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37–209 PDF 2007

THE ROLE AND EFFECTIVENESS OF THE

WORLD BANK IN COMBATING GLOBAL POVERTY

HEARING

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

MAY 22, 2007

Printed for the use of the Committee on Financial Services

Serial No. 110–33

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

GWEN MOORE, Wisconsin, 

LINCOLN DAVIS, Tennessee 

ALBIO SIRES, New Jersey 

PAUL W. HODES, New Hampshire 

KEITH ELLISON, Minnesota 

RON KLEIN, Florida 

TIM MAHONEY, Florida 

CHARLES WILSON, Ohio 

ED PERLMUTTER, Colorado 

CHRISTOPHER S. MURPHY, Connecticut 

JOE DONNELLY, Indiana 

ROBERT WEXLER, Florida 

JIM MARSHALL, Georgia 

DAN BOREN, Oklahoma 

SPENCER BACHUS, Alabama 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

ADAM PUTNAM, Florida 

MICHELE BACHMANN, Minnesota 

PETER J. ROSKAM, Illinois 

KENNY MARCHANT, Texas 

THADDEUS G. McCOTTER, Michigan

JEANNE M. ROSLANOWICK, Staff Director and Chief Counsel 

(III)

C O N T E N T S 

Page 

Hearing held on: 

May 22, 2007 ..................................................................................................... 1

Appendix: 

May 22, 2007 ..................................................................................................... 39

WITNESSES 

TUESDAY, MAY 22, 2007

Beckmann, David, President, Bread for the World ............................................... 10

Eizenstat, Ambassador Stuart E., co-chair, Atlantic Council Commission on 

Transatlantic Leadership for a New Global Economy ...................................... 13

Stiglitz, Dr. Joseph E., professor, Columbia University, and Chair, Columbia 

University’s Committee on Global Thought ....................................................... 5

Wade, Dr. Robert Hunter, professor of political economy, Development Studies 

Institute, London School of Economics and Political Science ........................... 8

APPENDIX 

Prepared statements: 

Beckmann, David, ............................................................................................ 40

Eizenstat, Ambassador Stuart E. .................................................................... 44

Stiglitz, Dr. Joseph E. ...................................................................................... 53

Wade, Dr. Robert Hunter ................................................................................. 67

(1)

THE ROLE AND EFFECTIVENESS OF THE 

WORLD BANK IN COMBATING GLOBAL 

POVERTY 

Tuesday, May 22, 2007

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 3 p.m., in room 2128, 

Rayburn House Office Building, Hon. Barney Frank [chairman of 

the committee] presiding. 

Present: Representatives Frank, Velazquez, Watt, Sherman, 

Scott, Green, Cleaver, Moore of Wisconsin; Bachus, Castle, Paul, 

Gillmor, Garrett, Neugebauer, and Marchant. 

The CHAIRMAN. The hearing will come to order. I apologize for 

the delay. We had votes scheduled at just the wrong time and I 

thank the panel for indulging us. This is the first in a series of 

hearings, and I do want to say—because obviously the World Bank 

has gotten somewhat more attention of late than it had previously. 

But I will say that this hearing began in a conversation that Dr. 

Stiglitz and I had at Davos in January. We have long had an interest here, the ranking member and myself, with two of the four 

members, along with a former colleague from Iowa, and our current 

colleague from California, who pushed hard for the debt relief at 

a time when there was some resistance to it. 

This committee’s concern and the concern of many of the members with a more effective use of the international financial institutions for the fight against poverty is long standing, and I do want 

to say that this is not an opportunistic hearing. I will say as an 

elected official, though, that I do not mean by that to denigrate opportunism as a mode of operation. I don’t want to be saying something that could be used against me later. But in this case we really had been thinking about this for some time, and this is the first 

in a series of hearings we are going to have about the role that the 

international institutions, financial institutions, can play in the 

war against poverty. I think it is important to reaffirm that it is 

possible, through thoughtful action, to reduce poverty. Not to abolish it or eliminate it—we are not in the miracle business—but to 

substantially reduce it. 

I believe, as do many others, that we have existing institutions 

which are, (A), imperfect and, (B), indispensable, and therefore it 

is our job to do what we can to improve them without going after 

them in a most negative way. When I first began involved in this 

we had the campaign called ‘‘50 Years Is Enough.’’ Well, we now 

2

know that 60 years is too little, not in terms of duration, but in 

terms of activity, and there are some very important issues that we 

plan to deal with. 

On the question of the Bank, there was a legitimate set of concerns about what role the IMF should be playing as things have 

evolved from when it was first set up. There were problems of excessive conditionality. Many of us, on the Democratic side in particular, have been concerned about what appears to be a bias 

against the rights of workers that has crept into some of the activity. There is a question about how you fight corruption effectively, 

and how you fight corruption in a way that does not make people 

who live in corrupt countries double victims of corruption—victims 

first when people steal money that was meant for them, and victims again when people then withhold any further money from 

them. We need to be able to sharpen that fight against corruption 

so that we go after those who are really the problem. 

There is the question of the extractive industries, of the failure 

of mineral wealth to benefit the large numbers of people whom it 

ought to, and all of those are things we are going to study on an 

ongoing basis. 

I have 2 minutes left in my statement, and I am going to yield 

it to the gentleman from California, and then in a step that the 

parliamentarian tells me is okay, I am going to give up my second 

5 minutes. The ranking member and I have 10 minutes each, and 

we both agreed not to extend the time. I appreciate that because 

we do have a little bit of a truncation. I am going to divide my 5 

minutes up among the witnesses because I don’t know that all of 

the testimony will be summarized within 5 minutes. And at this 

point I recognize the ranking member, the gentleman from Alabama. 

Mr. BACHUS. I thank the chairman. I welcome our panel, and I 

am going to make my remarks very brief because if I realize anything, it is that our four panelists all know more about this subject 

than I do, so I am going to spend my time listening. 

I would make one comment. Dave Beckmann—who is one of the 

panelists—and I worked very hard on debt relief, and his book 

‘‘Grace at the Table’’ was one of the books that inspired me to become involved. And in that book, one of the questions asked is, 

what will the United States and our generation be remembered 

for? Will it be—if we are leaders in the world, or we are to display 

leadership, what do we do with that leadership, what influence do 

we have? And I think it is becoming more and more apparent to 

all of us that it is in our best interest to improve the plight of people all over the world. Global poverty is a threat not only to the 

citizens of the poor countries, but it is a threat to the rest of us, 

as well. 

And I will close with this one fact, prior to the Taliban’s takeover 

in Afghanistan, according to many of the world surveys, Afghanistan was the poorest uneducated country in the world. Almost none 

of the young women in Afghanistan had ever seen a school and 

about 75 percent of young men had never set foot in a classroom. 

And it was into this vacuum that the Taliban came. And as we 

know, they filled that vacuum with something that was really a 

threat to all freedom-loving people. When they told the Afghan peoVerDate 0ct 09 2002 13:53 Aug 24, 2007 Jkt 037209 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\37209.TXT HFIN PsN: TERRIE
3

ple that you are not educated—you are not capable of educating 

your children, you can’t afford to do it, so we will educate them. 

And they taught the young children in Afghanistan really a doctrine of hate, and it didn’t isolate that situation to Afghanistan. It 

affects all of us. And throughout many parts of our world today, 

that same doctrine, those same forces are going into countries 

where there is a lack of education and infrastructure, and they are 

taking advantage of that. As opposed to nothing happening in that 

country, in those countries, what is happening in those countries 

is dangerous, which is actually far worse than nothing happening. 

So I think it is definitely in not only in the best interest of those 

countries, but in the best interest of our own national security to 

see that those countries are stable and that they have that basic 

education and as a consequence, as we know, different rights and 

freedoms are respected. 

Thank you, Mr. Chairman. 

The CHAIRMAN. I now recognize for 2 minutes the gentleman 

from California, Mr. Sherman. 

Mr. SHERMAN. Thank you, Mr. Chairman. The world goes gaga 

because one guy at the World Bank gets $195,000 for his paramour. The press ignores the fact that the World Bank is on schedule to disburse $1.3 billion—a substantial portion of which is American money—to the Iranian government, and that some $270 million was disbursed to the Islamic republic during Wolfowitz’s short 

tenure. The Administration has substantial clout with the World 

Bank purchased at the expense of the American taxpayer. It used 

it first to install Wolfowitz, then to back him as he tried to back 

the World Bank out of family planning, and then finally used up 

every bit of clout in an all-out effort to help him save his job. 

The Administration has done nothing to try to stop the loan 

agreements or the disbursements. Now it is true that the Administration voted against the loans, but they were required to do so by 

law. So perhaps we should consider ourselves blessed that no one 

in the Administration was willing to commit a crime in order to assist the Islamic Republic of Iran. Not only do these laws provide 

resources to the government of Iran, they also give it the Good 

Housekeeping seal of approval. How can we convince the Iranian 

people that they will be cut off from the world if they continue to 

develop nuclear weapons when they are getting money from the 

World Bank, some of it ours? 

In addition, governments stay in power by bringing home the 

bacon. We know how to stay in office, that is why we are sitting 

up here, and it is by bringing home the bacon even though it is not 

halal or kosher. The Islamic republic is bringing home the bacon 

from the World Bank, part of it ours. 

We will go back to the Floor of the House, I hope, and vote for 

foreign aid as I have again and again and hope that our constituents don’t realize that a portion of that foreign aid is going to a 

government that is developing nuclear weapons. 

I yield back. 

The CHAIRMAN. The ranking member of the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology, 

the gentleman from Texas, is recognized for 3 minutes. 

4

Mr. PAUL. Thank you, Mr. Chairman. Of all the elements of the 

Bretton Woods system, perhaps the most enduring has been the 

World Bank and its associated institutions. Although highly regarded in some circles, the Bank has been a significant failure in 

helping the residents of poor and developing nations. Like many 

bureaucracies, the World Bank has constantly attempted to reinvent itself and redefine its mission. Some critics have referred to 

this as mission creep. It is the reaction of self-interested bureaucrats who are intent on saving their jobs at all costs. The noninstitutional elements of Bretton Woods, such as the gold backed 

dollar standard, have gone by the wayside, but the World Bank 

and IMF soldier on. 

What is most annoying about the World Bank are the criticisms 

alleging that the Bank and its actions demonstrate the negative 

side of free market capitalism. Nothing could be further from the 

truth. The World Bank is not an organization devoted to capitalism 

or to the free market but to state-run corporate capitalism. Established and managed by a multitude of national governments, the 

World Bank promotes managed trade by which politically connected individuals and corporations enrich themselves at the expense of the poor and the middle class. 

Western governments tax their citizens to fund the World Bank, 

lend this money to corrupt third-world dictators who abscond with 

the funds, and then demand repayment, which is extracted through 

taxation from the poor third-world citizens rather than from the 

government officials who are responsible for the embezzlement. It 

is in essence a global transfer of wealth from the poor to the rich. 

Taxpayers around the world are forced to subsidize the lavish lifestyle of third-world dictators and highly paid World Bank bureaucrats who don’t even have to pay income taxes. 

The World Bank has outlived its intended purpose. Capital markets are flush with money and well-developed enough to lend 

money not just to national governments but to local and regional 

development projects at competitive market rates. 

In the aftermath of Mr. Wolfowitz’s departure, much will be 

made of the question of his successor when the questioning instead 

should be directed toward the phasing out of the organization. And 

I yield back. 

The CHAIRMAN. The gentleman from New Jersey is recognized for 

the remaining 2 minutes. 

Mr. GARRETT. Thank you, Mr. Chairman, for holding this hearing 

today. I thank the witnesses in advance. While the World Bank 

was created with the direct mission to make loans and grant loans 

to low- and middle-income countries to reduce poverty and promote 

economic development, and that is an admirable goal and one I 

support, unfortunately the World Bank has become, as many have 

said already, a bloated bureaucracy that is increasingly moving its 

focus away from its core mission. Desmond Lachman, a resident 

fellow at the American Enterprise Institute, states, ‘‘By extending 

its mandate, the Bank has not only lost focus of its primary goal 

of poverty reduction, but has also made it difficult to hold the Bank 

accountable for its core activities.’’ He goes on to say that it might 

be in the World Bank’s best interest to narrow its focus, suggesting 

that ‘‘These narrow goals might include the eradication of debiliVerDate 0ct 09 2002 13:53 Aug 24, 2007 Jkt 037209 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 K:\DOCS\37209.TXT HFIN PsN: TERRIE
5

tating illnesses like malaria, feeding the hungry and supplying 

clean water.’’ 

Another way that I believe the World Bank has ventured away 

from its original charter is by focusing too much of their resources 

on making loans to middle-income countries such as China and 

India. These countries already have access to vast amounts of private investment capital and should no longer need the World 

Bank’s help in financing infrastructure improvement. Approximately 50 percent of the loans made in 2006 went to just five countries, China and India included. 

Mr. Chairman, I believe the World Bank is an organization that 

is still trapped in the 20th century and has not moved forward 

with the times. Studies have shown that its past record shows that 

it is a failure in many of the countries it has been involved in. New 

York University concludes, studies show, that those countries that 

have been the largest recipients of World Bank loans have performed no better, and oftentimes worse, than those countries which 

did not receive the Bank’s favor. And to make matters worse, those 

countries like China, India, which have ignored the Bank’s nostrums, comfortably outperform those countries like Russia and Argentina, which were more receptive to the world advice, as has 

been stated. 

Finally, I do applaud outgoing President Wolfowitz for trying to 

rein in the out-of-control corruption within the organization. The 

anti-corruption agenda has been a primary objective of this Administration, but I do hope that whoever his successor comes in line 

that he will continue to focus on this important problem. 

And with that, Mr. Chairman, I yield back the balance of my 

time. 

The CHAIRMAN. I thank the gentleman. I thank all of the members for their cooperation. We will begin with Dr. Stiglitz. I have 

5 minutes remaining and I am going to yield a minute-and-a-quarter to each of the witnesses, so each witness will have 6.25 minutes. This is useful stuff. That may not seem like much, but it is 

when you start talking. So each witness will get 6.25 minutes. I 

will tell the timekeeper. Dr. Stiglitz. 

STATEMENT OF DR. JOSEPH E. STIGLITZ, PROFESSOR, COLUMBIA UNIVERSITY, AND CHAIR, COLUMBIA UNIVERSITY’S 

COMMITTEE ON GLOBAL THOUGHT 

Mr. STIGLITZ. Thank you very much for holding these hearings. 

I want to agree with the sentiment that you expressed in the beginning, that America and the world have a strong interest in contributing to reducing poverty and promoting growth in the developing world. Aid can be an effective instrument in achieving these 

objectives. 

The multilateral institutions, of which the World Bank is the 

premier lending institution, play an important role in this global 

effort. For a variety of reasons, assistance administered through 

the World Bank and other multilateral institutions can be even 

more effective in achieving our objectives than assistance provided 

by the United States directly. This is especially true at the current 

time, when American credibility, especially in the developing countries, has sunk to an all-time low. 

6

The question is, is the World Bank today playing the role that 

it should be playing? And if not, what can be done about it? Even 

before the recent turmoil within the institution, there was considerable concern about its direction. Large numbers of its senior people 

have departed in the past 2 years. The most important asset of the 

institution is its staff, its human capital, and it will take years to 

replace what has been lost. 

I want this afternoon, however, to focus on broader, though not 

totally unrelated issues: How the World Bank should conduct its 

business, what the development agenda should be, and what the 

United States can do to help ensure that this happens. 

It is in our interest that the World Bank remain strong, credible, 

and effective. The Bank has greatly emphasized good governance 

in corruption, but the Bank can only be effective if it is seen as 

having good governance itself. There has to be confidence that 

there is not corruption in the corruption agenda, that there is not 

a hidden political agenda with corruption in some countries being 

overlooked, while in other countries there is a policy of virtually 

zero tolerance. 

Finally, part of democratic values is due process. The implementation of a corruption agenda itself must conform to the highest 

standards. With the resignation of its president, the question is the 

choice of successor and, most importantly, the process by which 

this is done. 

Good governance and the commitment to basic democratic values 

requires that the head of the institution be chosen in an open and 

transparent process. It should be the most qualified person for the 

job regardless of race, gender, or nationality. It is in America’s interest that the head of the institution not simply be chosen by the 

President of the United States. 

There are other important changes in the governance of the 

World Bank and other multilateral institutions that will increase 

their effectiveness. These require careful balance, more democratic 

accountability, and strengthening procedural safeguards. 

There are reforms to the governance of the Bank, the need for 

which the present scandal has highlighted. I want to comment 

briefly on them. On the positive side, the review process shows that 

the Board could exercise its fiduciary role even in a very difficult 

situation where the largest shareholder was not fully supportive, 

by setting up a committee that included four members from developing and transition economies. In spite of the pressures that were 

brought to bear, 22 of the 24 directors concurred with the finding 

of the panel and, realizing that the wellbeing of the Bank required 

that the President had to go, supported that action. 

On the negative side, it is clear that the president of the World 

Bank had enormous elements of discretion in making appointments, in circumventing rules, in suspending loan programs, and 

in directing bank programs, with insufficient checks and balances 

in place and insufficient oversight. Some of the systems designed 

to provide the checks and balances are clearly flawed, with offices 

that might receive complaints about presidential abuses actually 

reporting to the president. Fears of retribution against whistleblowers or those raising complaints were not totally unfounded. 

The powers of the president had previously not been abused in this 

7

way, but the fact they could be abused also highlights a fundamental flaw in governance. 

Reform will require careful balancing. There needs to be more accountability of the World Bank, both to the Board and to other 

stakeholders, including donor countries, but this has to be done in 

ways that avoid excessive politicization of the institution. The Bank 

has created one of the most talented and qualified bureaucracies 

around the world; bureaucratic procedures have been put into place 

that ensure that by and large they attract and choose highly qualified applicants. But left to themselves, the bureaucratic safeguards 

could lead to an entrenched bureaucracy pursuing its own agenda 

or insufficiently flexible to adapt to changing circumstances, including new learning about the costs and benefits of privatization and 

liberalization, new attitudes about country ownership, or new agendas, such as those concerning worker rights. 

The Board, working with the president, must establish what the 

Bank’s overall agenda and priorities will be. As I argue below, this 

agenda must be more balanced and more consistent with our own 

values and our own practices. While the Bank is likely to continue 

to be focused on promoting growth and poverty alleviation, it is inevitable that there will be changing views on how that can most 

effectively be done. 

The Board, and not just the president, must play a central role 

in constructing and approving this agenda, and then ensuring that 

the president and the staff of the Bank implement that agenda in 

an effective and consistent way. At the same time, the checks and 

balances and safeguards against abuses by the president of the 

World Bank have to be strengthened. In the text, I provide details 

on how that might be done. There are problems in both internal 

and external governance that I discuss in the text. 

International economic institutions like the World Bank are at 

some distance from direct accountability. To address this problem, 

at least three actions are required. Responsibility for the World 

Bank should shift from Treasury to USAID or should be shared 

with USAID. This is a practice followed by many other countries, 

and it is essential if the developmental perspective is to remain 

paramount in dealings with the World Bank. 

Second, there needs to be more parliamentary/congressional oversight. The appropriate form of this oversight will need to be worked 

out. A committee of the parliaments/congresses, including donor 

and recipient countries, could be formed to review the agenda and 

procedures and to discuss widely perceived grievances. 

Third, there needs to be more transparency and public oversight 

of decisions, both before and after they are made. 

These reforms—and there are many other reforms in governance 

which I have discussed elsewhere—are, I would argue, as much in 

the interest of the United States as they are in the interests of the 

world as a whole. 

No system is perfect. A president determined to evade the set of 

safeguards put into place may still be able to do so, even after 

those are strengthened. Humans are fallible and so are the institutions that they create. 

I want to turn to more specific aspects of the World Bank agenda, beginning with corruption. Fighting corruption requires more 

8

than just speeches; it requires a comprehensive agenda that includes the development of policies that reduce the scope for corruption. There are ways that the United States and other advanced industrial countries can contribute to the fight against corruption, 

most notably strictly enforcing anti-bribery laws, eliminating bank 

secrecy, not just for terrorists but also for tax evasion and corruption, and demanding transparency in payments to governments by, 

for instance, using the Tax Code to enforce the Extractive Industries Transparency Initiatives. 

Successful development requires, however, more than just attacking corruption. Aid effectiveness can be undermined not just by corruption but by incompetence or by the absence of the appropriate 

complementary policies. It requires a comprehensive development 

agenda. 

There also needs to be country ownership of development policies, programs, and strategies. Excessive conditionality undermines 

this and development effectiveness. While the conditions that have 

been imposed have been reduced, in many cases they still remain 

excessive. 

IMF cross-conditionality is especially problematic, and even as 

up-front conditionality has been reduced, new forms of hidden conditionality have been introduced through the IDA allocation formulae. These formulae fail to deliver aid to where it is likely to be 

either most needed or most effective. 

The challenge to the World Bank and other aid agencies when 

confronting a country with poor governance is to find alternative 

delivery mechanisms for aid. It is bad enough that the people in 

these countries are suffering from poor governance. To be doubly 

punished by denying aid would seem unfair, especially if there are 

alternative ways by which assistance can be provided, especially in 

health and education—investments in the youth of these countries. 

The problem is that the conditionalities that— 

The CHAIRMAN. You will need to sum up, please, Dr. Stiglitz. You 

need to sum up. 

Mr. STIGLITZ. Okay. The problem is that the conditionalities that 

have been imposed in the past have in some cases actually reduced 

aid effectiveness. Moreover, these imposed policies represent values 

that are contrary to those that are held by the vast majority of 

Americans. The disparity between what we require of others and 

what we do ourselves further undermines the credibility of the institution and aid effectiveness. 

Thank you. 

[The prepared statement of Dr. Stiglitz can be found on page 53 

of the appendix.] 

The CHAIRMAN. Next, Dr. Robert Hunter Wade, who is a professor of political economy at the Development Studies Institute, 

London School of Economics and Political Science. Dr. Wade. 

STATEMENT OF DR. ROBERT HUNTER WADE, PROFESSOR OF 

POLITICAL ECONOMY, THE DEVELOPMENT STUDIES INSTITUTE, LONDON SCHOOL OF ECONOMICS AND POLITICAL 

SCIENCE 

Mr. WADE. Thank you. I want to step back from the concerns 

that Joe Stiglitz was talking about and address the current deep 

9

crisis of relevance that the World Bank is facing. The Bank’s market has changed fundamentally in the past decade, but the Bank 

continues to operate in much the same way and with much the 

same products as a decade ago. The change in the Bank’s market 

was dramatically symbolized just last week while the U.S. and European governments were fighting over President Wolfowitz’s future. At that same time, the African Development Bank held its 

annual meeting not in Africa, but in Shanghai. This event will be 

looked back upon as a milestone in the history of the 21st century. 

The main message of my testimony is that the World Bank can 

potentially add much more value to the solution of some of the 

world’s most urgent problems than it has been doing and, secondly, 

that the U.S. Congress and the next Administration can help the 

Bank do so by signaling strong support for a revived World Bank. 

In the immediate future, that signal of strong support means 

supporting the current Administration and selecting a first-rate 

candidate as the next president, a candidate with an excellent 

record as the leader and manager of a large complex organization. 

That criterion would knock out some of the names on the current 

short lists. 

And secondly, congressional support means the Congress paying 

over the still outstanding U.S. payments on the IDA 14. Looking 

beyond the immediate future, the Congress should support the 

World Bank in taking more of a leadership role in several genuinely global areas. In its traditional products of aid projects and 

economic advice to governments of developing countries, the World 

Bank’s market has changed in the sense that it now faces a whole 

array of new competitors supplying much the same kind of products, such as China and Korea, which have become big sources of 

financial assistance to poorer countries, such as private consulting 

firms which have developed superior skills in many of the Bank’s 

traditional areas of expertise, such as banking and finance, and 

also such as the Gates Foundation and other private philanthropic 

foundations which have become big players in this financial assistance game. 

But given all that, the Bank still retains a big comparative advantage over these other entities, which is based on its combination 

of: (A), intergovernmental guarantees; (B), its own large revenue 

base; and, (C), its global reach. This combination makes the World 

Bank almost unique. And in particular, I suggest that the Bank 

should take a leading role in addressing one of the biggest specific 

issues of our time, which is how to get economic growth with much 

less by way of carbon emissions, how to decouple economic growth 

from carbon emissions. 

The Bank has a lot of experience in formulating economic policies, translating them into investment plans, and translating the 

plans into investments on the ground, and it should use this general experience to take the conclusions of reports like the IPCC reports and the Stern report and then translate those general conclusions into what they mean for specific countries, such as China, 

India, Bangladesh, Brazil, and so on, and then to help those governments work out country programs focused on decoupling their 

economic growth from their emissions. This task would be a relatively new task for the Bank and it would require the Bank to deVerDate 0ct 09 2002 13:53 Aug 24, 2007 Jkt 037209 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\37209.TXT HFIN PsN: TERRIE
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velop new financing instruments in order to accelerate the take-up 

of environmentally friendly technologies. For example, the Bank 

could establish a carbon fund, a fund which would, for example, 

allow a developing country such as China or India to borrow from 

the Bank for a power station and to choose a state-of-the-art technology for that power station, a state-of-the-art technology, reduction technology, even though that technology is more expensive. 

But with this fund, rather than the government of the country having to bear the incremental cost, such a fund could be used to accelerate the uptake of climate friendly investments in the power sector, in transportation, railways for Africa, for example, in forestry 

and land use practices, and in still other sectors. 

Some of the finance for this fund could come immediately, tomorrow, straight from the World Bank’s current reserves. The World 

Bank currently has $36 billion in reserves. It needs only $25 billion 

in order to retain its all-important AAA credit rating, so the balance between—or much of the balance between the $25 billion that 

it needs and the $36 billion in reserves that it has could go into 

such a climate stabilizing fund. This fund could also receive grants 

from OECD governments, from private foundations and the like. 

This is just one small example of how the Bank could be playing 

a significant catalytic role in addressing international environmental issues generally and climate change in particular. To do 

this, to reposition itself in this way, it would have to undertake 

some pretty big internal changes and to develop some new streams 

of revenue. I leave the details of how I think the Bank could do 

these two things to the written testimony. 

The bottom line of what I am saying is that even though, if we 

were starting fresh in 1944, we would surely not start with the 

present World Bank. But the present World Bank is what we have 

to work with, and I suggest that the present World Bank does need 

U.S. support to reposition itself in order to fulfill the valuable role 

that it is almost uniquely able to play in the world. 

And just to address directly Mr. Paul’s point about how capital 

markets, private capital markets are now growing to the point 

where they can take care of all the tasks that the World Bank 

might do, I suggest that in this area of meeting these genuinely 

global problems, providing what economists call global public 

goods, capital markets, private capital markets are not going to do 

the job. For that job to be met, there is plenty of scope for a multilateral public institution like the World Bank. 

Thank you. 

[The prepared statement of Dr. Wade can be found on page 67 

of the appendix.] 

The CHAIRMAN. Thank you, Dr. Wade. 

Next, Mr. David Beckmann, the president of Bread for the 

World. 

STATEMENT OF DAVID BECKMANN, PRESIDENT, BREAD FOR 

THE WORLD 

Mr. BECKMANN. Thank you, Chairman Frank, Ranking Member 

Bachus, and members of the committee. I am honored by this opportunity to testify before you on the role of the World Bank in 

overcoming world poverty. 

11

The world is making progress against poverty. The Bank just announced that we are now down below 1 billion people in the world 

who are living in what it calls extreme poverty. That is still a terrible number, but in 1980, they estimated that the number was 1.5 

billion. So we live at a time where we can see dramatic progress 

against hunger, poverty, and disease, and the World Bank is playing a critical role in that great liberation. 

I have a relatively positive view of the World Bank, and it is 

built on 30 years of working with the Bank in various capacities. 

I worked in the Bank for 15 years in operations, and then I was 

a speech writer for the president of the Bank in the early 1980’s. 

Then I led the Bank’s engagement with civil society around the 

world. In the late 1980’s, it was a fringy idea that the Bank should 

not just deal with governments. 

I have been at Bread for the World for 15 years. I think you 

know that Bread for the World is a large citizens’ movement that 

organizes people and churches across the country to lobby Congress 

on issues that are important to poor people around the world and 

also in our own country. 

At Bread for the World, we have continued to focus on the World 

Bank, and in the early 1990’s, we did our part to try to get the 

Bank to focus more explicitly on poverty reduction, and to make 

the Bank more transparent and accountable. At the end of the decade, we chaired the legislative coalition for the Jubilee campaign. 

On all of those issues, this committee has played an important 

leadership role, and, in fact, the Bank today is more focused on 

poverty than it was when I worked there. 

It is more accountable and more participatory than it used to be, 

and I think the Bank’s leadership of the debt reduction initiative 

in general has been just excellent in reducing impossible debts, and 

doing it in a way that really has fostered economic growth, especially among poor people. Right now, Bread for the World is campaigning to change the U.S. farm bill in ways that would be good 

for rural America and rural Africa, too, and some of the analysis 

behind that campaign comes straight out of the World Bank. 

It is hard to figure out the World Bank. It is a complicated institution. But I have been feeling different limbs of this beast for 30 

years, and I have come to a deep appreciation for the Bank. Now 

any institution has its weaknesses, but I want to highlight five 

strengths. First, the World Bank is focused on reducing poverty. 

You can see the effect of that most clearly by where the money 

goes. If you compare the Bank to, say, AID, the Bank’s aid money 

goes much more to low-income developing countries. The Bank does 

all kinds of things. It may be working on policies that facilitate the 

private sector, to develop capital markets, but staff always have to 

link that back to the overarching purpose of poverty reduction. 

A second strength is that the Bank has improved and adapted 

over time. Dr. Stiglitz has criticized the Bank, and I think it is 

clear that the Bank listened to that criticism and has made some 

adaptations so it is a stronger institution now. He is probably not 

satisfied with all that they have done, but it is clear that they have 

listened to him and have made some adaptations. That is one example. 

12

Third, the Bank is an extraordinary center of knowledge. Even 

when I don’t agree with the Bank, I check what they are thinking. 

Fourth, the Bank’s governance structure works fairly well. It is 

a compromise. The governments that put in the most money get 

the most power, but all the governments that are members get to 

sit at the table and be part of the discussion. And it seems to me 

that, remarkably, most decisions are made on the basis of reasoned 

debate. 

And finally, the Bank evaluates itself. The independent operations evaluation department concludes that three-quarters of the 

Bank’s operations are satisfactory, so there is a lot of room for improvement. But I don’t know of any other institution in international development that is so self-critical and so open to learning 

from its own experience. 

Now, looking to the future, I would highlight three recommendations. First, I think the binding constraint on progress against 

world poverty is still a lack of political commitment in developing 

countries and also in the industrialized countries, and there are 

things that you can do that build political commitment over time. 

For example, you can set up institutions—strengthen non-governmental and governmental institutions that represent the interests 

of the poor. The Bank does a lot to build political commitment, and 

I would like to see a systematic review of what it is doing to deal 

with this fundamental constraint and what it could appropriately 

do to provide stronger leadership. 

Second, I would recommend that the Bank not adopt a bunch of 

new initiatives right now. In my judgment, Jim Wolfensohn 

launched more new initiatives than the Bank could effectively absorb. The Wolfowitz controversy has really caused some damage, so 

I think the Bank should focus on implementing the priorities that 

are already in place, notably, continuing the turnaround in Africa, 

changing the Bank’s role in the middle-income countries, and curtailing corruption. 

And then finally, the new president of the Bank needs to get all 

of the Bank’s diverse stakeholders, notably the Board and staff of 

the Bank, to start working together again. I think the way to do 

that is fundamentally to focus on the mission, because the Bank’s 

mission of reducing poverty is compelling to all different kinds of 

people. As the chairman and ranking member of this committee 

show, this is a mission that people of different political persuasions 

are drawn to. Virtually all the governments of the world say that 

they want to reduce poverty. 

I am a minister of religion as well as an economist, and all of 

the world’s religions and ethical traditions know that what is happening in the world to reduce extreme poverty is sacred business. 

The transition that is happening at the World Bank is a turning 

point not only for the Bank, but for the world’s progress against 

poverty. 

The CHAIRMAN. Sum up, please, Dr. Beckmann. 

Mr. BECKMANN. I think it is incumbent on all of us to play our 

various roles to strengthen the Bank and to make it a yet more effective instrument in overcoming poverty. 

[The prepared statement of Mr. Beckmann can be found on page 

40 of the appendix.] 

13

The CHAIRMAN. Thank you. And finally, our once and future witness, I know his face is familiar to many of us in a number of capacities, but he is here today as the co-chair of the Atlantic Council 

Commission on Transatlantic Leadership for a New Global Economy. Stuart Eizenstat. 

STATEMENT OF AMBASSADOR STUART E. EIZENSTAT, COCHAIR, ATLANTIC COUNCIL COMMISSION ON TRANSATLANTIC LEADERSHIP FOR A NEW GLOBAL ECONOMY 

Mr. EIZENSTAT. Mr. Chairman, and Ranking Member Bachus, I 

am appearing as co-chair of a bipartisan commission with Grant 

Aldonas from the Atlantic Council, looking at ways in which Europe and the United States can transform all of the international 

financial institutions in light of the major changes that have occurred in the world’s economy. I will focus on the World Bank, and 

to some extent, the IMF. 

The international economy has undergone radical changes in the 

past 50 years, with economic power shifting south and east, but the 

World Bank and IMF have not sufficiently taken this into account. 

Today, China, India, Brazil, Russia, and other emerging countries 

represent 45 percent of global GDP, 40 percent of world exports, 

and 65 percent of the world’s foreign exchanges. And yet they have 

much less of a central role in global economic governance than 

their economic importance dictates. 

Another major change is the remarkable growth of global private 

financial markets increasingly available to developing nations without the time delays and conditionality from the World Bank and 

IMF. For example, in 2005, the amount of private debt and equity 

flows to sub-Saharan Africa, one of the poorest places in the world, 

dwarfed the amount of money spent by the World Bank. Another 

development is the new entrants into overseas development assistance, particularly from China, which is building infrastructure 

projects all over the world for political and economic reasons, not 

to benefit the countries involved, with no conditionality, using oftentimes their own workers, not the indigenous workers, to build 

the very projects they are funding. 

All of these changes impose significant challenges for the World 

Bank and the IMF, including the desire of emerging economies to 

have more input into their governance. At the same time, our Commission strongly believes that the Bank and the Fund continue to 

be highly relevant. No other private or public institution, for example, can do the kind of macroeconomic surveillance as the IMF to 

prevent future global crises. And for the Bank, over half-a-billion 

people have risen above the poverty line over the last decade. 

While there are many reasons for that, the Bank’s programs have 

played a role. 

In addition, private lenders want their borrowing country clients 

to belong to the IMF and World Bank, and the World Bank still 

has a major role in long term financing for infrastructure. I was 

doing work for BP on the BTC pipeline in Azerbaijan, Georgia, and 

Turkey. There is no question but that having gotten World Bank 

financing in part for that project elevated the social and environmental standards of the project. 

14

No private capital will finance many of the projects that are now 

financed through the world’s IDA program. It is the world’s premiere poverty focused aid agency, with 81 of the world’s poorest 

countries, 40 in Africa, IDA-eligible. IDA has a greater capacity to 

deliver developmental assistance on a larger scale and in more sectors than any other agency in the world, and certainly than the private sector. No other private or public institution can address complex cross-sectoral issues like IDA, like, for example, linkages between macrostabilization and banking sector reform. Nevertheless, 

the World Bank faces challenges which require significant reform. 

And permit me to summarize briefly our Atlantic Council Commission’s recommendations. Number one, the top leadership of the 

World Bank and IMF should be chosen on the basis of merit, not 

nationality. Since their creations, this has been a monopoly for Europe and the United States—Europe for the IMF, the United States 

for the World Bank. This is antiquated and unfair. It doesn’t recognize the growth of African, Latin American, and Asian countries. 

And moreover, with the special focus of the World Bank on development and poverty alleviation, it doesn’t produce leaders who 

have the expertise in those areas. Indeed, it can lead nations to go 

the other way, like Chavez is trying to do, by creating a new body 

called the Bank of the South. 

With Paul Wolfowitz’s departure, President Bush can send a 

powerful signal to the world that he is turning a corner on American unilateralism by throwing open the contest to the entire world 

and supporting the best candidate, regardless of nationality. That 

would turn the tragedy of the Wolfowitz incident into a plus for 

America’s image in the world and for the future management of the 

world economy. 

Second, the World Bank and IMF governance should reflect actual economic power and influence. Emerging economic powers in 

Asia and Latin America are seriously underrepresented in voting 

power and board representation. If developing countries and emerging economic powerhouses are to take these institutions seriously, 

they must be given a genuine leadership role. 

And we recommended, therefore, in our Commission, two reforms 

to rectify this imbalance. First, European representation should be 

consolidated into two seats, an EU Euro zone, and an EU non-Euro 

zone seat. European countries are highly overrepresented, with 7 

directorships out of the total of 24. 

Second, we recommend that the U.S. and European representation be rebalanced in terms of voting shares. Third, there is serious 

confusion and overlap in the World Bank and IMF programs, with 

inadequate consultation and coordination. The Bank and the Fund 

have responded to changes in the international environment by 

reaching out beyond their mandates. Since they work in many of 

the same countries at the same time, this leads to inefficient overlap in their programs. We found that there was insufficient coordination between staffs, often going to the same countries at the 

same time. This costs public assets, gives conflicting advice to recipient nations, and fails to meet the needs of members. 

For example, the Fund’s financing activities in low-income countries have moved beyond their core responsibilities, and overlap 

with the Bank’s work in development finance. The Fund, for examVerDate 0ct 09 2002 13:53 Aug 24, 2007 Jkt 037209 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\37209.TXT HFIN PsN: TERRIE
15

ple, is moving into areas beyond their core capability, like civil 

service reform, land and energy sector reform, privatization, and 

judicial reform that are the Bank’s responsibilities. We recommend 

to rectify this the following: A clear delineation of responsibilities 

between the Bank and the Fund, each focusing on their core 

strengths, not based on the income of the recipient countries. We 

felt, for example, that the IMF should gradually withdraw from 

providing long-term baseline financing in low-income countries, and 

focus instead on short-term balance of payments financing and 

global imbalances. 

Next, the Atlantic Council recommended closer coordination between the Fund and the Bank by double-hatting executive directors. It does not make sense, at a time when there is a lack of cooperation, Mr. Chairman, to have separate executive directors serving for the board of the Bank and for the Fund. By appointing the 

same person to serve as an executive director at both, you assure 

greater coordination and collaboration and reduce duplication of 

programs. 

Third, even with this, we think that is not enough, and that 

there should be an eventual merger of the organizations no later 

than 2030. The Malan Report suggests a number of ways to 

achieve greater collaboration, but these simply will not achieve the 

degree of coordination without a merger. There are simply inherent 

overlaps only a merger could alleviate. For example, the Fund 

needs to take into account the sectoral level and composition of 

public funding, which is within the Bank’s responsibility, to achieve 

macroeconomic stability. Their work overlaps and duplicates of necessity. This means that the IMF and the— 

The CHAIRMAN. We will need you to sum up, Mr. Eizenstat. 

Mr. EIZENSTAT. —Bank should be under the same roof. And last, 

greater accountability. The way to achieve greater accountability is 

to follow a recommendation of the Meltzer Commission for an independent performance audit, or even better, a group like the GAO, 

the Government Accounting Office, inside the Bank for continuous 

evaluation of its programs. Also, the emphasis that both Jim 

Wolfensohn and Paul Wolfowitz placed on anti-corruption efforts is 

essential for sustainable development. The World Bank estimates 

there are a trillion dollars a year paid in bribes to all countries. 

The approach may be open to debate, but the necessity is clearly 

there. 

[The prepared statement of Mr. Eizenstat can be found on page 

44 of the appendix.] 

The CHAIRMAN. Let me apologize to the witnesses, but ask a 

favor of them. We have some votes that are going to take probably 

about 40 minutes. I would hope the witnesses could stay. If you 

have to get back and out of town, I understand that. If you are 

from Washington, the day’s probably shot anyway, so you might as 

well hang out. This is a very important hearing. We have had very 

good testimony. I promise you this committee plans to stay with 

this. If you can stay, I appreciate it. I plan to come back. Some others will. We will have maybe another hour when we come back. 

And if not, obviously you are entitled, you were already here, you 

thought you were at 2:00. But I just want to thank all of you. 

16

If you can stay, this has been very insightful. I promise you your 

time is not going to be wasted. I think you are going to find this 

committee engaging very seriously with the range of things that 

you said. So we are going to recess for about 40 minutes, but we 

are going to come back. And if you can stay, I appreciate it, and 

thank you. 

[Recess] 

The CHAIRMAN. I am going to begin with some questions. As I 

listened to the testimony, I believe there is a piece of legislation 

here, maybe several. For example, the President could appoint the 

same person, I assume, to be the ED, but we could also change the 

law to make that an appointment. That could be done statutorily. 

Dr. Stiglitz had a number of legislative suggestions, and I think we 

can work with those. There are some restrictions, obviously, in 

terms of members of the Bank staff themselves testifying. But one 

of the things that I did in 1993, when I chaired this subcommittee, 

was to convene a meeting of parliamentarians who were interested 

in the World Bank. I am going to indulge both myself and the 

ranking member, and we can make this more of a conversation, if 

that is acceptable to everybody. One of the things that struck me 

when I was first a member and then when I became subcommittee 

chairman was the point that Dr. Stiglitz talked about, that these 

important institutions, and you all talked about the political and 

economic and social aspects of them, but they are run entirely by 

finance ministries. Neither the diplomatic side nor the social justice 

side are involved, and the parliamentarians were excluded. 

I remember at one point suggesting during the Clinton Administration that we invite the State Department to testify on some 

things, because some members had some concerns about this. And 

the Treasury Department was very unhappy about that and reacted, I thought, unfortunately, in a kind of turf way. Well, we are 

not going to deal with that anymore. And one of the things I did 

was to convene a meeting of parliamentarians from 25 countries or 

so. There were some people very interested. And we had a meeting 

in this room and it seemed, in my mind, to be the beginning of a 

parliamentarians group. We did have officials of the Bank and the 

IMF come before us, because it was not any one parliament. That 

is when we began talking about what we had already begun to 

work on—the inspection panel and some other things. 

Unfortunately, from my standpoint, from a number of perspectives, that meeting was the first and the last, because I called that 

meeting in the summer of 1994 as chairman, and presided over it 

in December of 1994 as the lame duck, soon to be ex-chairman. But 

I think there is a great deal of bipartisanship in the respect I mentioned. I said that Mr. Bachus and I, Mr. Leach, and Ms. Waters, 

worked closely together. And we are going to get back in this business in a serious way. So let me just ask a couple of these questions, and then I would share the time with my colleague. 

Let me ask Dr. Stiglitz, Dr. Wade correctly pointed out the challenge of trying to promote growth without increasing carbon emissions. And obviously, the World Bank seems to be one of the forums in which we can deal with that, because you have the problem—Dr. Stiglitz talked about it in his testimony, and others have 

talked about it—obviously, you have this dilemma of how do you 

17

treat the disparity in carbon emissions between the rich countries 

and the poor countries? And clearly great growth will come there. 

What is the ratio? How do you meet the argument that no, you 

can’t just treat everybody equally when they start so unequally? It 

would seem to me that the Bank would be a very important place 

in which we could do this, including the environmental fund. Is 

that still functional? And that could be a piece of it. 

But another one that I am particularly interested in is important 

domestically and also internationally, and I will ask Dr. Stiglitz, 

and that is equally important is to show that we can make growth 

compatible—that growth does not mean increasing inequality. And 

there is the question of equality or increased inequality, since nobody is talking about equality in this system, but what degree of 

inequality you get. There is inequality between and among countries. But it seems to me increasingly here that unless we can deal 

with inequality within countries, we will not have the political support we need to try to diminish equality between nations. And I 

have talked about a bargain between business and some of us on 

the liberal side. I think we are beginning to see the possibilities 

here, but it is still in the early stages. Trade and immigration are 

two areas where there are the beginnings of compromise between 

liberals and the business community, two elements that I think 

would be in the interests of what we are trying to promote, but 

there is a lot of resistance to them by people who are still skeptical 

that they are not going to get burned. 

Now one of the areas that did strike me was a kind of cultural 

lag or is it the vampire reappearing? There had been this view, we 

had hoped that the World Bank and the IMF would stop trying to 

impose a particular kind of political economic orthodoxy, the Washington consensus, on countries, and we did seem to be making 

progress. It seemed that the picture of Mr. Camdessus standing 

over the president of Indonesia with his arms folded would not be 

repeated. And it wasn’t—obviously, it was a picture taken out of 

context, but it came at a time when there were these attacks. 

Some people have argued, and I would ask all of you who 

watched this, that the Bank and IMF, to some extent, but the 

Bank particularly, is slipping back into that, that we are seeing a 

kind of conditionality that represents a set of particular policy 

choices, in this case, ideologically conservative ones, but ideologically, liberal ones could be as much of a problem both because they 

interfere with the notion the countries are really deciding what to 

do. But also for any of us because they, in my judgment, exacerbate 

some of the problems we have had of growth and inequality. 

Are we getting back into the kind of conditionality, Dr. Stiglitz, 

that you complained about, and we thought was receding? 

Mr. STIGLITZ. Yes, I think there is some concern about that. One 

of the things I emphasized in my talk that we have become aware 

of in recent years is that in the IDA allocation formula, there were 

some hidden conditionalities. That is to say, the formula that determined who got aid was based on how well countries were doing on 

certain measures, and how well they were doing in those measures 

was, in effect, determined by how well they were doing in conforming to the Washington consensus policies. 

18

One of the ironies is that a lot of these measures are about good 

governance, and part of good governance is being transparent, but 

the measures themselves were not transparent, so there is almost 

an internal inconsistency. But when they became transparent, we 

realized the extent to which they were actually advancing some of 

the old-style conditionalities. 

I think the point that you raised is correct, that there has been 

a step backwards, that there had been a reduction in the set of 

conditionalities. There is a sense that in the last couple of years 

conditionalities have increased, or at least pressure has increased. 

What is particularly of concern is the fact that there are a number 

of conditions that have been imposed that are very inconsistent 

with the way that we, in fact, conduct economic policy in the 

United States. For instance, we have a central bank, a Federal Reserve, that focuses on inflation, unemployment, and economic 

growth. There is a three-partite macromonetary policy. One of the 

conditions that is often imposed, particularly with IMF cross-conditionality, is that central banks in other countries are supposed to 

only focus on inflation. The conditionalities require that they don’t 

pay any attention to employment or to economic growth. 

As another example, something which in the past has been a 

great deal of trouble and is still, to some extent, is that the IMF 

and the World Bank push privatization of Social Security. The 

United States had a big debate about privatization of Social Security. Different people came out with different views, but the country as a whole came out on the side that we didn’t want to privatize Social Security. Thus, the question is, are we forcing other 

countries to do something that we rejected, in the sense that a very 

significant fraction of Americans said no, this is not the right economic policy. Incidentally, as an economist, I also thought that privatization was a bad economic policy. 

The third topic that I talked about in my written testimony is 

this issue of worker rights and worker conditions. There is a lot— 

The CHAIRMAN. Which I put into the country policy example. 

Mr. STIGLITZ. Exactly. The point is that they put on things like 

labor market flexibility, which is often a code word for letting labor 

wages go down and unions being weakened, but nothing was said 

about core labor standards, so there was nothing to balance the debate. My view is that there should be discussions about the pros 

and cons and an awareness of the economic and political arguments, but labor market flexibility should not be demanded as a 

matter of conditionality. 

The CHAIRMAN. Thank you. I find that flexibility is often a quality that people find very desirable in others. Any of the other panelists? Mr. Eizenstat. 

Mr. EIZENSTAT. Well, I was in the Administration as Under Secretary of State at the time of the Asian financial crisis, and I certainly saw some of the negative impacts of the conditions that were 

imposed and the manner in which they were imposed. And we 

ended up trying to pull together programs to ameliorate some of 

the cuts in social programs. At the same time, I think we shouldn’t 

go to the other extreme and think that IDA or other grants and 

loans should be made without conditions. That is exactly what the 

Chinese are doing. There need to be conditions to assure that the 

19

funds are properly used—transparency, anti-corruption, good macroeconomic policy—or the money simply goes down a hole. So I 

think that there needs to be a proper balance. 

I would also say that for all the mistakes that were made during 

the Asian financial crisis, and there were mistakes made, that 

those countries did bounce back very quickly, and they now have, 

in many cases, current account surpluses, and good macroeconomic 

policies, much better than they did before. They are much more 

alert to exchange rate problems, in part because of the conditionality. So I would urge that we not throw the baby out with the bath 

water when we talk about conditionality and just look at what the 

Chinese are doing with no— 

The CHAIRMAN. That is a fair point. I think it is something of a 

distinction to some extent, and I am talking a procedural, substantive one. The conditions you talk about are procedural, but not 

in a superficial sense, transparency and honesty. I think that is an 

appropriate overall balance. I think the kinds of conditionality to 

which I have objected and others, they were both too specific and 

too ideological, that you—that those are the kinds of conditions you 

want to avoid, that you want to recognize a legitimate set of policy 

choices, but yes, I think we should be clear that doesn’t mean that 

you ignore whether the money is just being wasted, whether there 

is corruption, or whether there is a lack of any kind of openness 

to let you know that. 

Any of the others? Yes, Dr. Wade. 

Mr. WADE. In 2005, the World Bank published a 350-page report 

called ‘‘Economic Growth in the 1990’s: Learning From a Decade of 

Reforms.’’ So this was the Bank’s effort to write down what had 

been learned from the experiences in the 1990’s. And the main conclusion of this 350-page report was that we have learned that one 

size does not fit all. We must be more pragmatic in the kind of advice that is given, more contingent, make it more contingent on 

country circumstances, and so on. On the basis of this report, some 

economists declared that the Washington’s consensus is dead; nobody believes it anymore. I think that is quite misleading, because 

if you look not at what the World Bank says in its reports, but at 

what country directors say to their counterparts in government, 

they still tend to be pushing a rather hard, and I have to say quite 

ideological, version of the Washington consensus. 

The CHAIRMAN. And inappropriately, so you would say. 

Mr. WADE. Yes, inappropriately. The idea that there must be 

completely free trade, just sort of get the government out, privatize 

everything that can be privatized, and so on, a hard version of the 

Washington consensus. So that is where you have to look. And that 

is—and when you look there, you see that bank country operatives 

are still pushing this agenda. 

The second point I want to make is that quite a lot of the thrust 

for sort of homogenization of a one-size-fits-all kind these days, and 

since the Asian crisis, is coming from the IMF in the forms of the 

codification of standards of good or best practice in banking, in financial regulation, in corporate governance, and in data dissemination. These are universal standards, they are comprehensive standards, and the IMF’s business now is undertaking surveillance of all 

economies to see to what extent these economies are complying 

20

with these standards. And that, I think, has some quite worrying 

negative consequences, as well as some desirable. 

The CHAIRMAN. What is the enforcement? Is it that the Bank 

then picks up on the IMF standards and enforces them? Because 

the IMF by itself, absent a crisis, do they have any enforcement on 

those? What is the enforcement mechanism? 

Mr. WADE. No. There is some formal enforcement through IMF 

conditionality and also cross-conditionality with the Bank, but the 

main enforcement mechanism is an informal one through market 

signals. That is, the idea is that this information of compliance 

with the standards is made available to market participants, and 

they will then react and will be more favorable towards countries 

that comply more and will punish countries that comply less. That 

is the mechanism, the main mechanism. 

The CHAIRMAN. Yes, Mr. Beckmann. 

Mr. BECKMANN. Can I address the first comment you made about 

governance, and how to get social concerns, equitable growth, and 

how the governance— 

The CHAIRMAN. When we get down to five members, you can 

pretty much do whatever you want. Since you stayed so long, we 

owe you. 

Mr. BECKMANN. Well, just on that, the governance of foreign assistance within the U.S. Government is a mess. We haven’t had a 

reauthorization of foreign assistance since 1961, so the U.S. Government has been making its development assistance and foreign 

aid policy through the appropriations process in an ad hoc way, 

and that has been debilitating. The Bush Administration’s response 

to some of the debilitation of AID has been to start new agencies, 

so we have now the MCA and PEPFAR and AID. And then the 

MDB’s; the U.S.’s representative within the multilateral banks is 

from Treasury. 

I think we ought to have a cabinet-level department, as the U.K. 

does, a Department of International Development. It wouldn’t 

work, as Dr. Stiglitz suggested, that the MDB’s should be governed 

from AID; AID is too low in the bureaucracy. And now especially, 

it is really dominated by the State Department’s objectives, so that 

doesn’t really work. But I am hoping that in 2009 we are going to 

see a comprehensive reauthorization of foreign assistance. Fundamentally, what is needed is for the President and the Congress 

of the United States to agree on what they want to do with all of 

our foreign aid, whether it goes through IDA or through AID. What 

do we want to achieve? And to get the job done, we will need a 

more integrated institutional structure. That would mean that this 

committee would need to work with the International Relations 

Committee. 

The CHAIRMAN. Right. It is interesting. In the Senate, this jurisdiction is with the Foreign Relations Committee, where you might 

logically argue it belongs. I am very interested in this, so I am very 

happy that somebody, it seems to me quite mistakenly, said, ‘‘Oh, 

the World Bank, that is a bank, so it will go through the Banking 

Committee.’’ That is why we have it. I am not giving it up with 

any— 

Mr. BECKMANN. This committee has actually done a great job on 

World Bank issues. 

21

The CHAIRMAN. Thank you. I appreciate it. But we have already 

collaborated with—it has gone back to being called the Foreign Affairs Committee now—with Congressman Lantos and others, and 

we will continue to do that. Thank you. 

Let me turn to Mr. Bachus now. 

Mr. BACHUS. I thank the chairman. In fact, my first question was 

going to be, is the World Bank a bank? And you sort of hit on that, 

but let me just sort of change it around a little bit. I will just 

start—I want each of you to answer this. What do you see was the 

purpose and the function of the World Bank in 1944 and what is 

its function and purpose today? And has it changed? If you will, 

touch on economic growth, economic development, and also poverty 

reduction, and poverty alleviation, and how they go together. Professor Stiglitz? 

Mr. STIGLITZ. Sure. Remember that in 1944 it was called the 

International Bank of Reconstruction, and then they added the 

word ‘‘and Development,’’ so it really began with helping Europe reconstruct. But fortunately, they added ‘‘and Development,’’ and 

that has become the major focus. But it has gone from just a question of lending for development projects to a much broader focus, 

not just on development, but on poverty alleviation in developing 

countries. And that clearly is its focus. Some questions have been 

raised about capital markets. The fact is that capital markets are 

not going to be focused on poverty alleviation. They are not going 

to lend to the poorest countries. They are not going to lend for education or health. A little bit sometimes, but they just can’t go into 

those areas. Thus, there is a vast need there. 

Now, I think one of the things that has changed is a recognition 

that what separates developing and developed countries is not just 

money, but also knowledge. And with that has gone a change from 

being just a bank which lends money, to being sometimes called a 

knowledge bank, with a broader set of objectives. 

Mr. BACHUS. The technical expertise and knowledge. 

Mr. STIGLITZ. Exactly. There is an advantage of being a global 

institution that in principle is trying to learn from all the experiences, failures and successes all over the world, and then transmit 

that knowledge. It hasn’t always done it as effectively as it should. 

It has come in, I think, often with blinders. But the idea of having 

an international institution that would learn from all over the 

world and then transmit to the whole world what has been learned, 

that principle seems to me one that makes a lot of sense. 

Finally, I want to pick up on something that Dr. Wade said that 

I think is important. As the world has become more integrated, we 

have also become more interdependent; that means there are more 

areas where we need to act together. The World Bank is an important institution for acting together in areas that we call global public goods or global externalities, such as global warming, where 

there is an international interest in addressing this problem: It will 

affect all of us. How to help the developing countries do what they 

ought to be doing is at the current juncture potentially one of the 

most important ways that we can work together. If I were saying 

what are the new items in the agenda, that is one of the items that 

ought to be listed. 

22

Mr. BACHUS. Okay. All right. Dr. Wade? Anything? Mr. Beckmann? 

Mr. BECKMANN. Yes. If you go back to the charter of the Bank 

that was written in 1944, it talks about economic expansion. There 

is a reference to labor conditions; that is the way they talked about 

poverty. And there is a strong reference to promoting international 

trade. That provides a clear statement of what the Bank meant to 

do when they set it up, and those purposes are still relevant. The 

Bank still is promoting economic expansion, paying attention to 

labor conditions, and promoting international trade, but in the 

1990’s, the Bank adopted a new mission statement, which is pretty 

simple. If you go into the atrium of the Bank, up on the wall it 

says, ‘‘We dream of a world without poverty.’’ 

There has been a real evolution in the Bank’s mission over the 

decades. When Robert McNamara was president of the World 

Bank, the mantra was that we promote economic growth and poverty reduction. And in the 1990’s, there was a further shift, an 

agreement among the nations of the world that what we want this 

institution to do is to end poverty. I know that is a dream you 

share, and I find it to be a very exciting and compelling dream. 

What the charter says is still quite relevant; if you want to end 

poverty, you have to have economic growth, attention to labor conditions, and trade. 

Mr. BACHUS. Sure. Okay. 

Mr. EIZENSTAT. It is an excellent question. Let me just add to 

what has been said. I think the biggest change that has occurred 

since 1944 has been the remarkable growth of private capital and 

the access that developing countries have to that private capital. In 

2005, for example, in sub-Saharan Africa, not in middle-income 

countries, you had almost $25 billion in new equity flows, compared to $3 billion in net disbursements by the World Bank. But 

having said that, I think what that means is that to deal with the 

issue of poverty alleviation, which is now the goal of the Bank, you 

need first closer collaboration between private sector donors and 

the World Bank on what kinds of projects each will fund. Because 

for poverty alleviation you do need infrastructure, you need electricity, the things that business needs to invest. You need an open 

investment climate, you need an open trading climate, or you are 

not going to the economic growth. 

At the same time, you also need, as Joe and Dr. Wade were indicating, you need to have an institution, and that is what IDA particularly does, it focuses on things that the private sector won’t 

do—energy security, communicable diseases, global warming, and 

refugee resettlement in developing areas where that is a drag on 

growth. And that is where the Bank should be placing its expertise. 

But it needs to work more closely with the private sector, which is 

willing to fund infrastructure projects and other things that also 

contribute to growth. And that lack of collaboration, I think, is a 

significant barrier to poverty alleviation and to achievement of the 

Bank’s new mission statement. 

Mr. BACHUS. One thing Mr. Beckmann said, and I don’t know if 

the others agree with him, he said the expertise, the technical 

knowledge of the World Bank was probably one of its greatest 

strengths and values. Do you also—how would you grade their exVerDate 0ct 09 2002 13:53 Aug 24, 2007 Jkt 037209 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 K:\DOCS\37209.TXT HFIN PsN: TERRIE
23

pertise and their knowledge of being able to supply that expertise? 

Dr. Wade? 

Mr. WADE. I think it is true that in the past 10 to 20 years, private consulting firms have developed expertise in some of the areas 

that the Bank has long been in which excels that of the Bank. The 

Bank, I think, is no longer competitive in a lot of areas within 

banking and finance, probably within areas of private sector development. But on the other hand, there are some current activities 

that the Bank is in where the Bank’s expertise is exceptionally 

high relative to anyone else’s. There are many. But one of them 

would simply be resettlement. Resettlement of people who are involuntarily ousted from a project, a reservoir project, for example. 

But there are many others. 

But my worry is, looking forward, that the Bank on the one hand 

has an opportunity to take a leadership role in the international 

environmental issues that I was talking about, but it seems to 

me—including climate change—but is not yet very well staffed up 

to take that role. But this is an obvious direction of expansion. As 

other players become more active in areas where the Bank was traditionally strong but is no longer so strong, the Bank’s root of expansion, its comparative advantage is in these more strictly global 

issues, which nobody else is as well placed to deal with. But the 

Bank is not very well staffed up yet in those areas. So it has to 

expand in those areas and cut down in some of the more traditional 

ones. 

Mr. BACHUS. Mr. Scott, if I could have 2 more minutes or something if that would be possible? I note the chairman took about 12 

or—said we were going to have a little more— 

Mr. SCOTT. [presiding] Two more minutes. 

Mr. BACHUS. —relaxed atmosphere. The Administration is looking for a new president. Now Mr. Stiglitz, I read in the BBC, one 

of the articles, that you said they ought to be looking for an economist that understands development. And I would agree with that. 

What else would you add to that, any of you? Now, would you think 

that a passion for global poverty, or at least some expertise in that 

field would be at least a good qualification? 

Mr. STIGLITZ. Of course. The major thrust that I think all of us 

agree on is helping countries grow and reducing poverty, and that 

requires a certain kind of expertise. That is why I said it was important to have somebody who knows economics. I also will argue 

that you need somebody who can work with all of the diverse constituencies of the Bank, both the contributing countries and the 

countries that you are giving aid to. The staff of the Bank is very 

important. This picks up with something that Dr. Wade talked 

about in his remarks, which is that you have to have somebody 

who has the confidence of the staff, the donors, and the countries. 

One of the reasons that I suggested we ought to really think 

about how the head is chosen is because that process is going to 

affect that confidence. No matter who that person is, if he comes 

in through a process in which people have confidence, it is more 

likely that he will have an easier time of it. 

Mr. BACHUS. Okay. Thank you. Ambassador Eizenstat has to 

leave in just a minute, I am told, so I appreciate you being here. 

24

I appreciate your grandson’s patience while you testified. But Dr. 

Wade or Mr. Beckmann? 

Mr. WADE. Yes. I just wanted to add one thing to what Joe said. 

It seems to me really critically important, especially in the wake 

of current events, or recent past events, that the head of the organization have had—has an excellent record in running a large and 

complex organization. It is not enough simply to be sort of an academic expert economist in poverty reduction or something of the 

kind. You have to have had experience in running a large and complex organization. That seems to me to be a more important criterion probably than anything else. 

Mr. BACHUS. Okay. Thank you. 

Mr. BECKMANN. I think one criterion is clear, unalloyed commitment to the mission. There have been questions raised about Paul 

Wolfowitz’s personal loyalties, or his political loyalties coming in in 

an inappropriate way. What we have to do now is to get people 

working together—working and working together again. That includes the staff of the Bank, the Board of the Bank, but also the 

Bank has diverse shareholders all over the world—people who disagree as much as people in this committee disagree with each other 

and who are spread all over the world. So I think the next president needs to be somebody who is just straight in terms of being 

committed to the purpose of the Bank. It is that purpose that can 

draw all these folks together. And then I do think management, 

having experience in managing a large and complex organization 

is important. I think knowledge of development is important, real 

expertise in the area of international development. 

Ability to be a diplomat is clearly important. I think we have just 

seen that, in fact, we are not going to have the kind of international selection process that Dr. Stiglitz talked about. I don’t 

think this Administration would go along with that. And we have 

just seen that the Board of the Bank wasn’t willing to take on the 

Administration, so there is not the political will there to move to 

a completely different kind of process. But the Administration 

needs to put forward a candidate or candidates who are clearly 

qualified, and there needs to be some kind of process of consultation so that the next president can go into the Bank with support 

from the whole Board. 

Mr. BACHUS. Thank you. Let me just close with a comment. You 

know, I think you are going to have to have a person who is a real 

diplomat, who knows how to work for people, particularly in that 

just last month they announced the anti-corruption strategy, and 

you are going to have to do that with a lot of diplomacy. 

The CHAIRMAN. Thank you. The gentleman from North Carolina. 

Mr. WATT. Thank you, Mr. Chairman. And I thank the chairman 

and ranking member for convening this hearing, which has been 

very interesting and informative. At some level, however, I guess 

the question of at least the conditionalities and the Washington 

consensus have kind of an academic component to them except for 

the obvious conditionalities of transparency and more process-related things. Sometimes the Washington consensus I agree with, 

and sometimes the Washington consensus I disagree with. When I 

agree with it, I want the World Bank to move in that direction. 

25

When I disagree with it, I probably don’t want it to move in that 

direction. 

But that is kind of an intellectual academic discussion, and I 

would like to try to take this to a more practical discussion, because I don’t think you can get there from here without doing some 

of the concrete things that you all have suggested. 

As long as the United States is dictating who the leadership of 

the World Bank is, we basically will be setting the Washington consensus, whoever that person in the White House is who is sending 

that person there. How, as a practical matter, do we get from that 

posture to a position where the most qualified, the most—all of 

these criteria that you all talked about that you would want in a 

leadership is able to be named? How exactly is the naming process 

done now? I mean, does the Board have the authority, if they were 

willing to confront the president, to say we reject the notion that 

this person has to be a Washington former cabinet person or this 

person or that person? Or I mean, what is the process for getting 

us from where we are now to where it seems like everybody on this 

panel would like for us to get? Because I don’t think you can 

change the conditionalities unless you change the leadership and 

change the attitude of the United States toward what this is all 

about. Anybody who wants to take a shot at that. That is the only 

question I have, interestingly enough. 

Mr. STIGLITZ. The rules give the discretion to the Board to make 

the choice. It is nothing more than a convention, and it is an old 

boys’ agreement that Europe gets to appoint the head of the IMF 

and the United States gets to appoint the head of the World Bank. 

There is nothing constitutional, so there wouldn’t have to be any 

change in legislation. It is just the Board’s decision. Now, the problem is that in the case of the World Bank, the United States does 

not have a veto power. It is the largest shareholder, but the Europeans as a whole have many more shares than we do. This means 

that they have many more votes. But there is a reluctance to engage in confrontation, so there is a sense in which one can ask the 

question if they knew that— 

Mr. WATT. How do you move that? 

Mr. STIGLITZ. Okay. There are a couple of possibilities. One of 

them is that if Congress made a strong statement and said, we disagree with that, it would obviously have a big impact. If they said 

this president, this appointee, or this process does not have their 

support, that they think the old boys’ route does not make sense, 

while it may have made sense in 1944 but doesn’t make sense in 

the 21st century, I think that would have a very big impact. I have 

talked to a number of the European Ministers of Development and 

they feel the same way that I do. They are nervous about a confrontation, having just had a confrontation. If one changed that 

balance and said, look, we actually agree with you, I think it might 

give them some energy to address that. 

On the second issue, you can have more effect than you have on 

even the conditionalities. For instance, Congress instructed the 

American representative, the ED, to vote against cost recovery, 

which is this euphemism that the poorest kids in the world have 

to pay tuition. As a result of that, eventually the IMF and the 

World Bank gave up this requirement on cost recovery. I think that 

26

it is a delicate balance of this issue that I talked about. You don’t 

want to have excessive politicalization of the process, as it is a multilateral institution. On the other hand, there are certain areas 

where you can say, look, we think there is a global consensus on 

conditionality. 

Mr. WATT. I am focused less on the conditionalities than I am on 

the more practical, and Mr. Eizenstat seems to be having heartburn over some of the things that you said. 

Mr. EIZENSTAT. I was Deputy Secretary of the Treasury— 

Mr. WATT. So I better get him at the counter. 

Mr. EIZENSTAT. I was Deputy Secretary of the Treasury when the 

head of the IMF was being chosen at that time, and the United 

States, in effect, vetoed the first European candidate, Ciao KochWeser, who was, I think, perfectly qualified. But it is more than 

what Joe indicated about lack of confrontation; it is mutual backscratching. That is, it is not just that Europe doesn’t want to confront the Administration now because of the whole Wolfowitz thing. 

It is that if they do, then they will lose the monopoly on taking the 

IMF post, and they need the U.S. vote for that. 

So it is a mutual back-scratching between the United States and 

the European Union to keep this process going. The question is 

how to change it. I think that, you know, it is something perhaps 

to interject in the presidential campaign. It is something to get 

Congress and the European parliament to act on. It is one thing 

for the development ministers, Joe, to say that they want that, but 

when you talk about the political ministers, the finance ministers, 

the foreign ministers, and the prime ministers, they don’t want to 

give that up. So you need to build support by the parliaments, particularly, I think, the European parliament, and the United States. 

The second thing is on conditionality. Again, I saw this absolutely firsthand during the Asian financial crisis, where there were 

conditions like the cost recovery and things that were really unreasonable. But I think it is more than what the chairman called just 

process. One would be loathe to, in my estimation, to say that the 

World Bank could do its job unless you were also encouraging the 

country to open up their investment climate so that you could have 

foreign direct investment and know that you wouldn’t have your 

profits expropriated, that there was an arbitration process. You 

would be wasting money if you didn’t have an open trading environment, if you didn’t have a good macroeconomic policy and good 

monetary policy and good governance policies. Now that’s part of 

the Washington consensus. I think it was taken too far in some instances. But again, I am not prepared to say we should throw the 

baby out with the bath water, because I think those are all preconditions to economic growth and poverty alleviation, along with 

investing in public goods. 

The CHAIRMAN. Just briefly on that good macroeconomic policy is 

what, roughly, at this level? 

Mr. EIZENSTAT. Well, I think good macroeconomic policy, first of 

all, is having a transparent budget, one that’s— 

The CHAIRMAN. That is procedural, not substantive? 

Mr. EIZENSTAT. That is substantive. It means running fiscal deficits that have some rational relationship to GDP, that don’t expend 

so much that you inflate the economy and make your currency nonVerDate 0ct 09 2002 13:53 Aug 24, 2007 Jkt 037209 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 K:\DOCS\37209.TXT HFIN PsN: TERRIE
27

competitive in terms of your products. Having an exchange rate 

that allows your products to be competitive on the world market. 

And one of the reasons I am sure everybody on this panel would 

agree on the Doha Round is to open up the markets of— 

The CHAIRMAN. I agree with that. 

Mr. EIZENSTAT. I don’t consider macroeconomic— 

Mr. WATT. Even on that, there is a connotation that goes with 

opening up markets that basically allows corporate—the corporate 

community a free run that doesn’t always enure to the benefit of 

the country or the people in that country. So at some—I mean, to 

a point, I agree with you, but there are limits to that, too, unless 

you are going to put some constraints on that that make sure—I 

mean, I think what China, for example, is doing in Darfur is outrageous. You know, it is building like mad, but I don’t see any benefit that the people of Sudan are getting from it other than the corrupt leadership there. 

Mr. EIZENSTAT. Let me give, if I may, one concrete example. It 

was mentioned here briefly. One of the best things Tony Blair did 

was promote the so-called EITI, which is an Energy Industry 

Transparency Initiative, in which mineral companies and oil companies investing in poor countries have to publish what they pay 

to those governments. 

Now, I had a specific instance with BP and the BTC pipeline. 

And Azerbaijan, which has significant corruption problems, is part 

of the EITI now, and deserves great credit for doing so. And that 

is being published, what BP and the BTC consortium pay to that 

government is being published and is audited. What is not being 

done is the next step—and here again, I think Congress has a 

role—and that is while you are publishing the inputs into the 

Fund, the government is not required to publish what they do with 

it. And that is the other half of it. 

So you are certainly correct that just having foreign investment 

is not enough, but the EITI was a very powerful weapon to at least 

take a step to ensure that this investment begins to help the people, and not just the companies or the corrupt leaders. 

The CHAIRMAN. Let me just say that to Mr. Eizenstat, I think 

you are underestimating the extent to which the objections to the 

Washington consensus went beyond what you are talking about. I 

think there is a genuine consensus, it is not just a Washington consensus. I think the Washington consensus, as many of us talked 

about had a more specific, very free market ideology beyond the 

more general level you are talking about, for instance, the labor 

and other kinds of things. 

It did seem that the Washington consensus got much more specific, and to be honest, you, as a Democrat who served in the Administration of Bill Clinton, I thought that there was a point in 

which there was a real disparity, as Mr. Stiglitz suggested, or said, 

between the policies of the Clinton Administration which were 

being pursued at home, and those it was pushing abroad. 

I think politics stopped at the water’s edge, it seemed, before Bill 

Clinton liberalism. And he was Franklin Roosevelt until he hit the 

water and he became Ronald Reagan in terms of some of what got 

pushed. I think that got turned around some, but I do think we can 

differentiate. 

28

But, Mr. Beckmann or Dr. Wade, do you want to talk about that 

subject? Or we can go to Mr. Scott. 

Go ahead, Mr. Beckmann. 

Mr. BECKMANN. One thing that is good about the Bank’s governance is that there is a real recognition of the distribution of economic power in the world—where the money comes from—so that 

in the councils of the Bank, when a decision is made to do something on debt reduction for poor countries, there is a good chance 

that there is actually going to be money and power behind the decision. 

Just like the Security Council recognizes that some countries 

have a lot more power than other countries, and if there is going 

to be a decision about the direction of the United Nations, those 

powerful countries need to be part of the decision. 

In the councils of the Bank and the IMF, the countries that have 

more money, that put more money on the table, have more power. 

I thought Ambassador Eizenstat made a good point about the need 

for adjustments over time. There is no excuse for presidents of the 

World Bank who are not very well qualified; we need a qualified 

person in that position. It can’t just be an Administration official 

that they are trying to move someplace. 

But I think there is something to be said for moderation in moving toward a more democratic, egalitarian governance of the Bank. 

The way we have it now—and it is partly by having an American 

at the top of the Bank and a European at the top of the Fund—

those institutions have been able to mobilize money to do things for 

poor countries, whereas other institutions that are governed in a 

different way sometimes don’t have money or power to do anything. 

They may have more democratice processes, but they are not sufficiently ground in the political realities. 

The CHAIRMAN. Mr. Scott. 

Mr. SCOTT. Thank you very much, Mr. Chairman. First off, I 

want to extend an extra welcome to Mr. Eizenstat. We both share 

the Atlanta connection, going back to the early days when we both 

had more hair and it certainly wasn’t as white as both of ours are, 

and in our starting out with then-Congressman Andrew Young. 

And you moved on up and served President Jimmy Carter and 

President Bill Clinton, and I followed your career. 

I just want to take a moment to welcome you. It is a pleasure 

to have this opportunity to interchange with a long-time friend, 

and to all of you, certainly this has been a very, very informative 

hearing. 

Let me start by taking a look at the situation that I think presents an opening for us here with the situation involving the resignation of Mr. Wolfowitz, because I think, in the course of accountability and transparency, here lies an opportunity. 

I noticed when, I think Mr. Watt asked a question relative to 

this, you, I think—someone, I think it was you, Mr. Stiglitz; I hope 

I pronounced that right—referred to the reason we have an American at the helm is because normally you have an American at the 

helm of the World Bank and we have a European at the helm of 

the IMF, and that—but it is a little bit more than that, I think, 

in—a little in addition to that. And, in fact, when it was first started, it was because of the fact that the United States was a key 

29

guarantor of the bonds and put the World Bank in a much more 

reliable financial position. 

Now we have an opportunity. There is some discussion that it is 

not democratic to have that there and that maybe there would be 

added transparency if we chose not to have an American there for 

the first time. 

What would we lose in terms of that financial stability to move 

forward on—that having an American at the helm of the World 

Bank presents, compared to any added transparency or accountability one might achieve by not having an American at the helm? 

Anyone up here, I would like to have your comments on that. 

Would we lose anything? Gain anything? 

Mr. STIGLITZ. In financial terms, it would make absolutely no difference. The Bank has built up what might be viewed as a large 

endowment. Dr. Wade referred to that. 

It has a very conservative financial model that lies behind it, and 

it would likely continue that. So long as it continued that, the socalled ‘‘backing’’ that might come, extra backing that would come 

from having the President come from the United States, has no significant value. 

You also have to remember that much of the money that the 

World Bank gets today is raised from the markets in a real sense, 

and it is based on that endowment and a track record. 

To give you just one other example, some of the regional development banks, like CAF, which is an Andean bank, are able to borrow at very low interest rates because they are well managed. So 

as long as the Bank is well managed, then I think it will not have 

any real trouble raising money. The democratic advantages that we 

can talk about, and the ability for it to convey effectively the message that it can be trusted, will actually enhance its effectiveness. 

Mr. SCOTT. Do you think this is an opportunity we should seize 

and that it would be in the best interests of the Bank, going forward on some of these issues, that we not have an American at the 

helm? 

Mr. STIGLITZ. Very much so. I think it is in the interest of the 

Bank; I think it is also in the interest of the United States that 

the way presidents are chosen is changed. 

Mr. SCOTT. Is that the consensus? Does anyone have a different 

opinion? 

Mr. EIZENSTAT. I think it is. This was an essential feature of our 

Atlantic Council report. 

May I just add one caveat to that? I agree with everything. This 

was in our report. I think it should be based on merit without nationality. It would be good for the Bank, good for the United States, 

but—the only ‘‘but’’ is the congressional reaction. That is, you 

would need to have a leader in addition to all the other attributes 

that we mentioned, who could come up to Capitol Hill and convincingly argue when there needed to be an IDA replenishment when 

the United States needed to be goaded into paying its fair share. 

There is a question of whether Congress would receive a non-American in the same way that they would an American. 

Now, I have to say that since we are behind on a lot of our payments anyway, that may not be the most major factor. But in a serious vein, it would be important that whomever is chosen—and I 

30

do think it is on the basis of not nationality, but merit—be able to 

relate to the Congress and deal with the Congress and not just be 

Secretary General of the U.N., who has sort of a Third World agenda and is not sensitive to the major stakeholders and payers of the 

system. 

Mr. SCOTT. Thank you. 

Another line of questioning, if I may continue: Does the World 

Bank plan to implement improved strategies to reduce poverty in 

countries by aiming strategies only on boosting overall growth, as 

it is evident that this strategy may miss opportunities to reduce 

poverty? 

For example, I understand the reasoning behind focusing on sectors with growth potential, allowing for relatively quick payoffs. 

However, my question is, do these strategies impact poverty reduction in the most efficient way? 

While you are thinking about that, there is a recent report in the 

Washington Post which is entitled ‘‘The Persistently Poor,’’ and a 

report has come out where it really strikes a mixed message. If I 

may share, Mr. Chairman, just so you, as you are thinking about 

this, this is where this question comes from. It is written by Mr. 

Peter S. Goodman, and it came out late last year, in case you read 

it. 

It says, an internal report criticizes the World Bank’s efforts on 

poverty despite an intensified campaign against poverty. World 

Bank programs have failed to lift incomes in many poor countries 

over the past decade, leaving tens of millions of people suffering, 

stagnating or declining living standards, according to a report that 

was released by the Bank’s autonomous assessment arm. 

Are you familiar with that report? It says among 25— 

The CHAIRMAN. Get to the answers now, Mr. Scott. 

Mr. Beckmann, do you want to start in the middle this time? 

Mr. BECKMANN. The Bank doesn’t just support growth. The Bank 

is also heavily investing in primary education, and in improving 

health systems. 

Now, in general what they are trying to do is to promote the productivity of poor people, so this is not a Mother Teresa kind of operation. What they are trying to do, even in the social sectors, is 

to help kids get a decent education so they can be more productive, 

and in very poor countries, there really is no other option. You 

need to have growth among the poor. 

But it would be a caricature of the Bank to say that it is driven 

by a growth-only model; I don’t think that has been the case for 

a long time. 

I didn’t read the article that you are quoting, but the Bank has 

had limited success in many of the poorest countries, especially in 

Africa. There has been a clear case where the Bank had a cookiecutter liberalism approach—open markets, cut government—and 

for many African countries, that was just not— 

The CHAIRMAN. Mr. Beckmann, I assume you are talking about 

a kind of 19th century liberalism, not the way— 

Mr. BECKMANN. No. Maybe 1980’s liberalism. 

The CHAIRMAN. But in the 1980’s, most people called it conservatism. 

31

Mr. BECKMANN. That’s right. And I think it is clear that some 

of the Bank’s structural adjustment lending worked for countries 

like Turkey fairly well, but it didn’t work at all for low-income 

countries, partly because you eliminate government programs. And 

the idea was that the private sector was going to spring out of the 

closet and take care of the problems, and there was no private sector capacity to replace public programs that were being dismantled. 

A lot of the poorest countries in the world have not succeeded in 

getting onto a growth path, and the Bank has been there and has 

been unable to change that. 

On the other hand, there have been improvements in governance 

and economic productivity in some of the poorest countries in the 

would: 15 African countries have reduced undernutrition in this 

decade; and 19 African countries have had elections this decade. 

The Bank is not in the business of promoting elections, but it is 

in the business of promoting transparency and good governance. 

And so some good things are happening also among the poorest 

countries, and I think the Bank has been part of that mix, too. 

Mr. SCOTT. Let me ask you this—if I may, Mr. Chairman—on 

that point, because I wanted to get at Africa because I believe, 

when you look at many of these other countries where you have 

had some success—but in Africa there has been a stubborn problem 

there. 

To what degree is the political instability, the violent regimes—

I am reminded of scenes where even with food being dropped at an 

airport, the regimes were going to blow up the food, people coming 

in, trying to help the communities, were unacceptable. 

Sort of reminds me of that scene in the ‘‘Apocalypse Now’’—I 

don’t know if you have seen that scene where Marlon Brando says, 

well, you know I remember this time—and they came and they had 

inoculated all these children against a vaccine, and then they left 

the village, and they came back, and he said he saw a very pathetic 

sight, he saw all of these inoculated arms cut off in a heap. 

And in some places within Africa, I am wondering what role, 

what impact does the violence and the instability of the political 

situation and the dictators in the regimes have in being a hindrance to your— 

The CHAIRMAN. Dr. Wade. 

Mr. WADE. I want to be a contrarian for a moment and to say 

that the World Bank has focused too much on poverty reduction, 

specifically poverty reduction, and on the social sectors like primary education, primary healthcare, and governance agenda. 

You will see almost nothing in World Bank publications for the 

past 20 or more years on how to develop manufacturing, how to develop industry, or how to improve technology. These kinds of things 

should be central in any discussion of how to get countries onto a 

growth path. 

As you suggested, many African countries are not on growth 

paths. Any discussion of how to improve rates of growth should be 

placed at the center of that discussion—how to improve manufacturing, industry, how to upgrade technology and the like—the 

Bank is almost silent. And it is silent even on university education 

as distinct from primary schools. The Bank only deals with primary 

32

schools; it won’t touch universities. I think this is incredibly shortsighted. 

The CHAIRMAN. Thank you. And we thought there was an interesting article in the New York Times a couple of days ago, making 

just that point about African universities. 

Mr. Stiglitz and then Mr. Cleaver. 

Mr. STIGLITZ. Both agree with the sentiment that Dr. Wade has 

put forward, but also note that there was, during the time I was 

there, a recognition of that. It was the beginning of a move, but it 

was very difficult, and it was moving against the prevalent 

thought, so— 

The CHAIRMAN. Internal resistance in the Bank? 

Mr. STIGLITZ. Yes, and some from the outside. 

One of the reports of WDR that came out in 1998 was on knowledge for development. One of the points that we made was that we 

needed to move from just focusing on elementary education to focusing on secondary and universities. For a report like that, it had 

to get a consensus. 

In terms of the actual operations, there wasn’t really the kind of 

change that should have followed upon that. 

The CHAIRMAN. Mr. Cleaver. 

Mr. CLEAVER. Thank you, Mr. Chairman. I want to follow along 

with this kind of discussion. The World Bank came into existence 

in the post-World War II era to try to make sure that Europe was 

rebuilt and that many of the countries that had been devastated 

in the war were rebuilt. 

We are now in the post-9/11 world. And I know that the World 

Bank is not a political agency; it has no responsibility for dealing 

with the major political issues, at least not in the sense that we 

would traditionally view it. However, my concern is that in the 

post-9/11 world, when we look at the amount of the loans made in 

sub-Saharan Africa compared to what we are doing in other parts 

of the globe, it leads me to have some concern that poverty, just 

as it does in the United States, breeds all kinds of possibilities for 

tragedy. And my concern is that if we continue to spend the GDP 

at such a low level in sub-Saharan Africa, that we are in fact tilling 

the soil for some despot and for possible terrorism to spread. It is 

like opening a door, saying, please, you know, why don’t you make 

overtures to Osama bin Laden or whomever. 

And so, is that the kind of thinking that goes on? And if not, 

don’t you think maybe we need to think in terms of what is going 

on, or rather what is not going on, in sub-Saharan Africa with the 

World Bank? Anyone. 

Mr. EIZENSTAT. First of all, in this fiscal year, half of the IDA 

lending, about $5.5 billion, will go to Africa. So it is not an insignificant amount. 

Second, in answer to the previous question of Congressman 

Scott, you can’t have economic development and growth when you 

have violence and political instability. 

Third, I fully agree with you. And I chaired another commission 

for the Center for Global Development on failed states and U.S. national security. If you have failed states—Sudan and others, Somalia—they become a haven for terrorist groups, narcotraffickers, and 

others that directly affect our national security. So trying to invest 

33

in preventing those countries from becoming failed states is something that directly relates, in my estimation, to the issue of terrorism and may make it politically easier to try to convince Members of Congress and others to support Bank efforts in these kind 

of countries. Because I think, if they fail, they do become havens 

for the very groups that you are talking about that are a direct 

threat to the United States and their own security. 

Mr. CLEAVER. Well, $5 billion is no small amount of money; I 

agree with that. Most of us would not have that in our checking 

account. But $5 billion compared to what is being spent even in the 

Middle East means it is dwarfed. 

Mr. EIZENSTAT. Yes, sir. But if I can give you the 2005 figure, 

private debt flows to sub-Saharan Africa in 2005 were $3.8 billion; 

private equity flows in sub-Saharan Africa were $24.7 billion, 

dwarfing what the World Bank did. 

So there is a increasing amount of private-sector investment in 

sub-Saharan Africa, and what needs to be done is, the Bank needs 

to create the conditions in which those investments pay off and 

more private sector investments can be encouraged. 

So there is a lot of capital going in not just from the World Bank, 

not just from IDA, but from the private sector into sub-Saharan Africa. 

Mr. STIGLITZ. I still feel that if you look very carefully at where 

the money is going in the countries, there are countries that have 

good macroeconomic policies and good overall frameworks that are 

not getting as much private-sector investment as they need. Many 

of the countries have a shortage of funds in education, health, and 

other social sectors where the private sector isn’t going. One area 

where the lack of money has a very big, direct impact is, for instance, in those parts of Africa where there is a strong Islamic community. If we don’t provide good schools, children will go to schools 

organized by others who will not give them a good education in 

terms of modern society; they may get indoctrinated into views that 

most of us would say are probably antithetical to the ones in which 

we would like for them to be indoctrinated. 

That is an example of where there is a strong imperative for us 

to be much more supportive of funds in Africa and elsewhere in the 

developing world. 

Mr. CLEAVER. Mr. Beckmann. 

Mr. BECKMANN. More money is going to reduce poverty. More 

U.S. Government and European government money is going to poverty reduction and going to Africa than, say, in 1999. In the late 

1990’s, we were fighting every year to keep Congress from cutting 

money for Africa. It was just brutal. If there were cuts in the foreign operations budget, it came out of Africa. 

Since 1999, that trend has been reduced. Bread for the World 

keeps a list of poverty-focused development assistance programs, 

including IDA, the Bank’s concessional affiliate, but then also the 

Millennium Challenge Account and certain accounts at AID and so 

forth. The funding from that set of programs from the U.S. Government was $4 billion in 1999. It is up to $12- $13 billion for the current fiscal year. 

And the Europeans and the Japanese have also increased their 

funding for Africa and other poor parts of the world. That has hapVerDate 0ct 09 2002 13:53 Aug 24, 2007 Jkt 037209 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 K:\DOCS\37209.TXT HFIN PsN: TERRIE
34

pened partly because 9/11 made everyone aware that it is not 

smart to neglect misery in far-off places. 

We know exactly what you are saying. There needs to be further 

increases in funding. There also needs to be improvements in the 

quality of funding. Now that we have substantially more money focused on trying to reduce poverty in the world, we need to have 

substantially more attention to the institutions that are channeling 

that money, including the World Bank, and also including the 

agencies of the U.S. Government that are charged with this purpose. 

Mr. CLEAVER. Thank you. I yield back. 

The CHAIRMAN. The gentlewoman from Wisconsin has been very 

patient, but I know has a very strong interest in this area, particularly in Africa. 

Ms. MOORE. Thank you so very much, Mr. Chairman, and I 

thank the panel. I will get right to my questions. I want to start 

with Dr. Stiglitz. 

You indicated in your written testimony, you talked briefly about 

the extractive industries’ transparency initiatives. And I believe 

that the ambassador gave us an example of something that Tony 

Blair did by requiring that payments to governments be published 

as a reform that had some legs. 

And I was disappointed in your paper that you didn’t sort of 

delve into this extractive industries’ transparency initiatives, what 

we can do, as policymakers, to stop some of the offshore banking, 

the—you know, the Swiss bank accounts, the secret investments. 

Can you just share some of your ideas, and perhaps others will 

have something to say on this point as well? 

Mr. STIGLITZ. Yes. It is a good question and I spend a lot of time 

talking about that in my book, ‘‘Making Globalization Work.’’ 

Ms. MOORE. Yes. I am going to read that. 

Mr. STIGLITZ. For instance, one of the suggestions in terms of the 

Extractive Industry Transparency Initiative is very simple. It used 

to be that companies got a tax deduction for bribes; governments 

were paying effectively half of the bribe. We could use the power 

of the tax system and say, you don’t get any tax deduction if you 

don’t publish what you pay. 

You have to make payments to governments transparent. If 

American companies or those from any of the other G8 countries 

give a check to a developing country for an extractive industry and 

they don’t make it public, they should not get a tax deduction. 

That, overnight, could change things. 

Ms. MOORE. Could it just be a part of the cost of doing business, 

that you don’t get a tax deduction? The value of a tax deduction 

may just be the cost of doing business? 

I guess the point that I want you to confirm, the whole panel, 

is that part of the reason in a lot of our aid and assistance, the 

billions that we have given to some of the poorest countries in the 

world, is because the money never makes it into the mouths and 

hands, quite frankly, of the people because we are enriching the 

leadership at the top. And if they are getting paid billion-dollar 

bribes, or half-billion-dollar bribes, and if the benefit of extracting 

oil and gold and so on and gaining mineral rights forever is the loss 

of a tax deduction, they may see it as a cost of doing business. 

35

But I love the idea of some transparency, which leads me to the 

following question— 

Mr. EIZENSTAT. Can I just intervene? 

If I may, Joe was right. Before the OECD convention, which I 

helped negotiate, Germany and France, for example, allowed tax 

deductions for bribes. The World Bank itself estimates that there 

are a trillion dollars in bribes paid each year to developing countries, so it is a major problem. 

We have an Antibribery Act that I also negotiated in the Carter 

Administration which applied to U.S. companies. The OECD Convention bans the extension of bribes by all OECD countries to developing countries. Our Antibribery Act is quite well enforced; the 

OECD Convention is not as well enforced by European countries. 

There is still a lot of bribery going on by European companies in 

the developing world. So one thing is to put more pressure on those 

countries to live up to the very convention that they have signed 

on to. 

And second, as I mentioned earlier, is extending the EITI so that 

it not only captures what is publicly paid into the fund, but gets 

the governments to publish what they used those funds for. 

Mr. STIGLITZ. One more thing you allude to is the secret bank accounts. We could stop those secret bank accounts overnight. If we 

said, our banks can’t deal with other banks in territories that don’t 

conform to certain basic standards, they would shut down. In the 

Cayman Islands, this bank secrecy survives because of our tolerance. We have shut it down for terrorism; we have chosen not to 

shut it down for corruption. 

This committee could make legislation that would shut that 

down. 

Ms. MOORE. Did you hear that, Mr. Chairman? 

The CHAIRMAN. Funny you should mention that, because that is 

very much under consideration. 

Ms. MOORE. Thank you very much, Mr. Chairman. 

My next question relates to the—Dr. Wade, I think you really 

elucidated this point that the Bank, the World Bank’s market has 

changed in the last decade, and indeed other countries are going 

to China and other places for financing; that very few companies 

or corporations will participate, private investment just will not 

participate where the World Bank or the International Monetary 

Fund is not involved; and we just have been sort of asleep at the 

switch, and that—really, that China and Brazil and other places 

are now getting that business. In fact, you talked about the African 

Development Bank meeting occurring in Shanghai. 

What are you proposing that we—you know, the World Bank 

does have the IDA. Are you proposing a change in underwriting criteria? What exactly are you suggesting for—and also, perhaps, we 

are lending to middle-class countries and not lending to the poorest 

of the poor countries. 

I think there has been a healthy discussion about conditionality 

and other sorts of impediments. So what—and I am asking others 

on the panel, too—but, Dr. Wade, I was really interested in hearing 

from you first since you spent a lot of time in your written testimony talking about the change in the market. 

36

Mr. WADE. Well, on the middle countries, this is the subject of 

a lot of discussion inside the Bank at the moment, and some people 

who take the Bank’s poverty reduction plan, who take the Bank’s 

poverty reduction mandate in a very narrow and literal way say, 

the Bank should simply pull out of middle-income countries. 

But that is, I think, quite wrong, and especially when you consider that within 4 to 5 years, China will probably be a middle-income country, even though it has hundreds of millions of people 

who are poor by South Asian standards. 

The question, though, is how the Bank can be relevant in those 

countries which don’t need so much cheap finance, because they 

can get access just to finance from world capital markets. 

But they have a strong interest in getting access to knowledge, 

and the question is, can the Bank do much more by way of developing new revenue streams in fee-for-service activities in middleincome countries where the Bank asks the government of China or 

Brazil or Russia what kind of studies those governments are interested in? 

For example, studies of railway organization, let us say, that 

might be a subject that these governments would want disinterested advice, not necessarily advice from McKinsey, because 

McKinsey or some other private consulting firm is not necessarily 

disinterested because it has various kinds of tie-ups. But the Bank 

does have a reputation for being disinterested. 

And then the Bank’s question is, how it is going to charge for 

that kind of knowledge? That is a very relevant question in middleincome countries. But it does lead to the further question of how, 

if the Bank does develop in this way of charging fee-for-service for 

bringing knowledge to bear from around the world on the problems 

or the tasks of specific countries, how will it differentiate itself 

from the private consulting firms? That is a very real issue that 

the Bank has to deal with. 

Ms. MOORE. I appreciate that. I don’t want you to stray too far 

from it, because I want others to be able to answer it. Because I 

guess the ultimate question that I have is, if we are not reaching 

the poorest of the poor, with the current World Bank problems, 

with our current underwriting criteria, what can we do to create 

products that will attract investment and change the World Bank 

products so that we can lend to more needy countries than we do 

presently? 

The CHAIRMAN. I have to make this the last answer. We have—

the hearing room is going to be used at 6:30, and everybody has 

had over 10 minutes, so I don’t think we have cheated anybody. 

Let me just take these last answers. 

Mr. BECKMANN. I think what the Bank is doing is helping a lot 

of the poorest of the poor. And specifically, in Africa, I think there 

is a set of 15 or 20 countries that have really benefited from some 

trade liberalization and from more development assistance. They 

are working with the World Bank. Countries like Ghana, for example, are making progress both in terms of economic growth and for 

poor people. 

There is another set of countries in Africa. Many of them are 

plagued by violence, and where there is violence, the Bank has not 

had good instruments. One of the main initiatives that the Bank 

37

is pursuing is how can it be effectively involved in those countries, 

like the Democratic Republic of Congo, where there is violence. 

As you said, the poverty contributes to the violence and then, as 

Mr. Scott said, the violence contributes to more poverty. In those 

countries, the Bank is not doing very well. 

Chairman Frank, may I offer advice in terms of what the committee might do? 

The CHAIRMAN. Sure. I assume beyond letting you go home, 

which is what we are about to do. 

Mr. BECKMANN. I think it is a tremendous advantage that you 

have, Mr. Bachus, as the ranking member. The combination of Mr. 

Frank and Mr. Bachus is extraordinary. Global poverty reduction 

is one of the only areas where there can really be bipartisan collaboration in this Congress. 

President Bush’s record is a good record on development assistance, overall. So if this committee does something related to the 

World Bank, doing it in a bipartisan way would be good. I think 

you can encourage the Administration to send over a qualified 

nominee. I think hearings on debt relief, this committee— 

The CHAIRMAN. We have planned them, yes. 

Mr. BECKMANN. —would be great, because I think it is a big success story and we ought to know what made it work. 

You are not going to like this, maybe, but I think you ought to 

give the Bank some space. There has been a mess and they have 

to repair that mess, so I would give them a little space. 

You are going to authorize the next IDA, so you can make it 

clear that you will want to see certain improvements in the quality 

of the Bank or they are not going to get the authorization of the 

next IDA. 

I would hesitate a bit to actually pass legislation that is going 

to bind the Bank and the Treasury in new ways at a time when 

there have been some obvious mistakes made. We need to let the 

new management of the Bank try to get people working together. 

The CHAIRMAN. We will take a look at it. We have tended to 

work in a bipartisan way here in a number of things, including not 

just the World Bank, but some of the other IFIs we have worked 

with. 

Our colleagues in the Appropriations Committee, I think made 

some real improvements in transparency. And I do want to reiterate the statement I made talking with Mr. Eizenstat. There is a 

genuine consensus. I don’t know about procedural stuff, but it is 

deeply procedural; it is the basic rules of the game, and we have 

pushed towards that. Where we have held off are some things that 

I think are more ideological in the liberal/conservative sense. 

I will say this in terms of the Administration, and you mentioned 

it, I think; it is a good news/bad news story. Within the budget constraints, the Administration has been generous. But they created 

those budget constraints, and the budget constraints are a $500 billion war; and in my judgment, excessive tax cuts for very wealthy 

people, I think, do more harm than the relative improvement within that constraint to do good. But, yes, it has been bipartisan, and 

we intend to continue that. 

I will close by saying that I am going to be looking for a president, but I am generally reinforced in my view now that insisting 

38

that the next president of the Bank be an American expends a lot 

of American influence for no measurable gain. That is, we want a 

good president; we want a president who shares the values that are 

widespread in America; and we want a president who wants to do 

what America thinks is in the interest of the world. Whether or not 

he or she is an American is irrelevant. 

What I fear is that we will give up too much in terms of nationality; we will bind nationality by trading off policy. And so I am 

encouraged by what you said today, and I intend to ask some of 

my colleagues to join me in sending precisely that message to our 

colleagues. 

We want a good World Bank president. We want someone who 

will do the things we think most Americans would want that president to do, but that person doesn’t necessarily have to be an American. 

With that, I really am very appreciative. This is making a very 

serious impression on matters where we intend to act. I thank my 

colleagues for staying. And usually we have seven or eight members who stayed after the last votes, which is what we have had. 

But we now do have a staff caucus, a staff briefing, that claims the 

room, and so I thank you all very much. 

Thank you. 

[Whereupon, at 6:30 p.m., the hearing was adjourned.] 

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A P P E N D I X

May 22, 2007

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