James Wolfensohn Leads the Fight Against Poverty
Aired November 17, 2001 - 15:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JAMES WOLFENSOHN, PRESIDENT, WORLD BANK: Someone in a town hall meeting said to me: "Well, how did you judge the success of the projects?" And I said, "by the smile on a child's face in a village."
WILLOW BAY, HOST (voice-over): James Wolfensohn, president of the World Bank, gets smiles from some people, and firebombs from others.
WOLFENSOHN: When people come at us on a moral high ground saying that we don't know anything about poverty or environment or gender issues, or we're not doing enough for AIDS or debt, I get mad because I say, "well, who's doing more?"
BAY: Fighting poverty and facing his critics head on with the money and muscle of the World Bank at his command. James Wolfensohn, today on PINNACLE.
ANNOUNCER: This is PINNACLE with Willow Bay.
BAY: Seattle, 1999. Prague, 2000. Washington, 2001. Genoa, 2001. Wherever James Wolfensohn goes these days, the president of the World Bank confronts poverty on one hand, protest on the other.
The protests had grown so loud and violent that after the World Trade Center and Pentagon attacks the World Bank annual meeting scheduled for September 28 was called off. Bank committees are meeting this weekend in Ottawa. Wolfensohn says the attacks make his job, fighting poverty, more important than ever.
WOLFENSOHN: September the 11th changed the perception of everybody that poverty, that violence, that disturbances convey themselves throughout the world without regard to whether you're living in New York or living in any part of the developing world.
BAY: The developing world to Wolfensohn means some 60 countries, which account for the majority of the planet's population.
WOLFENSOHN: The World Bank has become the institution which deals with those countries in development, the poorest countries and those that are medium poor. It accounts for about 4.8 billion people in the world out of a world of six billion people.
BAY: The World Bank and its sister group, the International Monetary Fund, were formed in 1944 to help rebuild a world ravaged by war. It was not a new idea. Rich countries lending to poor countries has driven world economic growth for hundreds of years. The U.S. developed with the help of European money, as did Latin America, Canada, and James Wolfensohn's native country, Australia.
WOLFENSOHN: Our task is to try and alleviate poverty, to try and do it in a sustainable way, to take care of the environment, and basically to make people's lives better.
BAY: For decades, the World Bank helped finance huge public works projects, like the 1977 expansion of the Suez Canal. Its work has always attracted controversy. And during his tenure, so has Wolfensohn.
When he took over in 1995, he faced opposition that said, "50 years is enough." Today, the bank and the IMF have many detractors, including increasingly violent activists who claim global economic organizations exploit the world's poor.
(on camera): Do you take the protests and criticisms personally?
WOLFENSOHN: I think in part, yes.
BAY: What recent attacks, what sorts of charges, either against you personally or the World Bank have really made you mad?
WOLFENSOHN: Well, I think when people come at us on a moral high ground, I get mad because I say, "well, who's doing more?" Who has led this campaign? When you take corruption, they blame us for corrupt practice, but who is doing more than we are, in terms of trying to deal with it? So when they diminish the record of the institution without knowing what we're doing, I guess then I get defensive and I get mad.
BAY (voice-over): The institution is a complex global organization made up of 183 member nations, called clients or shareholders. Wolfensohn supervises 10,000 employees, up to $30 billion in yearly spending, and some 1,600 projects around the world. Appointed to lead the bank by President Clinton in 1995, he defines his mission as fighting poverty by stimulating free market democracy.
It was here, on a vacation at his home along the Snake River in Wyoming in 1998 that Wolfensohn created what he calls the comprehensive development framework to help the bank do more than simply write large checks.
WOLFENSOHN: I came to recognize sitting here over Christmas holiday that development was much more than projects. That meant that you needed legal systems, judicial systems. You needed to combat corruption, you need to train government. You needed education, you needed health, you needed power, you needed utilities, you needed culture, you needed strategy for the rural areas. You needed all these things to come together, and that if you just did one bit without thinking about the others, it would very often fail, because you didn't have the sustenance from the other parts of the program. And so, I put down a rather simple framework, so I'm very proud of it.
BAY (on camera): Interesting. But has it in some way left you more vulnerable to charges that the World Bank lost its focus, it's strayed from its original mission?
WOLFENSOHN: You're exactly right. You've been reading the literature. I think there's a misconception. In fact, I know there's a misconception. Having a framework that is comprehensive is not an attempt by us to do everything. Quite the contrary. There a lot of people out there doing a lot of the same things. And one of the things we hope with this methodology is that far from the bank expanding its range, we can diminish what we're actually doing.
BAY: You took on corruption, something that had not been done actively before. Was that a politically unpopular move on your part and on the part of the bank?
WOLFENSOHN: Well, you'll be interested -- when I arrived at the bank, I was told by the General Counsel, you cannot talk about the C- word. And I said, "what is the C-word?" And he whispered to me, "corruption." And I said, "why is that?" He said: "Well, it's a political issue, and we're an organization that is not allowed to be political. So we don't talk about corruption."
But that lasted about a year, because I recognized that corruption, in addition to having some political overtones, is essentially the single worst issue, or single most difficult issue, for poor people. And it's the great inhibitor of investment, and it distorts the society. So we redefined it as an economic and social issue.
And we have since that time now been working in more than 100 countries on programs that are designed to combat corruption.
BAY: How would you rate the success of your first term?
WOLFENSOHN: Well, I think we've done well in many things. We have addressed the issue of global debt, and I would say that, institutionally, our efficiency manifestly is much better. The quality of our projects is better, and that shows through.
I think on the negative side, it needs another two, three years to get this better done.
BAY: Are you now fighting dual enemies, corruption and terrorism, side by side?
WOLFENSOHN: Well, we've always said that corruption is central in our recent approaches to this whole thing. And I've also said very much that violence and terror and crime are new features of the world in which we're operating. So we're not going to change our approach. It's just that now the reality of this problem I think all of us in the developed world understand. BAY: Will you evaluate a country based on its known links, its financial links to terrorists before you give them money, or have you already been doing that?
WOLFENSOHN: We've already been doing it in the context of economic and political stability. I think everybody will have a different eye to these problems after September the 11th.
BAY (voice-over): What hasn't changed is the staggering need of the developing world. Wolfensohn has visited more than 100 countries in the six years he's been president, often traveling to the poorest places in the world. He says even small amounts of World Bank money can make an enormous difference.
WOLFENSOHN: I was in Rio on the top of a mountain, really, of slums, and we took in water and sewage into those slums. And the women coming up to me in tears, begging me to come to their houses so they could flush a toilet. But even more than that, what really moved me was when we were meeting with the women, they were coming to show me their bills that they'd paid. And I remember the mayor of Rio said to me, this is the first time in their lives they've had a piece of paper where their name is on it and where they're recognized.
And as a consequence of that, they can now go and buy a bicycle, or they can go and get credit for something. And I became aware of the incredible power of giving self-respect to people with things that you and I accept as an everyday reality, but which simply transforms the potential of the lives of these really wonderful people.
BAY: When PINNACLE returns, how this man of wealth and privilege got the hunger to serve the world's poor.
WOLFENSOHN: Well, I wasn't always wealthy. And it's a good start to have been born without a lot of money. I remember arriving to do graduate work in this country with $300 dollars in my pocket, and a two-year course to do, and with debts. So I have some sense of poverty within -- within the scale of those of us that are privileged to grow up in developed countries. It is not the poverty of India or of Africa, but it is a sense of knowing that there's a difference between being rich and being poor.
And as a child, although my family didn't have very much, there was always this sense that you had to look after people, that it was a charitable mandate that was placed on people.
BAY: Wolfensohn was born in Australia, where his family had settled after fleeing from religious persecution and economic hard times in Europe. His childhood was short on cash, but rich in other ways.
WOLFENSOHN: Lots of love. Lots of chocolate. A little fat. And I went to good schools. I started brilliantly, and proceeded through my career to graduate high school in 123rd place out of a 135 in my class, having started, I think, in the top 10. BAY (on camera): What had gone on?
WOLFENSOHN: I'd gone too fast. I graduated high school at 15, and frankly, I wasn't up to it. I went to the university, and I failed every subject in my first year, which was not a particularly brilliant start to my university career. But I did then become a lawyer and did somewhat better. And, in fact, when I'd finished my arts and law degrees, I actually graduated reasonably sufficiently well to get into Harvard.
BAY: You got it together.
WOLFENSOHN: I got it together, but finally, very finally.
BAY: Armed with that Harvard MBA, he returned to Australia in 1963 and joined the country's first investment bank. In 1966, he was hired by Schroders Bank in London. There, he helped develop the Euro- dollar market, which eventually led to the creation of the new European currency.
WOLFENSOHN: In the banking business, it didn't matter whether you had titles or not. It was the quality of what you did. The real question was, how well could you do that and play the game, if you like, a very creative game at that moment, in terms of developing this new marketplace.
BAY: The banking business may have been equalizing, but Wolfensohn was passed over for the chairmanship of Schroders in 1976. That went to a British earl. So in 1977, Wolfensohn moved to New York, and landed at one of Wall Street's foremost firms.
WOLFENSOHN: So I came and I joined Salomon Brothers, which was the antithesis of -- of an English investment bank. Salomon Brothers was a place that was a total meritocracy. Very driven. I think one of the great firms ever at that time. And so, from getting my coffee on a silver tray in the mornings with a man in striped trousers and a black jacket, I found myself at 7:30 in the morning with eight colleagues on the management committee, with the room already filled with cigar smoke, with people screaming and yelling at each other and abusing each other.
And I just loved it. When I got there, I said to Bill Salomon that I would stay either five years or forever.
BAY: So, five years later, in 1982, Wolfensohn left Salomon and put his so-called "golden Rolodex" to work. He started his own investment bank.
WOLFENSOHN: I wanted to have the best clients. I was -- I had the belief that without stealing anybody from Salomon Brothers -- and I didn't -- I could start a firm and maybe get 10 of the top clients in the world. I don't know why I had that sense of confidence, but I did. And we started this little firm. And pretty soon, we got those 10 clients, and then we got a few more.
BAY: Wolfensohn's clients were among the biggest names in corporate America: Dupont, American Express, Daimler Benz.
(on camera): What did you at that firm, though, do for your clients who reportedly paid a quarter of a million dollars a year just for the privilege of getting you on the telephone when they needed you? What did you do for them?
WOLFENSOHN: We did two things. First of all, we got to know their businesses very well. And we did not take competitive businesses. So that if you were working with us and you were our automobile client, which happened to have been Daimler Benz, they knew that we were 100 percent for them and that we would -- we were part of them. And the second thing was that we were not looking to do deals. We must have refused a multiple of deals, or recommended against a multiple of deals.
BAY: Unusual in that business.
WOLFENSOHN: Yeah, and, in a curious way, what made us a success -- and it's horrible to say this -- was the integrity of the business. And at that time in the investment banking business, that was rare.
BAY (voice-over): His company was eventually sold to Banker's Trust for $210 million.
WOLFENSOHN: I mean, I remember breaking down in tears as I told the team that I was going to -- to the World Bank, because it was my baby. And I was -- I was ready to take something on on the broader canvas, to which I could devote the whole of my life. And I've since learned that that was a pretty good decision, because this work that I'm doing is work that I think is unmatched in terms of its possibilities.
BAY: The broader canvas and its possibilities. From balance sheets to sheet music, when PINNACLE returns.
BAY: James Wolfensohn came to the World Bank with what he considers a valuable strategic asset, his wife Elaine. They met when he was at Harvard, and she was studying nearby for a degree in French.
WOLFENSOHN: She's been my partner for 39 years now. She's still my partner in the bank.
BAY (on camera): How would you describe her as a partner?
WOLFENSOHN: As she would say, much more intelligent than I am. And did better at school. I would say she's more intelligent than I am. She's made a huge contribution. And also today, given that she's an educator and deeply involved in women's issues, it's been a great partner to have as we've gone to these 100 countries.
BAY (voice-over): Elaine also shares her husband's love of music, something they've passed on to their three grown children.
At Wolfensohn's Wyoming home last summer, we were treated to a private concert. Jim on cello and his daughter Sarah, a professional concert pianist, who had recently performed with Yo-Yo Ma.
(on camera): Did you play an instrument as a child?
WOLFENSOHN: Played badly the piano, and took up later the cello.
BAY: You took up the cello as an adult?
WOLFENSOHN: When I was 41 years old.
WOLFENSOHN: Well, I was very close to Jacqueline du Pre, who was a cellist, as you may know, one of the great cellists of this generation who died of multiple sclerosis. And the night that she was finally diagnosed, I was having dinner with them in their house. And Jackie said, "what will I do?" And I said, "you should teach." And she said: "Well, no one would study with me. I've never taken formal lessons in the way that I would need to." I said: "Jackie, everybody would study with you. I would study with you."
And at the first lesson, Jackie made me promise that on my 50th birthday I would give a concert.
BAY: That concert, in 1983, was on stage at Carnegie Hall, where James Wolfensohn served as treasurer and then chairman for 20 years.
(on camera): You just put a little group together and got up there on stage.
WOLFENSOHN: Well, there are two ways that you can put groups and play at Carnegie Hall. The old T-shirt says, how do you get to Carnegie Hall and on the back it says, "practice." But there's another way, which is to be chairman. And so I used the chairman's route.
But these are all my friends. We've now given two concerts at Carnegie, and I'm looking forward to my third.
BAY (voice-over): Wolfensohn knows the next few years will be very busy ones, as he leads the bank through a world made more complex and more dangerous by the events of September 11.
(on camera): Do you still believe that fighting poverty, as you do and as you've made a career at this point of doing, is the most effective way to combat ills like this?
WOLFENSOHN: I think personally that unless we combat poverty and inequity, you will have a background environment in which it is much more likely to have terror and crime and dissent. I don't make a direct connection between poverty and the World Trade Center. But I do believe that in the next 25 years, when two billion more people come onto the planet, and that they go to the developing world, that unless we deal with the question of poverty, then there is no doubt in my mind that you do not have the preconditions for peace.
And that peace can be disrupted by violence, by crime, by terror, and in many other ways. So I still equate the fight against poverty as being the fight for peace.
BAY: James Wolfensohn, president of the World Bank, on this edition of PINNACLE.
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