I want to thank the council for asking me to do this, because it forced me to do some things easy to put off which is reading a book you need to read, and i enjoyed reading sebastians book. In journalism, editors sometimes refer to this story is as dbi, dole that important. In the papers the world bank is right up there in the top five dbi topics. Whats sebastian has done is discovered there there is a wol character at the center of the world bank and made it quite easy to read the books. I recommend it to all of you and its not just because i happened to be sitting here. Sebastian has been a columnist since 1999 and spent 13 years on the staff of the economist in zimbabwe and london, japan and in washington. He was trained in oxford where he obviously learned a lot, but he writes in the back of the book that he also prepared for this assignment after college by working for two months as a Truck Drivers assistant in chile after which he wrote through peru, ecuador, bolivia and brazil and one spread his own name on a missing persons notice in peru. If any of you have ever been asked to moderate one of the councils on these events, you know this turned out to be the single most organized institution in washington. At the council on Foreign Relations if they ran Homeland Security we wouldnt have to worry about terrorism anymore so im instructed to tell you to turn off your cell phones but unlike most Council Meetings this one is on the record that will begin burst with about 20, 25 minutes of questions by me and he answers by sebastian and then open up for questions from those of you in the audience. As a courtesy to the speakers we ask that you not leave early and im sure there will be a penalty to be paid if you step out the door before then. Sebastian, let me start by asking you to describe what you mean when you write that jim describes the hand grenade theory of management. The hand grenade of management, when wilson came to the bank in 1995 he came out of the private sector. He had been a banker running a private bank for a long time and made his name by leaving the crisis. Now you could imagine it wasnt a kind of polite sort of place. There were morning meetings. All the partners would have coffee with each other and that they would all be pulling at their kind of team, and when wilson sent him to the bank, he sort of brought some of this file which i think is a personal style anyway. The difference is they get a bonus in the several figures. Theyve got economic phds in to say what do you know about development and there is a clash between the larger then life sort of tornado figure and its very proud in the world bank and wilson said would shake it up and it felt like a hand grenade in the middle of the building. I think what was going on in the 90s is that there was the need for some discreet things to be fixed. But in the next couple of years remember we were going through the financial fall over. The private sector prestige without an alltime high and had kind of a psychological bubble as to what people believed private sector efficiency really was so was the perception that you come to the world bank and you can import the private sector, apply it to the institutions and people do things it never did before. It doesnt work like that. They meet twice a week and no private Sector Institution can be lean and mean if it has that kind of oversight in the mandate and so forth. So, i think that is greatly exaggerated and how much the bank needed treatment and they were trying to fix something that the description of the world bank in bosnia, what struck me is that it was a model of doing the right thing at the right time and not relying on the cookbook. I wonder if you could talk about that and the contrast if you will do the world bank in iraq that needs fixing as well. The world bank was being extremely early and within days of the ceasefire being announced and even before that there were meetings where the leaders had escaped and went under the airport and climbed up the mountain where there were meetings on the reconstruction with the officials and there were these deceived leaders that were committed to acting fast when the ceasefire came. The World Bank Director for the part of the world was a peace accord and i think it would have happened if it hadnt been for her presence because every time they went to walk out they would keep them to the table here at the world bank. You make the point that this was a deliberate strategy by holbrook, you think. Thats right. At the treasury at the time, they had brought the bank in very early to get that to happen and it helped that there was not only Larry Summers had been the chief economist of the world bank and make them do things to promote u. S. Interests. When it came time to plan reconstruction, the bush treasury was there and they were doing this kind of contact in the current treasury that we couldnt gbut wecouldnt go to k until after so we have to d hade invasion first and then reconstruction. This is the kind of relationship in the treasury and the world bank that enabled the United States to use the institutions for the tools of American Foreign policy. It doesnt happen unless you know how to do it. In the book makes a point of the world bank has the two big businesses one is lending to countries that basically can borrow on their own. Brazil, india and china. They make money on that which they used to finance their operations into the other is the loans to the very poor countries, the socalled programs, some of the loans never get feedback and some people think that they are declared grants in the first place, so it is a very delicate balance and requires a good Credit Rating to borrow money to lend to china. The second requires the largest of the parliaments around the world. If this is a sustainable model is under attack . There are two sources of threats to this model. Theyve been able to lend to those countries because it had the aaa Credit Rating and it isnt trying to make a profit so it lends a small spread over the capital and that is cheaper than citigroup but the thing is the world bank has become so cautious and careful about dotting every i and crossing every t. When it comes to getting everything ranked. Its been pushed to the extent it can take years and years to get the project off the ground and at a certain point it says look, i would rather borrow from citigroup and paid more of my money but do the project twice as quickly so that is the threat on that commercial business. Business. And you see it in the number its declined the last five or seven years there was a lot of fun project lending that basically there is a threat the bank is trying to face. They are trying to be extra careful on these environmental and social issues but its not clear they can escape that. On the other side you are right they often wind up with two rounds of debt relief to take one in 1999 and now the annual meeting just finished and weve had a discussion with a thirdround of debt relief for the same. If you do that that raises questions about depriving yourself of the money you would have been paid back. Some people would say so what, it is good news that they have evolved into the emerging targets are now able to outlive its usefulness in those things. So why should we worry if the bank is forced to shrink because the markets found a way to do what it was set up to do . In good times that argument has a good sensibility. As long as they can borrow from citigroup, they can issue from the funds in europe and raise money to fund the projects to spend that money on assistance for people and if it doesnt want to do that commercially than it is not really motivated why should we give them the money when we already changed the motivation, so that is the political case. But you do get stuff like the financial crisis or brazil or russia where it is important for the western interests to be able to stabilize the countries that are falling apart and have an institution with a large Balance Sheet and a lot of capital thatt can throw into backup the bailouts and it isnt costing us anything on this commercial site of the operation. It doesnt cost taxpayers anything so why get rid of that . The second thing, youve had this institution that has been around for 50 years which is the biggest concentration of thinking and expertise and sophistication of the toughest programs that we will face from aids to what you do in institution building, to all these things. Its the biggest institution of the creation in this field. You can argue that it isnt as neat as it was before. But i see no cost and keeping it on. Poor people around the world better off for the bank and in particular are poo our poor peoe better off because the things Jim Wolfensohn did at the bank or not. Its about defending the skeptical taxpayers because the truth about the development is it is a partnership between the external actors, but owners of the world bank and the domestic politicians. They see the country like ugan uganda. It is clearly done by the policymakers and a great character in this chapter called emmanuelle who had been a larger than life brilliant technocrats but ran the financing period and he drove the progress and most of the credit. What happened to the local schools and the Central Government budget seems to be transferring money to the local schools where did the money go. They looked at the Central Government books to figure out how much they are going to each school and think about in the survey 0 had got into them because it had been the midlevel of the government. It took the world bank person to do spreadsheet and crunch numbers. It can change things but most times it is a partnership. It can be hard to come up with this. They forced the bank to look at the nongovernmental organizations as if they were the enemy and to somehow slowed them with love in the hopes that they would appreciate that in the end they had similar goals that wasnt set up of course to destroy the environment or to enrich the bondholders but to help poor people. As for the good of the people and one that we in the press created. It starts at about ten years ago as a kind of case study in what you do in this society. In 1994 we had the reality of of that and that is what happened at the meeting in madrid it descended into complete chaos and then along comes olsson said and makes it an absolute top priority to reach out to the critics to try to see what they want and give them whats reasonable. He did this and made mor it made than 100 million on wall street fight Winning People over and doing these deals and in the particular case in the Environmental Defense fund whos written a book the year before in the department that said why all this is wrong and o and none and so forth an and wind will simpson came in they brought them in and said it wanted to make an effort to listen to these critics the world bank have spent five years building and the world bank would be okay. Was it okay . Though. It was circled by protesters and again it was complete chaos. Meanwhile the projects are in the book and thats in a way that suggests they take into account the efforts towards the environment but have been greatly improved so i think that this teaches you have to sometimes be critical and you cant go on the presumption i do think that the media and congressional staffers need to treat what the ngos say with a bit of skepticism. My final question this is my favorite passage in the book and for those of you that will never read the whole thing, page 70 and 171 you describe in november of 97 the french representative on the bank is leaving and turns out to be less than enthusiastic about the leadership and you described getting but im sure was an articulate speech and i hope it was recorded on the video because i would love to see it with its original french accent and finally, he says could we think of a better and apogee then the pant pants and f infatuated doomed hero of the greek mythology who drowned himself while reflecting in the water he looked down at his colleagues i had recited a poem that left it hanging out there in the air without saying what he meant by it. What is it like to write a book about a guy that has this kind of reputation with his colleagues . I began on this project traveling around north america and. It isnt just a sort of minori minority. It was an extraordinary mix in the qualities and as i went around talking to people i would give speeches about how this is the most charming and committed person they met that cares about the fact. When i gave the manuscript to a friend at one point he couldnt figure out but the thing is, hes both. I thought that this was slightly strange that in the shadow at the cathedral there is a seminar and we worked with Jim Wolfensohn and then there were black sunglasses and everyone to put the coalition together isnt a boring guy and it was a great experience trying to figure out that resurrection while i was doing the book. Doe does anybody want to open up to questions theres a microphone goofing around and you should use it especially for cspan. These stand when you ask a question, give your name and affiliation and remember the idea is to ask questions, not to give speeches. Would anyone like to go first . You said in the beginning of the toughest jothetoughest job was h the facts and having done that, what is the next World Bank President going to do to learn about this as opposed to the functioning of Jim Wolfensohn that would guide the next president of . It remains under siege and you need these communication skills. Some didnt have those into the second thing you need is to be able to manage the publicSector Institution which is different. The third thing you want is someone i have spent time thinking about the development already to reinvent the wheel idea. These things have been around and its a big pitfall in the development happening over time. Those are the qualities that we need to look for. My big strategic advice. The term is up at the end of may next year and its essentially y look, youve got a choice on the one hand youve got the northerners getting mandates trying to make you the secretariat of the northern ambitions so the g7 would meet every year. They would say no damage to the environment. It would be the money for the software over three years but the real job is to show debate m out and focus on the borrowers. The gentleman here in the idle. You have identified it would be very difficult to go into these issues to follow up. One thing and what yo in what ys the fact that one has the passion to thi this job and cant the issue of development and this is where this comes in, a creative person occasionally loses his patience and as you know very well when you lose your patience you have to control for yourself. He has a passion and is excused for the negative aspects. And for the legacy for the next guy would be how the passion is controlled. I would say youve pretty much absorbed it better than i do. But there is a lot of truth in that which was profiled in the times. I wake up in the morning thinking about it and go to bed at night thinking about it. It is a passion has grown and get this is the biggest injustice in the world. Hes attacking and i totally agree with you that he has that enormous passion and i think it is great. He also has a temper and thinskinned and so forth and making him less effective than he could have been. Wilkinson has that enormous numbers appear and its quite big even if the positives are even bigger. Thats how i think i would think about it. The first time ive ever heard anybody use the current account. [laughter] i would like to hear more about corruption and how mr. Wolfson said yields with corruption. He has to be concerned about the favor both with the u. S. Administration in the frontline states to be concerned about the frontline states he also has to be concerned about thinking about being reappointed. How do you think that hes handled himself on that and do you have suggestions about a future World Bank President dealing with this ugly issue of corruption . Thathats a great question. It is a sort of novel how do you turn a sliver of the world into progress against poverty. It takes you in if you think about development in the big sweep of history it starts off in the 50s doing physical infrastructure and the physical capital than in the 60s and 70s and by the 90s has become social capital. Theres a speech in the fall of 96 put on the map and it definitely faded out about the officials wanting to talk about corruption in the 90s and being told by the general counsel of the bank you cant do that. It is an Economic Institution and when they came into office he said im going to talk about corruption. He survived the president i will do what i want. But the tough issue is how do you implement that. He came in in 95 and went to jakarta and 96 and came back saying this is out of control. We used to have a situation where they joked about 10 and now it is well over 10 . The banks country team were having a debate about the same issue. If they dont do something about this corruption into the expert said that this country is cutting poverty and they put out a paper for cutting poverty. Isnt corruption in the grand scale of things kind of like saying the policy isnt that great and the fact 25 is written off on this project is it better if you go to india into the whole project fails so that was the thinking. Corruption is bad but not so bad that we are going to get out of here and then of course they had to throw out the pass and primarily it didnt begin by extending the bill it couldnt be controlled because the institutions of the state were so corrupt and anytime you try to get a handle on the financial stuff, money was flying out of the bank for any kind of Monetary Policy undermined by that so it was proving to be the hyperinflation or something so serious to the prospect that basically wipes out everything else. Telling that before the fact is incredibly harder. Question over here. I wanted to ask about the culture of the bank. They complainethey complained ty is the bank bureaucratic in many ways, but because it is populated by so many third world elites it is bureaucratic in the third world way with micromanagers that are secretive, they are not open to ideas. Theres something wrong about the institution partly because it grows out. Is it your sense tha