Global Economic Views
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JIM LEHRER: The meetings of the IMF And World Bank, and accompanying protests, are about to begin in Washington. We will have full coverage over the next few days. Margaret Warner begins that coverage.
MARGARET WARNER: Last year, it was the battle in Seattle, a violent showdown between police and protesters at the World Trade Organization meeting. This week, anti-globalization demonstrators are again taking to the streets, but this time they are here in Washington. Their target: The annual spring meetings of two major players in international finance and development, the World Bank and the International Monetary Fund. The 182-member IMF monitors the world’s economy, and provides short-term economic aid to needy countries, usually demanding free-market reforms in return. The World Bank focuses on longer-term lending and development projects. Joining us now are the heads of both organizations: James Wolfensohn, president of the World Bank; and Stanley Fischer, the IMF’s acting managing director. Welcome, gentlemen.
Mr. Wolfensohn, you said yesterday you found these protests a bit demoralizing. Do you understand or sympathize with what these protesters are upset about?
JAMES WOLFENSOHN, President, The World Bank: Well, of course I understand they’re concerned about globalization and that they’re concerned about issues of equity and poverty. But the thing that I find demoralizing is that I — together with 10,000 of my colleagues — spend all our time really trying to address the issues of poverty, dealing with the country’s concern and trying to make the world a better place much as they would like. So I think there’s a lot of misunderstanding about what we’re doing, although I understand that many people are concerned about the future.
MARGARET WARNER: Mr. Fischer, I want to read you a quote from the “New York Times”, they described the protesters’ attitude – thinking that you are part of the problem. It said that “many of the protesters view the World Bank and the IMF as global loan sharks, hooking low-income nations on cheap debt and then insisting on policies such as opening their markets that actually often drive them further into poverty.” What do you say to that?
STANLEY FISCHER, Acting Managing Director, IMF; Well, the IMF does mostly emergency crisis lending, and we’re lending mostly to help stabilize economies. And that has worked around the world, it’s been successful in the Asian countries in Brazil, in Latin America. So it works, and it helps the citizens of those countries. Typically also, if there are conditions related to the structure of the economy, they’ll be included in some of our loans. And all the evidence is that opening to the global economy actually helps countries grow, helps the poor people in those countries.
MARGARET WARNER: But let me give you an example that they point to. The Asian economic crisis, in a way these countries were encouraged by the IMF to completely liberalize their financial markets, all this international investment money came in. Then when things got at all shaky, it all left and they were left prostrate, really, and then with huge loans. Do you think the IMF bears some responsibility for that kind of a situation, that some of these economies aren’t ready for perhaps full capitalism on a global scale?
STANLEY FISCHER: The IMF hasn’t encouraged immediate opening of capital accounts, and what was wrong in the Asian cases was that they had opened first to short term capital, the most dangerous form of capital, and Korea for instance had opened to long term investment, which is much more stable, much more successful. We were not involved in those countries when they opened their accounts, and I don’t think we were pushing for that particularly. We would certainly advise that that be done cautiously in any case, starting at the long end of the spectrum.
MARGARET WARNER: Mr. Wolfensohn, on a related matter, there is also a perception at least among these protesters that quite often your two organizations insist on these poor countries opening their markets, for instance there was a piece in the “Washington Post” today about Haiti being forced to open its market to say rice imports, all the subsidized American rice flows in, and their own market collapsed, or their own production collapses and there are no compensating, either industries there, nor do they have the ability to export many of their products, because many developed countries don’t accept them. I mean, do they have a point?
JAMES WOLFENSOHN: Well, I don’t think they do, Margaret. I mean, I understand what happened in Haiti, but we spend all our time in the bank trying to deal with the questions of dislocation caused by changes in the market and openings in markets. Our objective is to make sure that there’s a social underpinning, if there is a change in the market, we try and help countries to become competitive. We think that globalization, quite apart from the bank, is here to stay, and we spend all our time trying to deal with the questions of poverty and deal with these dislocations. So to suggest that we cause it is, I think, a very extreme description of what we do.
MARGARET WARNER: Give us an example of something that you do that tries to deal with these dislocations.
JAMES WOLFENSOHN: Well, for example, in countries in North Africa that are concerned about opening their markets, we will put in social safety nets for people that are put out of jobs. We will go into training programs so that people can be retrained. We will start programs to finance small and medium sized enterprise, so that people that are dislocated can start their own businesses. We try and introduce private sector to come into the countries to bring in new technology and people. And many of these countries we’re bringing in modern technology. The objective is to try and help countries advance in the world, and not to stay back in the dark ages. And so our objective is to try and ensure that there’s the training, education, the finance, the opportunity, so that these countries can compete.
MARGARET WARNER: So you’re saying– it seems that the image of the World Bank is only funding these huge development projects, that that’s no longer true, that you’ve made a change there?
JAMES WOLFENSOHN: That’s simply not true. The focus of our place is to fight, as we put it, poverty with passion. And in our meetings that we’re going to have now, the first item on the agenda is AIDS, and the second item on the agenda is poverty and development and trade. And what the demonstrators are trying to do is essentially stop us talking about those issues, which I think is very sad.
MARGARET WARNER: Mr. Fischer, the one concrete thing that the demonstrators seem to agree that they actually want you to do, as opposed to stop you from doing, is to grant really not just some dealt relief, but full dealt forgiveness for all these poor countries. They point out a lot of these countries now spend more on interest payments, lots more, than they do say on addressing the problem of AIDS or on health care. Can you do that?
STANLEY FISCHER: It takes financing to pay for debt relief, and at the moment we’re still trying to get payment for the debt relief new under way, which altogether will reduce the debts of the heavily indebted 41 of them, countries, by about two thirds. When, if those payments are made, and there are severe difficulties for some of the other development banks, then we can proceed to give a lot of debt relief. If the creditors would want to do more, then we could move ahead on that basis. But at some point one has to ask what is the best way of distributing aid if it’s available, is it on the basis of how indebted countries are? And do you, at some point, want to say that countries which borrowed have an obligation to repay something? So there are complicated issues. But the debt relief is now well under way, and considerable amounts of debt relief will be given. We’re working extremely closely together on those issues. And a number of countries have already passed the first stage of this process. I hope that in a day or two we’ll get the next country into the second stage, final stage of the process.
MARGARET WARNER: Jim Wolfensohn, where are you on this issue of debt, first of all expanding the dealt relief so it’s debt forgiveness and expanding the number of countries?
JAMES WOLFENSOHN: Well, after all, we in the fund three years ago started this whole idea of debt forgiveness because we basically felt that a number of countries had borrowed so much that they could never get out of debt, much like individuals sometimes do or companies that are going into bankruptcy. Our objective is to try and restore these countries to a certain balance so that they can retain their momentum and move forward. And so our objective is very clear. We want to try to remove the debt to a point where the countries can invest their funds in social programs, in education, in health, and we will arrange for the debt forgiveness when those countries demonstrate that that is what they want to do. And we are now working with all these countries, along with our friends in the Fund, to try and have them develop their programs. So I have no pace at which I want to do this, other than to say that let them have their programs first, let’s be satisfied, and then let’s try and bring about the debt reduction.
MARGARET WARNER: Mr. Fischer, one other major point — it seems agreement among the protesters has to do with environmental policies. What they say is that the IMF and World Bank tend to fund things that contribute, help large corporations come in and perhaps develop these countries in a way that’s not conducive environmentally. What do you say to that?
STANLEY FISCHER: Well, it’s a difficult issue for the IMF. We typically lend for general government expenditures and not for particular projects. But typically we’re lending in cooperation with our colleagues in the Bank. And they do have environmental protection programs, they’ve been very active in that regard. And we’re very supportive of what they do. In a few exceptional cases where environmental problems become very large scale and would affect the macro economic variables on which we focus, we have had agreements on improvements in environmental policy in countries, but that is basically something that the World Bank does and has been pursuing pretty vigorously, I may say.
MARGARET WARNER: And, Mr. Wolfensohn, do you see the World Bank as having a responsibility to steer these countries into -I don’t know — renewable resources, rather than fossil fuels, is that part of what you try to do or not?
JAMES WOLFENSOHN: Well, yes. We’d have a major program if we could have everybody working on solar energy, and it would be wonderful. But of course that’s not possible in many countries. And where it’s possible to have natural gas, we move towards it. But where the countries have fossil fuels, then our major objective is to make sure that those fuels are used in the most environmentally sound way. We are in fact a major force in saving the environment where people are forced to use fossil fuels. We’re also very active in trying to get trading going to enhance the Kyoto initiative. So to say that we’re not involved in the environment would be a gross misstatement.
MARGARET WARNER: Mr. Fischer, finally, I want to ask you both, why do you think we’re seeing this sort of generalized revolt against globalization? We see it aimed at the WTO, trade with China, genetically modified foods, what you two do. What do you think explains it?
STANLEY FISCHER: It’s interesting that it’s happening now. We’ve just come through a very major crisis during which there was a fear of a worldwide recession. Fortunately, that didn’t happen. The Asian crisis is largely over. There’s stability in much of the rest of the world — the world economy is growing. And it is a point at which we’ve had an opportunity to take our breath. I think what’s happening is that there are two things going on out there. There are some who are pushing for debt relief, they’ve had many good ideas and they’ve been very constructive. There are others who have a natural or a simple reaction against globalization, I think without understanding that globalization per se is as Jim says something we can’t stop — that countries have grown best by integrating into the world economy. But they see some of the downside, they see workers losing their jobs in the short run. They see some aspects they don’t like, the environmental problems that you talk about, some object on labor grounds. So they’re looking at negative aspects of globalization and instead of saying let’s deal with these negative aspects, which we are trying to do, they’re objecting to the whole thing. But it can’t be stopped, and it shouldn’t be stopped.
MARGARET WARNER: Go ahead. I just wanted to get Mr. Wolfensohn on that point also.
JAMES WOLFENSOHN: Well, I think that people are worried about the future, I think they don’t understand a lot of the big international institutions, I don’t think that they know that we’re reaching out to civil society to try and build the relationships that we have to open the doors to discussion and dialogue, and hopefully as a result of these meetings, maybe people will recognize that we are ready to talk, and we have been ready to talk, we’re very anxious to do it, and some of the mystery will go. But we are entering a new age of globalization, and I think there’s a lot of fear.
MARGARET WARNER: All right. Well, thank you Jim Wolfensohn, Stanley Fischer, thank you both very much.
JIM LEHRER: We’ll have a report on the World Bank-IMF protesters tomorrow night.