickly to show precisely that there is true will by different countries to go ahead and to facilitate trade, and to facilitate development.
Now again, as I said before, this is a difficult issue within developed countries. You cannot make this kind of decision to eliminate subsidies without thinking about the way in which people will be immediately directly affected by this kind of policy, can be compensated; how the dynamic process can be organized in such a way that those people will move from the sector, from the agricultural sector to other sectors. So this is something which must be thought of.
Now we know that these are not programs which may be designed from the day to the next. It seems to me that the usefulness of the debate which now is everywhere in international circles is precisely those countries have realized that they have to tackle that problem. And there will be a lot of talk--it has started in several countries and I'm coming from a country where farmers are especially voiceful. But it is clear that the debate will continue and we'll have to find a solution.
And all these countries already went through reallocation of people, activities which were very hard, very difficult. Remember very much in the old days where we had to close in many European countries coal mines and steel industries, you had regions which were damaged and where people had to move and it was difficult to find the best way to handle these transitions. This is what we have to think of and I cannot imagine that this thinking about that transition will not start very quickly and very seriously in those countries.
MR. MILVERTON: And the final question just up the back there, the gentleman.
QUESTION: Tim Cullen, Dubai Meetings News. It's a question somewhat related to the previous one. Former World Bank Director General, Bob Picciotto, has argued recently that while the Bretton Woods Institutions and the donor community generally have urged a tremendous amount of thought, reform on developing countries, that that's not been matched by advocacy for reform in industrialized countries to help developing countries. And you've just touched on agriculture and trade, but there's intellectual property and a range of other issues. And Nancy Birdsall's institute recently published their index of friendliness of industrial country policies to developing countries.
My question is, the extent to which you believe that the institution and you, yourself, in your new position and the advice you give your president, will be the Bretton Woods Institutions should be willing to take on its major shareholders and urge them publicly to change their policies, so that that advocacy does not come purely from NGOs but has the authority of the World Bank.
MR. BOURGUIGNON: Yes. I think these goals are in the same direction as previous questions. It is certainly difficult to imagine that the Bretton Woods Institutions and the World Bank in the first place will not say something very loud to the developed countries to make sure that they will undertake these reforms. This already started. There are clear statements by the World Bank, by the President of the World Bank, that something must be done to modify, to ease the trade in agricultural products through modifying the subsidy system in developed countries.
There were already some talks about the TRIPS, TRIP agreements. There was also a position taken on those drug negotiations, and I believe that this will continue. I mean, I cannot imagine that the role of the World Bank in terms of policy advice will be only in one direction. It is necessarily in two directions.
MR. MILVERTON: Okay. Thank you very much for your attendance this morning and we will wrap it up there. Thanks very much.
We also have bios, biographies available as you leave the press conference if you'd like them.
(Whereupon, at 11:14 a.m., the meeting ended.)