Wolfenson in sheep’s clothing!


Jan Slakov

Dear RN list,   Oct. 27

Paul Swann, active with the London Human Rights Forum and Amnesty
International, also involved in green economics education and Y2K
preparedness action, amongst other things, just sent us the following
commentary on a speech by James Wolfenson, president of the infamous World Bank.

I think this posting is important - in reading what Wolfenson has to say and
figuring out how we would reply to him, we are forced to better articulate
what we know, what we want.

Wolfenson talks, even quite movingly, of the terrible consequences of the
economic crises occuring in many areas of the world. He then goes on to list
"pillars" the World Bank and the international community must put in place
to address these crises. (See his speech below, which I am obliged to edit
in order to fit it into this message.)

Reading his speech, I cannot help but wonder: Maybe he honestly thinks that
the current economic system, one that is based on keeping people and their
governments in debt and then getting the governments to bail out the banks
which lent the money in the first place, one that is based on wasteful use
of the earth's resources in the "First" world while those without money do
not have access to the basic requirements for life, is the best option we
have. In any case, he seems to see the economic crises associated with it as

So, the pillars he suggests putting in place amount to palliative afforts to
soften the blows of these crises on people.

As Paul says, this is simply not enough. 

Wolfenson speaks of "the new economic architecture in the aftermath of World War
II" which has "served us well".  He admits there have been problems but how
can he truly say they have served us well?! Not only that, he convienently
fails to mention the end of the Bretton Woods agreement, which has allowed
the various currency crises people have had to endure since the early 1970s
to occur. (For more on the end of the Bretton Woods agreement, see the
posting from Richard's book, GRI/I.2- "Evolution of political power: from
national kingdoms to global corporate rule, via democracy" (sent to the RN
list on Aug. 25, '98)

I doubt that Wolfenson can possibly be truly sincere in his speech. (For
instance, he speaks of the need for "emergency social assistance" but he
knows very well that "his colleague" Michel Camdesus and the IMF impose
Structural Adjustment Programs (aptly named "SAPs") on countries and that
these are very effective in getting rid of social programs of all sorts.)
BUT, many people can take in this type of rhetoric and believe that his is a
voice of moderation and common sense. We need to be able to argue with
Wolfenson and others like him if we are to convince others.

all the best, Jan
Date: Tue, 27 Oct 1998 12:43:59 +0000
To: •••@••.•••
From: Paul Swann <•••@••.•••>
Subject: Wolfensohn in sheep's clothing

~ Wolfensohn in sheep's clothing ~

The recent speech on "The Other Crisis" by James Wolfensohn, President of
the World Bank, is reminiscent of a wolf dressed up in sheep's clothing
trying to talk his dinner into climbing into the pot.

The global elite are evidently learning to speak the right language,
and Wolfensohn's fine words could hardly have been more skilfully designed
to lull the unsuspecting flock into trusting their dubious intentions.

Consider them carefully.

Wolfensohn's call for a "new approach to development partnership...led by
governments and parliaments of the countries, influenced by the civil
society of those countries" amounts to no more than cosmetic adjustment of
a system that is fundamentally flawed. As long as the people and nations of
the world are subjected to a debt-based monetary system, we will remain
enslaved to the power elite who control the system.

We, civil society, must cry "Wolf" and demand AUTHENTIC monetary reform and
a GENUINELY new global financial architecture that eradicates the parasitic
elite and their corrupt institutions. The bankers, corporations and toady
politicians must be set to work IN SERVICE TO the people and the planet,
before it's too late.

In one respect Wolfensohn is certainly right: "in a global economy, it is
the totality of change in a country that matters".

It is time to re-think the basic assumptions on which our societies are
based. Corporate globalization and neoliberal "free" market capitalism are
not working for the benefit of all people, but only for a few. The
deregulated financial market ~ the global casino ~ is not working for the
benefit of all people, but only for a few. The debt-based monetary system
is not working for the benefit of all people, but only for a few. The
mantra of economic-growth-at-all-costs is not working for the benefit of
all people, but only for a few. Neither are our so-called "democratic"
political systems working for the benefit of all people, but only for a few.

Yes, a systemic "totality of change" is called for in our nations, but not
of the kind that Wolfensohn envisages. Beyond the rhetoric and hubris, his
solutions are no more than a set of re-vamped rules for more of the same
old game:~ lining the pockets of the elite at everyone else's expense.

Wolfensohn is again right in saying:

"What we can do here and now is this: We can identify what needs to be
done. We can recognize the problems. We can clarify our objectives. We can
work to reach consensus. The problems are too big, their consequences too
important, to be guided by the pat answers of the past, or the fads or
ideologies of the day. We must make a collective commitment to join
together to build something better. "

Indeed we must. But are Wolfensohn and his ilk genuinely prepared to put
"the benefit of all people" at the head of the agenda instead of the
benefit of the few? Are they prepared to make respect for the Earth
a priority of our national and global economic policies? Not on the
evidence of the programme set out in this speech.

Clearly there are no easy answers to the complex mess that we've got
ourselves into. With a few notable exceptions, economists and other
self-styled "experts" are blind to the root causes of the looming global
financial crisis. As Wolfensohn says, "we have focused too much on the
economics, without a sufficient understanding of the social, the political,
the environmental, and the cultural aspects of society." To that list of
missing considerations may be added the psychological, the spiritual, and
the moral aspects of living in a truly civilised society.

Yes,  a "holistic framework" for a new financial architecture is needed.
And those best qualified to supply such a framework are those who have
educated  themselves  to think holistically ~ ordinary people for the most
part, men and women who have learnt to combine their intuitive sense with a
penetrating analysis of what's wrong with the world. These are the people
who should be designing the new economic and political systems, not the
tired old men in grey suits who have failed us so badly for so long.

Genuine repentance among the ranks of the de facto leadership of our global
economy is to be welcomed. But fine words are cheap and the sincerity and
intent of Wolfensohn's declaration must be demonstrated in practical action.

The first step is to acknowledge that usury, the creation of money out of
debt, and the mindset of continual growth are the root causes of the global
economic crisis.

Nothing less will suffice.

Paul Swann
London Human Rights Forum


The Other Crisis

Address to the Board of Governors


James D. Wolfensohn


The World Bank Group

Washington, D.C., October 6, 1998


This is the fourth time I stand before you as President of the World
Bank Group. At the outset I would like to express my appreciation to our
Chairman, Wolfgang Ruttenstorfer, and to my colleague and friend, Michel
Camdessus, for the partnership that we have enjoyed during the past


Mr. Chairman, I stand before you today under very different
circumstances from last year.

Twelve months ago, we were reporting global output that grew by 5.6
percent - the highest rate in twenty years. Twelve months ago, East Asia
was stumbling, but no one was predicting the degree of the fall. Twelve
months ago, South Asia, home to 35 percent of the world's poor, was
still nuclear test-free, and seemed set to enjoy future years of 6
percent growth. Perhaps more. Twelve months ago, developing countries as
a whole were on a path toward strong growth over the next decade. Twelve
months ago, there was optimism about Russia with its strong reformist

And then came a year of turmoil and travail.

Mr. Chairman, I have spoken in the past about images of hope - of people
from the slums of Brazil to the rural villages of Uganda, from the Loess
plateau in China to the hundreds of thousands of women who are finding
their dignity through microcredit. People empowered to take charge of
their destinies.

But today I have other memories. Dark, searing images of desperation,
hopelessness, and decline. Of people who once had hope, but have it no

The mother in Mindanao, pulling her child out of school, haunted by the
fear that he will never return. The family in Korea, with a mid-size
scrap metal business, made destitute through lack of credit. The father
in Jakarta, paying a money lender three times in interest what he can
make that day, falling deeper and deeper into debt. Not knowing how he
will ever work himself free. The child in Bangkok, now condemned to work
the streets, a child no longer.

Today, while we talk of financial crisis - 17 million Indonesians have
fallen back into poverty, and across the region a million children will
now not return to school.

Today, while we talk of financial crisis - an estimated 40 percent of
the Russian population now lives in poverty.

Today, while we talk of financial crisis - across the world, 1.3 billion
people live on less than $1 a day; 3 billion live on under $2 a day; 1.3
billion have no access to clean water; 3 billion have no access to
sanitation; 2 billion have no access to power.
We talk of financial crisis while in Jakarta, in Moscow, in Sub- Saharan
Africa, in the slums of India, and the barrios of Latin America, the
human pain of poverty is all around us.


Mr. Chairman, we must address this human pain. We must go beyond
financial stabilization. We must address the issues of long-term
equitable growth, on which prosperity and human progress depend. We must
focus on the institutional and structural changes needed for recovery
and sustainable development. We must focus on the social issues.


I believe that in the more than half century that has elapsed since the
creation of the new economic architecture in the aftermath of World War
II, our international economic institutions have served us well. No,
they have not solved all our problems. But we are far better off with
them than we would have been without them.

While poverty has not been eradicated, incomes have been raised. The
Green Revolution has brought food to millions who might otherwise have
starved. Some scourges, like river blindness, have been almost
eradicated, and we have made progress against many others.

We have gone for more than a half century without a major global crisis.
The system withstood large shocks, such as the huge increase in oil
prices. And in that half century the institutions have evolved with the
global economy.

But Mr. Chairman, we cannot pretend that all is well. We cannot close
our eyes to the fact that the crisis has exposed weaknesses and
vulnerabilities that we must address. We must be bold but we must also
be realistic. We will not devise a new architecture in two days, or even
two weeks. But neither can we afford a lost decade like the one that
afflicted Latin America in the aftermath of its crisis in the early
1980s. Too much is at stake, too many people's lives...

What we can do here and now is this: We can identify what needs to be
done. We can recognize the problems. We can clarify our objectives. We
can work to reach consensus. The problems are too big, their
consequences too important, to be guided by the pat answers of the past,
or the fads or ideologies of the day. We must make a collective
commitment to join together to build something better. Let me suggest a
three-pillared approach.

The first pillar must be prevention: We must understand the causes of
the crises, and work to create economic structures that make them less
frequent and less severe.

The second pillar must be response: No matter how successful we are in
the first task, there will be crises. We need to devise more effective
ways of responding to the crises, ways that entail a better sharing of
the burden, ways that do not entail such pain on workers and small
businesses, and other innocent victims.

The third pillar must be safety nets: No matter how successful we are in
devising fair and efficient responses - and it is clear that we have a
long way to go - there will be innocent victims. Unemployment rates will
rise. We must do a much better job of ensuring that these innocent
victims are protected.

Mr. Chairman, at the request of finance ministers we have been working
to increase collaboration between the Bank and the Fund. Ministers asked
us to review our division of labor and we have done that in a spirit of
true partnership.

Our roles are clearly different. The Fund's mandate covers surveillance,
exchange rate matters, balance of payments, growth-oriented
stabilization policies and their related instruments. The Bank has a
mandate for the composition and appropriateness of development programs
and priorities, including structural and sectoral policies - and
therefore, by building a sound basis for development, a responsibility
for crisis prevention.

At this moment of crisis, with private sector funds withdrawing from
emerging markets, IMF resources strained, and little direct support from
more wealthy nations, we recognize the obligation to be a
counter-cyclical lender, committed to help where it is needed. Not just
in the crisis countries but for our many clients who are excellent
performers - but who are caught short in the current squeeze for funds
in the global markets. Yes, we must help them so that they do not become
crisis countries.

Yes, we must come in quickly in crisis countries to make sure that
social, institutional, and policy reform can take immediate root and are
integral parts of the overall program - that the responses to the crisis
enhance long-term recovery.

Yes, we must come in quickly with emergency social assistance. But ours
is a different role from that of the Fund. We can be an emergency
lender, but we cannot be a liquidity lender. Given our financial
structure, and the need to stay within our prudent lending limits, there
are trade-offs that we cannot ignore.

If we are to lend more upfront, there will be less to lend for our
long-term development mission. Less for IDA, less for HIPC, as well as
less for the poor in the crisis countries. New demands made on us will
require a very careful assessment of possible needs for new resources.
Today, backed by our existing capital and resources and substantial
uncalled capital, we are in a very strong position, but as we move
forward we must be careful not to find ourselves constrained by capital.

And we must also remember that we cannot be distracted from the urgent
need to ensure that we have full funding for the poorest countries
through IDA-12 and HIPC. That must be a priority in the weeks and months


Mr. Chairman, when we look at the pace and the depth of global change
over the last twelve months, we, like all of you in this room, are
concerned about what are the lessons we should learn from these
experiences. We like all of you are asking, what can we do differently
in the future to try and avoid these shifts in the economic and
socio-political landscape? What is it that we have observed?

We see that in today's global economy countries can invest in education
and health, can put the macroeconomic fundamentals in place, can build
modern communications and infrastructure, can do all this, but, if they
do not have an effective financial system, if they do not have adequate
regulatory supervision or adequate bankruptcy laws, if they do not have
effective competition and regulatory laws, if they do not have
transparency and accounting standards, their development is endangered
and will not last.

We see that in today's global economy countries can move toward a market
economy, can privatize, can break up state monopolies, can reduce state
subsidies, but if they do not fight corruption and put in place good
governance, if they do not introduce social safety nets, if they do not
have the social and political consensus for reform, if they do not bring
their people with them, their development is endangered and will not

We see that in today's global economy, countries can attract private
capital, can build a banking and financial system, can deliver growth,
can invest in people - some of their people - but if they marginalize
the poor, if they marginalize women and indigenous minorities, if they
do not have a policy of inclusion - their development is endangered and
will not last.

We see, Mr. Chairman, that in a global economy, it is the totality of
change in a country that matters.

Development is not just about adjustment. Development is not just about
sound budgets and fiscal management. Development is not just about
education and health. Development is not just about technocratic fixes.

Development is about getting the macroeconomics right - yes; but it is
also about building the roads, empowering the people, writing the laws,
recognizing the women, eliminating the corruption, educating the girls,
building the banking systems, protecting the environment, inoculating
the children.

Development is about putting all the component parts in place - together
and in harmony.

The need for balanced development is true for East Asia and Russia. It
is true for Africa. It is true for Latin America, for the Middle East,
for the transition economies of Central and Eastern Europe and Eurasia.
It is true, Mr. Chairman, for us all.

The notion that development involves a totality of effort - a balanced
economic and social program - is not revolutionary, but the fact remains
that it is not the approach that we in the international community have
been taking.

While we have had some extraordinary success over the many years with
individual programs and projects, too often we have not related them to
the whole. Too often we have been too narrow in our conception of the
economic transformations that are required - while focusing on
macroeconomic numbers, or on major reforms like privatization, we have
ignored the basic institutional infrastructure, without which a market
economy simply cannot function. Rather than incentives for wealth
creation, there can be misplaced incentives for asset stripping.

Too often we have focused too much on the economics, without a
sufficient understanding of the social, the political, the
environmental, and the cultural aspects of society.

We have not thought adequately about the overall structure that is
required in a country to allow it to develop in an integrated fashion
into the type of economy that is chosen by its people and its
leadership. We have not thought sufficiently about the vulnerabilities -
those parts of an economy that can bring all the building blocks
tumbling down. Or about sustainability - what it takes to make social
and economic transformation last. Without that, we may build a new
international financial architecture. But it will be a house built on

Mr. Chairman, let me suggest a concept that may help us address some of
these concerns.

The IMF has an overall framework that it reviews annually with its
client countries - a framework that finance ministers - all of us - use
to evaluate the macroeconomic performance of each country.

Today, in the wake of crisis, we need a second framework, one that deals
with the progress in structural reforms necessary for long-term growth,
one that includes the human and social accounting, that deals with the
environment, that deals with the status of women, rural development,
indigenous people, progress in infrastructure, and so onŠ

And so in our discussions at the Bank, we have developed and are
experimenting with a new approach. One that is not imposed by us on our
clients but developed by them with our help. An approach that would move
us "beyond projects," to think instead much more rigorously about what
is required for sustainable development in its broadest sense.

Mr. Chairman, we need a new development framework.

What might countries look for in such a development framework?

First, the framework would outline the essentials of good governance -
transparency, voice, the free flow of information, a commitment to fight
corruption, and a well-trained, properly remunerated civil service.

Second, it would specify the regulatory and institutional fundamentals
essential to a workable market economy - a legal and tax system that
guards against caprice, secures property rights, and that ensures that
contracts are enforced, that there is effective competition and orderly
and efficient processes for resolving judicial disputes and
bankruptcies, a financial system that is modern, transparent, and
adequately supervised, with supervision free of favor, and with
internationally recognized accountancy and auditing standards for the
private sector.

Third, our framework would call for policies that foster inclusion -
education for all, especially women and girls. Health care. Social
protection for the unemployed, elderly, and people with disabilities.
Early childhood development. Mother and child clinics that will teach
health care and nurture.

Fourth, our framework would describe the public services and
infrastructure necessary for communications and transport. Rural and
trunk roads. Policies for livable cities and growing urban areas, so
that problems can be addressed with urgency - not in twenty-five years
when they become overwhelming. And alongside an urban strategy, a
program for rural development that provides not only agricultural
services, but capacity for marketing and for financing and for the
transfer of knowledge and experience.

Fifth, our framework would set forth objectives to ensure environmental
and human sustainability - so essential to the long-term success of
development and the future of our shared planet - water, energy, food
security - issues that must also be dealt with at the global level. And
we must ensure that the culture of each country is nurtured and enriched
so that development is firmly based and historically grounded. All of
these five, of course, within a supportive and effective macroeconomic
plan and open trade relations.

This may not be a comprehensive list. It will of course vary from
country to country depending on the views of government, parliamentary
assemblies, and civil society. But I would submit it gets at the

Mr. Chairman, we must learn from the past. How a framework is developed
and applied is as important as the contents of the framework.

Ownership matters. Countries and their governments must be in the
driver's seat, and, in our experience, the people must be consulted and

Participation matters - not only as a means of improving development
effectiveness as we know from our recent studies, but as the key to
long-term sustainability and to leverage.

We must never stop reminding ourselves that it is up to the government
and its people to decide what their priorities should be. We must never
stop reminding ourselves that we cannot and should not impose
development by fiat from above - or from abroad.

Mr. Chairman, hubris should not allow us to think we at the Bank or in
the donor community can be the cartographers. But we can be important

What I am proposing is that over the next couple of years we bring a new
perspective in working with interested governments in drawing up
holistic frameworks that sharpen strategic vision. We would like to find
two countries in each region of the world that we could work with to
test this idea. And we will report to you all at the end of that time.


Mr. Chairman, this year the headlines have been full of the financial
crises. This year we are asking ourselves how we can prevent the
financial crises of the future. This year we are focusing on financial
architecture, corporate restructuring, and building strong safety nets
as part of both crisis prevention and crisis resolution. This year we
are waking up to the fact that we do not have all the answers.

Let us not stop at financial analysis. Let us not stop at financial
architecture. Let us not stop at financial sector reforms.

Now is our chance to launch a global debate on the architecture - yes -
but also on the foundations of development. Now is our chance to show
that we can take a broader and more balanced view. Now is our chance to
recognize that there is a silent crisis looming on the horizon.

A crisis of world population that will add 3 billion more people to the
planet over the next twenty-five years. A crisis of global water that
will see 2 billion people suffering from chronic water shortages by
2025. A crisis of urbanization that will mean that urban populations
will treble over the next thirty years. That by the year 2020 two-thirds
of Africa's population will live in cities - cities that today have no
economic growth. A crisis of food security that will mean that over the
next thirty years food production will have to double.

A human crisis, Mr. Chairman. A human crisis from which the developed
world will not be able to insulate itself. A human crisis that will not
be resolved unless we address the fundamental issue of the essential
interdependence of the developed and the developing worlds. A human
crisis that will not be met unless we begin to take a holistic approach
both to development and to how we respond to crisis - looking at the
financial, the social, the political, the institutional, the cultural,
and the environmental aspects of society - together.

Mr. Chairman, the poor cannot wait on our deliberations. The poor cannot
wait while we debate new architecture. The poor cannot wait until we
wake up - too late - to the fact that the human crisis affects us all.

The child on the streets of Bangkok needs to go back to school. The
mother in the slums of Calcutta needs to survive through childbirth. The
father in the village in Mali needs to be able to see beyond today.

As markets tumble and the poverty numbers soar, all of us in this room
have a shared responsibility and a shared interest in promoting
prosperity in developing and emerging markets. As markets tumble and the
poverty numbers soar, all of us in this room have a shared
responsibility to put in place policies that can help these countries
work their way out of crisis.

In the end, Mr. Chairman, we succeed or we suffer together. We owe it to
our children to recognize now that their world is one world linked by
communications and trade, linked by markets, linked by finance, linked
by environment and shared resources, linked by common aspirations.

If we act now with realism and with foresight, if we show courage, if we
think globally and allocate our resources accordingly, we can give our
children a more peaceful and equitable world. One where poverty and
suffering will be reduced. Where children everywhere will have a sense
of hope.

This is not just a dream - this is our responsibility.