CHAPTER 11
A Miracle to Be Preserved
We are faced with a hard truth, one we know and regularly tend to forget. No single world leader has ever had the capability to act alone to solve the world’s great problems. That statement is more true today than ever. Whether the issue is climate change, migration, public health, digital technology, or most obviously capital flows, most issues now require cooperative and global action. Our leaders no longer have a choice. They must face the hard truth that the people they govern are frustrated and confused at being threatened, forgotten, and overwhelmed by giant superstructures that don’t speak their language. They have been overtaken by a mechanism that seems disincarnate and as if it is operating on automatic pilot.
How do we rekindle international cooperation? How do we create or improve dialogue among the various advanced, emerging, and developing economies; the multilateral institutions; and even the weakened federations? How do we create unity to fight against the centrifugal forces that push us to reject the Other and withdraw within ourselves? How do we go from the O-H-I-O strategy to the C-A-lifornia strategy, that is, from the traditional concern of getting our own house in order to promoting collective action?
This is where finance has a historic role to play. Instead of being a simple item on the agenda in world governance, it can be a practical tool for mobilization—a tool so powerful that the international community will seize it and decide to define standards, adapt its regulatory and legislative framework, test and expand new modes of cooperation, and make sure that this tool is truly effective. We have the means to achieve our goals. The money is there, in the hands of private investors. The institutions are also there. They are only waiting to be better used! A new finance, rebuilt from the ground up, can be one of the best ways to give their actions a purpose.
The (Useful but Frustrating) Miracle of Current International Institutions
Kofi Annan, secretary-general of the UN, says about international institutions,
At the beginning of the millennium, the UN reminded us the lessons it had learned from the interwar crisis. The architects of 1945 had learned just how destructive the stubborn refusal of any economic interdependence could be. During the 30s, the most unbridled economic nationalism and a policy of “everyone for themselves” and beggar thy neighbor was in vogue almost everywhere, degenerating into political retaliation, totalitarianism, and militarism in some countries, and isolationism in others. The League of Nations got off to a bad start trying to deal with these forces and never had a chance to fulfill its mission. This is why the post-war builders wisely chose the path of openness and cooperation. They created the United Nations, the Bretton Woods institutions, the GATT (which then became the World Trade Organization) and an entire series of organizations with the mission of making sure the system was functioning properly. . . . We are now harvesting the fruits of their labor.1
We must acknowledge that a small miracle occurred in 1944–1945 with the creation of a number of international institutions. It was visionary to focus on economic and financial cooperation to regulate the economies of the world. We have been lucky because it would be much more difficult, or even impossible in such a connected, complicated world, to invent tools with such ambition today. All of us alive today are custodians of this legacy. We could not do anything without it.
True, international organizations have created a giant, monstrously bureaucratic mechanism, which functions poorly in many respects—and sometimes functions so well that there is no need for a human at the wheel. True, this system, with its rituals, codes, programs, and agendas, generates inertia and frustrations. All that was probably inevitable.
An institution like the World Bank has 189 shareholder governments.2 I saw the full impact of what such governance involved when I chaired its board meeting. Imagine 25 people meeting regularly to spend three hours talking: even if, as a whole, everyone says more or less the same thing, at times there are a few important nuances—some people think there is not enough equality between men and women, others that we are too focused on civil society, others that there is not enough civil service involvement. If each person talks for just five minutes, it would take over two hours to go around the table! During these meetings, my brain feels like it’s split in half; one part says that this is an unbearable ritual, and the other whispers maybe, but what is the alternative? Is this not the price we pay so that the most powerful can sit around the same table with the least powerful so that they can be seen talking successively, representing the United States and the Seychelles (what beautiful symbolism!), and to prevent “the West” from deciding everything on its own in the name of the planet? Maybe everything can’t be perfect, but this system, despite still being dominated by OECD countries, in particular the United States, strikes a balance, year in and year out, in mobilizing tens of billions of dollars for the benefit of the most vulnerable and setting a few rules for everyone to follow: on child labor, on respect for indigenous populations, and even on the preservation of biodiversity.
Hell Avoided
Dag Hammarskjöld, the UN’s second secretary–general, who hailed from Sweden, has been quoted as saying, “The UN has not created a paradise, but it has avoided hell.” Is awkwardness and dysfunction sufficient reason to give up such a benefit?
Wouldn’t it be better to think about the reasoning behind all these rituals that at first glance seem so disconcerting? I am thinking about international summits, for example. In 2003 when I was working at the Élysée,3 I found myself, still quite young, on the terrace of the Hotel Royal in Évian, in the midst of Vladimir Putin, Hu Jintao, George W. Bush, and Jacques Chirac. We were at the G8 summit, the weather was wonderful, and the most powerful world leaders were enjoying the sunlight, talking in small committees. I sidled over to Michel Camdessus, who had taken me under his wing and remarked, “This is horrible! So much wasted time! We manage to gather the world leaders and instead of sealing them up in a room to negotiate and make decisions, we give them a few hours to wander around without doing anything.” Michel Camdessus replied, “Don’t be so sure. This ‘wasted time’ is the most important time of the summit! All the rest is just choreography. We already knew generally what was going to happen. There were a few minor changes: everyone read the paper, the translators translated, and then, during the night, the sherpas molded the speeches into shape. . . . Now is the moment each person can learn to understand, to sympathize, and to ask things like, what are the key issues where you live? How are your wife and children doing? All at once, the next time they pick up the phone, they are going to start off by asking for personal news before politics. That is the strength, the added value of international summits. They create cohesion and human relationships.”
I was able to verify the wisdom of these words myself in 2014, during the G20 summit in Australia. We had just finished—temporarily—with the Ukraine crisis, and international relations between Russia and the United States were chilly. Vladimir Putin even went as far as to send a Russian fleet to Brisbane! Yet in a quiet moment, far from the reporters’ microphones, I was surprised to see the Russian leader chatting with Barack Obama and Narendra Modi—proof that some parts of the summit’s mechanism were still working, and proof also that it is crucial that such rituals exist, even with the fleeting worries they may produce.
Learning the Unspoken Languages of Cultures
These rituals are all the more useful as the international community diversifies and the need to understand intensifies. As the United Nations announced in 2000,
We are now faced with a paradox. This is a multilateral system put in place after the war that makes the emergence and rise of a new globalization possible, but it is globalization which has gradually made this system obsolete. In other words, the institutions that arose after the war were designed for an international context, while we now live in a global context. And the main challenge that our current leaders now face is how to skillfully navigate a passage from one to the other.4
The passage we are navigating today means going from the G7 to the G20 format—without discarding the G7—and it involves learning the language and codes of dozens of new cultures and new countries.5 While the Americans, French, English, Germans, Japanese, Canadians, and Italians know each other well—when the English open their mouths, the French, who have been confronting them since the Hundred Years’ War, know when yes means no and when no means yes!6—figuring out as much for an Indonesian or Argentinian, or for them to figure out the same for a French person or a Canadian by only their smiles and blinks, will take a few decades.
Personally, I have learned a lot these past few years, rubbing shoulders with representatives from emerging countries and learning about the various paths their lives have taken. I have in mind a dinner where my tablemate on the left was the South African minister of finance, and my tablemate on the right was a Chinese colleague from the World Bank and the head of the IFC. We were talking about education. The South African confided, “I got my education in prison. I spent 10 years there for being a member of the ANC [African National Congress].” The Chinese man one-upped him: “I was born in 1958, into a Muslim family in Beijing, and I saw the ravages of the Cultural Revolution. Luckily for me, Deng Xiaoping opened the borders in 1980, and I had the chance to get one of the first visas to go study in the United States. Since then, I have worshiped this man: if he had not been there, if he had left the country in the hands of the Gang of Four who succeeded Mao Zedong, China today could have been a giant North Korea.” This man led Goldman Sachs in China, then a major international institution, and today he is leading the project to leverage money in his country to invest in African development? What a difference in background, particularly from my classical route as a French technocrat, having passed an exam at 18—(and taken a second exam at 23 because I loved it!)—before starting my career. When you become aware of the life experiences of your peers from emerging countries, you see that they will not necessarily have the same vision of the world as you will, and that they will not necessarily want to be chummy. A Russian told me one day, “Really, if we scare you, it is because we know what it is to be hungry, to fight. Life does not have the same value for us as it does for you Americans and Europeans, who are so well fed; you are afraid to fight, to lose your comfort. You have lost the tragic meaning of history.” How can you even respond to that?
A Steep Learning Curve but Worth Our Pain
We need to learn to better understand these populations who do not share our culture, values, political systems, and life paths, and who, in addition, do not have the same appetites as 15 years ago: their expectations have been multiplied and sophisticated. I was taken by surprise myself when, during a trip to Xiamen, China, I unexpectedly came across a group of workers at a construction site along a riverbank who were in the process of lifting a church and its vicarage so they could be moved elsewhere. I never would have thought that the Chinese would have reached this stage in their development where the preservation of historic monuments was a priority—yet that is indeed the case. Let’s drop our prejudices about countries and cultures that often we have not taken the time to learn about and understand. We will learn about and cooperate with them by acting in good faith so we are all on a level playing field, in other words, by recognizing their legitimate right to take a larger role in decision making and international debates. This goes both ways: leaders in emerging countries should also be able to recognize the negative effects of, for example, their environmental or monetary policies on advanced economies. But this can be done only if all of us learn to respect our differences.
This business of respecting differences will not be easy. When we see how long it has taken Europe to learn this, when we see how fragile the respect is, even when the countries in the European Union share nearly the same history, the same civilization, we can see the difficulty in extending this to other continents. It is not because we speak the same language more and more often—the same Globish (a subset of English) or the same financial or digital language—that it will be less work to do. But we don’t have a choice. We are living and working together and will be doing so more and more in the future for the good of humanity. We must promote the teaching of multilateralism, explain to the public that the self-sufficiency of countries is an illusion, and that the nostalgic dream of returning to an Elizabethan England, the France of Louis XIV, Imperial Russia, the Monroe Doctrine, or the Ottoman Empire will not come to anything.
For all that, denying the differences that distinguish us from one another would be just as counterproductive. Instead, we must learn to make these differences work for us, to create opportunities to work together. I am not imagining a uniform, Babelian world. If the whole planet spoke the same language, thought the same way, there would no longer be words or thoughts. (Bio)diversity is a priceless treasure for humanity. Instead of curling up, rejecting the other to preserve our own identity, we would do better to work together to help every country in the world develop its own cultural, economic, and social resources, to help create their own luxuries to be proud of, rather than trying to copy those of other countries.7
The World Bank, from this point of view of working together, is a precious organization that we should use more effectively. In a little more than 70 years, it has been able to create its own culture, which we can classify as universal: a mix of American political culture (with its universalist bias), economist and financial culture, development culture, and the contributions of the original cultures of its 189 member governments.8 The profiles are much more diversified than in the past. As I said in 2015, “Nothing is fixed for eternity. The principles [of the World Bank] are subject to debate. We must keep them alive. Some people think that we impose the same vision everywhere. This is less and less the case. We are talking more and more about our ‘partners.’ The Chinese tell us, ‘We have as much to offer you as you have to offer us.’ They are right. Our institution, which could be extremely rigid—and still is, in many ways—has, bit by bit, managed to adapt and create a global model.”9
Improve Legitimacy without Smashing Efficiency
In the mid-20th century, humanity, thanks to US vision and leadership, had succeeded in establishing visionary and useful institutions. We have already, over time, redirected these institutions’ missions, combining them with complementary organizations. The UN, IMF, multilateral development banks, G7+, G20, G24, G77, FSB, European Parliament, and others are practical tools for international cooperation. Instead of deciding not to use them, let’s make the most of them with a system that is not so bad. Rather than leaving them to fall apart and get bogged down in awkwardness and bureaucracy, rather than sweeping them aside, claiming that we have had enough with IMF and the World Bank, that it’s better to see them disappear to escape the “tyranny of the financiers,” let us focus our efforts on adapting these tools, modernizing them, and opening them up to the world and its new players: emerging countries, the private sector, and civil society.
We must move the international public domain out of the solely Westphalian system, centered on interstate relationships, where it has been stuck until now: the United Nations cannot be summarized as a union of nations, while ignoring the people; the European Union cannot be summarized as a union of states; the World Bank and IMF cannot be summarized as a meeting of shareholder governments represented by a board of directors. We must make this global governance system more accessible to people and diverse stakeholders engaged in our society and make it more transparent. It already has been made more digestible and intelligible in many ways, but often people are not aware of this. Simply putting thousands of pages of agreements, treaties, and reports online is not enough. We need to know how to promote them, to provide context and credit to these discussions and international commitments, which would make them more democratic as well. International organizations will make people dream and mobilize only when they have integrated participative democracy more into their action procedures and decision making.
In this new approach to global governance, one of our priorities must be to find an appropriate balance between effectiveness and legitimacy. Efficiency is the temptation of a directorate of the leaders of the most powerful countries (those of the G7 or the defunct G8) to instruct the rest of the world under the influence of their own interests—there is no question that decision making is faster with seven or eight. Legitimacy is the endeavor of everyone who feels they are a stakeholder in these decisions, whether they live in Trinidad and Tobago, the United States, or China, whether they are the president of the republic, a minister of finance, an entrepreneur, or simply a citizen. The G20 was created in 1998 to respond to the Asian economic crisis by gathering together the central bankers and ministers of finance of the 20 largest powers: the international community acknowledged that the seven or eight richest countries could no longer be the planet’s sole decision makers.
But this framework, expanded to 20 megaphones, is reaching its limits today: in a world that is now interdependent and ultraconnected, how do you make sure you are listening to everyone who is not sitting around the table (and they are the majority)? How do you make sure that you take their interests into account? How do you handle problems specific to countries that are forgotten by the international financial system? How do you reintegrate those excluded by the regulations on correspondent banking, as discussed earlier? How do you impose the international standards defined by the FSB—a G20 organization, which covers 90 percent of global finance—on the 150-plus remaining states? We cannot ignore the claims of some African central bankers who feel forced to apply regulations that they were not involved in developing.
When we are faced with this problem of legitimacy, an institution like the World Bank should play a crucial role. In fact, the presence of this development bank is unique in the world: not only does it have a multinational network, but through its global access, it could be a “voice for the voiceless” within the international community. The World Bank Group is invited to G7 and G20 discussions and summits. It is a member of the FSB and is represented in a number of standard-setting organizations. This is not a symbolic status. This is access to the place where global consensus is shaped and where the rules that have an impact on the clients are discussed. In other words, the World Bank is in a position to express the opinions of people who are not present in the discussion and share their concerns, to ensure that the awareness of the interconnectedness of the planet is also heard. It can ask questions that no other organization would dream of asking: What is the impact of the new financial regulatory framework on emerging and developing economies? Are there unforeseen consequences, as in the case of correspondent banking? It can emphasize the importance of mitigating, measuring, and rolling up risk to the appropriate level. It needs to do even more: bring up the recurring question of the management of global public goods, insist on the cultural efforts required to agree on bringing high-level discussions closer to daily priorities in the field. The World Bank Group is the only one with the power to take on this mission with the intensity required. We are still not there. But we cannot give up. And it is in this spirit that I have acted each time I found myself in one or another of these forums. The need for a continued evolution of ongoing reform (time to adapt to a continually changing world rather than believing in a linear, rigid way of the status quo) is critical. Moving in that direction in a resolute manner could do a lot to improve the legitimacy of the institution. The pressure from civil society and the shareholders must drive the agenda and demand results. This is further strengthened by the current political climate around the world, in many parts of which there is no appetite to continue to write checks. Do more with what you have, be ruthlessly innovative and efficient—and repeat. It is these types of changes to the mind-set that are needed going forward.