Zoellick to the Rescue ?

Zoellick to the Rescue?

Kenneth Rogoff

Will newly anointed World Bank President Robert Zoellick be able to get the organization back on its feet after the catastrophic failed presidency of Paul Wolfowitz? Although hardly a megawatt star of the Bob Rubin category, he certainly brings some positive attributes to the job.

First, as a key player in bringing China into the World Trade Organization, Zoellick is a proven internationalist in an American administration where internationalists have sometimes seemed like an endangered species. Second, he is a firm believer in the power of markets and free trade, which have clearly done far more to alleviate poverty over the past half-century than any aid program. Third, he seems to have been a consistent behind-the-scenes supporter of the Bank, whereas many of his Bush administration colleagues would be just as happy to see it shut down and its Washington headquarters turned into private condominiums and offices. So presumably he has a constructive vision for the Bank’s future.

But Zoellick is not without his weaknesses. First and foremost, his appointment extends the embarrassingly outmoded practice of always installing an American in the job. With the Bank tirelessly preaching the merits of good governance, its failure to adopt democratic principles undercuts its own legitimacy. The claim that the World Bank needs an American president to ensure that the US keeps donating money is ridiculous. The annual cost of the US contribution to the World Bank, even taking into account off-the-books loan guarantees, is relatively minor. Any number of developing countries, from China to India to Brazil , could easily step up if the US foolishly stepped down.

Zoellick’s background as a lawyer hardly makes him perfect for the job, either. The World Bank presidency is not about negotiating treaties, as Zoellick did when he was US Trade Representative. The Bank’s most important role in development today is as a “knowledge bank” that helps aggregate, distill, and disseminate best practices from around the world. In this respect, the Bank’s technical assistance to governments is very similar to what private consultants offer to companies.

Moreover, many of the World Bank president’s most important decisions involve economics in an essential way. Wrong economic decisions, such as in the 1970’s, when Robert McNamara pushed grandiose, but environmentally devastating, infrastructure projects, have haunted the Bank for decades.

The biggest question mark, though, is whether Zoellick will be able to hit the ground running and implement desperately needed reforms. Reform number one, of course, is to ensure that the next World Bank President is not an American. Rodrigo de Rato, Zoellick’s counterpart at the European-dominated International Monetary Fund, has already suggested that his successor should be chosen in a more inclusive process. The World Bank should be ashamed that its president has not yet offered a similar proposal.

Second, Zoellick should ask why the Bank spends only 2.5% of its budget on the “knowledge bank” research function that it trumpets so proudly in its external relations materials, while it spends three times that amount on maintaining its executive board.

Third, Zoellick should use his formidable negotiating skills to cajole rich countries into greatly increasing the grant component of World Bank aid. The idea that a big government-guarante ed global bank is needed to fill holes in private capital markets is laughable nowadays. True, the Bank’s poorest clients have little access to private capital markets. By and large, however, the poorest countries need grants, not loans that they still won’t be able to pay in 20 years.

As the Bank switches from loans to grants, it can use some of its massive retained earnings to endow its “knowledge bank” function and related technical advice. But all this knowledge shouldn’t be free. A lot of technical advice falls on deaf ears, with countries listening only long enough to get their hands on Bank money. Instead of merely pushing its agenda, the Bank should start charging for its technical advice on a graduated scale so that more of its engagements are client-driven.

Last but not least, the Bank needs to play a much bigger role in environmental issues and, in general, in promoting good international citizenship by both rich and poor countries. (Some of us have been proposing this for almost two decades.)

Of course, Zoellick could just attempt to fill the role symbolically and do little or nothing, as some of his predecessors have done. Or, less likely, he could embrace some megalomaniacal and over-reaching vision of government intervention, as others have tried. In any case, let’s wish him luck. The world needs the World Bank a lot more than it needs another condominium.

** Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF.

Questionsfor Robert Zoellick

Questions for Robert Zoellick

Joseph E. Stiglitz

Paul Wolfowitz’s resignation from the World Bank solved one problem, but brought another to light. When Wolfowitz’s name was first mentioned as a candidate to lead the world’s premier development bank, the idea that the architect of America ’s failure in Iraq would be so rewarded was met by incredulity. But President George W. Bush had, from the beginning of his administration, sought to undermine multilateral institutions and agreements. Wolfowitz’s nomination seemed to be part of that effort.

Should Bush, a lame duck president with little support at home and less abroad, now be allowed to appoint the next World Bank president? Bush has already demonstrated his lack of judgment. Why give him another chance?

The arguments against the “old boy” system – by which the United States appoints the head of the World Bank and Europe the head of the IMF – are especially compelling today How effective can the Bank be in promoting good governance and fighting corruption if its president is chosen in a process that demonstrates flaws in its own governance? How credible will an anti-corruption message be when delivered by an appointee of what is considered one of the most corrupt and incompetent administrations in US history?

Interestingly, as several heads of US Congressional committees have pointed out, it is in America’s interest for the Bank to be led by the most qualified person, selected in an open and transparent process, regardless of nationality, gender, or race. This requires a change in how its president is chosen, and, at Congressional hearings on the World Bank – the first in 13 years – I, like everyone who testified, called for this key reform.

Presidential appointments to senior posts in America ’s government are subject to open hearings. Regardless of whether the old boy system is preserved – but especially if it is – the Bank’s Board should likewise conduct open hearings on Bush’s nominee to succeed Wolfowitz. Here are some of the questions – with some hints at right and wrong answers – that it should ask any proposed candidate for the Bank’s presidency, including Bush’s nominee, Robert Zoellick:

Do you believe that the president of the World Bank should put the interests of developing countries first? Will you press for Europe and America to eliminate their agricultural subsidies? Will you advocate a development round that emphasizes liberalization of labor markets more than capital markets, elimination of non-tariff barriers that keep developing countries’ goods out of advanced industrial countries, and abolition of so-called “escalating tariffs,” which impede development? Will you be open to research even when that research shows that policies of the advanced industrial countries may, at least in some circumstances, not be in the interests of developing countries?

During James Wolfensohn’s presidency of the Bank, there was a change in philosophy. We encouraged research-based policies, even when that research was critical of policies being pushed by certain advanced industrial countries and by some in the Bank. When our research showed that certain policies (like agricultural subsidies) were hurting developing countries, we publicized the findings, helping to redefine the debate.

Will you support the initiative of developing countries to have a development- oriented intellectual property regime?

What separates developing countries from developed countries is not only the gap in resources, but also a gap in knowledge. The Bank should be viewed, in part, as a Knowledge Bank, and it should advocate reforms that enhance developing countries’ access to knowledge. Access to generic medicines is essential if developing countries, with their limited budgets, are to improve the health of the poor. TRIPs, the intellectual property provisions of the Uruguay round, were designed to reduce access to generic medicines – and they succeeded. But as bad as TRIPs are, the bilateral trade agreements that Bush has been pushing are worse. Any candidate claiming to represent the interests of developing countries must distance himself from these policies.

Will you work to redefine the criteria by which countries get access to funds?

Today, money goes to countries that are neither most in need nor can most effectively use it. Complying with current orthodoxies – for example, on privatization and liberalization – can earn you points on “good governance,” and thus increase aid allocations—even when they reduce true aid effectiveness.

Do you think countries that are corrupt should be cut off from funding? If so, will do you so in a consistent way? If not, how should the Bank respond? Will you support a comprehensive anti-corruption agenda, including closing down secret bank accounts?

One of the flaws of Wolfowitz’s anti-corruption agenda that expansion or continuation of aid for countries favored by the Bush administration, like Iraq or Pakistan, was pushed, regardless of how corrupt they were, while there was little tolerance elsewhere. Problems with Uzbekistan were overlooked – until it fell out of favor with the US .

Likewise, the Bush administration opposed the OECD initiative to restrict bank secrecy – until it realized that secret bank accounts help finance terrorists. Since then, it has shown that it can close secret bank accounts, but has chosen to do so only for terrorists.

Do you think the World Bank should do more to encourage countries to adopt core labor standards?

Not only has the Bank not been active in promoting these globally agreed standards, there is a concern that the Bank discourages collective bargaining and protections for workers when it talks about “flexible labor markets” and conditions that are conducive to private investment.

The old boy system of choosing the head of the World Bank must go. It has done enough damage. But if the advanced industrial countries that control the Bank refuse to stand by their principles, at least they should give a nod to greater transparency. The world should know what it is getting. Open hearings would be a step in the right direction.

** Joseph Stiglitz is a Nobel laureate in economics. His latest book is Making Globalization Work.

Copyright: Project Syndicate, 2007. http://www.project- syndicate. org/commentary/ stiglitz88

A Fair Deal on Climate Change

A Fair Deal on Climate Change

Peter Singer

The agreement on climate change reached at Heiligendamm by the G8 leaders merely sets the stage for the real debate to come: how will we divide up the diminishing capacity of the atmosphere to absorb our greenhouse gases?

The G8 leaders agreed to seek “substantial” cuts in greenhouse gas emissions and to give “serious consideration” to the goal of halving such emissions by 2050 – an outcome hailed as a triumph by German Chancellor Angela Merkel and British Prime Minister Tony Blair. Yet the agreement commits no one to any specific targets, least of all the United States , whose president, George W. Bush, will no longer be in office in 2009, when the tough decisions have to be made.

One could reasonably ask why anyone thinks such a vague agreement is any kind of advance at all. At the United Nations Conference on Environment and Development in Rio de Janeiro in 1992, 189 countries, including the US, China, India, and all the European nations, signed the UN Framework Convention on Climate Change, thereby agreeing to stabilize greenhouse gases “at a low enough level to prevent dangerous anthropogenic interference with the climate system.”

Fifteen years later, no country has done that. US per capita greenhouse gas emissions, already the highest of any major nation when Bush took office, have continued to rise. In March, a leaked Bush administration report showed that US emissions were expected to rise almost as fast over the next decade as they did during the previous decade. Now we have yet another agreement to do what these same nations said they would do 15 years ago. That’s a triumph?

If Bush or his successor wants to ensure that the next round of talks fails, that will be easy enough. In justifying his refusal to sign the Kyoto Protocol, Bush has always referred to the fact that it did not commit China and India to mandatory emission limits. Now, in response to suggestions by Bush and other G8 leaders that the larger developing nations must be part of the solution to climate change, Ma Kai, the head of China ’s National Development and Reform Commission, has said that China will not commit to any quantified emissions reduction targets. Likewise, the spokesman of India ’s foreign minister, Navtej Sarna, has said that his country would reject such mandatory restrictions.

Are China and India being unreasonable? Their leaders have consistently pointed out that our current problems are the result of the gases emitted by the industrialized nations over the past century. That is true: most of those gases are still in the atmosphere, and without them the problem would not be nearly as urgent as it now is. China and India claim the right to proceed with industrialization and development as the developed nations did, unhampered by limits on their greenhouse gas emissions.

China , India , and other developing nations, have a point – or rather, three points. First, if we apply the principle “You broke it, you fix it,” then the developed nations have to take responsibility for our “broken” atmosphere, which can no longer absorb more greenhouse gases without the world’s climate changing. Second, even if we wipe the slate clean and forget about who caused the problem, it remains true that the typical US resident is responsible for about six times more greenhouse gas emissions than the typical Chinese, and as much as 18 times more than the average Indian. Third, the richer nations are better able than less well-off nations to absorb the costs of fixing the problem without causing serious harm to their populations.

But it is also true that if China and India continue to increase their output of greenhouse gases, they will eventually undo all the good that would be achieved by deep emissions cuts in the industrialized nations. This year or next, China will overtake the US as the world’s biggest greenhouse gas emitter – on a national, rather than a per capita basis, of course. In 25 years, according to Fatih Birol, chief economist at the International Energy Agency, China’s emissions could be double those of the US , Europe , and Japan combined.

But there is a solution that is both fair and practical:

Establish the total amount of greenhouse gases that we can allow to be emitted without causing the earth’s average temperature to rise more than two degrees Celsius (3.6 degrees Fahrenheit), the point beyond which climate change could become extremely dangerous. Divide that total by the world’s population, thus calculating what each person’s share of the total is. Allocate to each country a greenhouse gas emissions quota equal to the country’s population, multiplied by the per person share. Finally, allow countries that need a higher quota to buy it from those that emit less than their quota. The fairness of giving every person on earth an equal share of the atmosphere’s capacity to absorb our greenhouse gas emissions is difficult to deny. Why should anyone have a greater entitlement than others to use the earth’s atmosphere?

But, in addition to being fair, this scheme also has practical benefits. It would give developing nations a strong incentive to accept mandatory quotas, because if they can keep their per capita emissions low, they will have excess emissions rights to sell to the industrialized nations. The rich countries will benefit, too, because they will be able to choose their preferred mix of reducing emissions and buying up emissions rights from developing nations.

** Peter Singer is Professor of Bioethics at Princeton University and Laureate Professor at the University of Melbourne. His books include How Are We to Live? and Writings on an Ethical Life.

G-8 Summit and Climate Change

G-8 Summit and Climate Change

Katherine Sierra

Two years ago, the G8 Summit in Gleneagles , Scotland promised to advance a clean development agenda and mobilize financial support for greener growth in the key emerging market economies. This year’s meeting, in Heiligendamm , Germany , must deliver on that promise.

Since Gleneagles, a critical mass of public support to act decisively on climate change has developed. Some say a tipping point has occurred. The science and the economics of climate change has come closer as a result of the overwhelming scientific evidence in the studies of the Intergovernmental Panel on Climate Change (IPCC) and Sir Nicholas Stern’s Report for the UK government on the costs of action and inaction. Around the world expert officials, the business community, concerned citizens, and responsive governments are coming together to find common solutions to a global problem that may be the single most important issue we face as a global community.

In Heiligendamm, the G-8 leaders, together with representatives of major emerging economies (Brazil, Mexico, China, India, and South Africa, who have a critical stake in energy consumption to continue to generate economic growth), will discuss a comprehensive approach encompassing a set of energy options, from energy efficiency and renewable energy, to clean coal, carbon capture and storage, and carbon sequestration. They also have a chance to advance the use of market mechanisms to do two things: mitigate climate change, and, at the same time, create incentives for expanded use of clean energy.

An important way to achieve both objectives is by expanding carbon markets. Carbon finance is an effective vehicle for channeling funds for climate-friendly investments, including to the developing world. Last year alone the size of the world carbon market tripled to over $30 billion, of which about 20 percent went to projects in the developing world. By one estimate, with a long term, predictable, and equitable post-2012 global regulatory framework for curbing greenhouse gas emissions (when the Kyoto protocol expires), carbon markets could develop exponentially and deliver financial flows to developing countries of anywhere between $20 and $120 billion dollars/year.

The funds are sorely needed. The World Bank calculations show that developing countries need an annual investment of about $165 billion through 2030 just to supply electricity to their people. Of this sum, only about half is readily identifiable. On top of this $80 billion gap, developing countries will need another $30 billion per year to reduce their greenhouse gas emissions from the power sector alone and get on a low-carbon development path, and $10-40 billion dollars more per year to adapt to the already inevitable impact of climate change .

A G8 commitment to the global carbon market will foster long-term financing beyond 2012. Such carbon finance can also tackle deforestation, which represents about 20% of the global CO2 emissions causing climate change. A forest carbon facility can reward forest conservation as a means of protecting the climate while also preserving ecosystems and generating income for poor communities in developing countries. The World Bank is keen to work with partners to experiment with such a facility for avoided deforestation.

An expanded carbon market can help pay for a transformation to a low carbon economy, but it won’t be enough. Like other new markets, it will take time to mature and reach out to places with weaker market institutions.

German Chancellor Angela Merkel has said that rich countries need to take the lead because only then will the less developed economies follow, and she is right. The United Kingdom recently announced a new £800 million Environmental Transformation Fund International Window. Japan ’s Prime Minister Shinzo Abe said his country is ready to look into the possibility of creating a new financial mechanism, with substantial funds for the relatively long- term, to help developing countries halt global warming. These are the types of climate change leadership that the world needs.

Mobilizing large scale financing for clean investments today and over the next 5-10 years is critical because this is when developing countries will essentially “lock-in” carbon emissions for the next 50 years. If we can help them get on a low carbon path, we will have taken a giant step forward in preserving and protecting our planet while enabling them to reduce poverty and offer their citizens a better future. The meeting in Heiligendamm can advance the commitments made at Gleneagles two years ago and bring the world closer to a more sustainable future.

** Katherine Sierra is Vice President for Sustainable Development, The World Bank.

Copyright: Project Syndicate, 2007. http://www.project- syndicate. org/commentary/ sierra2

Climate Change and Water Security

Climate Change and Water Security

Mikhail Gorbachev and Jean-Michel Severino

The Intergovernmental Panel on Climate Change recently released alarming data on the consequences of global warming in some of the world’s poorest regions. By 2100, one billion to three billion people worldwide are expected to suffer from water scarcity. Global warming will increase evaporation and severely reduce rainfalls – by up to 20% in the Middle East and North Africa – with the amount of water available per person possibly halved by mid-century in these regions.

This sudden scarcity of an element whose symbolic and spiritual importance matches its centrality to human life will cause stress and exacerbate conflicts worldwide. Africa , the Middle East , and Central Asia will be the first to be exposed. The repercussions, however, will be global.

Yet this bleak picture is neither an excuse for apathy nor grounds for pessimism. Conflicts may be inevitable; wars are not. Our ability to prevent “water wars” will depend on our collective capacity to anticipate tensions, and to find the technical and institutional solutions to manage emerging conflicts. The good news is that such solutions exist, and are proving their efficacy everyday.

Dams – provided they are adequately sized and designed – can contribute to human development by fighting climate change and regulating water supply. Yet in a new context of scarcity, upstream infrastructure projects on international rivers may impact water quality or availability for neighboring states, thus causing tensions.

River basin organizations such as that established for the Nile , Niger , or Senegal rivers help facilitate dialogue between states that share hydraulic resources. By developing a joint vision for the development of international waterways, these regional cooperation initiatives work towards common ownership of the resource, thereby reducing the risk that disputes over water use will escalate into violence.

Most international waterways have such frameworks for dialogue, albeit at different stages of development and levels of achievement. If we are to take climate change predictions seriously, the international community should strengthen these initiatives. Where they do not exist, they should be created in partnership with all the countries concerned. Official development assistance can create incentives to cooperate by financing data-collection, providing technical know-how, or, indeed, by conditioning loans on constructive negotiations.

Yet international water conflicts are only one side of the coin. The most violent water wars take place today within rather than among states. A dearth of water fuels ethnic strife, as communities begin to fear for their survival and seek to capture the resource. In Darfur , recurrent drought has poisoned relations between farmers and nomadic herdsmen, and the war we are helplessly witnessing today follows years of escalating conflict. Chad risks falling prey to the same cycle of violence.

It is thus urgent to satisfy populations’ most basic human needs through local development initiatives. Rural hydraulic projects, which ensure access to water for these populations over large stretches of land, can prove to be efficient conflict prevention tools. Secured grazing corridors are being established with the help of modern satellite imagery to orient nomads and their herds to appropriate areas. Such initiatives provide rare opportunities for dialogue and collaboration between rival communities. The key is to anticipate the need for action before tensions escalate to the point of no return.

Water consumption also must be addressed. Agriculture accounts for more than 70% of water use in the world. Agronomical research and technical innovations are crucial to maximizing water efficiency in this sector, and they must be taken much further. But addressing scarcity will inevitably imply revising agricultural practices and policies worldwide to ensure their sustainability.

The development challenge no longer solely consists in bringing agricultural water to deprived areas. As the dramatic shrinkage of the Aral Sea , Lake Chad , and the Dead Sea illustrate, it now requires preserving scarce natural resources and ensuring their equitable distribution among conflicting needs. Responsible use will require adequate economic incentives. In West Africa or the Middle East , Central Asia or India , this, too, can contribute to abating clashes over water.

Given the unprecedented scale of the threat, business as usual is not an option. The Cold War came to a peaceful end thanks to realism, foresight, and strength of will. These three qualities should be put to work if our planet is to be spared major water wars. This global challenge also demands innovation in global governance, which is why we support the creation of a UN Environment Agency, endowed with the legal and financial resources needed to tackle the issues at hand.

Humanity must begin to resolve this water dilemma. Waiting is not part of the solution.

** Mikhail Gorbachev is Chairman of the Board of Green Cross International; Jean-Michel Severino is CEO of the French Development Agency.

Copyright: Project Syndicate, 2007. http://www.project- syndicate. org/commentary/ gorbachev4