The Amazon

An informal letter I sent to my Executive Director colleagues at the World Bank in 2004

Dear Friends and Colleagues

Today we approved a US$505 million Programmatic Reform Loan for Environmental Sustainability to Brazil. Frankly, how could it be otherwise, when in fact we should be on our knees thanking a country like Brazil that with so many other problems commits to repaying 100% of principal plus interest of an environmental-sustainability loan that will benefit the whole world and all of us.

Honestly, I do believe the World Bank should occupy a stronger leadership in these matters from the very beginning, advocating for the cooperation of the rest of the world. If silly windmill projects can have access to carbon credits, the Brazilian environmental program to help stop deforestation should too.

For instance, if 20% of a loan like this were to be repaid by some international-support mechanism, this would not only motivate the Brazilian government to sell environmental protection locally, but it would also be a clear sign that in these matters, Brazil does not stand alone. Of course any external assistance would have to come with the clear understanding that it does not impose additional conditions on the country, as this is the best and perhaps only way to guarantee true sustainability and ownership of such programs.

This morning we had a two-hour discussion about the Development Committee agenda. Frankly, however, the issue of how the world can help in crucial global matters, as in the case of the Amazon—where the need of avoiding the very negative externalities of large deforestation have to compete with so many other urgent local needs, as well as with the rising opportunity costs of not exploiting the forests—should be a foremost issue. If it already is there—for instance hidden in a global taxation initiative—I very much welcome it but, if not, we should strive to put it there.

Last year at least 25,000 hectares were deforested in the Amazon. At a low carbon value of US$20 per hectare/year, this would indicate a value of about US$50 million a year if the program were successful at stopping deforestation. Add ten years of stopped deforestation, and the value of this would be—in approximate Kyoto terms—about US$500 million a year for the rest of the world. If this is so, how come we can spend so much time and money on expensive initiatives such as the Extractive Industry Review, and not come up with something more reasonable for the Amazon, than to have the Brazilians pay for it, 100%?

Per

Published in Voice and Noise, BookSurge 2006 and there is also an article that touches upon the same theme and that I published in Spanish in Venezuela early 2004 

PS. We need to stop the Amazon from smoking… now!

A humble suggestion to the Gates/Buffett Altruism Dream Team

William Easterly offered his advice to what he calls “the new Bill and Melinda Gates/Warren Buffett Axis of Altruism” with his “4 Ways To Spend $60 Billion Wisely” Washington Post, July 4.

Three of Easterly’s suggestions, number 2. It's not about the money, 3. Beware of technological quick fixes and 4. Don't believe your own press, sounded extremely sensible to me, but, on number 1. The business world and the developing world are worlds apart, I choked, since given the track record of Bill Gates and Warren Buffett I had imagined the potential good they could do if, with that kind of financial resources, they tried to help some poor developing countries to break out from their aid dependency, by teaching them a little bit about what it takes doing business. Gates/Buffett should know! And learning to do business by doing business is an as-good-as-it-gets- approach to sustainability.

I am not too experienced in this aid-business, but having recently been one of those rare Executive Directors of the World Bank who got there with only a private sector background, I know exactly that the following is what I would tell team Gates/Buffet to do:

Take at least half of the money and set up an organization that copycats the International Finance Corporation (IFC), which is the entity the World Bank Group uses to promote sustainable private sector investment in developing countries, helping to reduce poverty and improving people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses.

Such an organization, with such Directors as Gates/Buffett could have a tremendous and sustainable impact on the poor developing countries helping them for instance to put up schools for certified bilingual nurses; construe retirement home for foreign senior citizens; do environment projects designed to compensate, against cash payments, for the developed world’s many environmental sins; and exploit all those great new opportunities that are out there to be taken, the moment poor countries learn not to focus exclusively on agriculture and textiles.

But besides helping the poor countries directly, hopefully in a self sustainable way too, they would also do so indirectly by putting some competitive pressure on the rest of all the development actors and that are currently living sort of cozily in quite uncontested markets.

So Team Gates/Buffett, why don’t you follow that old advice of doing what you’re good at, pro-bono (not that Bono) instead of making a too a drastic career change that will just risk wasting your talents. By the way, if the would need a manager to start it up? Well Peter Woicke, the former managing director of IFC who had to retire because of age, at an unseemly young age, might be available to help out, the first steps.

Distinctively Alike

We so frequently hear about the importance of finding ones identity that sometimes we forget that our human reality is also to share so many identities and so that even though we should feel identified we also need to fight against being miniaturized and put into little boxes as is preached for better than none by Amartya Sen the Nobel Price in Economics who also a professor in philosophy, might also line up for a Nobel Peace Price.

Sen, in his most recent book Identity and Violence attacks vehemently those who seed divisions fomenting bad identities, quite frequently with bad intentions. From his own memories as a child in the India of the 40’s Sen remembers “the speed with which the broad human beings of January were suddenly transformed into the ruthless Hindus and fierce Muslims of July . . . hundreds of thousands perished at the hands of people who, led by the commanders of carnage, killed others on behalf of their ‘own people’”. Sen concludes that “Violence is fomented by the imposition of singular and belligerent identities on gullible people, championed by proficient artisans of terror”.

Unfortunately, Sen does not face difficulties finding more recent examples and Rwanda, Yugoslavia and even the prisons of Abu Graib are all places where terror find its origin in a “you know, they are so different from us”. Of course from Sen’s book to our Venezuelan reality of "pro chavistas and not chavistas”, those divisive and senseless identities that we did not even dream of less than a decade ago, there is too little distance for us not to feel deeply anguished.

Friends, let us at all times discredit those who try to instigate us buying into an identity that only looks to divide and let us instead search for with run-amok-humanity all those identities that unites us, like Venezuelan, fathers, mothers, children and our taste for arepas.

Friends, let us not allow anyone to divide us, in us and them, because as humans, in each one of us there is so much of them, and in each one of them there is so very much of us, and so that, at the moment of truth, we are all in fact distinctively alike. If this sound like a sure recipe for a collective multiple personality disorder, so be it, the mental health of our Venezuela depends on it.

Translated from El Universal, Caracas, June 1, 2006

PS. Social media, which allows polarization and redistribution profiteers to send out their hate and envy messages at zero marginal cost, has become social harmony’s worst enemy.

Other posts in which I started to fight odious polarization profiteers

Red and blue, or, red or blue

Communications in a polarized world

On faith-based organizations as reality checks

In the company of many fellow students from many developing countries, we—all participants of a seminar on international labor standards and global jobs organized by the World Bank Institute—went to visit an impressive state-of-the-art One Stop Career Center, created in order to find jobs for the unemployed.

During the presentation, we heard the official in charge tell us that the results achieved there came from a joint effort, a full partnership, among civil servants, like himself, the private sector, and faith-based organizations. I understood the role of the agency as coordinators and suppliers of information; the role of private enterprise as suppliers of jobs; but I could not make head or tails about the role of faith-based organizations. So I asked. The answer left many of us speechless.

In more or less these words, the director told us. “Yes, we the civil servants do organize all the activities intended to match an unemployed person with any of the opportunities that, yes, private enterprise does indeed provide, but all our efforts would come to naught, were it not for the members of faith-based organizations, who go out there on the streets and into homes and find the unemployed, wake them up, feed them, comb them, stimulate them to come, and, if there are jobs reasonably suited for them, try to make sure they take them, and that they keep them.”

I believe most of us thought that although in our countries this responsibility was usually the role of the social workers, this might very well be one essential ingredient we were all missing. After all, we so frequently could see our public employment agency’s offices empty; even though there were good working agreements between the public and the private sector; even when there were thousands of social workers; even when there were millions of unemployed.

Agreed, but what about the private employment agencies? Yes, they are great . . . as long as the unemployed wakes up, has breakfast, takes a bath, combs his or her hair, and pursues with dedication a job, of course with the intention of keeping it. And so welcome to the real reality, friends. Sometimes reality itself could really do with some faith too.

I wrote this many months after the visit when I recently read about an organization that was expelled from what seemed to be quite useful work at a prison—just because it was faith-based. The reason for it has to do with the Constitution of the USA, the first Amendment, something that I as a foreigner know very little about. Nonetheless I felt it was a shame that what only seemed to be an excessive faith in a no-faith principle could lead people to refuse good help, so unnecessarily.

The patriotism of foreign owned ports

As an outside observer I followed the recent debate in the USA and here are my facts and my conclusion.

Fact 1: A port is a national security asset that cannot really be shipped away.

Fact 2: Probably, as usual, the owner of the port is the last to know about what is happening. At least check the management.

Fact 3: The real security controls are in the hands of government, coastguards and workers.

Fact 4: If something happened in a port and the management company was American there would most probably be no major consequences but, if the management company belonged to UAE, then all hell would break loose and they could easily lose all their investment. Therefore, because of how real life economic incentives are lined up, perhaps foreign owners have a larger interest in the security of the ports than the locals.

Fact 5: Any money not invested in the ownership of a port is money available for investment in other things that from a national security angle could be much, much worse, like paying off with much less money those real traitors that always have a price.

Fact 6: Also a real security issue with a port is that it operates efficiently, in economic terms.

CONCLUSION: It is always sad to see whenever and wherever patriotism stands in the way of good and effective patriotism.

The true nature of remittances

Mr. Chairman, I see references over and over again to the remittances of foreign workers in developed countries back to their not-so-developed homelands and so I feel once again compelled to remind my colleagues about the true nature of these flows. The remittances come from very private earnings.

Picture yourself working in a foreign country for less than minimum wages, alone, perhaps sleeping in lousy quarters, not understanding all that they say to you, and still you take a substantial part of your earnings and send them home. That’s what these remittances are all about. They are quite close to being like sacred religious donations.

Please do not confuse these flows with other financial flows. Do not even think of taxing them or assisting third parties to lay their hands on them. Be extremely careful. Do I exaggerate? I hope so but I have already read in World Bank publications about the securitizing these flows! Come on!

My 3 bullets for justice in prisons

• In too many countries around the world when judges sentence people to prisons, they are in fact sentencing them to another Auschwitz in terms of the absolute disrespect those places show for the most basic human rights, and worse the judges cannot even start to claim they didn’t know. When will the International Criminal Court in The Hague start to investigate these crimes against humanity?


• Justice is something very difficult to understand with precision, since it is situated along a continuum that becomes finite only when it reaches Divine Justice. On the other hand, injustices are much easier to identify and, in our countries, prisons themselves represent one of the greatest injustices. In terms of the use of scarce resources, as an economist I am convinced that programs of Judicial Reforms would be better served by improving prisons than by investing in Supreme Court buildings.


• The world needs to adhere to a minimum set of global good-prison practices and allow for ISO 9000-type quality certifications of its prisons and jails.

Some bullets on immigration

• In today’s globalized world I find it sad to hear so many very local Americans believing that when they ship one of the criminal mara gang members over the border, to someone much less resourceful, they have gotten rid of their problem.
  
  
• Would it not be more transparent and effective, instead of going on as if nothing has happened, to bite the bullet and accept that an American Union between North and Central America already exists, de-facto, and issue a common passport for all the citizens of the enlarged AU.
  
  
• Having a real AU would make it possible for many of those over 11 million currently illegal immigrants to be freed from their also de-facto mother of all jails, and go home even on a temporary basis, since they now permanently do not dare to leave, just because they do not know whether they can later return.
  
  
• Doing so would also help the USA to realize that if it had spent an Iraq-war sized budget assisting Central America, as EU did with Spain and others, the whole immigration debate could have been a very moot issue, with exception perhaps for all the aging baby boomers moving south to find care and services.
  
  
• Sometimes, when I see how all the Central Americans toil away in the USA and help their families back home, I just ask myself whether this is not just part of the process whereby the USA manages to remain strong, renewing its working, social and family ethics.
  
  
• How can you think of building a Maginot line, if it is not in the Bering Strait and the Panama Canal?

The ethics of solving the shortage of caretakers

An older population, many of whom will experience longer periods of chronic illness and dependency before dying will require a growing number of caretakers. If there are enough caretakers, the issue will be to find the resources to compensate them. However, if there are not enough trained caretakers, no financial resources would suffice, and you have to find practical solutions.

The practical solutions available for solving the shortage of caretakers in developed countries are the following four:

1. Increase their productivity, but unless you wish to run the risk of being dehumanized on a Charlie Chaplin Modern Times assembly line cared for by robots… there might be a limit to how much this can help.

2. Move the careneeders to another place (if there are caretakers available anywhere else), and this you should do as early as possible if at an older age you do not appreciate finding yourself in strange surroundings as much as you did when younger.

3. Import caretakers, and this you should do as early as possible if when older you do not appreciate finding yourself in the company of strangers as much as you did when younger.

4. Give incentives for having more children and grandchildren—which is not such a crazy idea when you start considering how much society is, one way or another, currently rewarding people for not having children. (Talk about externalities!)

The Presidents Council of Bioethics www.bioethics.gov (USA) published in September 2005 its report titled Taking Care. It makes all types of thoughtful recommendations about the issue of Ethical Caregiving in Our Aging Society. As much I appreciate its effort, I do not think that the report spells out sufficiently the need for much more forceful and immediate work on achieving practical solutions. If those solutions are not found, the frontiers of what is currently considered ethical caretaking will just have to move to take up for the slack. No matter how horrendous it sounds, euthanasia and other flexibilities needed to bridge intergenerational conflicts might then turn out to be thought of as the only ethical solutions to the problems. In this respect, the most clear and real unethical behavior today is that of not anticipating and providing timely solutions.

Extract from my Voice and Noise

Red and blue, or, red or blue?

On the radio, C-Span recounted details about “Intelligent design,” which according to its defenders is a valid scientific alternative to the evolution theories of Darwin. I could not resist post-scripting the following to my American friends.

Unity is a very precious thing for a country (I should know as a Venezuelan), and there are some issues better left alone. This is clearly one. Pitting “intelligent design” against “evolution theories” can never lead to anything good, and you surely must all be aware that you will never ever reach something close to a mutually satisfactory conclusion.

As a Christian, I know we are challenged by a lot of apparent contradictions in our faith but, as a Christian, I also believe that we are supposed to find ways to make peace with those demons of contradiction, so as not to let the devil triumph. Friends, how can I put this warning any clearer to you? Well, if we were still in the “good old days” of the Cold War, I could have advanced the thesis that the very bad Communists had seeded this destructive and divisive debate in the heart of your heartland.

That said, I cannot refrain from mentioning that, if you absolutely have to, I would prefer the term “Divine Design,” since “Intelligent Design” sounds to me like opening the door to an equally unnecessary debate about more mundane issues such as quality controls.

I switched channels and I heard Faith Hill singing “Is everything A-OK in the good ole USA?”

The above is from my Voice and Noise of 2006

PS. No Faith Hill, sadly, purple/violet is gone, USA is more red or blue than ever

PS: A speech at the World Bank, May 2004, on "Communications in a polarized world"

PS. Social media, which allows polarization and redistribution profiteers to send out their hate and envy messages at zero marginal cost, has become social harmony’s worst enemy.

PS. Distinctively alike

PS. One prime reason for my criticism of regulators risk weighted bank capital requirements not gaining much traction, is that in these times of extreme polarization it's hard to make it a red against blue issue, and violet is so out of fashion.

PS. A tweet January 17, 2021: "Will America end up with red or blue hotels, red or blue grocery stores, red or blue schools, red or blue universities, red or blue social media, red or blue tv-channels, red or blue newspapers, red or blue states, red or blue counties, red or blue taxes?"

On The First Blahw of Petropolitics

I normally enjoy reading Thomas L. Friedman’s articles and I envy the quality of his pen but frankly, his recent “The First Law of Petropolitics”, Foreign Policy, May/June 2006 reads like what we in Venezuela refer to as “discovering the tepid water”, discovering common knowledge, although, in fact, if he really feels that he must advice his own government “that the price of crude should now be a daily preoccupation of the U.S. secretary of state, not just the treasury secretary” then I can only conclude that the USA has a much more serious problem than oil. Of course to place huge oil income directly into the pockets of the politicians in countries with weak institutions, will distort their minds and make them act like bullies, what’s new?

Friedman also thinks he makes an important point concluding in reference to consumer countries such as the USA that “we can affect the global price of oil by altering the amounts and types of energy we consume” which is of course also very correct. But, where he goes absolutely wrong, and in his bio we see no reference to studies in economy, is when he says “we cannot affect the supply of oil in any country”. Of course you can! That day consumer countries would be willing to guarantee a decent price for oil over a long period, well that day producers would immediately produce more but, while what the consuming nations really seem to be looking for is oil at the $5 per barrel predicted by the prestigious The Economist as late as in March 1999, then you can obviously only expect to be creating the conditions for oil at over $100. Want to help? Then ask your treasury secretary to offer good long term prices for oil, subject that most of the revenues are distributed directly to the citizens of the producing country.

By the way, and back to the demand, what is currently on the board for fighting USA’s oil addiction seem just like nicotine patches and chewing gums for a non meant new-year promise, and will only serve to guarantee that the modern day successors of Mark Twain will also be able to argue that “it is easy to quit, as they have done it a thousand times”. Instead, $7 per gallon, that should indeed do it!

Levying a new federal consumption tax on gas that would increase its price to about the level at which it has been in Europe, would reduce demand for imported oil, provide the government with about $300 billions in taxes to balance the accounts and benefit the environment. Yes, it would destroy many jobs, but it also would create new ones. Better to bite the bullet now before the current economic imbalances erode confidence in the dollar, and anyhow take the price to $7 but then, with no gain to pay for the pain. That, of course, would require leadership, which is even scarcer than oil.

oil addiction Mark Twain

Thomas Friedman leadership scarcity

Fair prices!

And while waiting in the line I see a “Fair Trade Certified” coffee that on its label promises that its purchase will improve the lives of coffee farmers by insuring they receive a guaranteed “fair price for their harvest”.

I could not resist such an enticement and I bought a cup of it. It was great, and like any truly good coffee it made my mind wander. What does a fair price mean? That the coffee grower can afford to send his kids to school, afford good decent healthcare, and buy a car? Or that his kids will not go to bed starving. I hope he gets at least the last.

Or does fair in this context mean that he is getting prices that are fairly similar to those quoted for coffee on the commodities exchanges without risking being taken to the cleaners by some savvy distributors? Who knows? I finish up my coffee with a lingering suspicion that perhaps a fair price might still not be enough.

Would it not be better to certify “unfair prices” or, in perhaps more marketing digestible terms “fair price plus 100%”? Whatever, at the end of the day, if I were a farmer, I know that I would much rather get European farm prices than fair prices.

Justice begins with having just prisons

They are sending them to another Auschwitz.

In too many countries around the world when judges sentence people to prisons, they are in fact sentencing them to another Auschwitz in terms of the absolute disrespect those places show for the most basic human rights, and worse the judges cannot even start to claim they didn’t know. When will the International Criminal Court in The Hague start to investigate these crimes against humanity? Also, many ongoing judicial-reform processes would do well to reflect upon the fact that civilized prison systems do more for justice than majestic Supreme Court buildings.

Forget justice and fight the injustices

Justice is something very difficult to understand with precision, since it is situated along a continuum that becomes finite only when it reaches Divine Justice. On the other hand, injustices are much easier to identify and, in our countries, prisons themselves represent one of the greatest injustices. In terms of the use of scarce resources, as an economist I am convinced that programs of Judicial Reforms would be much better served by improving prisons than by investing in Supreme Courts.

We need minimum standards

The world needs to adhere to some absolutely minimum set of global good prison practices and allow all prisons to be subjected to an ISO 9000-type quality certification.

To write or not to write … by hand

My father always thought good handwriting to be one of the foremost proofs of a good education and he was most certainly right, in his own time and way. Unfortunately, nowadays, you do not have that many opportunities to show off your good education by handwriting. Every year that goes by, the less I write and the more cramps I get in my arm when I try. 

As an economist, concerned about input/output productivity, I have to question whether there still is a valid reason for including learning to write by hand in the general school curricula. Just think of the number of hours you put into that effort and then calculate the estimated number of letters you are expected to handwrite in the future where even your signature is perhaps about to be supplanted by a scanned image of your right eye pupil. 

“Dear God, another economist gone mad believing life is just about efficiency!” I can hear the purist cry out. No, friends, I am among the first to acknowledge a real human need for inefficiencies but perhaps even from this perspective, we should be able to find more enjoyable and useful inefficiencies than writing—and also with much less potential for creating conflicts with our perfectionist fathers.

Many write-defenders will put forward the argument that it promotes coordination of mind and muscle. However, if this were the whole purpose of the exercise and if we look at what seems to be future needs for coordination, derived from the many hour children invest playing handheld games, then I would argue that what we have to do away with is single-hand writing. Forget about right-handed or left-handed, let Darwin work, and have children learn to write with both their hands.

“But writing helps you to understand the language!” Nonsense! That you do by reading, listening, speaking, and nowadays by typing. If you really must cling to writing because of contractual clauses carefully crafted by your writing teacher’s association, then, at a minimum, you should convince them to use those sessions to teach writing in Chinese. 

Want your children truly to stand out and be able to master future technologies with the same flair as Cirque du Soleil acrobats? Let them then practice to write with both hands in Chinese and Arabic, simultaneously, while humming Bob Dylan’s “The Times They Are A-Changin'.” That should do it!

But my purpose is not to eliminate writing as an art form but to recapture it as a true art form. You know how much I worry about how the world seems incapable of creating new good-paying jobs. Well, limiting the teaching of writing now allows us to visualize in a couple of years the resurrection of the profession of writing clerks. May I offer you my services then?

What on earth has this to do with the World Bank? If you can’t figure it out, you should not be in the business of development!

A quite interesting spin on this same issue is made by Willam Easterly in his book The Elusive Quest for Growth, since when he argues that “the productivity gains of the computer are slow to be realized . . . because there are still too many traditional people out there with ink and paper,” he is actually making the point that perhaps we should prohibit handwriting as such, so that the world can move forward. [Jim, my editor: “Plato suggested—I suspect jokingly—that the invention of writing was a bad thing that ruined human powers of memory.”] 

In the World Band Group's cafeteria, we read that by using its napkins made with 100%-recycled paper, the WBG Food Services was proudly saving 268 trees annually, 110,000 gallons of water, 47 cubic yards of landfill space, 65,000 Kwh of electricity, and 945 pounds of greenhouse gas emissions. As the World Bank board’s 100% paper-intensive proceedings alone might consume several times these “savings,” not being able to write by hand could presumably also have some favorable environmental implications.

Extracted from my 2006 "Voice  and Noise"

Is inflation really measuring inflation?

Sir, over the years, the Central Banks have grown a lot more independent, which is good, as long as it does not diminish their accountability and allow them to focus blindly on goals of their own choosing, monitor the results, and live forever after happy in a big club of mutual admirers.

Inflation is the number one of those monsters that central bankers proudly show off as having been tamed but sometimes we must have our lingering doubts about whether it really is so. In an economy where whatever few savings we can set aside buy fewer and fewer assets like houses, it is sometimes hard to accept that there is no inflation, no matter how much central bankers tells us so. 

As inflation is just the result of the formula, or the basket, or the sampling techniques that we use for measuring it and is therefore a truly incestuous economic concept, there might be very good reasons for revisiting the whole issue of what, how, and why we measure it, even if this means some new hard work load for our overburdened central bankers. With the world going through major changes, inflation, as we think we know it, might very well have degenerated into something quite different from what we initially had in mind when we first thought about how to measure it. 

Meanwhile just to put some check on their egos, every time I see a central banker, I urge him to take a shopping trip to the closest IKEA so as to see who really should get the credit for controlling inflation as we currently know it.

Extracted from my Noise and Voice 2006

And on the same theme in Financial Times May 2006

And here, warning the Financial Times in August 2020, that the inflation had already returned. 

November 2021: To help moor (my) inflationary expectations, get rid of what facilitates it.

PS. The Consumer Price Index is calculated based on actual consumptions. But the real inflation that consumers register, is that of the products and services they no longer can afford to buy as prices have gone up too much for their diminished budgets. What would be the inflation rate on the consumer basket of e.g., two years ago?

PS. #AI #OpenAI #ChatGPT: “If you had access to real time data provided by a great number of outlets and other sources, would you be able to provide reasonable inflation figures estimates without us having to incur in current time lags?”

 

The truth, in theory and in practice, is that everybody's inflation, might be nobody's inflation.

"The Elusive Quest for Growth" by William Easterly

The Elusive Quest for Growth by William Russell Easterly

Subtitle: An Economists’ Adventures and Misadventures in the Tropics, Cambridge, Massachusetts: MIT Press, 2002: 

The Roman philosopher Seneca defined luck as the moment when preparation meets opportunity, and in this excellent book Easterly analyses some big-bang moments of development luck, and even extends the concept to include the possibility of unpreparedness meeting opportunity—for instance when not being held down by merely recent technology allows for a better use of the very latest. 

The book makes a great case for PPPs Private Public Partnerships or, as one famous president of Venezuela would have put it, “It is not the private sector or the public sector but just the opposite.” 

The book explains very well the need for developing the right incentives for development, although in doing so it might not emphasize sufficiently those other variables that help the sustainability of development, such as a reasonably equitable income distribution. 

Also, a book that discusses the benefits which development receives from “knowledge leakage” but also promotes strong intellectual-property rights as incentives must, obviously, enter into some contradictions. But, then again, with no contradictions, what would be the role of luck? 

The book is crystal clear about the destructive role of bad governments. When Easterly calls for banning the concept of a financial gap, I feel much at home with my arguments against debt-sustainability analysis.

When the author writes, “Thinking about luck is good for the soul. It reminds us self-important analysts that we might just be totally witless about what’s going on,” I know that William Easterly is one of those rare Ph.D.s whom I could gladly consider inviting to my “Guaranteed Ph.D.-Free University.” 

PS. A quite interesting spin on the issue of whether “To write or not to write … by hand” is made by William Easterly in his book The Elusive Quest for Growth. In it, when he argues, “the productivity gains of the computer are slow to be realized . . . because there are still too many traditional people out there with ink and paper,” he is actually making the point that perhaps we should prohibit handwriting as such, so that the world can move forward.

[Jim, my editor: “Plato suggested—I suspect jokingly—that the invention of writing was a bad thing that ruined human powers of memory.”]

Extracts from my Voice and Noise 2006.

The World Bank and IMF, should give the whole world, Mother Earth and the Global Rovers, more voice at its Executive Boards.

Many seem to opine that if only the votes and the composition of the Executive Boards of the World Bank (and the IMF) reflected better current economic size, then global imbalances had a better chance to disappear, like magic. It might not be as easy as that, and just for a starter why would GDP or the market share of the world trade be more important than market capitalizations for assigning voting power. Also if we are at it, why should we not then go for a full Monty on democratic reform and use population as the basis?

If and when a possible reshuffling of the current 24 Executive Directors should happen, I hope it will be to give representation, perhaps not to Civil Society, which is sort of intangible, but to that very tangible piece of land, water, and air that we all know as planet earth.

Although we proudly name ourselves the World Bank, the fact is that we are more of a “Pieces of the World Bank”, with 24 Executive Director representing parochial interests. As a consequence I sadly had to conclude in that the World itself, call it Mother Earth if you want, in these times of globalization, is in fact the Bank’s most underrepresented constituency.

This needs to be fixed, urgently, as we need to be able to stimulate a profoundly shared ownership for the long-term needs of our planet, if we want to survive as a truly civilized society, worthy of the name civilization. As I see it, adding a couple of truly independent seven-year-term Executive Directors, whose role would be to think about the world of our grandchildren, way beyond the 2015 of the Millennium Development Goals—could be what the World Bank most needs now.

And, while at it, we should perhaps also ask one of the current Directors to give up his Chair for a new constituency—call it, if you will, the Constituency of the International Rovers, by which I mean all those workers, skilled or unskilled, legal or illegal, who nowadays represent jointly one of the largest economies of the world. By the way, the first thing that the Global Rovers’ ED would need to do is to make clear the enormous difference that exists between an immigrant with a long-term plan to emigrate from motherland and forever assume a new nationality, and, on the other hand, a temporary worker who just wants to make a buck in order to help his family to a better life, and who wishes with all his heart and soul to return home as soon as possible. Forcing temporary workers to swear allegiances to foreign flags, just so that they can have the right to a better income, cleaning toilets, seems only like a new generation of artificial trade barriers.

Currently we are too stuck in the geography of the non-globalized world to be able to see what is truly happening around us. For instance, El Salvador has about 2 million of its people working abroad, more than a third of its total workforce and so if to the current GDP figures of El Salvador we add what these workers are earning, gross, well then perhaps El Salvador’s growth rate could actually be higher than China’s. And you tell me, why should we not do it this way? Is not an El Salvadoran still a real El Salvadoran just because he or she is working abroad? The internal emigration in China from west to east might take a Chinese from 50 to 150 dollars per month, but the El Salvadorans going south to north go from 120 to 1.200, and no one is heard complaining about an over or undervalued currency.

(Extract from a presentation of Voice and Noise at InfoShop on May 16, 2006)

Lost in the water of globalization

I have just returned from a trip to Central America (October 2000) during which I noted that an important issue in the debate on how to improve public services like water and power was the awarding of concessions to international water companies. I thought at that moment, not without some sadness, how some cultures that hundreds of years ago were expert at building and managing their aqueducts have today simply given up even trying.

Having three daughters of different ages, I have several times had to watch a movie aimed at adolescents called Clueless (in fact, it’s a great movie, and I might be using my daughters just as an excuse). In this movie a young girl tries to pass the exam for her driver’s license. After being severely reprimanded by her instructor for not knowing how to park her vehicle, she curtly answers back with the excuse that valet parking could be had everywhere. I feel that today many of us react in the same way to the difficulty of improving our public services and making them more efficient: “why try so hard when foreign investors can do it?” 

Evidently it is very often necessary to invest a considerable amount of resources or advanced technological know-how in order to offer an efficient and economically viable public service to the end user. In these cases a country may not have any alternative but to call on international investors and offer them a deal. However, in those cases where the only thing that is required to make a project go forward is good administration and a sound strategy for creating and maintaining relationships with users, specifically addressing issues such as quality and tariffs, it is difficult to condone the lack of desire to find a local solution to a local problem. One asks simply where we stand on our ambitions as a nation. 

You may ask what, for example, the administration of water systems or the distribution of power has to so with being a nation. The answer is probably “directly—nothing.” However, building a nation is not easy and requires at a minimum that its society learn how to resolve certain problems on its own. Taking the easy way out and simply calling in foreign assistance in order to solve problems in the water or power sectors could be compared to parents doing their child’s homework to insure a good grade while at the same time not allowing the child to learn how to do thing on his or her own.

Much of the pressure that creates the conditions for the sale of concessions of public services to multinational companies comes from multilateral agencies. You know the saying, “Do not give a man a fish, but teach him instead how to fish”? On occasion I ask myself whether these agencies “are not really asking developing countries to sell their fish-rods and their oceans. 

In Venezuela, we are close to renewing our efforts to privatize certain public services. In this sense, I feel it is important to ask ourselves without any inferiority complex, whether international investors should or should not have access to these services at all. I make reference to complexes simply because I feel many of us suffer from a “globalization insufficiency” complex that now exceeds that of the ardent nationalism that affected us a few decades ago.

What should we do then, in order to insure that national interests are always present in the privatizations that loom in the future? Above everything else, it is important to recognize that the way the privatization process is designed will either attract or scare away national investors. For example, if in the case of the privatization of a power distribution network the state wishes to obtain a large price for selling the utility which it has owned, a price which must then be passed on to the customers of the network itself, the total costs involved will be so high that they will automatically disqualify or discourage any local investor. If on the contrary, use of the power-generation assets were awarded on the basis of who offers to charge the end user the lowest possible rate, local investors would have a better chance of participating. 

Finally as no one is prophet in his own land, looking for foreign support I wish to make reference to a declaration I heard by David Montgomery, Viscount of Alamein, son of Field Marshall Montgomery (Monty) and the new British Ambassador to Mexico. He maintained that he simply could not understand why Argentina had sold all its public utilities to foreign investors. I do not understand it either, but what I am sure of is that unless we wish to lose our country in the waters of globalization, we must define with utmost clarity some strategic borders, and I don’t mean just our geographical ones. 

How depressing! With so much to be gained from globalization, why do they have to do it the wrong way, and why do they have to start doing it wrong just here and now?

Translated from El Universal, Caracas, October 27, 2000

As published in "Voice and Noise", 2006

My insecurities about the social security debate

The following is extracted from my Noise and Voice of 2006, a book which reflects on what I discussed and opined during my two years as an Executive Director of the World Bank 2002-2004

About disseminating our knowledge

It really is not possible for the value of investment funds to grow, forever, at a higher rate than the underlying economy, unless they are just inflating it with air, or unless they are taking a chunk of the growth from someone else. Therefore when we observe how many Social Security System Reforms are based on the underlying assumption that they will be growing 5 to 7 percent, in real terms, for ever. I wonder when we are going to use our knowledge, and inform the world that this is just plain crazy.

When we speak of expected returns, let say a real 3%, this is just an average of a distribution curve where there are a lot of winners, with higher returns, and a lot of losers, taken to the cleaners. Knowing this, how come we allow the debate on Social Security reforms to use the averages? In systems where you are supposing to pay someone to manage the funds, you should expect the managers to produce different results. Yes of course the returns could be average, but for that you just buy a stock index, and pay no fees.

A question

Are there any real differences between a pay-as-you-go, governmentally backed pension system, and a pension fund that invests completely in government paper?

About the timing and the losers

Any individual Social Security accumulation system that has the luck to start when the markets are close to rock bottom will always perform better than those systems that start when the markets are at the top. This has been the real beginner luck of the Chilean system and future generations of Chilean accumulators might not be as happy with the results as the pioneers were. 

When we now read how investment funds publicly state that they do not wish to receive more funds since they do not know where to invest them and we also observe how many private pension schemes in the United States are running for public cover, we need perhaps to ask ourselves whether the timing for those Social Security reforms that might be en route is really that good.

Those who beat the market average will always love to be on their own, and therefore the problem does always reside with the losers. The difficult question is whether in an individual security accumulation system all of the future losers have truly surrendered their expectations of receiving official assistance and, even if they have, proudly preferring to starve than to ask for help, whether the governments could really get away from their social responsibilities by answering the losers with a “Hard luck, pal, you had a private plan.” 

And so, at the end of the day, to me it seems that you might just be substituting a pay-as-they-fall for a mean-based pay-as-you-go system. So, when we add it all up, it all boils down to the same—except of course for the fees.

On Social Security in Real Terms

In order for your savings and social security investments to be worth something when you need them, the real economy must be in a reasonable condition at the time of your selling your investments. When I hear the many discussions about the financial preparation needed to accommodate for the upcoming demographic changes, I find it truly amazing how little is being said about the economy in real terms. 

Considering that there will be many fewer young ones to drive people around and shovel snow, much of today’s beautiful real estate might drop in value when the elderly start selling their houses to live close to a metro, hospital, and more reasonable weather conditions. So, before putting the money away in a private accumulation trust I think we need to rethink the whole retirement strategy.

Also we should never forget that historically, through all economic cycles, there is nothing so valuable in terms of personal social security as having many well-educated loving children to take care of you, and that you can’t, in real terms, beat that with any social security reform.

Two current updates on the social-security issue

Sir, Delphi’s (a company that supplies General Motors) problems do indeed pose a threat to public-pension institutions, but it also evidences the structural weakness of the alternative of accumulations in private-investment accounts. The fact is that when the old retire and might need to sell their stocks, the young might not be willing to buy them. 

Sir, With respect to GM’s pension woes, you claim that the company recorded a return of 5 per cent in the first half of the year, putting it on track for its assumed annual return of 9% but also that if GM’s pension funds produced the same poor returns as the equity and bond markets, this would of course have a dramatic negative impact. What is thereby implied makes a case for developing a formula that calculates how much arrogance it must take to promise to pay 9% on funds over a life span, and/or to beat the markets continuously.

PS. First, they discount future pension liabilities at high rates. Then they impose bank capital requirements which much favors refinancing the safer present than financing the riskier future. And so the squeeze is on, the squeeze is on.

PS. OpenAI ChatGPT: 

 "Would you be able to implement a system that continuously monitors and informs us whether social security and pension funds have sufficient reserves to reasonably meet their expected future obligations?"

What the World could learn in Sri Lanka

Last week, I heard the presentation of a research paper that studies the impact of migration on growth and spatial inequality in Sri Lanka, titled Can migration be an engine of pro-poor growth?, authored in 2006 by Nobuo Yoshida, K.G.Tilakaratna and Suranjana Vidyarathne. It was a very interesting presentation but; nonetheless, after just a couple of minutes, I could not stop my mind from wandering off into the following reflections. I beg your pardon, Nobuo Yoshida.

Would this study be different if instead of looking at a map of all the very different districts in Sri Lanka we were looking at a map of the world? Can we really research migration from one country to another with the same ease we observe when the analysis is of the internal migration? Do not all the institutional restrictions and emotional biases that arise while analyzing migration from one country to another hinder us one way or another from reaching the real conclusions?

Can we analyze migration from one country to another in a globalized world if we still have to carry the flags from the non globalized world? When we study the migration from El Salvador into the USA, should we instead of looking almost exclusively into their remittances, be looking much more at their gross earnings, salaries; and thereby perhaps conclude that El Salvador, as that nation that is no matter where their people are, might indeed be growing much faster than China. If in China migration might be from west to east, from 50 to 150 dollars of income per month, El Salvador is doing theirs from south to north, from 100 to 1200 dollars per month.

The state of Connecticut showed a per capita income in 2004 of 45,318 dollars while Mississippi had only 24,518, just about half. Does this imply that when deciding upon temporary visa programs the USA should consider more where the temporaries should go? Should they go to the poorer or to the richer states? Can or should the states compensate each other for differences in migration, one way or another? Certainly if we knew more about these issues then we all stand a better chance for rationality to prevail.

Back to the Sri Lanka study, one of its conclusions is that as their internal migration goes mainly to the already congested Colombo Metropolitan Area, this could reduce Sri Lanka’s annual growth rate by 1.5 percentage point, compared with if Colombo were not over-concentrated. Would this be indicating we should start to look at controlling migration flows in the world as London does with its traffic, by officially charging a fee for passing from one area into the other and have market forces decide how much these fees should be.

And we could go on and on this route of analysis, and fight world poverty so much better, if only we could ban the flags. It is clear now that we need many of these internal migration studies, like the one on Sri Lanka, if we are ever to get a chance to understand cross-border migration.

Did the Minister do right?

I recently ended my two years as an ED in The World Bank Group in representation of Venezuela and seven other countries. Even though it sounds strange, I was nominated for that job through a process that initiated in a chat box on the Web (Foro Nacional) where the then Minister of Planning, Mr. Felipe Pérez, asked for candidates.

I, as a born optimist, sent the Minister my curriculum vitae reminding him in clear terms that I had no experience in the public sector; that I was fiercely independent, “a radical of the middle or an extremist of the center,” and that I had no interest at all in going to Washington if that meant silencing my own voice. But, if the government could live with all that, I felt myself both capable and honored to represent my country.

As I had met the Minister only briefly, once when he invited me to give a conference in IESA about the taxes charged on gasoline in the consuming countries, I did not harbor any major expectations, and, in fact, I forgot all about it. One month later, out of the blue, the minister calls me on my cell phone, and informs me I had been nominated.

The nomination of an Executive Director, politically independent, from the private sector, with no public-service trajectory, and picked on the Web, did also surprise the World Bank, and therefore the question posed by the article’s title. Its answer is not easy.

First. Was my election simply an accident, a craze of the moment never to occur again, or was it just the tip of the iceberg of a new way. If an accident, I was just lucky, but, in fact, the new technological advances are pointing toward new forms of government. In the future, instead of governing by polling opinions, we could have daily referenda, with all citizens, at zero costs, for good or bad. In this sense, as Mr. Perez seems to be a person who believes a lot in the revolutionary power of transparency, my selection could have been a precursor, and the Minister a prophet. Even though I harbor many doubts about where so much transparency could take us, intuitively I support it as such advances seem to be an important evolution of our society.

Second. Of an ED in the World Bank it is expected that he represents, simultaneously, both the interests of his constituency and the interests of the Bank, as an institution. And that balancing act is not easy. In this respect, the question is whether someone with my characteristics could walk the rope. Though clearly someone from the public sector and appointed for political reasons should be much better positioned to represent the short-term interests of the current governments, a free agent like me, inasmuch as he can provide new perspectives on issues, could also turn out to be useful, both for the institutions as well as for the country.

Subjectively, I have no doubt that the Minister did splendidly. I have had an incredible experience and I believe that I have served well the interests of my beloved Venezuela, of the other brother countries I represented, of The World Bank Group and of that whole little planet earth where we are all stuck on. And so … Thank you, Felipe!

Published in El Universal

What is the financial world to do with Venezuela?

A letter to the Financial Times

Sir, In Venezuela, as in most other countries, Congress is supposed to exercise control over the executive branch. For instance, its Constitution establishes that ‘No contract in the municipal, state or national public interest shall be entered into with foreign states or official entities, or with companies not domiciled in Venezuela, or transferred to any of the same, without the approval of the National Assembly.’

Now, even though Venezuela is currently known as a very polarized nation, the fact is that after the elections of December 4, 2005, its Congress includes 167 members who are in favor of and obedient to him who wishes to be called ‘Commander’, and 0 representation for those many who are not in the least in agreement with chávez´s confused ramblings of his vision of a twenty-first-century socialism. This indeed poses some serious questions about its legitimacy and therefore some serious challenges for those who issue opinions.

For instance, what are legal counselors or credit-rating agencies to do after they might receive a letter from a Venezuelan citizen (or perhaps even read this letter in FT) informing them that sooner or later the debts now contracted by Venezuela might be questioned as ‘odious debt’, as they are not duly approved by a legitimate congress (167-0), nor are they needed, as can be evidenced by the many donations Venezuela, with its own so many very poor, has recently made, among them, to the relatively few somewhat poor of Massachusetts.

Sir, if a company like Nike has to worry about the labor conditions in the factories to which they outsource their production, why should the financial world be allowed to ignore civil representation issues in those countries it helps to finance?


That letter to FT was included in my Voice and Noise 2006, a book that I wrote after my experience as an Executive Director of the World Bank (2002-2004) and that now, after having duly marked the extract above, I give freely to any lawyer who might have to prepare a due diligence on Venezuela and to anyone from the credit rating agencies who has to rate Venezuela with the words... “and do not forget that a citizen from Venezuela, who has all the intentions of tomorrow, when given a chance, to protest all the odious debts and gifts, I told you so… I have not the faintest idea if I have a legal case… but are you really sure I don´t?”

Perkins’ Confessions… a rough book tour is not punishment enough!

I just read the Confessions of an Economic Hit Man by John Perkins. It is a repulsive autobiography, I guess about the mother of all mid-life crises, as the author describes his remorse with the active role he played in a conspiracy aimed at inducing developing countries to incur excessive debts so as to subjugate them and control their natural resources. That individuals could on purpose miscalculate in order to gain benefits is a fact of life, but that this would be happening with malice on a worldwide scale and as part of an American conspiracy is just too much to fathom—and then just sit back.

I haven’t the faintest clue whether the book is true or not and in fact I don’t care because, in either case, Mr. Perkins needs to be prosecuted. Either by American or international courts for committing fraud and crimes against humanity, or, by the same courts, for seeding that kind of distrust that makes it so much harder for good people to trust good people—a basic requisite if the world is to stand a chance.

Something should be done, soon, before it gains more credibility. The book is already a New York Times Bestseller and even though it states that the “World Bank doesn’t help them [the poor countries] to defend themselves. In fact, it forces them into this position,” on the back cover we read a former lead economist of The World Bank saying that it “succeeds as a wake up call because the reader cannot help but assess his or her role on a personal level, thus providing impetus for change.” Pearson ends his book with, “Like all confessions, it is the first step toward redemption.” Good for you! But, pal, a rough book tour is not punishment enough!

I have vociferously argued against the Debt Sustainability Analysis of poor developing countries which is currently so much in vogue, basically because I feel that debt should always be contracted if it is productive, not because it might be sustainable. Nonetheless, against Perkins’ Confessions my arguments do sound hollow and naïve though, come to think of it, I much prefer to live out my life with this kind of naïveté than to live with the cynicism otherwise obligatory. Perkins says he wrote so that his daughter could have a future. So do I—for my daughters and for his.

On our own (World Bank) governance: About the board and the staff

Not long ago in a personnel committee I was reminded (I am not sure why) of the saying about why grandfathers and grandchildren get along so well: they have a common enemy!

But then again I must confess that I have been through some experiences that point to the existence of a big divide, Mr. Chairman. (Jim Wolfensohn) On some occasions when I have been speaking with staff members who were unaware that I belonged to the board, when they found out, some of them have actually panicked, trembled—and that to me is not a very healthy relation. What does the staff think of us? I know that I think very highly of them, generally, and I know I treat them all with respect but … do we all? Or is somebody setting us up?

And while we are on the subject, when are we going to end the tradition of praising one another so much that we dilute the traditional meaning of praise? Colleagues, do you have some special words or a code that you use when praise is really for real? Can you share it with me?

I must be a total stranger to this community because there is no way on earth I can come to understand why all the quite reasonable discourses I keep hearing about development and helping people out always need to be praised as courageous or fearless. They probably know something I don’t. I’d better watch out.

Extract from Voice and Noise 2006

On our own (World Bank) governance: Diversity

Dear Mr. Bourguignon:

I wish to extend to you my most sincere congratulations for your appointment as World Bank Chief Economist and I am certain we will all benefit immensely from your presence among us.

Though I feel that we need always to have one foot firmly placed on each of our development pillars, I very much welcome your “plan to focus more on the second goal, that is, social inclusion,” as inclusion is exactly why I want to make the following comment.

When the search for a new Chief Economist for the World Bank was announced we were told that although it was obviously quite a delicate task, it should not take too long, as the search had to be carried out within “quite a small and exclusive community of development economists.”

As I am certain you realize, that characterization illustrates in itself one of the many daunting challenges we face in the WBG. I beg you, in parallel to your many other responsibilities, to dedicate some time to the challenge of developing that small-and-exclusive-community, so that perhaps in a couple of generations, the Bank could choose one of your successors from a larger and more diversified group—even though that would mean a somewhat more extended search. Again, very much welcome, do count on our support and I wish you a very heartfelt good luck.

Yours sincerely,

Per Kurowski
Just one of 24

Extract from Voice and Noise 2006

On our own (World Bank) governance: Hurrah for the Queen

Dear Friends,

Facing, involuntarily, the need for a career move in the month of November (as I suppose many of you also are), you might understand why I found it interesting to find in The Economist, the announcement by the Buckingham Palace requesting an Assistant Private Secretary to H. M. the Queen. Colleagues, don’t fret, I did not send my C.V. to recruitment@royal.gsx.gov.uk, not because it was not tempting, but because I believe that, although I could perhaps help to offer a global perspective on many issues, the Queen might really be looking for someone with more local know-how (cricket) than what I (baseball) could provide. By the way, for those who believe they might indeed qualify, go to www.royal.gov.uk.

That said, I do think Buckingham’s announcement is in itself noteworthy as it evidences that, even in the Monarchy, good governance issues are deemed so important, as to require the inclusion of a notice that “The Royal Household is committed to equality of opportunity.”

But, my friends, in terms of transparency and equal opportunity in hiring, how really does the IMF currently stand up in its search for a Managing Director, when compared to the British Monarchy? Even though being a born republican (in its original meaning), I cannot refrain from a Hip Hip, Hurrah! For the Queen!

Per

Extract from Voice and Noise 2006

On our own (World Bank) governance: The Annual Meetings Development Committee Communiqué

I must confess that I do not really understand how it gets produced. We sort of start out by pitching out a lot of issues to ourselves and then we go over to the other side and bat the balls back for about eleven continuous hours just so that we can later have a chance of fielding them again in our Board meetings six months later. It is hard to tell whether we are in a virtuous or a vicious circle or, if at the end of the day when we get some issues out of the loop, it is because we have adequately exhausted these issues or because they have just exhausted us.

Nonetheless in this unpleasantly volatile world we might find comfort in the thought that our communiqués provide an inspiring source of stability—as they always read the same.

Any readers who do not understand what I am talking about should not worry. The preparation of communiqués is like one of those strange initiation rites impossible to describe to anyone not part of them … and to most who are part of it.

Extract from Voice and Noise 2006

On our own (World Bank) governance: WBG’s fight against corruption

Dear Colleagues,

I sincerely believe that the World Bank Group could lose its entire capital, and could still count on the full support of its shareholders, as long as they believed that this was just the financial consequence of a bona fide development action. But I also think that the Bank could lose all support, if its willingness to fight corruption is put in doubt.

I have seen some very important advances but I also believe that the Bank still has some way to go before it can fully live up, in actions and in spirit, to its commitment of being a prime force in the battle against eternal corruption. The fight against corruption really boils down to the continuous setting of good examples, and therefore there could never be a real fight against it if you are unwilling to communicate very openly with the world about your struggle.

I have repeatedly noted concerns that publicity related to fraud and corruption in any Bank project could make it appear that the Bank has acted negligently in its supervision and thus impeded the good work of many; and, on the other hand, that disclosing more detailed information could provide a basis for litigation or other challenges. And this, in turn, might be indicative that a somewhat nonproactive state of mind still exists in some quarters of the Bank. Of course disclosing corruption always presents risks but those risks clearly belong to the “getting up from bed” risks, and, as such, are totally negligible when compared to the “staying in bed” risks.

The Bank, in order to have the moral strength to fight the corruption externally, needs to demonstrate that it is doing its best at home. As no one could expect the Bank, where thousands of individuals move billions in resources, to be immune to human shortcomings, fighting corruption can only mean being very forthcoming on the issue.

In the same vein, as corruption has many tentacles and is certainly not limited to individual wrong-doings, the Bank could perhaps be well-served by appointing an Ombudsman for Corporate Behavior to ascertain whether there is a logical and moral relation between its almost sacred mission of fighting poverty and the way it goes around the planet earth doing it.

Per

Extract from Voice and Noise 2006

On our own (World Bank) governance: Board Effectiveness and the ticking clock

Dear Colleagues,

One year gone and less than one to go, so excuse me if I am getting a little anxious and want to share with you some concerns related to Board Effectiveness in a slightly more formal way than through our many brief corridor meetings. I know many of you share them.

First, the truth is that our Board is simply not functioning the way it should and that it really comes down to us to improve it since, unfortunately, in this matter we cannot instruct management to do it for us.

What is wrong? Well, in very few words, that we are drowned in too many written and spoken words about too many topics so that our power, as a body, is completely diluted to such an extent that we could easily qualify as the most expensive rubberstamp in mankind’s history. Think about the following facts:

Our yearly workload consists of about 850 formal Board documents, 3,700 other documents like project assessments, besides technical meetings, informal meetings, bilateral meetings, contact with our capitals, seminars, retreats, executive travel, spring and fall meetings, 11-hour communiqué-drafting sessions, plus, of course, hopefully, some life.

Being 24 EDs, means that very rarely a sufficient number of us are simultaneously focused on the same issue and, if it were to happen, like boats passing in the ocean as they say, chances are that there would always be a need for additional documentation that, presented in some future fall or spring, would at least mean having the issue to be revisited and analyzed by different EDs altogether.

Yes, we have our 24 Alternates, “with full power to act for him when he is not present,” plus the valuable additional resources of about 80 Senior Advisors and Advisors that could act as temporary Alternates, “in the event that both an ED and his Alternate ED are unable to be available.” Unfortunately, sometimes this could make for some additional dilution by splitting us up even more.

Many of us do receive good support from our capitals and so we might reasonably be fulfilling our role as a communication channel between our constituencies and the Bank. Nonetheless, when it gets down to that very personal fiduciary responsibility to “exercise individual judgment in the interest of the Bank and its members, as a whole,” it is clear that we are lacking, in too many ways. My reading of the Articles of Agreement makes it clear that someone counted on our own consciences, as individuals, in order to find some reasonable cohesiveness in this world full of uncertainties and contradictions, and this could perhaps require us to be somewhat more than management—not less.

The Bank is in itself a very peculiar organization and truly difficult to assess. That, together with the extreme sensitivity the Bank shows against any type of criticism, which stops the development of reports which would show clearly what does really work and what really does not work, clearly makes it currently impossible for us to prioritize in any sensible way our workload.

I know that when anyone starts hinting at these problems, the wet blanket of the dangers of micromanagement by the Board are quickly thrown over the discussions but, my friends, in this case what I really am referring to is the problem of the Board’s having a sub-micro influence on macro issues.

In the end, it really doesn’t matter if you are a Pavarotti, if you have to sing in Madison Square Garden during a Knicks’ match or in the deserts of Arizona, because in both these cases you will not be heard anyhow. In this respect, our Board’s acoustics are currently so bad that I have to repeat what I’ve frequently said in our discussions on the issue of voice for the developing countries, namely that, in reality, no one has a voice.

Where do we go from here? I do not know, but it really behooves us all to find out. This is not a matter for the management of the World Bank since they are not doing anything else than what normal management normally does, which is to maximize their own control of the organization by minimizing the Board’s interference.

Nonetheless, there are some ideas that could provide the basis for some discussions among us. For instance, there is always the possibility of splitting up more of our workload into more committees. Although they should have their own powers of approval, these powers should be subject to our possible objection. This would still mean that the Board does not relinquish its final say in any matter. This way we could perhaps create four committees with responsibility over geographical areas and so at least have more of a chance that, when we convene to discuss a matter, enough of us will have really read and analyzed that particular case in depth.

We know that the CODE, the Committee on Development Effectiveness, is reputed to be the most important committee of the Board, although that might just be false since CODE probably is just as weak as the rest of us and could in fact have the lowest functional-strength/importance-of-issue ratio. Nonetheless, many of the current issues of CODE are exactly those extremely important issues that should always be discussed at Board level, and so we might therefore be delegating in CODE some nondelegable issues, while retaining at the Board the workload of some less important tasks.

Another thing we should do, as I indicated before, is to be more straightforward in demanding from management evaluation reports that clearly identify what is working and what is not. Management should be able to come up with this overview, and, if not, we need to worry even more.

In conclusion, we all know that the needs of our world are almost unlimited, and I am certain that we never discuss something that does not have its very clear and urgent merits but, nevertheless, as every single effective hour of our Board discussions ends up costing us around 80,000 US dollars, we absolutely have to find better ways of prioritizing our time if we are to have a chance to fulfill our mandate as EDs.

I am aware that COGAM (the Committee on Governance and Executive Directors’ Administrative Matters) is planning to take up the issue of Board Effectiveness very soon and I know that it shares many of the concerns. I am certain this step will be a good opportunity to take this issue forward.

Meanwhile, and knowing that so many of you share these concerns, excuse me for reminding us all that our clocks are ticking.

Per

Extract from Voice and Noise 2006

On our own (World Bank) governance: The Normal Distribution Function is missing

Dear Colleagues,

The 14th of October we discussed the 2003 Annual Report on Operations Evaluation, and I must admit that I felt a bit unsatisfied with the debate because, when it ended, I left without a real feeling of what was working well in the Bank and what was not. It was only later that I suddenly realized what was missing from the report, so although perhaps a little late, let me share this worry with you.

The standard feature of any evaluation and monitoring system we know of, is the use of some sort of distribution function, be it the normal bell-shaped curve or any other type. It somehow indicates the extremes; for instance, the worst 5% of the organization’s performance and the best 5%.

Any board, if it wants to be effective, cannot spend a lot of its time in the grayish middle area of the function, but has to concentrate its attention on the extremes of the curve, weeding out poor performance and learning from bad experiences, so as to avoid being dragged down into mediocrity, while guaranteeing the promotion of the best and learning from its successes, so as to advance the organization’s goals

Only hours away from completing my first year at the Board, I cannot honestly tell you, with any degree of certainty, about what is working and what is not, and this is quite frustrating. I know I share this sense of frustration with most of you and perhaps the root of our problem lies in the fact that these distribution curves are totally absent in the evaluations brought forward for the Board to consider. If so, it behooves us to make certain they are adequately introduced.

In general terms, I have felt a generalized difficulty of the Bank to manage criticism, as just the utterance of minor questioning, or even withholding praise, makes one sometimes feel somewhat of a traitor to that esprit de corps that is expected to prevail. We have also reached a point where it is even hard to congratulate one another on extraordinarily good performance as the value of praise has been diluted by its ridiculously excessive use.

All this is wrong and clearly to the detriment of the efficiency of our development work that so many poor depend upon. On a daily basis, the needy people of our constituencies are harshly evaluated by life in very cruel terms, so we might as well ask ourselves whether we should not be a little stricter in our assessments, living up to the accountability we so much preach to others.

I wonder: does anyone join me in challenging our evaluation and monitoring systems to come up with a list of the 4 worst and the 5 best activities? of the WB? What if our own Board effectiveness is among the worst?

Per

Extract from Voice and Noise 2006

On our own (World Bank) governance: Voices, Board Effectiveness, and 60 Years

Dear Colleagues,

The World Bank is soon to be sixty years old, and I think that it is a tribute to the foresight of its founders and the capacity of its managers to know that if it did not exist, we would have to create it in order to do very much of the same things which it currently does, in very much the same way, and with very much the same people.

That said, it is clear that with time the Bank must naturally have lost some of its original vigor and that most definitely the circumstances, challenges, and resources are not the same as those present sixty years ago. So, if we were to recreate this multilateral development effort today, a “new” World Bank, it might turn out to be a somewhat different organization from ours.

I mention this as lately, for instance in the discussions of voices, it is clear that having to look through a glass colored by the Bank’s day-to-day realities (and all the special interests that have evolved with time, whether internal or external) makes it very difficult for management and ourselves to visualize what changes are required.

In this respect I would suggest that, as a Board, we could benefit immensely from an in-depth and outside view as to how the World Bank should have been organized, had it been born today. The nonbinding conclusion of such a study that could be provided for instance by a diversified work group of creative, wise, and credible personalities, could most probably provide us with a better vision of what we all should strive to achieve. It is only by painting the green valley you want to reach that you can muster the sufficient will to get there.

Is there any support out there to make the study I propose a part of the roadmap of voices and the so many other issues we are grappling with? Perhaps a 60 Years Development Committee?

Per

Extract from Voice and Noise 2006

On our own (World Bank) governance: A real choir of voices

Dear Colleagues,

Experience is said to be something you can gain only when things don’t go as you’ve planned. In the same vein, what is the purpose of an Executive Director if he is just going to sit around and agree? Friends, as we recently spoke again about the importance of voices let us remember that 100 voices saying the same message might sound nice but still be only a Gregorian chant, while a harmonious choir requires many different voices (and now also some noises).

Per

Extract from Voice and Noise 2006