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Bob Zoellick Comes to Town

August 15, 2011

April 22, 2010 - Washington DC., World Bank/ IMF Spring Meetings. World Bank President Robert B. Zoellick, opening press conference. Photo: Simone McCourtie/World Bank.

Hearing Bob Zoellick speak in Washington a few years ago, I concluded that if there was a presidency of the world, he would be the ideal nominee. He believes in opening markets, lifting growth in Sub-Saharan Africa, accommodating the rise of China in the world system – and he is a good friend of Australia.

As he confirmed in his address to the Asia Society last night in Sydney.

Zoellick, of course, is the president of the World Bank, as well as a former US Deputy Secretary of State, US Trade Representative and managing director of Goldman Sachs.

It’s the convergence of events in Europe and the US that has pushed the world into a new danger zone, he said. In particular the sturm und drang in congress alarmed a world that is used to seeing America show leadership.

Underlying this is a global shift. Today, one half of global growth is represented by the developing world. In the 80s it was only 20 percent.

Zoellick focused on potentially disruptive events in China without elaborating on what form they might take: another Tiananmen? unrest in the provinces over land and environmental issues? labour uprisings and strikes?

He was specific on another challenge, and I’ve never heard it put this way before: per capita income in China now is $5000; in 2030 it could be $30 000. Said Zoellick, “That’s like having 25 new South Koreas.” Which the world could not absorb.

China already sucks in 53 percent of the world’s cement, 47 percent its iron, 45 percent of its steel, half its pigs and one quarter of its soybeans. The Chinese will have to change their resource utilisation.

He said China has 85 million low-value jobs and the World Bank is working on plans to get those jobs to Sub-Saharan Africa, where already a variety of economies have been achieving five to six percent growth.

I’ve often been asked during presentations whether the US dollar will cease to be the world’s reserve currency, the currency with which oil is purchased for example. Zoellick had an interesting formulation on this one. He said we could be moving to a system where there are multiple reserve currencies.

Asked a question by Professor Geoffrey Garrett, Zoellick yielded probably his most interesting and thoughtful answer. He was actually confident about progress in the Doha Round. He said the US will be cutting farm subsidies, winding back ethanol subsidies and doing other things. This could easily be presented as a good package. It could win the support of China. And it could revive the progress towards freer world trade. Moreover he said the American administration should see an advantage in going on the offensive in trade. Not only avoiding protectionism itself but taking this package to the world and challenging other nations to get a move on.

As in many of these kinds of discussions, Zoellick was dwelling on China and avoiding India. Asked about this by Neville Roach – who pointed out that India was Australia’s third largest export market and our biggest source of skilled migrants – he said, “In India you can visit five centuries in one country.” Which probably leaves more questions hanging.

7 Comments
  1. Anthony Porter permalink
    August 15, 2011 1:47 pm

    When I heard that Zoellick was to become the next president of the World Bank, my chair moved across the floor. I remember quite well his time as US Trade Representative, applying pressure on behalf of wealthy US drug companies on the Howard government to reduce subsidies for drugs listed under the Medical Rebate Scheme. Though, from all accounts he appears to be doing a good job at the Bank.

  2. A E ANDERSON permalink
    August 15, 2011 3:34 pm

    Coming from a personage as eminent as Zoellick, these are remarkable comments. But I must question whether any sane Congress would risk alienating and annoying electoral constituencies by taking actions that might significantly increase the prices of food and commodities for voting consumers in the United States. Despite recent price increases for food products in the United States, prices for foodstuffs at the checkout lanes of America remain for the most part considerably cheaper than prices in Australia and New Zealand. I think the average American, used to filling the trolley with calorie-laden goodies each week, would be in open revolt if faced with the supermarket pricing of Melbourne, Sydney or Auckland, which even in the day of a high US dollar seemed dear to visiting Americans.

    What’s more, a not-inconsiderable portion of the agricultural subsidy is tied in with one of the United States’ leading social welfare programs, Food Stamps. I would hate to think a former Labour premier, in the tradition of the “Big Fella,” would laud the Americans for slashing the latter day corn dole, on which millions of impoverished, marginalised Americans (including idled workers) now depend. In this vein, it is perhaps not too strident to suggest that the low agricultural commodity pricing schema, created the days of Roosevelt’s New Deal, and modernised by Nixon’s famed-but-controversial agriculture secretary Earl Butz, has been one of the underpinnings of broader American prosperity in the last century. Cheap food, no less than cheap housing, cheap food and cheap (if not free) education, was and is among the very pillars that sustain and elevate the American experience. As a consequence, it remains difficult to see American politicians sacrificing this tangible good on the fickle, situational altar of free trade policy, the view of the World Bank and certain State Department internationalists notwithstanding.

  3. Watson permalink
    August 15, 2011 11:44 pm

    It seems amazing to me that conservative politicians in the US would sooner wind back unemployment benefits, Medicare for the elderly and educational equity programs than reduce the 15 – 20 billion dollar a year agricultural subsidies paid in large measure to a very small number of very carefully managed ‘corporate farm’ recipients – talk about upper class welfare!
    America’s bonanza of cheap food, especially corn, corn syrup and ethanol has been subsidized to the detriment of the economy and the health of the American people. A false economy indeed.

  4. boy on a bike permalink
    August 16, 2011 7:23 am

    Bob

    Off topic, but this may amuse. In an older post, we were debating how far people are willing to walk to a train station.

    In Bernand Salt’s new book, “The Big Tilt”, he finds that single, professional women living alone (who are growing in numbers) like to live within 500 metres of a train station – because that is as far as can be comfortably walked in heels.

    So there you have it – transport policy, urban renewal and urban consolidation is driven by the heels on women’s shoes.

    I wonder if trade policy and international relations have similar oddball drivers?

  5. Peter Pando permalink
    August 19, 2011 7:06 am

    Dear Mr Carr,
    In relation to the projection of ‘25 new South Koreas’ and its ramifications, this may seem off topic, but I once was in conversation with a man who said that he learned the value of a dollar through shearing sheep. His first job was the hard work of shearing and was paid per sheep sheared. Every time he looked at a sum of money after that job he considered how many sheep he would have to shear to earn that money. That was his realistic benchmark. The economist ‘rationalists’ in all likelihood haven’t connected projected financial projections to the availability of world resources, or if they have, they’ve decided that what matters is that they profit sufficiently from the status quo so that they will be the last people able to afford the last drop of oil, years hence. Alternatively, there is the geo-imperialist option which requires taking control of ‘developed’ countries and their resources, in which case economic expansion domestically can be, with the help of weak governments, translated into international expansion through investment and market-flooding. Mr Zoellick was able to put economic expansion in perspective , but the ‘level playing field’ of the laissez-faire market means that the biggest ‘players’ can stomp on little players like Australia. Currently the big players are not acting as the wise old civilisations they purport to represent. Match available resources to the expanding economies, and you might just see catastrophic inflation just around the corner.

  6. Kerry Wright permalink
    August 19, 2011 2:32 pm

    Interesting, Bob, But nowhere in this was there talk of humanity.

    Two dogs passed each other, one was coming from China, one was coming from India. The Indian dog had yellowed eyes, his fur was all matted, he was scruffy and thin, with feet broken from the rough Indian roads. The Chinese dog was sleek, well-fed and well-dressed, his fur shiny and eyes bright.

    ‘Hi. Where are you going?’ asked the Chinese dog, of the Indian dog.
    ‘India’ he replied. ‘Where are you going?’
    ‘China.’
    ‘Why are you going there?’ asked the Chinese dog, curiously.
    ‘It is obvious. Just look at me. Look at you.’ replied the Indian dog. ‘Conditions and life are obviously much better in your country than mine. But… I am confused…why are you coming to India?’
    The Chinese dog looked sad. ‘Yes’ he answered slowly. ‘Things are good now in China. But in China… we cannot bark.’

    A few days ago yet another tortured Tibetan monk was delivered to his family, hours before his death. Many people have died in Burma, around the traumas of the state- sanctioned Chinese dams.

    Aren’t there a few more steps to go before we shower China with accolades, or even just look with economic glee after Australia’s interests?

    I prefer India. But perhaps my language is not the language being spoken in this discussion.

    • Bob Carr permalink
      August 19, 2011 4:13 pm

      Read what I wrote below on Tom Friedman – how can China become a creative force if it censors Google?

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