79052 DIVISION OF THE HUMANfflES AND SOCIAL SCINCES v3 CALIFORNIA INSTITUTE OF TECHNOLOGY PASADENA, CALIFORNIA 81125 . -- ~· ...,.. . A&/(p'{ A CONVERSATION WITH ANDREW KAMARCK, III ·F:o:-G ·f;~Lr NEW YORK CITY fJr /t1 ~"' ··<~~ November 3, 1985 © Robert W. Oliver '"'!t1\lUTE Of: ~~ ,.~ ~ ~ ~ "' 3 • % C\ ~ -:< f" 1:: ~ -~ 't CONVERSATIONS ABOUT GEORGE WOODS AND THE WORLD BANK 2 A CONVERSATION WITH ANDREW KAMARCK. III the Baak. He was in Cargill's Asia Depar~ent. assigned to the New York City Phillipines. His name was Emmanual Levy. So I went down to Cargill. November 3. 1985 talked with hia. and said. "I've got this kind of a job. This is very Robert W. Oliver important. I think you will agree." and he agreed. "'You have just t:he kind of person we need. I think it will be good for all of us if we can OLIVER: Andy. we talked a good deal yesterday about saae of the find somebody for this. and you happen to have the guy. 11 Cargill was economics work in the Bank. but I wonder if there isn't a bit aore that very good in that respect. He agreed to release him. so that was how we might say today. Kaybe we could introduce the subject by my asking we got Bmmanual Levy to do statistical work. This included the if you would say a bit about your recruiting of econaaists for your statistical work that led to the World Tables and to the tables which staff. What kinds of people were you seeking? are now the. KAMARCK: I realized. when the Econcmics Departaent was set up. that we OLIVER: The ~1 had an enoraous opportunity. I also realized that there was a very KAKARCK: Well. the Atlas uses part of those figures. but the World limited time. The way these things work in a bureaucracy. when you get Development Report is largely based on that. the go ahead signal to do something. it doesn't last forever: you have I had some very specific slots I wanted to fill. like the one 1 to take advantage of it when it's there. We were given an eno~ous just mentioned. I wanted to build up some kind of a fiscal division. expansion of budget slots. and I knew it was very important to start so I was looking for a fiscal economist. We looked everywhere. The filling the slots as soon as possible. personnel department was very helpful in this respect. There was a guy One of the things that we did first was to look around the Bank to named Harold Dyer in the department at that time. and he really got see if there were possibilities elsewhere in the Bank. One of the jobs caught up in it. He went through all the records we had of people who that I wanted the Bconoaics Department to do was to work on collecting had applied for jobs. He wrote to institutions and people the Bank had the basic data we needed on developing countries. to start helping the worked with asking for suggestions. We had an enormous number of developing countries produce the kind of data they needed for their names. and we went through all of them to find people and to recruit economic policies and that the aid agencies needed. What I wanted was them as fast as possible. I devoted a lot of attention to this. This a guy who was very good at statistics. a feel for statistics. and had a is how we picked up David Henderson from the U. K. He had been in tremendous drive in that respect. I found out there was such a guy in Greece. I think. at the time and was more or less floating. We picked 3 4 up a guy from Brazil. (What was his name1 Paolo Perriera. a double- KAMARCK.: Yes. barreled naae. I've forgotten it.) He had a brilliant career after be OLIVER: Was David Kno:z: amongst those? left the Bank. became the central Bauk governor and all the rest of it. KAMARCK: I don't think so. I don't recall. I certainly don't recall. Irving wu very helpful in this regard. because there were people he OLIVER: Do you care to say a word about Sandy Stevenson's coming to had run into over the years working in consultation with the Fund the Econaaica Department and the importance of your deputy? younger people and senior people whoa be regarded as good. We went KAHARCK: When the department was set up. Berend DeVries became deputy. after thea. DeVries did not take on the responsibilities of the deputy director in Some of the we could only get on the basis of their coming for the Bank's set up that he was supposed to take on. He was more two or three years. so they wouldn't have to give up their careers at interested in pursuing some of his own ideas of research. He would get home: two Brazilians. for example. and an Israeli. David Kocher. who involved in various matters that interested him. rather than taking on was very. very good. We picked up Prank Taaagna. who had been at the the day-to-day administrative role that the deputy director is supposed Federal Reserve Board and was a consultant. He did not want to come as to take on. After a period of time. it became very clear that that job a full time person. so we picked him up as a consultant. We got Isaiah was not being done. We succeeded in making him an advisor to the Prauk of the Johns Hopkins School of Advanced International Studies. departaent. Later on. after McNamara came in. one time when Irving was We picked hia up as a consultant. We were looking in some cases at away on a long trip. a slot opened for an economic advisor in one of specific slots. specific backgrounds. We also wanted to have a group the area departments. and I went to McNamara and suggested that DeVries of ten people (Irving and I had discussed this) who had had a lot of be given that slot. He was transferred out of the Economics Department experience in developaent problems in their own countries and had into that slot. We clearly needed soaebody who could do the job. worked in different institutions that we regarded as brilliant. hard- Sandy Stevenson at this point was Associate Director in the Asia driving. willing to work hard and could come up with ideas. We tried Department. There had been two Asia Departments. one for South Asia. to do it as fast as possible. because we were pretty sure that this and for the rest of Asia. They were merged. One director. Peter opportunity would not last indefinitely. It was true. After two or Cargill. became Director and the other. Sandy Stevenson. became three years. we were told that that was as far as we could go. Associate Director. I talked to Peter as to whether or not he would OLIVER: So these were the years. 1 64. '65. and perhaps '66. something have any objections to Sandy's coming over and to Sandy to see if he like that. would wish to come. Sandy was interested. He came over. took the job 5 6 of Deputy Director and did very • very well. He removed an enormous deputy in the Bank. mass of material and work from ••· OLIVER: Was there a clear-cut division of responsibility between you OLIVER: I take it this whole story illustrates one of the things that and Irving Friedman. or were many of the things you did you did we talked about yesterday in connection with economic adVisors: a jointly? person who is a good econoaiat and good econamic analyst need not KAHARQ<: No. there was not a clear-cut division. except in same necessarily be a good ad.iniatrator. or •&¥ not seek to be an respects: Irving was responsible for the relationship with the administrator. President and defending the economics complex against the rest of the KAHARQC: Very definitely. very definitely. There are people who are Bank. He contributed strategic ideas to what the Economics Department interested in ideas and working with ideas and are not interested in and what the Bank should do. He was there not simply as The Economic working with people; who do not have the self-discipline to be able to Advisor to the President. but as a person whose job it was to look do the nuts and bolts. sometimes the very irkaoae details. that after the economic work of the Bank. When Woods brought him to the administration consists of. Very often it is very irksoae. and there Bank. the role that he wanted Irving to consider was advising Woods on are soae people that can't bring tbeaaelves to do it. It's better if what the Bank as a whole was doing outside of the economics complex they recognize it and everybody else recognizes it. the strategy. the policy of the Bank as a whole. This was something OLIVER: Did you yourself have any qualas about doing administrative that Irving was very good at. and this was very important to Woods. work after your long service as an economic advisor? Some of the major initiatives of the Woods period. such as KAMARQ<: No. At first. with DeVries there. I couldn't carry out my changing the way in which everyone looked at the problem of resources intentions. That is. I would devote ~self to the direction of the for developing countries. came from Irving and the economics people. departaent. worry about the recruitment of the senior staff. work with and it had an impact on the Bank as a whole. The attempt to increase the divisiona on the prograas and projects. devote myself to the size of IDA tremendously came out of discussions between Irving and relationships with the rest of the Bank and with Irving. As for the George Woods. and while George Woods did not succeed in lifting the inner administration of the depa~ent. I would have a deputy to do it. level of IDA to what he had wanted to. there is no doubt in my mind For awhile. I was doing the kind of administrative detail I can force that what he succeeded in doing was to change the limits within which myself to do. but it is not something I like to do for a long period of people thought of IDA. Until George Woods' time. they thought in terms time. H¥ idea was to get a deputy to do it. That is the role of a of resources for IDA of $150 million to $300 million a year. something 7 8 like that. The idea of thinking in terms of billions of dollars a year the rest of the Bank hierarchy felt that this was somewhat came from George Woods, and when it first came forth. it was regarded inappropriate. If you look at that Annual Report and then at the next with horror - this -.ount of money flowing from a aul t.ilateral agency Bank Report. you will find that the economic section is banished to a of this kind. But, as a result, over the years, IDA did become a separate section. It is not the principal section. it is almost an multi-billion dollar agency. This came out of the Woods era. Irving addendum. It is almost as though it were a report of a separate had a big role in that, and that is over and beyond what the economic institution. It took two or three years before the Bank as a whole complex had to do. accepted the fact that there should be an economic section. Included OLIVER: I think that is a natural transition•• also is a statistical section which provided some of the principal KAMARCK: Wait, there is one aore thing 1 should say, which I did not statistics which were of value to economic development. This was one mention yesterday and which occurred to ae later. There was a very of the very first things that the Economics Department did. important decision taken early on in the Econaaics Department. Shortly OLIVER: This was sort of an incipient World Development Report which after I caae back from UCLA, George Woods bad lunch with Irving and me. came much later. What he wanted to know is when we would be able to do an economic KAMARQ{: Much later. section in the ~ Report. ~ Annual Report was a purely OLIVER: Really the beginning. operations document. It told about the number of loans. to what KAMARCK: Very much the beginning. That's right. We had to educate countries. There was practically nothing economic in it. and George the Executive Directors and the Senior Staff that the World Bank had a Woods thought there should be economics. Here you have the leading view and should have a view -- which it made public so the world would development institution in the World putting out an Annual Report know what it was. without any economics in it. without any review of the state of OLIVER: That is very interesting. Well. let us now go on and talk development in the world; a review of the resources we were going to more generally about the years 1 63 to '68. the Woods years in the World develop without a review of the major problems in this field. He Bank. You talked a bit in passing about the IDA replenishment and the thought that saaething should be done about this. so he asked us how importance of raising the sights of the world on concessional type soon we felt we could do it. I put my neck out and said. ''This coming lending. What other major events or achievements of these years come time. 11 And we did. It really took a hell of a lot of hard work. but to mind? we got an economics section into the ~ Report. As was typical. KAMARCK: Oh boy. This is something that I really need notice of. One 9 10 of the most important developments of the Woods period &teRmed in part KAMARa<: I don't know where it came from. It may have been something froa the aaae point of view which I just mentioned in terms of the that was just evolving. I do recall that. in that period. there was Annual Report: the World Bank should consider itself the leading even one country that organized a consultative group on its own. It economic development institution which had taken. and should take. a set up a meeting. and it invited all of the agencies to come to the position of leadership. One way this was trananitted by the World Bank aeeting. It was an idea whose time bad come. but Woods put the Bank was by beginning to organize consultative groups and by multiplying into the leadership of it. consultative groups. A very important initiative that came during the Woods period What is a consultative group1 A consultative group is a group of was the policy toward India. The Bank with respect to India bad a financing agencies and governments that are interested in helping a policy which was quite different from its policy toward other particular developing country. The idea was that if a developing countries. Now I am talking as an outsider. because I was never country bad investment needs, the World Batik would aak.e a study • a involved in the policy in India. but everytime we had a discussion in survey of that country and have conversations with that country to the Economic Committee. or I talked to anybody who had been on a diagnosis what the position was and what the country could do and mission to India. the impression that I got was basically that. unlike should be doing by way of econoaic development. One of the things that the sort of thing that we bad done in Australia or that we were doing would come out would be an estimate as to how auch the count~ needed in other developing countries. the mission would go to India. the over the next few years. Then you would have this consultative group. Indians would more or less tell them what they wanted the mission to which would be chaired by the Bank. of all the sources of finance that hear. and the mission would come back reporting for the Indian were interested in helping this country. At that meeting. the Bank government. There was very little. as far as I could see. really. of would present its analysis of the country and would wind up objective analysis and criticism of Indian policies. recommending that so much assistance be granted on such and such te~s George Woods changed that with the attitude that India was our -- some hard loans, soae soft loans. a blend and so on. This was an biggest problem. A lot of resources were going into India. and we attempt. first. to provide leadership; second. to mobilize finance; ought to see what could be done to improve the situation. The details third. to encourage countries to improve their economic performance. you should get from Bernie Bell. There was an attempt to do sector This was a very big thing that Woods put a lot of effort into. studies. one after another. very thorough sector studies. I think the OLIVER: Was this his personal idea. would you guess? coal study took over a year. There was an agriculture study and a 11 12 power study: they really tried to get on top of each sector. what changed their agriculture policy. and the result is that now Indian needed to be improved. The moat i.aportant of these was agriculture agriculture is regarded as one of the successes. policy and the policy in aanufacturing. The Bank put on a lot of The other thing that the Bank tried to do was to change the policy pressure as a result of these studies to induce the Indian government in India in manufacturing. In manufacturing. the Indians had this to change their agricultural policies their agricultural price policy of investment in heavy industry. Other industries were kept on policies. and their agriculture research and tax policies -- to improve very strict controls. controls on the allocation of foreign exchange output. The impression that I got -- I don't know if this is true -- for imports and machinery. controls on the opening of new enterprises. is that the Indian goveraaent up to this point had not been interested controls on allowing private enterprises to compete with the government in improving agriculture output at all. enterprises or even just keeping the private enterprises out in areas The U. S. was giving Public Law 480 wheat and to same extent rice where government enterprises couldn't enter. The Indians were which was coming in and being sold for local currency. This provided convinced that it was iapossible to export manufactures. so they the local resources that the Indian governaent could then use to refused to consider changing their exchange rate so as to make it finance heavy industry. If you iaprove agriculture output. it meant possible. that you wouldn't have PL 480 grain coming in and you wouldn't get the The Bank under Woods put pressure on India. Woods had a carrot local currency. Froa their point of view. holding agriculture output and a whip: if they changed their policy. the Bank was going to try to down aade it possible for them to carry out the very stupid policy provide more resources and to mobilize more resources for them. The they had in those days of building up heavy industry on the model of policy was only partially successful. because the Indians did not do as the first Russian five-year plan. much as they were supposed to do. and the Bank didn't do as much as it Woods and the Bank tried to change this. and the Bank policy was then hoped it would be able to do. But there was a bit of a change. supported by the U. S. government. Lyndon Johnson decided that instead The Indians. of course. are doing much better now. I don't think that of making PL480 wheat available freely to the Indians. he'd keep. what the vast improvement in the Indian industrial policy. which is still he called. the Indians on a short tether. He would provide just enough far from complete. the Bank can claim credit for. I think that about wheat to prevent thea from building up resources. They would feel on all you can say is that the Bank started to make this whole thing the verge of running out of food. There was an eno~ous outcry in somewhat respectable. It is not the outstanding success the Bank had. India against LBJ and against the Bank, but. as a matter of fact. they and could take credit for. in agriculture. 13 14 Before Woods. as I bad mentioned earlier. the cast of mind that last global-type question, I wonder if you would say a word about wha't people bad was that international financing agencies and donors were you think George Woods had in mind in the way of ambition for the Bank doing as •ucb as they could for the developing countries. They were when he came to the Bank and even more generally what sorts of financing all the good projects. Woods flipped that over. One of the qualities you think are important in a person to be a president of the things that he did was to say that. if what we are doing for these Ba11k1 countries is beins stopped by the scarcity of good projects. what can KAMARCK: The first question is very difficult to answer, because I we do to help these countries to produce more good projects? What kind don't really know what be thought he would like to accoaplish with the of help? Shouldn't we get into technical assistance in helping them. Bank. He had the advantage of knowing a fair bit about the Bank, not You started building a whole policy within the Bank of helping these only from Black, but also from having done one or two missions for the countries produce better projects. This is where the PAO agreement Bank as a consultant. He also clearly bad an interest in the caae from - then. later on. with UNESCO and WHO. developing countries. He had been offered at one time the post of head The Bank started building missions abroad. missions that were more of the U.S. AID Agency. (It bad been withdrawn because of criticism of than representative aissions. The big example is the one in Indonesia his association with First Boston's role in TVA.) So he clearly had where you have a aission that was set up with projects people helping shown interest in the problems in the developing countries. the Indonesians prepare projects which would then be subaitted to the My own feeling is that since, in his investment banking days, he Bank. This also fits in with Woods' policy of no longer keeping the U. was a person primarily in the buying end, be was in the creative end of N. at aras length. of no longer trying to show that the Bank vas not investment banking, the side of investment banking that tries to solve strictly speaking a U.N. agency. In cooperation with the UNDP and the problems for enterprises, rather than on the selling side where the use of UNDP funds to prepare projects, the Bank became willing to investment bank bas created some securities and it is a question of accept UNDP financing of project preparation with the Bank siaply peddling the securities. The story about the Ringling Brothers administering this preparation. This kind of technical assistance Circus indicates that he tried to do not only good business but also bloomed in the Woods period and fitted in with that kind of good social policy. So I think this is probably what be had in mind. orientation. I think those are the things that pop into my mind right The only thing explicitly that I ever heard him say was that it n~. was very clear the Bank had to do a lot on the economic side, to build OLIVER: Well, this is a marvelous place to stop. If I might ask one up the economics staff and do economics work. That was the only thing 15 16 I reaaaber his saying in the professional staff meeting when he came to investment bankers initially rather than bankers fraa some other field. the Bank. There aay have been other things that he said. but that is I think in the long run the two investment bankers who were heads of the thing that I remaaber aost. the Bank for a period of time. Black and Woods, will be regarded as OLIVER: Do you think the fact that be bad been in the investlll.ent having aade auch more of a contribution than either McNaaara, an banking business R!X ! ! was an attribute as far as his capabilities industrialist, or Tom Clausen, a commercial banker. were concerned -- in contrast to his being a lawyer or a commercial OLIVER: I take it that you also think it is important that Woods had banker. let's say. been on the buying side as an investment banker? In the early years KAMARCK: Jive thought a bit about this. and of course one can't be the Bank rather ezpected to be presented with proposals by prospective terribly conclusive. Black was an invest.ent banker and Woods was an borrowers so that it could act more passively as a recipient of investment banker. and they brought an approach to the Bank which is proposals almost like a commercial banker making funds available when best suited for the Bank -- from the point of view that the investment creditworthiness was established. The Bank later became an banker takes a long-teDt point of view. He doesn't look at situations organization which itself perceived it had to help its clients to find aonth to month. He looks at situations over years. perhaps even over a out what kinds of projects were appropriate and what kinds of fiscal generation. An investaent banker deals with people. An investllent policies were appropriate. That is. perhaps, more the sort of thing banker thinks in teras of staff, not so auch the W&¥ a aanufacturer that a buyer in the investment banking area might be concerned with. thinks of so IDB.Dy widgets per hour--so lll&lly widgets per week, or year, KAHARCK: Well, even during the period when Black and Garner were but of eve~ tranaaction. Eveeytbing an inves'tllent banker does is running the Bank and they talked about the scarcity of good projects unique. Very seldom do they repeat the saae thing over and over again. setting the limit on what the Bank could lend. it was quite clear -- I A comaercial banker. to soae extent. is like a manufacturer in think this came from the investment banking side -- that you didn't that be sees a multitude of separate and, on the whole. fairly small accept a project necessarily in the form the client presented it to transactions compared to the whole. Hy feeling is that the World Bank you. In the Reorganization of 1952 when the Projects Department and is much more investment banking than it is commercial banking, the area departments were set up, it was made very clear that one of certainly much more like investment banking than manufacturing or any the reasons projects people were needed was so that, in looking at a other field that I can think of. I think the U. S. government and the project that was presented, they could help the country not only other governments were wise when they thought in tenRs of recruiting evaluate but make sure it had a good project: they would work with a 17 18 countzy to aake it a better project. An iuvest.ent banker on the the U N. They contrasted that position with the position in the Bank. buying aide doesn•t juat accept what the client gives you. he tries to and that hurt a lot of countries. The Board becaae more difficult in iaprove it in sa.e way or another. That vaa an iaportant element from that respect. I think that was an important element. the beginning. OLIVER: Is it worth mentioning. in that regard. Hr. Stone from OLIVER: Are there any burning questions which I should have asked you Australia? and haven't asked you over tbeae tvo daya'l KAHARCK: Yes. Well. Stone doesn't quite fit the pattern. Maybe he KAMARCX: One thing that auddebl.y popped into my aind is the does in this respect. I did quite a bit of work on Australia at one relationships between the industrialized countries. on the one hand. tiae. I don't regard myself as a Australian political expert. but the and the developing countries on the other. and the relationships clear impression I got was that the Australian posture in the British between the u. S. and the other induatralized countries. These shifted Coamonwealth was always one of being cheeky to the British. They were a bit over the years. In the very early years of the Bank. the u. s. the ones that stood up to the British. During World War II. as a clear was so dc.inant that even other induatrali.zed countries didn 1 t have all exaaple. when Singapore was being threatened by the Japanese and the that aucb to say. The British felt right from the beginning that they Australians were pulling back their divisions out of the Middle East to could contribute soaething. but aost of the others really didn't feel defend Australia. the British government wanted the Australians to they had much to contribute. They were willing to take U. S. divert one or two divisions to Singapore. The Australians told the leaderahip without auch question. That changed over the years. British to go to hell. In this particular case the Australians were particularily during the Woods period, and Woods had a much more right, because if a division had been diverted to Singapore. what would difficult tiae in that respect. have happened is what happened to the one of the British divisions: it The relationship between the industralized countries and the landed in Singapore and marched straight into a Japanese prisoner of developing countries changed a good deal too. The developing countries war ca.p. were increasingly beginning to feel their oats. particularly in the This was the willingness to stand up to the British. almost United Nations. and the Woods years coincided with an outburst of getting a joy of standing up to the British. As the British influence independence in Africa. There were something like 30. 40 or 50 new declined. the Australians basically learned not to look to the British members. and the voting power in the u. N. shifted. The developing for protection any more. They realized that their protector was the countries suddenly discovered that they could have huge majorities in United States. So to some extent they have shifted their attitude 19 today -- the attitude that they uaed to have of tweaking the British. Now they are tweaking the United States. John Stone, when he stood up to Woods, becaae an enfant terrible. He is a ..all guy, so it really appliea that way too. On the Board, to the eztent the Australian goverDDent knew what he was doing, it wouldn't have bothered the to show that ~ Australians can• t ,&!! pushed ~· Just because we have one-tenth the population of the United States, doesn't aean that the Americana can push us around.• I tbiult that that was a aeparate ele.ent. There may have been ataetbing personal in addition to that. John Stone, whoa I knew frc:a the tiae he waa a:n assistant in the Treasuey, an Australian Treaaury Attacbl! in London, always had a bit of a chip- on-the-shoulder attitude, like so many saall men h.we. '"I may be small, but by God you better not overlook me or I will have to kick you in the shins: in fact I will kick you in the shins to aake sure that you don't look over me.• There is a lot of that attitude in John Stone. and that may have also have been an iaportant factor. (LIVER: I think we have gotten quite a bit on two tapes in these two days. and I thank you very much. I'll look forward to another one when the proper time comes. Thank you very much.