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Speeches & Transcripts

Transcript: Bending the Arc of History - A Conversation with World Bank Group President Jim Yong Kim and Chief Economist Kaushik Basu

April 17, 2013

World Bank Group President Jim Yong Kim and Chief Economist Kaushik Basu World Bank/IMF Spring Meetings 2013 Washington DC, United States

Transcript

MS. WROUGHTON:  Are we set to go?  Can everybody hear me?

Jim, can everybody hear you?

DR. KIM:  Yes, I think so.

MS. WROUGHTON:  All right, good.

Hi.  I am Lesley Wroughton.  I am a correspondent for Reuters based in Washington.  I have been covering the Bank and the Fund for 10 years, and this seemed like a good time to be able to sit here and have a conversation with Jim Yong Kim and Kaushik Basu to talk about the new vision that Jim is going to be sketching out during the IMF Meetings and for Kaushik to help explain a lot of the technicalities of where this is going.

And with that, we also want you to know that they are--there is availability for questions, and if you raise your hand, somebody will come up and give you a card, and you can write it down, and then, probably the last 20 minutes, we will give to questions and maybe a little longer if you want to.

We are going to start off with Kaushik explaining exactly what--Jim, you have declared that extreme poverty can be wiped out within a generation.  We are going to ask Kaushik to lay the foundation for us and explain to us what -- how you see this.

MR. BASU:  You know, Jim had thought that we ought to define the broad mission of the World Bank.  A big organization like this will be doing a thousand things, but we are organized around a couple of important mission ideas, broad targets and indicators.

That discussion was going on, I jumped into it midstream when I took up my job, and subsequently, with a lot of consultation and discussion, we feel we should be organized around two broad ideas.  And again, I stress that there are many other things which fall under the broad umbrella of these two which are important to us; but what are these two?

First of all, pretty much in keeping with what the World Bank has done for a long time, which is that you try to take on chronic, absolute poverty head-on.  The discussion there was should we continue with the poverty line which we have used for quite some time, which is $1.25 per person per day.  At one level, that seems just far too low, $1.25 per day, and it is a bit of an embarrassment of this world that when we just look around immediately at people with whom you are interacting, you feel who will be below that line.  But if you look at the numbers, you realize that close to one-fifth of the world still lives below that line.

So we thought, yes, the time will come, the time should come quickly, when we move that line up and begin to focus on a broader segment, but there is still a big distance to go.

So with that line, we had to set ourselves a target, what we would work towards and we are -- 2030; the end of absolute, chronic poverty is what we are looking at.  Now, "end" does not mean that you manage to bring it down to zero.  There will be pockets of difficulty; there will be frictional poverty.  Frictional poverty is as painful as poverty in any other form.  But the strategy of how you battle with that begins to change.

So it is going to be a tough call going to less than 3 percent of the world population below that line by 2030, but that is what we are doing to do.  That is number one.

Number two is actually quite a new venture for the World Bank, and I am actually personally also very delighted that we have gone that way.  It is togive shape to the notion of shared prosperity.  And with a lot of debate and discussion, we decided that one good way to capture it is to look at the growth rate of the income--average income--of people at the bottom 40 percent of each country, how they are growing, focus on that.

So this combines lots of things.  It is a very simple indicator, but it combines lots of things.

First of all, it is looking at growth.  We want the countries to do well, to have greater growth, but we are saying that the focus of that growth should be on the bottom segment.  So, let everyone go, but let us focus especially on the bottom segment.

One way of thinking about this is a bit of an ode to central banks and the Fed.  It is a kind of operational twist, not in the financial world but in the real world.  Let the country grow the way you want it to grow, but twist that where the growth occurs more; let it occur at the bottom end more.  So it is a kind of inclusive growth, and this engages us, actually, in some ways with the entire world.  With some countries, we won't have much to do but make the numbers available, because they have already done well on that.  With some countries, we will have to get down to work with these targets—so these targets, indicators.

But basically, we are then reaching out to the poor, the relatively poor, wherever they are.  And I think in today's world, for us to be more effective in the poorest countries, we need to be engaged in even the better-off countries, and this notion of shared prosperity takes us down that road.

Let me stop with that.

MS. WROUGHTON:  Thank you, Kaushik.

Jim, you have been President of the World Bank for 10 months.  I have covered the Bank since Jim Wolfensohn's time, and I have heard a lot about reducing poverty.  Nobody has mentioned eradicating poverty, and that is pretty ambitious.

What has led you to follow this course of saying to yourself it is possible now, this is the opportunity, and we can do it within a generation?

DR. KIM:  Well, I asked that question very directly before Kaushik joined us to Martin Ravallion, who is one of the greatest scholars of poverty in the world, who was acting as head of our Development Research Group.  I asked Martin:  Is it possible to end poverty, and what would that mean; and how long do you think it will take; and what would it mean to set a target that would be ambitious and change the way we do our work?

So Martin and his team got to work on it, and they came up with this notion that in 17 years, we could get poverty to below 3 percent.  That was extremely exciting to me, and I asked, well, Martin, how difficult is this going to be?

And he said this is going to be extremely difficult.  Developing countries have to continue to grow.  High-income countries have to get back to historical levels of growth.  There are so many things that have to go into place.  We have to be sure that climate change does not destroy all the advances that we have made so far and make lifting people out of poverty so difficult.

So it felt like a clear goal, a simple goal, one that would force us to change the way we do our work, one that could galvanize the community.  And part of it is just that I have had a lot of experience with setting targets, and if you ask any person who has ever tried to run a complex organization or even build a social movement, unless you have a clear target with a clear end date, people often don't change the way they do their work.

Everyone can agree that poverty is bad.  And you can agree that poverty is bad, but if there is no urgency in actually getting somewhere, you don't change the way people work.

So, for me, I thought that having a clear mission--it is written on our wall, right outside, those of you who have walked in:  "Our Dream is a World Free of Poverty."  I guess what we are saying as a group--and this was a group decision; we all took part in it--what we are saying is that it is time to stop dreaming, and it is time to make it happen, and we are going to do it within a generation.

Now, let me tell you how I think this is going to work.  Some people might say:  But you are focusing so much on income; aren't there other aspects of development?

And our answer would be:  Absolutely.  Of course there are.

So here is how it is going to work.  In any given country--and we just did this; our Country Strategy for India was just presented to the Board with specifically in mind how is this going to contribute to ending poverty and building shared prosperity.  It is not a uni-linear focus just on income, because in order to lift people out of poverty and build shared prosperity, there are so many potential things that we need to do.

We know that investing in human capital is critical; health, education, social protection.  You need to do those things not only for the growth of today but for the growth in the medium term and the long term.  This is what I have spent my whole life doing.  There is no way that we are going to take our focus off the investments in human capital that are critical.

You have toprovide energy for people.  Energy is critical in order for businesses to form, for jobs to be created.  We have got to tackle issues like agriculture, which is of course linked to food security, but it is also linked to climate change.  Agriculture is one of the few things that can actually take carbon in the air and put it back into the ground.

So, in saying that we want to end poverty and boost shared prosperity, what we are saying is in every country in which we work, we want our teams to be clear about how their work in that country lines up with those two goals.

Now, of all the things that can be done in a particular country, we want our teams to focus on the areas around which we can be most impactful.  It is going to be different in different places.  In some places, it is going to be focused on agriculture and food security; in other places, it is going to be focused on energy and health and education.  There is going to be a mix.  We are not going to be able to do everything in every country, but we are going to focus on the areas where we can have greatest impact.

Finally, we have to be clear about the comparative advantage of the World Bank Group.  We have more global, more experiential knowledge and data than I think many other organizations, but most importantly, we have teams that work in the public sector, we have teams that work in the private sector, we have teams that provide guarantees--political guarantees--for work in developing countries.

We think that working across the entire World Bank Group is going to be a very special area of our comparative advantage.  So, two goals, very much income-focused, but if you just look at the shared prosperity target, what we have been very clear about is that shared prosperity is not just with the current generation.  By "shared prosperity," we really mean sharing prosperity intergenerationally, which of course brings us to the issue of climate change.

I think it is a mistake to think about climate change as a long-term threat.  Just ask people who are living in the island countries; ask the people who are living in the Philippines.  It is a threat today.  So, for us, ending poverty is clear; boosting shared prosperity is new, but what is also new about it is the notion that we want to share prosperity with future generations as well.

MS. WROUGHTON:  Jim, you are not saying that what the World Bank has been doing along now has been a waste of time--

DR. KIM:  Of course not.

MS. WROUGHTON:  --and that that has not been effective.  What you are saying here is that times have changed, and you need to reflect on that and really hone in on those areas.

How can you see the World Bank then changing or re-focusing to look at these new challenges?

DR. KIM:  Well, I think it is going to happen especially at the country level.

What we have found is that for the India team, it has been a very useful exercise to say, so, okay, what does that mean for us?  So, for example, a higher proportion of investment in India will go to the poorer States.

I was just in Uttar Pradesh.  This is a state in India with more than 200 million people in which 8 percent of the people living in absolute poverty in the world live.  We have to be successful in Uttar Pradesh if we are to have any hope of reaching this target of ending poverty.

So what it has done--you know, I have come to this organization, and one of the great things is that this place is full of people who are passionate about ending poverty.  That is what I have found.  This is why we have the target.

I have walked every single unit in Headquarters.  I visit with the field staff every time I travel, and what they are telling me is that they could have done lots of other work, but they are here because they are passionate about poverty.  So we have that goal--we have that sense of clarity.  And for years, they have been doing fantastic work.

But saying to everybody that our goals are ending poverty and boosting shared prosperity is forcing them to think a little bit differently about how to shape their programs; what are the most impactful ways for us to do it.

What can happen in big organizations like this is that there are a lot of people who come to us with a lot of great ideas, and we receive funding to tackle this idea or that idea or another idea, and it is difficult for us to say no--we are going to do this, and we are not going to do all these other things.  That has been very difficult.  But with these two clear goals, I think what we hope to do is empower our teams to say:  We have a mission, and this is the mission.  We are clear about it.  So we are not going to do all of these things because it is not our comparative advantage, and it is not as impactful.  We are going to focus on these issues.

It is building on years and years of work inside the World Bank but just giving them a focus.

MS. WROUGHTON:  Do you have a sense right now--and by the way, don't forget to put the questions on--put your hand up, and somebody will come and get them, so we can get those.

Jim, we know what works--or, you know what works, and you have seen it happen on the ground in Haiti and these countries that you have worked in.  But you said it the other day,  that perhaps the pickings have been on the low side, and now you need to reach a little higher, where it is more difficult to get.

How do you get to that, especially at a time when aid and donors are not coughing up as much and are more reluctant and specifically have more demands on what goes on with the money?

DR. KIM:  I would put it this way, Lesley.  You know, there is no question that this is a difficult time for official development assistance, but I was just in India, and both the Prime Minister and the Minister of Finance said to me:  We, in the next five years, have a $1 trillion infrastructure deficit.

So if we are thinking just in terms of aid flows, there is no way that aid flows could even match the Indian need for infrastructure over the next five years.  So you could take all of official development assistance, and it would not meet India's needs.

So there is no question that we have to rely on sources from within the countries.  And the Indian leaders told me directly that 53 percent is going to come from public resources, 47 percent has to come from private resources.

So, for us, I think the fact that we work in the private sector, the fact that we have been very successful at bringing other private sector sources of funds--everything from sovereign wealth funds to private equity companies.  When our IFC goes into a project, they feel much better about going in because IFC has decades of experience understanding the nature of risk and reward in developing countries.

So our vision for this is that ODA is critical--ODA is absolutely critical--and it is ever more critical because we have to be absolutely clear about those things that we should fund with official development assistance.  Official development assistance is relatively unfettered.  We are not going to reach the goal unless we make full use of all the different sources that could help us toward our path.

So, in this particular case, we have to think beyond what we have been thinking about before, and in the post-2015 agenda, I think we all understand that private sector participation in infrastructure development, in ports, in roads, in communication technology, is going to be a critical part of actually reaching those goals.  And we feel fortunate in that we are already working in that space.

MS. WROUGHTON:  Kaushik, poverty has a different face in different places in the world.  What you see as poor in one place looks different in another.  Can you tell us and explain to us a little bit more how that differs, and what are your new numbers?  I know it is embargoed, but you have new numbers coming out.  Can you give us a little sense of how the world is changing that way?

Could you also describe as you go what the rise of these emerging economies is doing--are they actually reducing poverty?  Are they bringing prosperity to the poorer, to the uneducated?  What are they doing to change the lives of people?

MR. BASU:  Lesley, yes.

Poverty does look different from one place to another--not altogether different, because they share this one common thing that they are below an abysmally low line.  But that line--income itself is very multidimensional.  People don't realize that income is something with which you are trying to buy health, trying to buy education, clothing, et cetera.  And different countries have different profiles of prices for these.  So there can be one country where you are doing relatively better on health, but you are still poor; in another country, you are doing relatively better on education but still poor.  So poverty can look very different when you go out and see that.

Having said that, we have drawn a line where we are taking the view that no matter how you view this, it is unacceptable in the world today that people should live below that line.

The global profile is roughly like this.  The bulk of it is actually South Asia; India, a large country, a country that began growing, really, in 1994--India's rapid growth started from there--poverty started falling with the growth, but it is still there in large numbers.

But take large emerging economies, and you will find a lot of poverty there, from Nigeria, Congo, Indonesia--it is there.  China--a large country, but poverty started declining very rapidly from about 1978, so it is down quite a bit, it is down.

Here, one question arises, Lesley, and one reason why the 3 percent target is actually a very hard target is that if we were just focused on that global number, unmindful of anything else, and you would take on the biggest countries, take on India, take on Indonesia, Nigeria, Pakistan, Bangladesh, you will get very close to that target, and you will probably make the target with these countries.

But as Jim was saying, there are many other things beneath these couple of numbers, and we are also very, very conscious that it is chronic, absolute poverty that we are after.  So if there is a country where poverty remains at 80 percent, even if the world is below 3 percent, a small country with such big poverty is a blot on our achievement.

So we are going to target even the smaller countries so that that comes down.  And I will give you one number which is quite interesting.

If you do business as usual, just attend to growth the way it is occurring, if we make that 3 percent target, we will still have 17 countries with more than 30 percent of their population below the poverty line if it is business as usual--which means we cannot do business as usual.  And that is the reminder that this target drives home, that you have to change the way you go about; growth is important, but growth is not everything.  And we have lots of examples from history--countries growing well where the poverty comes on very rapidly.  China is an example of that, but there are other countries where growth has not been accompanied by poverty declining rapidly.

So we need action apart from just saying go for growth--that is important--but you also need complementary action with that.

MS. WROUGHTON:  So, when you look at the figures, you look at some of the biggest dents being made in poverty are countries like Tajikistan and Ethiopia, believe it or not, and Nigeria is really struggling to do this.

Jim, how do you then advise the government?  What differences do you think the World Bank can make in trying to show--we were both in South Africa recently, where the government explained to you how difficult it is to narrow this inequality that it is dealing with.  What kinds of things does the World Bank have to change to be able to convince these countries and/or help them really get to the difficult stages?

DR. KIM:  Well, I'd really like to hear Kaushik's view on this, but let's just take those two countries.

First, Nigeria.  Right now, Nigeria has only one-fifth of the energy they need.  So, how can we possibly think about Nigeria making rapid progress if they only have 20 percent of the energy they need?

So one of the things we are working on is trying to find public and private initiatives to dramatically expand access to energy, because right now, electricity is also very expensive.  While it is only 20 percent of the need, it is also very expensive.  And we have an opportunity, we think, to meet the entire energy need while also, at the same time, decreasing the cost of energy.

So there are very specific, straightforward things that Nigeria has identified, and that we agree with them that we have got to move on.

In South Africa when I visited, the request was very specific.  What they were saying was:  We have good policies--we even have money--and we have achieved a lot of things, but one specific request was that we have 98 percent of our kids in school, but we are not sure they are learning anything.

So, for them, they really put it to us as an implementation/delivery/execution problem.  So we set up a Knowledge Hub there, and we are specifically going to try to help them focus, for example, on how to make sure the kids are learning--because you can have 98 percent of kids in school, but if they aren't learning, the parents know that, and they start pulling them out of school.

So we have to be ready to really respond to specific countries given their local context and given what their priorities are.

I don't know that--it is always useful for us to provide data and provide our own assessment of needs, but in many of the countries that I have visited, they actually really understand pretty clearly what they need, and it is just a matter of getting there—how do you actually deliver.  And of course, we have talked a lot about trying to be the organization that helps people actually deliver, but I can't tell you how often that is what is said to me--we have great ideas, you have given us great ideas, we even have some funding; we just can't make it happen.

And we want to be the organization that really helps countries make it happen.

MS. WROUGHTON:  Kaushik, what makes some countries more successful at this than others?  Is it political, is it resources--what is it?

MR. BASU:  Lesley, in coming to that, let me just touch on the example of South Africa, since this has been talked about.

South Africa is an amazing country because it really combines the developed country with a developing poor country within the same geographical boundaries in a way that maybe no other country does.  And it also has a burden of history in the apartheid period that it carries.

So, if you look at its living patterns, the townships--when I went to South Africa, the first day I spent, actually in a township.  It is segregation not by law anymore but by the burden of history--that housing is cheaper over there, people opt to live there, but the jobs are not there.

The unemployment figures are abysmal.  For the black unemployment, for instance, youth unemployment can be 50 percent in these areas.  So jobs is something that you have to focus on in a big way.

You mentioned Tajikistan, and I will also point to something interesting.  In Tajikistan, poverty fell very, very rapidly.  A large part of it is remittance money.  That is absolutely fine.  India used to rely a lot on remittance money in the early 1990s and late 1980s, really a huge amount.  Tajikistan does that.  It is the country with the biggest inflow--relative inflow--of money which is remittances.  But that means you have a huge dependence on other countries.  A little bit of jolt in a rich country, your remittance is going to go down, so again, you need to diversify, you need to have employment within the country.

And if you look at patterns and what is it--a question that allows you to attend to this--look at China.  I think China was doing two things.  From 1978 onward in particular, you can see that.  The growth is very rapid, but over and above that, there is a lot of very well-directed policy.  That was there, actually, for a very long time.  In health, education, emphasis begins to come at an earlier stage, where you don't leave it and say "When I become better-off, I do that." 

Actually, if you look at Sri Lanka over a long period, interventions in these sectors began taking place even if it was pretty poor--which is a reminder that because you are poor, you cannot say:  Let me first grow, and then I am going to attend to health and education.

You can and you should do that, and that is where the World Bank can come in with technical expertise, with money where it is needed, and really be a very, very major partner in this very important effort.

MS. WROUGHTON:  Jim, I wanted to ask you, because your target comes at a time when the UN is looking at its own post-2015 MDGs--how does this fit in with what the UN is doing?  Is it to work together in parallel with it, or is it to try to set something a little bit more ambitious since you guys are at the forefront of it?

DR. KIM:  Well, I think one of the really exciting things about the last 10 months is that we are really working on a path where the World Bank Group and the United Nations are going to be working very closely together.

One of the things that the Secretary-General and I have been saying to each other is that the intention from the beginning of the multilateral system in the 1940s was that the UN and the Bretton Woods Institutions would work hand-in-glove together.

So, on everything, including the Post-2015 Agenda, we are working very closely together, and there is very strong support in the UN System for this particular target.

I think there is a lot of modeling going on, and people are sort of saying if left to its own devices, where would poverty be; and we hear 7 percent, 8 percent, something like that.  In that sense, I think there is very clear agreement that if we don't do anything, poverty reduction will start slowing down.

So the title of this series, "Bending the Arc of Poverty"--that is really what we are trying to do.  As the curve starts flattening out because so many of the low-hanging fruit have already been picked, we want to bend that curve back so that it continues to go down.  That's the whole idea.

The UN is completely on board.  And moreover, we are taking very seriously this notion that in the most difficult areas--another thing--and Kaushik said it clearly, but I just want to make clear--that if we reach 3 percent, and there are places, fragile and conflict-affected states, that have 60 percent poverty, we will consider our efforts an utter failure.  In other words, we need --want to be sure that everyone is participating in this movement.

So, at the end of May, the Secretary-General and I will be traveling together to the Great Lakes Region--a place where of course there have been tremendous problems with poverty, the Democratic Republic of Congo--so we will be going to that region together.  And the whole idea is that in places like that, if we can find political security and economic solutions simultaneously, how much more effective could we be?

So the spirit of what we are doing is we are trying to say:  Look, let's make the multilateral system work as it has always been intended.  The UN and the international financial institutions should work hand-in-glove, and we should come up with a set of post-2015 targets that are measurable, that are clear, that are ambitious, that have a financing plan--that is critical.  That is one of the roles that we are going to play.

I mentioned earlier the importance of the private sector.  There are people who still doubt very much the importance of the role of the private sector in things like development goals.  But I have to say that if you look at ODA, and you look at the needs in the world, the embrace of the private sector is a question of how ambitious you are for the poorest.  If you are really ambitious for the poorest people, if you really want to hit these targets, you have no choice.  You have got to start thinking about how we can use private sector finance, how we can work together and build public-private partnerships that will truly have the transformative impact.

So we were just in Madrid with all the heads of the UN agencies, and we agreed on a bold effort around the last thousand days of this set of MDGs, and we also agreed that we are going to have bold targets with a financing plan for post-2015, and I think--we will see what the process is, but support among the UN for this target was very strong.

MS. WROUGHTON:  I am going to get to the questions now, but I really have one pressing one that I have been thinking about for several years now, and that is looking at the rise of people who have come out of the $1.25, who have just moved over the $2--and I think this is the 40 percent you are talking about, right, the bottom 40 percent--but these people who are living between.  Some people say there are a lot more of these people who are not classified as extremely poor.  They are just above the $2--they are between $2 and $4, maybe $2 and $10.00.  They are easily hit by shocks, and they are a growing number.  They are starting to pay taxes.  They want more services.  Forty percent, apparently--this is what economists tell me--40 percent of the people in the Arab Spring uprising were in this $2 to $10 group.

How much more difficult is it to tackle those problems within that group than it is for the $1.25?

MR. BASU:  In some ways, it is more difficult, but let me clarify here that people who live below the $1.25 are in some ways people who have already been hit by the shock, so they are there.  So we should not get confused about the priorities.  People who are already that poor--that has to be our first line of attention.  Then, indeed, there is a vulnerable group, and we want to take precaution that they do not fall in there, but that precaution must not override the concern for those who have already fallen.

With this group--that is what I was touching on earlier--if you have some diversification of sources of income, so if one part of the global economy gets a shock, you don't get jolted and go below the poverty line.  So you need diversification, you need income coming from multiple sources.  If a country is relying on only one thing, and as long as you keep your fingers crossed, that one thing works, you are fine, but if that gets a jolt, you go below the line--there, you need to work on the structure of the economy, which gives a sort of cushion to these people.

I want to elaborate on one thing that Jim said, and that is a concrete example--the role of the private sector--and this actually pertains, in fact, to the category that you are talking about.  Take, for instance, food for the poor.  If you try to do it entirely by the state--you collect the food from the farmer, carry it, then take it to the doorstep of the poor and give it over, there will be pilferage and there will be leakage.

But there is one way of doing it where you need the state, where you need multilateral organizations--empower the poor; give them buying power.  Then, don't bother to carry the food over, because there is profit to be made in carrying food over.  It sounds horrible, but that is what trade is.

Once you have empowered the poor, there is profit to be made in that transaction, so the private players will come in.  So it is an intelligent way of directing the power of the private sector to where we want that power to go. That is what we want to do.  So you don't stop them from doing it but change the incentives in the system so they are going to reach out to the ends that reach our ends which we are writing down.

MS. WROUGHTON:  Well, as you see from the huge growth in private sector interest in Africa and elsewhere, those are the people that they are targeting; right?

So, we have some questions from the audience and from online.  Jim or Kaushik, you are going to have to decide.

Here is one from Gabrielle in the UK that has come from online.  "What is the World Bank doing to ensure shared prosperity in developing countries where equality structures are not in effect"--or are not effective.

[Pause.]

MR. BASU:  Should I have a--

DR. KIM:  You are the Chief Economist, sir.

[Laughter.]

MR. BASU:  This is one question where I would have preferred to give it to Jim.

[Laughter.]

MR. BASU:  These structures of inequality are very deeply embedded, so it is not easy.  But we have taken the first step in writing this down as something that we are looking at and paying attention to.

In fact, I have been asked in small groups:  "What will you do?"  To that, my first response is that, you know, we are drawing attention to this problem.  These numbers will now be available.  And here, we will have to work with countries.

There are many countries, if you read their manifesto, the manifesto will say that inclusive growth is what we want.  So we have to then work with them there given their structure on how you can attend to this.  And some countries will come back and tell us:  Look, our top end is growing very well, and it is going to trickle down.

And we have to lean on them gently and say that that is the kind of thing that we are doing.  We are asking you not to do so.  Wait on the trickle-down, but take direct policy measures.

I will give you one or two examples.

You know, investment in health and education--every often, when we talk of investment, we are thinking of machinery, we are thinking of factors.  Those are extremely important; they enable a country to grow.  But if you invest in human capital, which is both education and health, you are empowering people to earn more, and that is needed for the bottom segment.  The rich can buy their own health, buy their own education.  If you pay attention to these being provided and the state stepping in and enabling this, you are going to help the bottom segment, and that begins to come up, and the inequality gets dented.  But on this, there is a lot of variation from country to country, and we will have to be engaged in working this out.

DR. KIM:  Let me put it this way. You know, I talk with ministers of finance and heads of state all the time, and we are asked these questions about equality, we are asked these questions especially about gender equality, and this has been my response.  You know, there may be scholars out there who are arguing that massive inequality is good for growth, and therefore, it is okay.  But then, there are also lots of studies--and Kaushik has taught me a lot about them--that suggest that in fact massive inequality builds instability into the society.  I think that is one of the lessons of the Arab Spring.

So we are very evidence-based here at the World Bank, but when there are divergent opinions, I think you have to take a position.  Our position is clear--that if you grow, and you are not including young people, and you are not including the poorest, you are not including women, you are building instability into your society, so you have got to think about how the poorest and the most marginalized participate.  That is our position.  They may find others who have a different position, but that is our position.

On gender equality, I was in a country, and I was told in that particular country:  Well, you know, gender equality is an okay idea, but in fact, it is different because of our culture.  Inger Andersen, one of our VPs, was with me at that time.

And here is what I said.  I said, you know, when I was born in Korea in 1959, I bet the situation of women was worse than the situation of women in this country in 1959.  But there is still a long way to go in Korea, but look at what they did.  Despite Confucian culture, women became part of the workforce.  Despite Confucian culture, there were laws that were changed that gave women many more rights.  And just recently, they elected a woman as President of South Korea.

I don't think that Koreans necessarily believe--I know they don't believe--that they have discarded Confucian culture.  I am an anthropologist.  Please don't tell me that your culture prevents you from moving toward gender equality.

So we are taking a position on it, and you can argue that respect for culture is important.  I am an anthropologist.  I have great respect for culture.  I do not buy, though, that people will tell me, in terms of our relationship with them, in terms of our efforts to help them,  that we should not insist on gender equality because of culture.  We are taking a position.  I don't buy it, all right?

[Applause.]

DR. KIM:  So we don't--look, I am a doctor, but the one thing the World Bank does not do is give prescriptions.  We don't do that.  But we will deeply, deeply engage in these kinds of discussions with places that may be more reluctant, and we will say there is evidence--the evidence for gender equality and for the importance of women in economic growth is overwhelming; it is overwhelming--but even if you want to argue with us, we want you to know that we have a position on these issues.

MS. WROUGHTON:  Jim, this raises a touchy subject for the World Bank.  So are you prepared to say "No" to projects if you don't think the evidence is there that they do not affect or really raise the bottom 40 percent and the poorest?

DR. KIM:  We have to apply these lenses now, going forward especially, to everything that we do.  Now, there is a delicate balance that we have to make between ensuring that the countries are leading, and at the same time, we have to feel confident that what we are doing is evidence-based and leading us toward these two areas.

You know, right now, there is a lot of development financing coming from many different sources in the world, and the needs are so enormous that we know that if you took all the development assistance, both public and private, together, it is not nearly enough to meet all the needs.  So we want people to know that we have a view at the World Bank Group, and we are very happy to work with all of our member countries, including high-income countries, but while we are not prescriptive, and we are going to listen carefully to you, we think the evidence leads us to a particular approach around certain issues that we believe in and that we want to pursue.

MS. WROUGHTON:  A question from the room is:  "What do you consider the Bank's biggest failures in reducing poverty over the past decade?"

DR. KIM:  Well, let me start by saying that I think none of us are happy about our record in fragile and conflict-affected states. You know, it is difficult--it is very difficult work in these kinds of situations--but I feel that going forward, we have to make this an area of our specialty.  I think we want to be the go-to organization in working in fragile and conflict-affected states.  I think it is great that we are doing it in collaboration with the UN System.  We are going to be working very closely with other bilateral donors.  But you know,  I just think we have not been very successful in lifting fragile states out of fragility, and we have to make that one of our sub-goals, that in ending poverty and boosting shared prosperity, one of our areas of focus has to be the fragile states.

MS. WROUGHTON:  Again, it is a difficult place to work, isn't it--

DR. KIM:  Absolutely.

MS. WROUGHTON:  --because there is political uncertainty.  I interviewed MIGA recently, who said that they had created a guarantee fund so they could move in at an early stage with investors.  That is quite a touchy thing.  A lot of these countries go back to war quite quickly, soon.

MR. BASU:  In fact, I should tell you on two of the points that just came up on fragile and conflict states--I don't know if Jim remembers that when I first met him in connection with this job, I told him about my interest in this.  I said I don't quite know the line that the World Bank is taking, but countries where others don't go, I would love the World Bank to go there.

And it really just fills me with great joy to see that that is the direction in which the World Bank is going.

The other point I do want to make about gender equality and culture.  This was way before I met Jim, and I have written it, so you can check it out.  I said that although I am an economist, I am a "closet" anthropologist.

As an economist, you have to be careful when you say that.

[Laughter.]

DR. KIM:  It's okay now.  You can come out of the closet now; it's okay.

[Laughter.]

MR. BASU:  And really, I just totally second this, that you have to respect cultures, but gender equality is extremely important, and the two are completely compatible.  An anthropologist says that, and a "closet" anthropologist says that.

[Laughter.]

MS. WROUGHTON:  Another question from the room:  "To what extent have member countries bought into the idea of the proposed twin goals?  Is there a consensus on this vision?"  And since we are just two days before the IMF and World Bank Meetings, how are you going to sell this to your member countries?

DR. KIM:  It's a great question, Lesley.

The primary purpose of the Development Committee is going to be to really look at these two goals.

You know, we have a resident Board, and part of my priorities for the first 10 months was to really get to know our Executive Directors.  So these goals have been deeply, deeply vetted and discussed with our Executive Directors, and we have, I think, very strong support from our Board.  Now we are going to the Governors to finance it in terms of development assistance.  And we hope that they will be embraced. 

I think there will be a lot of questions.  I think there will be a lot of questions about how they are going to work and how they are going to work inside the World Bank Group and the impact on the rest of the world.  But so far, we have heard a lot of very positive feedback, and now we will see how the Meetings go.

MS. WROUGHTON:  Good.

Jake from the U.S. online is asking:  "Will climate change make an end to poverty impossible?"

DR. KIM:  If we don't take very quick action, we really think it could.  There is no question about it.

You know, I am trained as a physician, I am trained in science, and I thought I was keeping up with the climate change literature, but it seems to be getting worse with every month.  Things that we thought would only happen at 2 degrees Celsius are happening now at less than one degree Celsius.

So I was shocked to learn that if we are to have any hope of keeping global warning below 2 degrees Celsius, the peak carbon emission year has to be 2016.  We are nowhere near reaching that.

So what we are saying is that climate change is not another topic, separate from our work.  What we are making clear is think of all the things that we do here in the World Bank Group that touch on climate change--energy, agriculture.  We are very involved in the building of cities, building roads, building information and communication technology.

So what we are doing is saying that in everything we do, we have to look at through the lens of climate change.  There are some complicated issues.  There are difficult issues.

On the one hand, we have to be sure that the poorest countries have energy.  They need energy in order to grow and lift their people out of poverty.  We cannot put the burden of climate change on the poor countries because they will tell us, and they tell us all the time, they are not the ones who got us into this situation.

So we have to balance the need for energy with the climate change work, but think of all the things we do.  For example, there is an exciting, inspiring vision of Africa having all the energy it needs while at the same time keeping it clean.  We can do it.  It is going to be tough, it is going to be tricky, but we have to set ourselves that as a goal.  With the Secretary-General, we started this initiative called "Sustainable Energy for All," and we could actually reach that target in Africa--clean energy for the entire continent.  What an achievement that would be.

If you look at agriculture, we are deeply involved in agriculture, but new developments in approaches to what we call "climate-smart" agriculture--reclaiming degraded lands, older varieties of wheat that have much deeper roots, new technologies that may even be able to fix nitrogen and put it back into the ground--there are so many exciting things we can do to improve yields and tackle food security, while at the same time putting carbon back into the ground.

We need to make sure that everything we do is focused on scaling up those kinds of approaches.

The Chinese Government just asked us to work with them on urbanization.  I had the amazing experience of driving behind buses in Delhi and seeing no black smoke--because they all run on natural gas.

We think that there are tremendous advances already that if we apply them everywhere that we work in the building of clean cities, just the World Bank focusing on those three things can have a huge impact.

Now, there are much more difficult things, but they have got to be on the agenda.  We have to have a stable price on carbon, and we need agreements to get there, but we are going to keep pounding on the table and saying we’ve got to find a way to establish a stable price on carbon.

And the other really difficult one, of course, is fuel subsidies.  Fuel subsidies amount to at least $600 billion a year.  What could we do with that $600 billion a year to invest in the poorest, invest in health, education and social protection?

It is a difficult problem for everybody.  Every government would like to reclaim the money they spend on fuel subsidies knowing that they are mostly regressive, knowing that they also pollute the air, and then use that money for other things--but politically, it is difficult.

What can we do as a World Bank Group--what can we do as a world--to help them get through that political difficulty and actually remove those fuel subsidies?

So what we are saying is that, yes, the agreements are important, but right now, today, there are specific things we can do to really tackle the climate change issue, and we are committed to doing it.

MS. WROUGHTON:  Jim, a lot of people would say, well, we can't get the rich and the developing countries to agree in Kyoto; how is it going to be for the World Bank to get around this issue?

It is political, isn't it--

DR. KIM:  Yes, it is political--

MS. WROUGHTON:  --and the question is we pay as well.

DR. KIM:  Right.  But the point is what we are trying to say to the world is that you cannot wait for the political process to resolve to take immediate aggressive action today.  There are so many things that we can do right now that we have got to move forward.

Here is what I think has been going on.  Every time there is a severe or an extreme weather event, the world kind of looks at us, people like the World Bank and people like the environmental groups--they kind of look at us and say:  Okay, what's the plan?

And so far, we have been saying things like wait for the political process, or recycle--all very small-bore things.

I think what happens is that they look at us, and we just give them problems--we don't give them a big, major plan --  things we can do right now--and they turn away and go back into denial.

So what we are saying is that the next time they look at us, the next time something major happens, we have to say:  Yes, there is a plan.  Some of it requires political action, but there is so much that we can do right now, on a large scale, to have an impact.

I think it will change the way the world sees the prospects for moving toward a workable plan to battle climate change.

MS. WROUGHTON:  But many people will say that there should not be a separate plan, that it should be just part of a bigger development--when you are going into a Country Strategy, you shouldn't say, oh, this is for climate change, that it should just be one thing.

DR. KIM:  Right, and that is exactly what we are saying.  Sustainable energy--clean energy for Africa; clean energy for as many countries in which it is at all possible.

We are building cities right now.  We are building them--we are building them in sometimes sprawling, uncontrolled ways.  Why not do it in a way that is climate-smart?

We are facing the problem of agriculture right now.  Why not do it in a way that is climate-smart from the beginning?

So we are trying to move away from that completely and say build it into everything we do so that we have an impact today.

MS. WROUGHTON:  There is a question here on Kosovo that actually goes into IDA replenishment--and I think this probably has to be our last question from the group--and it has to do with:  "As the Bank works to convince governments to put money into IDA to support climate change and the gender agenda, there are IDA prospects where the Bank will invest in coal, such as Kosovo's power project.  How can you connect the conflicting prospects such as these, especially in the project, when Kosovo wastes so much energy today?"

I think it comes to the whole issue of do you continue to invest in these projects when you are talking of a cleaner environment and more development impact.  Do you still support those projects?

DR. KIM:  The issue for us in Kosovo is that their need for energy is so severe that it is not a question of whether everyone can have three refrigerators and multiple flat-screen TVs.  We are talking about people who could potentially freeze to death.

So we are trying to look for any--any possibility at all--of avoiding investing in coal.  We understand that coal is the dirtiest fuel.  We want to do everything we can not to do it.  But at the end of the day, if we are the last resort, and people are saying to us this is a fundamental humanitarian issue--people are going to freeze to death if they don't have energy--if we were to get involved in the coal project in Kosovo, we could make it more efficient and cleaner.

Now, I am telling you that for me, the climate change issue is very personal.  If we go on the very worst curve of carbon emission, when my 4-year-old son is my age, he is going to be living in a world that is unrecognizable to us today.  So it is very personal for me.

On the other hand, there is so much carbon being put into the air right now from coal-burning plants in Washington, D.C.--the electricity we enjoy today is most likely brought to us through a coal-burning power plant--I don't think it is fair to tell the people of Kosovo that while the rich countries continue to burn coal, you are going to have to freeze to death because it is against our political ideology to support you.  I can't do that.  I can't do that.  We will look for everything we can possibly do to avoid that, but look, poor people should not pay the price with their lives for mistakes that we have been making in the developed world for a very long time.

MS. WROUGHTON:  I am going to ask one of my own questions, and then I am going to give you the last five minutes to wrap this up.

The one question that everybody is looking at when you see new donors coming into the world--China, Russia--there are reports today that China, Russia and India are going to give Egypt some money--these are the new faces of donors, and where the World Bank is not going to go, they might want to go, and they will take it.

How do you work with these groups, or how do you make sure that the sustainable development that you are after is not usurped by groups that have the money and that don't, frankly, perhaps care about what that impact is going to be?

DR. KIM:  Well, right now, there is a lot of talk about new instruments, new banks, and new sources of funding.  Let me just go back to one piece of data that I gave you earlier, which is that India has a $1 trillion infrastructure deficit over the next five years.

So this notion that we need new sources of financing to meet these infrastructure deficits is clear; it is just a fact.

So we look forward to working with everybody.  We work with all the different organizations--as I said, we work with the UN, we work with the other multilateral development banks--because there is more than enough work to go around for everybody.  You know, fighting for turf when 1.2 billion people are living on less than $1.25 a day is just ridiculous.  And for the poor people in the world, believe me, they understand just how ridiculous that is.

So we are just simply not going to engage in turf battles, and we are simply going to say, look, the World Bank has been doing this for 66 years.  We know a thing or two about everything from health, education and social protection to building roads to providing long-term financing for investments in countries that not many people are investing in.  We know a lot about macroeconomic policies.  We know a lot about that, and we are ready to work with any of them because--you know what--we are so serious, we are so serious about ending poverty, that we understand that we are not going to be able to do it alone and that everyone is welcome.

Now, what we are also seeing is that when certain actors get in trouble in some of these countries because they don't have safeguards, because they don't do the kinds of analysis that we can do, that they are now coming to us saying can we do things together, can we invest in parallel.

Lots of that is happening already.  We think even more of it will happen in the future.

MS. WROUGHTON:  Kaushik, can you eradicate poverty?

[Laughter.]

MS. WROUGHTON:  Some people say that they will always be poor, and this is--

DR. KIM:  "Eradication" is really not the right word.  I am an infectious disease specialist, so "eradication" means just getting rid of it from the face of the Earth, and we have only done that with one disease ever, and that is smallpox.

That is why we talk about ending poverty and getting it to a level where the fight will change.

MR. BASU:  That's exactly right.  Poverty, in any large, chronic sense, can go and should go.  But there will be people who--if there is a sudden crisis or a sudden conflict, some people fall below that line.  But as long as it is these little pockets, you come in with emergency measures and try to attend to it.

It is like there will be an occasional fire that will happen with your best precautions that will happen, but you can attend to that.  The whole strategic change--that is what we are after, and that is just very, very doable.

And Lesley, I am also touching on these new countries coming into play that you are raising.  I think at one level, we worry about a difference of viewpoint of a dramatic sort coming onto the world stage, but that is not the case.  As countries integrate--China, India, Russia, as you say--the concerns are very similar, and I think that once they are on the world stage, you will find a very similar voice.  And yes, there may be some change that we will have to do to accommodate, but as long as it is with the broad same concerns of the world--and I like to believe, having lived in different places and worked, that fundamentally, when you scrape off the surface, they are very similar concerns that human beings carry across the world.

So I think that with these new players coming in, the broad objectives that we are going after will remain intact.

MS. WROUGHTON:  Jim, I'm going to give you the last five minutes.  You have a message to put out there ahead of the meetings.

DR. KIM:  I think that today, we have a lot of civil society organizations, we have bloggers and the press here in the room.  My predecessor, Bob Zoellick, started something that is really quite revolutionary--the notion of an "open Bank," "Open Data."  And we just want to extend that, and we encourage you to engage with us deeply--be critical, hold us to account.  We are very, very serious about ending poverty and boosting shared prosperity.  And we are going to make mistakes, and I have told my team inside the World Bank Group that if you are trying to be bold and ambitious and tackle difficult problems, go ahead, and just know that if we make mistakes, the most important thing is that we learn from the mistakes.

So you are going to uncover mistakes that we make.  Please do, and please let us know about them.  And we will do everything we can to correct them, to learn from them, and to keep moving forward.  But we are not going to be paralyzed by the possibility that we will make mistakes going forward.  We need you to engage with us; we need you to be here with us; we need you to hold us to account because we share the mission.  The mission is that there are way too many people in the world living in poverty, there are way too many people in the world living in vulnerability between the $2 and $10 a day range.

We are serious about it.  We are committed to it.  It is what I have been doing all of my adult life.

And finally, I welcome you all to the 2013 Spring Meetings.

Thank you. [Applause.]

MS. WROUGHTON:  Thank you very much, Jim.

 



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