other lessons from the bank but more generally is, you've got to build in feedback loops. nobody's got the perfect idea that solves all problems all at once. that shouldn't be an excuse for stasis, but in other words learn and try to use a transparent system to figure out how to improve what you're doing. >> you've now had obviously five years, going on five years of experience at the helm of the bank and you've got your both the stakeholders in terms of governments and clients. and you've had to sort of write a letter to you know, dr. kim as he comes in and say you know, here's some core things that you know, that i've learned both in terms of not only keeping the bank relevant but keeping the world bank group at the forefront of the role it plays as this premiere multilateral institution. what would you put in that? >> well, i spent about three hours with dr. kim yesterday so i'm not sure i can condense it

into a letter, and by the way, i think the bank is very fortunate. he's obviously a highly intelligent, highly accomplished very committed individual. and part of the way i'm going to answer the question is, i resist the idea of telling your successor what to do because i think that's their job. and this is something else that kind of fits a broader civil society notion. i think change is good. it's good for me, good for the institution. he'll bring in things that i didn't know. i have things maybe he has less experience with. so that's the starting point. but within that constraint, i'll say that -- a couple things. one, the simple focus on the client is very important. and it may seem obvious you know, if you think, well aren't you there to serve? but let me just give you an example in the course of the debate about my successor. there were some who devoted themselves to development but in

my view, they were repeating the mistakes of 20 or 30 years ago where they said ah, you know, we know the answer and developing countries should just focus on one, two, three. okay? and that to me is the elite top down model that's not going to work. and so frankly, i was somewhat disappointed that these people don't recognize that the way that the bank operates is to say look, what do you think the problems are? and what have we learned from other countries how to address those and by the way, here's some things that we think are kind of over the horizon. so let's take safety nets. you know, one of the lessons of the financial crisis in east asia and latin america in the '90s was macroeconomic stabilization isn't enough. if you don't get basic nutrition, you can lose a generation. if you don't get kids in school, you can lose a generation. now, the good thing is starting in mexico and then brazil, they developed these conditional cast

transfer programs that for a half of 1% of gdp, which certainly would make me envious if i look at u.s. budgets. they're able to deal with 15% to 20% of the bottom of the population and they connect the money with requiring kids to go to school and get basic health checkups so probably done more for women's health than anything in the history of mexico. at the same time we also learned lessons, like for example in the study in brazil showed if you give money to the woman head of household, you get much better use in the community than if it's the men. and in brazil and now mexico, we're trying to -- they're trying to expand it to financial inclusion by using cards so move beyond sort of the cash system. now, we've helped expand those to 40 countries, okay? now coming back to this point, one of my conclusions from the past years is, every country needs some basic safety net system because we're not going to be able to control food or oil prices or the other things that can hit people.

but what we can do is to try to make sure you've got in place something that helps those that are most vulnerable when crisis hits. and so we're doing an inventory of every country and trying to figure out well if not a conditional cash transfer, can it be a school feeding based system or something like that. so that's an interaction with the client. it's to show them what's been done but it's also trying to understand the problems that they see. so client focus. and then second, i guess, what's been inherent in our whole exchange which is you see the bank as a partner and how do we add some wheres the support, some where compare to advantage, some where we can teach, some where we can learn. so a network model but that's something i'm sure dr. kim knew well from his experience. i did, by the way, on the list of items i did discuss civil society groups and foundations. >> thank you for doing that.

really appreciate that handoff as a world bank president so open to this concept of the net world. it is interesting we reflect on the relevance of the world bank for years to come. i mean the level of capital flows out there is the core relevance, you know, resources, knowledge, you know? how does the bank play a critical role in what has been a really transformative on going transformative portion of human history of such reductions in world poverty as you know, parts of the global economy have stalled and so forth? so where is that key skill set? >> that's a great question because there's still a tendency and you can see this too in the succession to sort of evaluate the bank but how much money it's had. and frankly we have had as i said a quarter of a trillion dollars is not worth scoffing at but on the other hand, in the larger things it's still a modest amount. but i sometimes point out to people that one of the problems with understanding the world bank is it's called bank.

and so most people kind of associate banks with lending money at least they used to. and now they associate it with losing money i guess. but in reality where the bank performs best is combining innovative finance. we've got some great financial capacities to think about how to you know, rein index futures for various areas, try to help with trade finance and combine that with the knowledge and learning from the we generate that other countries generate that you generate and we create various platforms to be able to expand that but then to try to make investments that expand market institution and capacity. so it's not an individual investment alone but it's to try you know, how do you build a system by which others can expand.

so, you know, it may be a carbon market. it may be a local currency bond market. it may it be microfinance market. it may be the capacity in a conditional cash transfer system. how do you, in a sense, leverage that to expand it, and oh what i would summarize is say we're in the business of development solutions. and some of those solutions will come to the private sector, some of them will come with partnerships with civil society groups, some of them helps the government to use their resources better and it varies by country. so i was talking with donald kaberuka of the african development bank last week and he brought to my attention that now 54 sub-saharan african countries, 46 have proven energy reserves so the big issue for many of those countries is how transparent will they be, will they use it for inclusive growth, how do they avoid corruption, how do they take care of the environmental issues, how do they avoid dutch disease with the

currencies. and so the bank has to figure out how to have development solutions related to that. i'll give you a very practical example of this. i have a morning staff meeting every morning. so i have all the vice presidents regional and functional and others. and one of the things we were talking about was how in some of the post conflict states that have good mineral resources they've got big mining companies but one of the presidents said it's him with the mining companies. and so could he get some legal help. we do some of that, but one of the things that we talked about is developing kind of the quicker response capacity whether it's you know, a chinese or european or u.s. firm to help a country understand, well, you know, what should one expect? what are the norms of legal agreements and then what are the lessons how you develop this. so that's why again, i'm very suspect of silver bullets one size fits all. you know, it's the world of development solution. and we will keep learning how to do that better.

>> yeah. thank you. i'd like to open it up to our audience here and if someone has a question, do raise your hand. please keep it to a question or if your comments are short, fine, but -- >> can i make one other comment. >> yeah, go ahead. >> you know, one of the issues i get asked a lot too is well, okay, developed countries are all under stress. they're under -- been going through a terrible time. why does this patter to them. so why should developed countries contribute to this? well, you know, one starting point is you know, two-thirds of global growth over the past five years have come from developing countries. if you look at that in the '90s, it would have been in the 20% something. so you know, part of the answer and part of the point i've said is we're beyond a model of charity to poor people. this is in self-interest because we want to create more pools of growth. we know china is one and southeast asia is one, latin america, sub-saharan africa is growing 5% to 6% a year. these provide opportunities to

also sell goods, make investments and so you know, as the world economy grows it's going to benefit developed countries. that's one thing. second, if you don't pay attention, these become breeding grounds of problems. so whether it's afghanistan or that i was talking about with the development, you can't environment security unless you figure out some way to have an economy sort of based on it. whether it's based on the transnational spread of health problems and diseases and pandemics or refugees or immigration, you know, you all have sort of the commonality of interest. so it really covers security, it covers economics. it covers the environment. and you know, if you just take the united states, you know, it's 4% of the world's population. you know, 20% or more of the world's economy. you got an interest in what's happening out there, whether it's from your own sense of ethics or whether it's your economic or security self-interest. so institutions like the world bank help address some of those problems and help not only

improve the lives for people in those countries but thereby can come back and help europe and the united states japan, canada and others. >> obviously you're talking to a converted audience in terms of international audience with the desire to link ourselves together and create a common good both in the developed world and developing world. so i throw it open to a question. if you could raise your hand, identify yourself and don't be shy. i know it's always hard to get the first one out there. got one over here. looks likes an interaction staff person which was not a plant. >> no, not a plant. is this on? >> yeah. >> yes, thank you so much for your comments. i'm ken with interaction you've obviously had very broad experience both internationally and within the u.s. government.

i wonder if you could step back and reflect on what as an american, what single change or you know two or three changes in terms of our domestic politics you think would make the u.s. a more effective, a more responsible, a better global actor or citizen. >> well, i met with bob carr in the past week who is the nut new foreign minister of australia. very successful premier of new south wales, wonderful gentleman, had a strong interest in the united states and he said his message in washington was the united states is one budget deal away from being restored on the world stage. and i think -- and he was also saying that some countries in east asia were saying, look, don't spend your time with the united states. we're going to be the next power you know, so pay attention to

us. and it's a challenge for the united states on how to deal with that. so frankly, you know, my feeling is that whether it's a question of the united states' ability to be a strong economy, to be innovative, to support foreign affairs budget, whether it's security issues, it has to start at home and i think that's a key issue of trying to restore the fundamentals of u.s. growth which include dealing with the spending and debt and deficit policies. not relying solely on monetary policy as we've largely been doing because if you rely on monetary policy for a long time, you plant the seeds of other problems. i don't only mean the fiscal issues. it's also what i find interesting now and what i experience with the world bank is that because i deal with so many countries, there's a lot of innovation going on in developing countries the

developed countries should pay attention to. and one of the concerns that a lot of middle income countries have is avoiding the so-called middle income trap which you get to a certain level of income and growth, it tends to slow down. how do you keep up the productivity? well, these issues relate to the united states too in terms of energy policy, in terms of education. united states puts a lot of money into education of schools but what do we get for it really in terms of overall performance. so these are infrastructure. you know, when you read about the infrastructure proposals of the united states, they're all still talking about how to use public money, i can't go to a developing country that doesn't try to figure out how to have a public/private partnership for this. i can go to parts of china that will monetize the toll roads, but the state of pennsylvania refuses to do so. so you've got states that have liabilities but they also have assets and they're less open in using those assets than developing countries are. so i guess the basic point for

the united states is i think it's got to get its economic house in order but as part of that, i don't only mean the budget although i think that's a key part of it. it also is kind of freeing up some of the ingenuity and entrepreneurism and drive and building for a next generation. >> thank you. >> another question? >> they're awful quiet. >> when you stump civil society, you know, you've done a very good job. >> it's funny in my experience with civil society, most people don't all sit there quietly. >> very good. so i've got one i guess one in the back there and then we'll move up to the front. again, if you identify yourself. >> hi, thank you very much. aaron chassy from catholic relief services. mr. zoellick, how do you address the challenges posed worldwide by neo patrimonial states? i'm thinking about the article written by barry weingast and douglas north a couple years ago that talked not so much about the rent-seeking state but rather the rent-generating

state. thanks. >> explain it further what you mean. >> exactly. >> it's -- it's political economic system where the state essentially controls access to markets through political patronage. so it oversteps the political arenas into more the economic and even the social arenas where civil society organizations included are very much tied in the sort of top down vertical network of patron client networks. >> so like the corporatist state coming out of the '20s and '30s. well, let me start out with this. i think you know, what we've seen across the development field is there have been different approaches that have worked in terms of engagement of the state.

so you know, it starts out sort of 19th century liberalism, property rights, contract, basic performance, basic education, services and others. but obviously, there's been models sometimes of state-driven development. this gets to very tricky governance issues. so if you look at the history of a lot of state-owned enterprises say in latin america, they're not as competitive. they're protected and they may be a good deal for those who are part of it but they're not such a good deal for the society as a whole. you know, and here's an interesting issue. you're starting to see in the discussion of mexico the role of pemex which was part of the history and tradition of the mexican revolution and the role of the pri, but the pri candidate, you know, has actually been sort of saying maybe we need to relook at this. now, and because if you look at

the revenues for mexico, a big share come from pemex and the amounts have been going down, the performance is worse, the environmental performance isn't as good. on the other hand, you have some state owned companies like saudi an ram cole that actually are run quite well. so one of the things it tried to encourage was maybe to have the mexicans look at some of the other models but also whether they might approach sort of a change to consider additional role of the private sector. i think what the bigger issue presented by that related to civil society is that old corporatist model was almost like a pyramid where everybody has to fit into the system in some fashion. the labor unions are kind of part of it, the businesses all kind of have to kowtow to it and so on and so forth. and i think most experiences is that that wasn't as successfully

economically and it didn't lead to as free a society. and so in that sense, i think you know, the need to create more space for individuals, for community groups and others, it will be done differently in different societies. look, i obviously believe in democracy, but even short of democracy, you can have broader participatory systems. there's another aspect that i think one will hear more about and that is kind of the role of state-owned enterprises more generally. and this is a topic some of you may know with china. we produced a report called the china 2030 report which is really looking at the changes in china's growth model over the next decade or more. and frankly, i compliment the chinese, they've grown 10% a year for 30 years but realize that the model that they had coming out of deng chao ping in '78 with kind of export and investment led growth wasn't going to be successful going forward so part of what they

engaged with us on is prompting their own debate in their own political transition about these issues but once you get these enterprises, the state owned enterprises they become interest groups and they've got their own hold and kind of like the idea that they are given really inexpensive loans and they don't dividend things back to the public and threw build retained earnings and they have less competitive positions and so on and so forth. so the i think in some ways, it's intellectually intriguing because when you've seen the models of growth in some emerging markets and some of the difficulties of u.s. and others in the financial crisis, it's a more active debate but i think that over time, it's very important, my view would be that the discussion with civil society you know recognizes kind of the some of the dangers of some of these systems. under what conditions do they work better than others.

and also, what does it say about the good society in which you want to live in. so let me give you, again, a mexican example just because i think in historical terms. i was very active with nafta. one of the reasons that i thought nafta was going to be very important was because you could see that the old pri system in the mid '80s was breaking up. and i would at least argue that you know, the pri was a representative of that corporatist clientist sort of model. and then the question is, where would the pieces attach themselves, the unions, the businesses, the school groups and others and for me, nafta was much more than a trade agreement. it was kind of the embrace of north america with mexico and i don't think it's totally accidental that you then started to move to a competitive democracy and now you started to decentralize power to the state level. one of the issues in mexico is the capacity at the state level. then what are the roles of the

components of that system? this is still a fight in mexico today because was narcotraffickers, it's a question of whether they take over the judicial system and the local police forces. so i admire i think president calderon and his team have done heroic things in this but the challenge isn't over, and by the way, we go down to central america and they are much weaker in terms of institutions and capacity and that's where the drug traffickers will go. again, just to connect this to the bank, one of the things we had at a spring meeting was i worked with central america a lot over the years. we were bringing together the private sector in central america and civil society groups and some foundations and some universities to try to deal with a broader question of violence in central america, which is partly gangs, partly narcotics and others. i don't have the numbers in front of me anymore but the population of spain is about the same as the population of central america. and if you compare the murder rates in these two, it's just like exponential.

but part of the message this was intriguing to me was this group that we start out with was in some ways catalyzed by a school called incae, which is a business school in costa rica, nicaragua and it kind of creates a regional business group and one of the deans of the business school said came to me and said look, we're worried about the public administration in our societies. can we work with you to help develop the capacity of our governments to deal with these issues. as you know, sometimes in latin america and others the private sector said we'll stay as far as away from the government as we can. you know, it's corrupt, it takes our money. we'll build walls, and i think the lesson that i've seen in colombia or mexico or others is that will kill your society. so i thought it was a good sign that the private sector business community said we've got to get into this fight. we've got to get in. so part of what i was trying to do was to show how we could also work and support.

it's part of the larger aspect we've talked about about, you know, private sector is not only the profit making private sector obviously. it's the nonprofit, too. >> one more question right up here. yeah. >> thank you. thank you, president zoellick for the work you've done at the world bank. i work for the fao, and i happen to be from tanzania. my question to you is on youth unemployment. this week, about 90,000 students will graduate in tanzania from six. about 20% of them might go to college. the rest will probably have no employment or no alternative ways to find jobs. what is the bank doing to advise countries or to advise governments and what can you tell your successor to do when he comes in to deal with the problem of youth unemployment? >> thank you. >> well, let me start by saying around the world, so not only in tanzania or in africa but in countries, developing countries and developed countries, what i

find is a huge area of interest is the inner connectivity between education, skills, and workforce. you know, and we're working with a variety of partners to look at this issue. i mean this is an intriguing one. we started with the islamic development bank, part of our broader partnerships to do research on education and youth unemployment and we came up with an e for e initiative, education for employment including how you can do public/private partnerships and sometimes private sector performance, which by the way it turns out in malaysia and others there's a much larger sector of this done by the private sector to help interconnect people. it also talks about the education and having the feedback for the schools what employers are looking for without making it sort of a narrow training. but the bigger issue i think is this. our next world development report, so we've done -- these are sort of the landmark reports we try to do to push the agenda.

one we did on food and agriculture and then gender and conflict states. the next one is on jobs. and it's basically so this will come out later this year. and just to give you kind of a short form perspective of this, some of the questions it's asking is, i don't want to reduce this too far, but many of the economics profession would simply say jobs is an unemployment issue and it's simply a derivative of growth. you get certain growth, you create the jobs, okay? we're twisting the prism a little bit and trying to say let's understand the value of jobs from different dimensions. for example, individual self-worth. social cohesion. broader productivity in the society. okay? so some of these are what economists would call external analogies, right? then the question is as you

start to look at the problems from that, what are the gaps? they may be discrimination gasp, they may it be institutional gaps, there might be information matching gaps, but what with policies might you want to try to do to address those. and then when you think about jobs, it obviously varies by country and so if you're a country that has large informal sector, if you've got a big agriculture sector, if you're urbanizing and post conflict and one of them is youth. and i think one of the things that one -- that this study, i hope will come out, is to recognize there's a loss for society as well as the individuals if you don't make special efforts for people at early stages to get engaged in the workforce to feel that they are learning skills, but also a sense of social worth and other aspects and there are lessons that this is the nice thing about development solutions we've seen from various countries things you can do that are consistent with markets and incentives but to encourage them. it may be entrepreneurship.

in some countries it may be public works programs. it may it be different things that allow people to get that transition but from school to work to jobs in a way that is good for them and good for the society as a whole. so when you ask what will i do to my successor, i'll say well you inherited a good world development report. >> i think i agree to wrap up how we tend to look at the world of sort of the glass half full or the problems there you know, economics are often kind of termed as the dismal science but perhaps looking at the other way from this. you know, if you had to conclude what, are the bright spots out there? where are the places that we can build on and look at that you think might be the shining spots of human prosperity in the years to come? >> well, at the big level, i then think about what we talked about in development. think about the fact that countries that used to be considered as charity cases are now driving the world's growth.

this is a huge opportunity. i mean, you know, and it's not only in terms of gdp statistics but it's in terms of the individual fulfillment of each of those people so you know, the scientists, the engineers, the potential creative entrepreneurs you know, this is an enormous thing and people if not given an opportunity so rather than be negative about this, i see huge potential but you need to keep trying to find win-win solutions. now, and the most individual level i'll tell you what i always find motivating and i'm sure many of you do. when i work with the very poorest and i remember i've had the good fortune of working with a group called the self-employed women's association in india and it works in south asia. i think over 2 million women. a lot of these women are very, very poor. and have been given no chance in life. you start to see what a little opportunity makes and a little difference makes and the empowerment of them in terms of whether one of the things we