The Multilateral View

RICHARD N. HAASS: Well, good afternoon and welcome to today's lunch program of this first ever -- but we hope first of many -- gathering of the Council of Councils, as we are calling it.

Just a couple of housekeeping remarks for a second. If people would please turn off your cellphones, that would be a great help -- BlackBerrys and all such devices. Secondly, this session is on the record. Let me just say that.

Let me -- and we'll repeat later, but just let people know -- the building we're meeting in is only several years old, and it's environmentally, shall we say, advanced. It's a Gold LEED building. And what we'd like to do -- if anyone would be interested, after the last session today at 3:45, we are more than happy to give you a tour of the building, just so you can see what sorts of things have been done here, both environmentally, but also in audio-visual type things and all that, which might be (of) interest to some of you from other organizations.

As I said, this is the inaugural meeting of the Council of Councils, which is a network of policy institutes from around the world, and the whole idea is to discuss, identify global challenges as well as global opportunities. And hopefully out of the discussions will emerge some ideas, some initiatives that people then can take home and introduce either into their own respective public debates or possibly as well into decision-making circles within their own countries.

Some 20 countries or so are represented here today, roughly tracking the G-20, the difference being that the agenda here is far more comprehensive. The agenda here is not simply economic or even economic and energy and environmental issues, but deals also with the full range of political challenges -- for example, humanitarian intervention, those questions -- as well as security challenges.

We just spent an hour and a half discussing -- we didn't quite solve, but discussing the challenge to the nonproliferation regime posed by -- posed by Iran. We also had a general conversation about global governance, the whole challenge of coming up with common rules and norms and, ultimately, institutions to bolster what Hedley Bull would've called the society part of international relations, as opposed to the anarchical dimension of international relations.

I would like to offer special thanks to the Robina Foundation, who have made not just this possible, but the larger program, the council's program on international institutions and global governance. And I'd also like to pay a special welcome to one of my bosses, to Carla Hills, who is the co-chair of the board of directors of the Council on Foreign Relations and a former U.S. trade representative. Indeed, she is one of two former U.S. trade representatives with us today -- actually, one of three; we have Charlene, Carla -- Charlene Barshefsky -- and Bob Zoellick. So probably nowhere in the world at this moment are there more U.S. trade representatives, and -- (laughter) -- who knew? And so any of you tweeting can tweet that. (Laughter.)

I'm thrilled to welcome Bob Zoellick. Bob is the 11th president of the World Bank Group. And he's a longtime personal friend. Let me get the conflict of interest out on the table. We've worked together for more years or decades than either of us probably care to remember. And he's also been a longtime supporter and active member of the council. He first spoke here in the early 1990s, roughly two decades ago, and he served on the council's board. And our statisticians tell us that he's actually spoken here more than 20 times. Did you know that? For no fee -- I should point that out.

Bob is in the nonprofit business, as are we. (Chuckles.)

I won't spend a lot of time on his bio. I already pointed out he was U.S. trade representative. He was deputy secretary of state as well as several other positions in the State Department. And Bob played, I thought, an extraordinary role -- and if I were still teaching at the Kennedy School, I would highlight him to show how in government, you can be entrepreneurial. And Bob was truly entrepreneurial after the fall of the Berlin Wall in stitching together what became the German unification inside of NATO. It was policymaking, I thought, at its highest and finest.

What we're going to do is have a conversation for a few minutes about economic issues and the Bank and all that, and then we're going to open it up to you all. And I won't go on to -- I won't filibuster, even though we're in the city of filibusters. And when we get around to Q-and-A, we'll hand out microphones, and we'll just ask you to identify yourself before you speak.

You OK there, sir?

Again, welcome, Bob.

A few weeks ago you published a piece in our magazine, Foreign Affairs, which was titled "Why We Still Need the World Bank." OK, let's start with that. Why do we?

ROBERT ZOELLICK: Well, first, let me thank all of you for taking time to come to this. Richard explained to me a little bit to me about this concept, and I think it's a great one. So I know for many of you, it required a little bit of a journey, but it sounds like a superb idea to be able to get the councils together.

It's like trick questions, because aren't they supposed to read the article? (Laughter.)

HAASS: Give him -- give him the Cliff Notes. (Laughs.)

ZOELLICK: Well, let me -- let me take this approach. When I came to the World Bank Group about a little less than five years ago, I had a slightly different perspective than some had in that some who come purely from the economics profession or even development economics -- and that is I view the World Bank as part of this very thin tissue of multilateral institutions that was created during and after World War II to try to deal with the problems that were seen as -- the political-economic problems that were seen as driving the crisis in the '30s and leading to the world war.

And this includes the IMF; it included at that time the GATT that became the WTO for trade; it's got the World Bank, other institutions.

And it's striking if you go back and you look at the issues that people were concerned about: currency in international capital flows, you know, free trade, reconstruction of broken states, development, investment flows. Those remain very vital issues, but obviously, the circumstances changed enormously.

So I saw part of the challenge for the Bank and my challenge as a leader of the bank as how do you modernize multilateralism; how do you -- recognizing that nation-states are still going to be the dominant player, how do we take this thin interconnecting tissue, if you want to call it, related to global governance, and make sure that it's updated for the current age. That gives you a slightly different strategic perspective.

So for example, if you look at this solely from an economics perspective, in 2007 you'd say, well, in 1945 you didn't really have private capital flows, and so -- but now you had a whole large flow of private capital that dominate the official sector, so why do you need this anymore. OK, well, problem number one is that what economists thought in 2007 -- (chuckles) -- turned out not to be the case.

In 2008, 2009, we learned economists can be wrong. But even more than that, it missed the fact that a lot of what the Bank does is not just invest money; it's the knowledge and learning and interconnecting transfer.

Or another perspective -- this, again, seems obvious to me, but it may come back as a debating item. When I came to the Bank, there was a school of thought that said, really, the middle-income countries should just be sort of taken out; you just focused on the poorest. Well, if you believe in this as a multilateral institution, that would be a strategic mistake of huge proportions because actually you want to get -- first off, there's some huge development challenges in the so-called middle-income countries. About, you know, 75 percent of the people living under $2 a day are in those countries. But, in addition, you actually want to get those countries to be responsible stakeholders in the system.

And so just to give you a very current example, the Bank's got a lot of attention recently because of a report we did called "China 2030," which is looking at the structural changes of China, that it will need to have a different growth model. And I've found this has got interest in other middle-income countries; it's got the investment community; it's got the interest of Congress. You know, if you said, well, we weren't supposed to deal with the Chinas of the world, then you wouldn't be doing reports like that. And yet it's fundamental to the rebalancing.'

So part of what I try to do in the article is talk about the intellectual and strategic position of the Bank, but then I also talk about some of the challenges of modernizing the institution and opening it up, changing the development model so there's not a monopolist of sort of people with Ph.D.s from certain universities and sort of democratizing the development process. So that's part of the challenge.

HAASS: I've noticed from your previous lives -- and we've talked about it before -- you're a great believer in institutions. Let me take a second, because it's so close to this -- what we're talking about here, governance. What do you see as the real advantage of institutions? Why are they so important?

ZOELLICK: Well, since you got a pretty erudite group here, I mean, I could talk about Edmund Burke and kind of the view of institutions that --

HAASS: He couldn't come today, but we've got -- (inaudible) --

ZOELLICK: (Chuckles) -- he couldn't come today, but he'll be here in the evening session when you do the Ouija Board.

HAASS: (Laughs.)

ZOELLICK: Well, I think that the institutions, whether domestic or international, play critical organizing roles, intermediating roles. It -- and in an international system, I think what sometimes people underappreciate is they can play a role in identifying issues, sometimes helping to bring people together in a mutual fashion on -- try to address those issues, sometimes they can bring additional resources to bear. And so they're the heart of problem-solving.

If you think about challenges, whether it be private sector or public sector, it's a little hard to do in an atomistic way. So institutions become the enabling power; they become the societal -- the social capital. They become the glue. But a critical point: Institutions have to adapt too. And I think one of my lessons from the public sector is that, in the private sector, the market demands are such that institutions are compelled to adapt or die; in the public sector, they can drift for a long time.

And so this is -- this has implications for how you open up the institution to criticism and engagement (and ?) others, but it also has implications for the nature of how you lead the institution because you really -- you have to keep folk -- there's a tendency in public sector institutions where process becomes all controlling. So I have this debate sometimes in other international forum(s) where people talk about quote, "legitimacy," as -- and they define it simply by the participation. My view is legitimacy also has to be driven by effectiveness.

My view is legitimacy also has to be driven by effectiveness. The League of Nations had one legitimate model that turned out not to be very effective, OK, so the U.N. overhaul was designed to partly deal with that. But I find when I deal with other international institutions like some of those in the U.N. system, they've drifted a little further away from the effectiveness model. And I think that it's incumbent on people running international institutions to try to sort of get that balance right.

HAASS: Before you said the World Bank does a lot more than dispense money. It's almost something of a misnomer. So if you could rename it, what would you call it?

ZOELLICK: (Chuckles.) Well, I don't think the name is so bad. I once had a friend who's now deceased who, when he talked to me about the institution, said, look, if you have an institution that has the two worlds -- words "world" and "bank" and you can't do something with it, you know, you're missing -- (laughter) -- but the reason that I highlight the -- why the Bank causes it a problem is that you'll see when many people assess the Bank -- and you see this when it's -- they'll look at the -- sort of the loan flows or -- so you now have people comparing it with some of the big development banks in developing countries or others.

And my view is is that when the World Bank is most effective, it combines three things: One, we really take knowledge and learning from all quarters of the world. And what's really changed with incredible rapidity over the past decade is the degree to which that is now coming from developing countries to other developing countries. And we try to update it, customize it, share it with others.

And then second, you try to have your investments or projects so that they have a multiplier effect. So you're looking at building markets or institutions or capacity.

And then third, what distinguishes us from a university or the OECD is that we can be innovative with different financial ways.

And so, again, many people may not be aware we have a private sector arm, IFC. So we make equity investments. One of the things we created was an asset management company to change our financial intermediation model so that people will invest in a fund that we create. We invest in private equity funds, about 180 around the world. So there's diverse ways of having the financial innovation, and that's again where sometimes I think people, when they think about the Bank, think about it as traditional, you know, 1960s major loan program.

You know, we use rain index futures for countries because you can see, in certain countries, that are (heavy with ?) agriculture that if the rain is below a certain level, you're going to have a huge hit to the crop. You can use insurance programs. So, part of it is how do you use the tools of financial innovation for development, but always keeping an idea on the sharing of knowledge and information.

Let me give you two current examples that I've been focusing on.

The safety net programs -- we're in a world environment where I think we're going to have to expect considerable volatilities and uncertainties. You'll see some policy efforts to try to control those. I'm not sure how successful those are going to be, whether it's food or energy or natural disasters or others. So it makes sense, as a matter of policy, to try to see if you can have effective, efficient, low-cost programs that provide a basic safety net.

Well, many of you may know that there's a program that started in Mexico -- it's got a lot of attention in Brazil -- called "Oportunidades"; "Bolsa Familia" in Brazil -- they're called conditional cash-transfer programs, and they give money to the poorest people in communities. Varies on the program, normally maybe 15 to 20 percent of the population, on the conditions that the families send their children to school, and they get health checkups. So it's probably done more for women's health than anything in the history of the Mexico.

The Bank has worked with over 40 countries to expand this program, OK? And they customize it for different circumstances. And what's striking is in Mexico and Brazil, it's done for about a half of 1 percent of GDP, OK? So if you consider entitlement programs in the U.S. and Europe, this is a pretty darn efficient investment, OK?

Now, you have other countries that may not have the capacity to have those set of programs. But -- so what have we learned about school feeding programs, community-based efforts, so that you have some basic safety-net protection? So that's an area where you take sort of knowledge and learning and expand it across regions but always have to customize.

And I'll give you the direct relevance: You look at a lot of the subsidy programs across North Africa, and they're a huge waste of money. I mean -- and so you're spending a lot of money, not getting much for it, not focusing on those most in need, not protecting people.

So one of the things -- I just came from a function over the weekend, which was talking more about U.S. policy. What I find somewhat striking in the world of so-called development is that there's a -- much more of a -- what I'll call a relentless pragmatism about what works, as opposed to getting locked into ideologies, which I sometimes see in the developed world.

And just to give you one other example that I think will be very important -- and this is true for developed countries as well -- I can't go to a developing country that isn't interested in infrastructure investment, and there's a certain amount you get from the public sector, but obviously, people want to get public-private partnerships, not only for the money, but increasingly, in middle- income countries, it's because they're run more efficiently; they -- the design package makes more sense. So we've created a hub in Singapore that is trying to sort of take the knowledge of that region and others about how to design these models so we can move beyond a series of one-offs.

But to give you a sense of the changing Bank, we're also working with Singapore to create a special infrastructure investment fund that will go along with this process.

So -- and then to bring it back to, say, the United States, obviously, a lot of the states are having financial problems, but people are only looking at the liability side of the balance sheet; they're not looking at the assets. So Mitch Daniels, the governor of Indiana, was able to privatize or monetize his toll road for about $4 billion. It was controversial at the time -- ended up being a big success. The state of Pennsylvania couldn't do it. So I point out to people that, you know, in communist Chongqing, you can monetize a toll road, and in capitalist Pennsylvania, you can't.

So the -- part of the message of this is -- and it's relevant, I think, for a group like this -- there's -- even 20 years ago, OK, when Carla was working -- (inaudible) -- USTR, Charlene, there was still a common assumption about a North-South knowledge transfer. Now it's increasingly South-South, South-North. And that's a good thing.

HAASS: That actually segues naturally to my next question, which is I -- you made the shocking pronouncement a few minutes ago that economists have been known to be wrong. (Laughter.) And it's good we're all sitting down in this room. Where are we now, then, with this debate about models? I remember when I was a graduate student looking -- and studying economic development, and you used to have the debate between sort of top-down and bottom-up approaches, market approaches versus so-called social overhead capital and, you know, large state role. Where's the debate now intellectually? What do -- what -- how has the balance swung, if you will -- and maybe not -- in this debate about markets, private sectors versus public? You just talked about public-private a bit. Where's the theology or the ideology now? What's happening?

ZOELLICK: Well, it varies a huge amount. And my major point is that I think in the developing world, the key is that it's not theological; it's pragmatic about what works.

And I guess I'd take the question and tilt it in one direction that I've been more worried about because it may be relevant for the work of these councils.

There's a lot of focus in the globe today about the macroeconomic stabilization, the -- you know, basic fiscal and monetary policies. One of my concerns is that -- and this is another way of answering your question about debate -- is that there's going to be a need in all countries to focus on the structural change. So if you're talking about models, this is -- really takes you more to the microeconomic. So the China 2030 report was about this in the Chinese context, but it's true in Brazil; it's true in India. And it's definitely true in the United States -- (chuckles) -- Japan and in Europe as well.

And the reason I worry this doesn't quite get enough attention is if political leaders are unable to take this on, what I suspect we'll see happen over the next year or two is that the monetary authorities -- and I'm not being critical of what they've done so far, but the monetary authorities will feel the pressure to use a tool that really isn't designed to fit the problem. And you're going to continue to see monetary policies that are extraordinarily unusual by historical standards, and I think they will plant the seeds of future problems, OK?

Now, the nature of those problems is it's always very difficult to predict, but I'll just give you one. I've spoken to some of the Federal Reserve banks in the United States. I was out at the Kansas City Fed last year. And you know, when you go to places like that, you ask local questions. I was asking about farmland prices. And farmland prices are really going up, really at real levels, as I recall, similar to where they were at the height that led to the farm credit system crisis in the early '80s. Now, right now they're still covered by cash flow, but farm prices are relatively high.

So what I'm -- my point is that I think if the economies, developed and developing, don't focus on the structural issues and the microeconomic issues that are fundamentals to growth, we could see that as we, you know, continue to go to phases of this recovery, we could be planting the seeds for a very serious future problem. And for emerging markets, which are the ones I'm most concerned about, this will mean you'll probably have a rather modest growth environment with lots of volatility and uncertainty, which means go back and build domestic demand, infrastructure and be uncertain and be prepared for difficult moments like I mentioned with safety-net policies.

HAASS: I'll just ask a couple more questions, then we'll open it up. One of the issues historically has been uncertain American and -- popular and congressional support for international institutions. Where does that stand with your institution?

ZOELLICK: Well, at least as of the last year we're a bit of an anomaly, but this is -- let me explain the context. We achieved the first general capital increase in the Bank in over 22 years. The last one, I was actually working for Secretary Baker at the Treasury Department. So in an environment in which people are watching their dollars closely, an environment which is sort of anti-foreign aid, where there's populism, we were able to get this through a Democratic Senate and a Republican House.

There's a actually a little bit of a lesson there. (Chuckles.) And the lesson is I spend a reasonable amount of my time working with legislators -- and I do this in other countries as well -- but part of this, in the case of the United States, was trying to get an appreciation of the value of the Bank, having those that might be against it to recognize -- at least maybe not attack it.

So it's a -- it's an -- I don't want to make too much of it, but I happen to believe that on the key issues that are going to be facing the United States, things like broad-based tax reform and entitlement reform, things can be done, but you're going to need an executive leader, and you're going to have to figure out how to work the system a little bit better than has been done before. But that takes us in another direction.

But I -- but I would -- I guess I would say you got, you know, Charlene here and Carla here too. Let's take trade, where we worked together. You know, in -- it just -- the reality is unless an executive pushes this, it's not going to happen, you know. So don't -- you know, and it was actually kind of amazing that in the case of the three FTAs that got done -- of course, that happened because Congress decided they wanted three, not one, done. So that was to Congress' benefit.

But the reason I say this is -- again, I don't want to get too U.S.-centric here, but I was looking at the fact that, you know, with the Colombia and Panama FTAs done, the United States will have FTAs with about 50 percent of the GDP in the hemisphere, not including the U.S., so not a bad starting point. And we had tried the FTAA -- Charlene and I had tried this, and it ran into difficulties with Brazil. The dynamic has changed, in part because of the rise of China.

So there could be some interesting opportunities here in the Western Hemisphere, but they're not going to come just out of the sky. Somebody is going to have to push them. Again, that means organizing -- by the way, this goes back to the Bank story. In the case of the Bank, I organized the Chamber of Commerce; I organized other groups and so on and so forth, so I could go to members and say, here are people that support it.

And there is -- there is a -- there are -- there are -- if you think about the U.S. role in the world, there's actually a lot of opportunities out there. The United States is still the linchpin on a lot of this. But it -- that doesn't just happen. So going back to working with the Congress on international stuff, you kind of really have to -- the -- it's the responsibility of the executive branch, and then working the others levers in the system.

HAASS: I guess I'll ask you ask one last question, which is close to our intellectual --

ZOELLICK: Just to -- well, just to give you -- just in the spirit, because it might of interest of other people here: Take this "China 2030" report we did.

You take that report apart, and there's a good discussion to be had about what China will do. But there are lots of opportunities there for -- to change what is kind of the zero-sum U.S.-China economic agenda into cross-investment issues, service industry expansion, energy sector, IPR and innovation. So you could build off what China itself wants to do in a win-win fashion.

So does that maybe make a little bit better sense than continuing to have the same debates that people have over the rather narrow issues?

But the point is -- I mean, I was actually pleased Chairman Baucus raised this with the USTR in a hearing. OK. Well, it wasn't accidental, because Chairman Baucus was interested in this, and I've gone up and talked to him about it. But to be honest, it should kind of come from the other side too.

HAASS: Duly noted.

One thing that's come up here in our talks this morning is the relationship between efforts at the regional and global level.

ZOELLICK: Yeah.

HAASS: Could you just say something about -- and you got all these regional development banks. What's the relationship? And is there a conscious division of labor? How does that work?

ZOELLICK: Yeah. Well, you know, my -- this happened in trade as well. I believe multilateralism includes regionalism, and I think, you know, there's a lot that we've learned about while economics are a component of it, but whether it's immigration, whether it's security, whether it's narcotics -- I mean, the whole history of the European Union -- and so people who decry regionalism, I think, are not recognizing sort of realities. And so -- and moreover, the ability to interconnect these regions in an open regionalism, as was discussed in the Asia-Pacific.

So one of the things -- just a small insight -- at the bank when I came, which we really really weren't doing that much of, is that -- (I see Yusuf in the audience ?) -- we started to work much more with regional institutions at institutions, ASEAN as an institution, in Africa not only the African Union but sort of regional institutions.

And so part of our service is to try to understand how to help their capacity. And if you take development issues in sub-Saharan Africa, for example, they're going to be critical to sort of build larger markets and how do you have the infrastructure and how do you reduce the cost.

Now, in the case of regional development banks, one aspect of that was that I tried to organize in a more coherent fashion our cooperation with the regional development banks. In some cases, they may take the lead; in some cases, we take the lead; we work over that. The one part, though, where I think regionalism could go to far is, remember, I talked about a knowledge -- a global knowledge transfer. One of the -- where the Bank is at its best is to -- being able to transfer knowledge across regions. If you're a regional bank, you don't really have that facility. But they undoubtedly will have capacities that the World Bank doesn't have.

So I tend to, in structural terms, look at the world more as a Venn diagram with intersecting circles. And so I -- it doesn't -- in a sense, the -- some people describe multilateralism in a(n) old- fashioned -- what I'll call mid-20th-century hierarchical model. I think that's not going to work; it's a mistake. And I think it doesn't recognize the diversity of the international system.

And I'll just -- I'll give one other little insight on this that some people here might be interested in. You know, climate change is an issue that I first started to work on, actually, when I helped get the Rio agreement through in Bush 41's administration. And the -- what happened in -- with the UNFCCC process is there's kind of -- talking about international governance; I think that was one of your topics -- there is this view, well, we must get all 195 countries to agree to everything big enough for, you know, climate change (for the world ?) all at once. Well, good freaking luck.

You know, and so to be honest, you know, I've been part of more agreements and -- bilateral, multilateral than probably most people, and I -- so I can know what they take to get done.

But I'll give you a very practical aspect to this.

I went down to see President Calderon in Mexico about six or nine months before the Cancun meeting, and I outlined this "weltanschauung." And then I said, you know, what I would do? I said, here's individual papers on building blocks: energy efficiency, technology, avoided deforestation, less plant soil carbon. And if you actually go back and look at the real agreement, it was that countries were supposed to build national action plans.

I said, so what if you have 150 countries agree on combined national action plans? So you don't have 190, but you got 150. And that's exactly the model that they followed, and I -- that's the reason they were successful. And ironically, the more that you don't allow one country to hold it up, the more you're actually going to have a chance of getting it done.

And the key on this was then I went to see him the week of the final meeting, and I said, Mr. President, I said, you know, you probably think that consensus means all countries. (Laughs.) I said, go talk to your lawyers in the Foreign Ministry because there's varying views of consensus. And I said, you might find one country, like Bolivia, that decides it wants to hold you up after you've got everything else all lined up for whatever reason they have. And I said, so, you know, be prepared to think of a way you can describe consensus without a country, and it was one of these forecaster -- (inaudible). It was Bolivia that tried to hold them up.

So the -- I emphasize these because, as you -- as Richard and I both know, there are views in America that say -- that kind of says, oh, well, you can't make any of these multilateral systems work, and they're sort of imperfect. I think that's a terrible mistake. But, on the other hand, I constantly find myself having to sort of issue -- kind of argue a pragmatism or realism against those who argue, you know, a rather utopian view.

HAASS: All or nothing, you may end up with nothing.

Why don't we open it up and, again, just wait for a microphone, and just introduce yourself, your name and your institution, and toss up a difficult question for Bob.

ZOELLICK: Or an easy one. (Laughter.)

HAASS: Or an easy one, if you insist. Sure. Let's start here.

QUESTIONER: Thank you. My name is Kuseni (Dlamini ?) from the South African Institute of International Affairs. My question has to do with the World Bank and its leadership. There've been some debates around the process that's used to choose the head of the Bank. I'll be interested to hear your views, Bob, as you're about to leave this very important institution and having done such a great job. Do you think we should move away from the established practice of having America decide and having Europe decide on the IMF and allow the emerging powers from emerging markets to also contest for the position?

ZOELLICK: Well, the process has gotten better in the sense that our board -- our board meets and decides that there are certain characteristics that they're looking for and whatever nominations will go forward. People will have to present their case and so on and so forth. But the United States has 15 percent of the votes and Europe has a larger amount, so that's the kabal that could guide it in the past.

Let me start this level. I think it is actually critical for the institutions to broaden their engagement at multiple levels with emerging markets, but it's -- and a lot of this focused on voting shares, OK? And we made adjustments in voting shares. I honestly think sometimes that becomes an overstated argument. So let me start with this.

One thing is, we added a chair for sub-Saharan Africa on our board, another chair, which actually South Africa and Nigeria share. And because we don't really take votes, that was probably more important than kind of a voting adjustment.

Second is how you run the institution.

So yeah, you can actually see some of the commentary about the Bank now is that I was -- been very much driven by a client-driven approach, what are the clients interested in, and then share the knowledge, so on and so forth. The -- interestingly, some people who actually would come more from what I'll call the left-of-center side have what I'll call the monopolist view that -- you know, that you should do this, this and this. That's actually, I think, what the Bank needs to get away from.

So -- and then another aspect is the staffing. And as you probably know, I brought -- about half the officers are now women and in much larger numbers from the emerging markets.

Then it just leads to the question on the U.S. And I guess I'll pose -- for the presidency. I'll just pose this part. Some people pose this question to me in an interesting way. They said, is it time for the U.S., you know, not to be president of the Bank anymore, OK? And that's an interesting perspective because it would suggest, in a merit-based system, that an American cannot run the Bank, OK? And here's where I guess I'll -- going to twist this in a little bit different way.

As someone who's worked a lot with multilateral institutions and tried to get the United States to work more effectively in that system, I think it's very important that the United States have the responsibility of running some. And I'm not going to say which ones, but I will say this: There's never been an American who's headed the WTO; there's never been an American who's a U.N. secretary-general; there's never going to be an American who is going to be head of the regional development banks. So you know, there's -- never had an American who's headed the IMF.

So if you're going to change the whole thing, all I'm saying is somewhere in that system, I think it's good for the United States to bear the responsibility of the multilateral system because, going back a little bit to what Richard said, and some of my colleagues in the room here, I've found that my being in that role actually compels people to engage with these institutions more than they might otherwise.

So I won't necessarily say which one and others, but be careful, if you push the U.S. out of this system, what the net effect will be.

HAASS: (Off mic.)

QUESTIONER: Thank you. Gilad Sher (ph), from the Institute for National Security Studies in Israel, and excuse me for being a bit region- oriented.

MR. : (Laughs.)

QUESTIONER: In the absence of the --

MR. : What's the World Bank going to do about the Iranian nuclear program? (Laughter.)

QUESTIONER: No --

ZOELLICK: I was just at the Herzliya Conference. (Laughter.) I know the topic du jour.

QUESTIONER: In the absence of any substantive negotiation process between Israel and the Palestinians, what role do you see for the World Bank in the Israel-Palestinian arena in particular and in the changing Middle East in general? Thank you.

ZOELLICK: Yeah. Very important one.

Well, I've had the good fortune that Prime Minister Fayyad in the Palestinian Authority is somebody I've got the highest respect for, and I think he's got actually a very sound economic and political model, which is he's trying to build the state from the bottom up. And because the Palestinian Authority is not a member of the World Bank, I actually -- to support (by ?) them, we have to make a special allocation out of our income, which we do. But we also, as we do in other areas, run sort of trust funds. So one of the problems in the developing world is people may have good intentions, but if they have 50 or a hundred different programs for one small authority, you overwhelm it. So we will coordinate with that authority.

So I think Fayyad has done a very important job of building the institutions of governments, more transparency, fighting corruption, building capabilities that, at least from my conversations with Israelis, are probably important for Israeli security as well as economic development.

So I certainly think it's short-sighted -- (chuckles) -- when people do things like cut off the money flow of their own tax revenues for those institutions, and I've said that to some of the Israeli authorities. And I think the Israelis, at least the vast majority, recognize it too.

And I think the bigger issue there also is one of contesting in an open fashion kind of a modernization agenda. So I -- when I went to the Herzliya Conference, I also went to see Fayyad in Ramallah; I thought it was a good thing to do. I have no idea what will happen, but he's using modern communication -- Facebook, social media and other things, things his kids have taught him -- to engage Palestinians -- public -- on these issues, to take a sense of responsibility. And he believes, actually, that in an electoral sense, that what he stands for could do better than some people think, because he's been actually trying to build the base up.

Now, the real problem there -- and this is one where I can observe; I don't -- I can't say with great specificity -- much of the growth in the Palestinian Authority has been developed through public sector funding. He's trying to wean it off public sector funding. You need more of a private sector development. And it's going to be very hard to get the private sector development with some of the movement restrictions.

On the other hand, I understand the security logic for some of those movement restrictions. But I think if it were up to me, I'd be testing the border of what more I could do on movement to allow a greater sense of private sector development and, frankly, personal dignity that will be the important part of building that state and capacity.

And I guess the -- what this would also suggest, as I saw -- Dennis Ross, a former colleague, wrote an op-ed not too long ago about whether one could open up other sections of the West Bank to be able to encourage this sort of development. And the logic would lead me into that direction.

HAASS: Do you want to say something about the broader Middle East that would say that where you had regime changes -- places like Egypt, Tunisia, Libya -- what sort of a role the bank is playing?

ZOELLICK: Well, you know, one of the other things -- this gives you a little sense of how I try to guide the bank -- we need to learn too, OK. So we've got a lot of smart people, but the world changes and so on. We're trying to learn our own lessons from this, I mean, not the least of which was, you know, an Egypt that was growing well and frankly had a pretty good economic team, but nevertheless that wasn't sufficient -- and this goes to some of these issues of dignity and also kind of, I think, a system whereby you need to combine economic growth with a sense that people (feel ?), well, it's not crony- and favoritism and others.

What this has led us to is the idea of trying to work with governments to build on their own movements to have greater openness, transparency, social accountability, and this again connects from other regions.

So what you now have with modern telecommunications is the ability to have, you know, people in villages with cellphones be able to comment and guide about the delivery of services. (Right ?). And this is -- this opens up not only anti-corruption things, but it opens up a challenge for sort of bureaucratic performance.

So with countries such as Tunisia and Morocco, we've been trying to take those steps and encourage them. And that will be a big issue for us with Egypt, and -- because we have certain programs that are of investment projects in agriculture or energy or others, but the bank sometimes gives what's called development policy loans. This is money that goes to the budgets, but it's based on various policy changes. And it's my own view that those need to include these types of social accountability and openness and transparency measures. And it's things that we're applying to the bank as well.

So -- and just to give you one other connection, because -- something probably many people may not be aware of, but with your research institutes, I really hope you are -- one of the -- one of the most lasting things that we've done at the bank during my time is we created an Open Data initiative.

So we've taken all our data sets going back decades and made them for -- available for free on the Web.

And there's this interesting little bureaucratic story behind this. (Chuckles.) I used to go to meetings, and I'd have, you know, some slightly wizened professor come up to me and say, oh, you've got some great data sets, but you still charge for them. And I'd go back to my economic staff, just as you would, and say, why are we charging for them? And they'd say, well, we add value, and we need to get compensated. You know, it took me about three rounds to realize it was, like, a $3 million offset to their budget, right, or -- so -- and so finally, we said, OK, we're going to wipe this out, and we're going to open all this up.

And then we started to get our economic staff to work on different applications to make it easier to access. And we created an Apps for Development competition. So we opened up to the software community and said, use our data, and the only requirement is relate it to the Millennium Development Goals and use our data. And so we came up with mapping, games, other things that you could never, you know, even with a very brilliant staff, have been able to produce.

What I'm finding is, as is often with an idea like this, it starts to drive a whole series of other possibilities. So for example, when we're working with countries on gender, another great possibility for growth, it's a little hard to know the effect of the policies if people don't keep gender statistics, or beyond-border trade barriers -- getting beyond the quotas and the tariffs to some of the logistics and the customs systems -- unless you have the information, you can't do it.

So this notion of -- that we've talked about of democratizing development -- so it's the exact opposite of the monopolist model, but openness, transparency -- and the relevance to the broader Middle East is that I think this is going to be -- this is going to take awhile -- (chuckles) -- but I think building in this concept of openness and engagement for the society and the government is important, as well was for the Bank.

QUESTIONER: Michael Emerson, Centre for European Policy Studies in Brussels. Palestinian question. You mentioned Morocco. I wonder whether you could broaden this out to talk a bit about the response to the Arab Spring, or let us call it the Arab political earthquake, that happened last year. I'm sure that you've been faced with the task of defining the World Bank's strategic response to this huge strategic event, earthquake, and I'm wondering what conclusions you -- you came to.

ZOELLICK: Well, just to build on a couple of the points I said: Number one, development has to be owned by the local people. So -- and this is a lesson from everywhere. You could have great money, ideas, so on and so forth, but so this goes to the governance issue. So you have to build your development strategies with the evolution of the governance topic.

And obviously, you have countries at different states. So some have had a revolution and are on the way of developing a political system. Tunisia, Morocco and Jordan have sort of a fast-paced evolution, OK? Egypt is -- I mean, I don't know, coup, partial revolution. I mean, I can't tell yet, right?

And so the key point is, we have to recognize the local ownership but also that it may be going through phases of development, and then what can we share -- and this is the important part about the south- south. So it's not just U.S. or the European, but some of the ideas of what's worked with other developing countries. So if you work in this area, I'm sure you've encountered there's a huge, huge interest in Turkish economic development, but also there's an interest in some of the other models from East Asia as we go forward. And so what can we share about safety net systems, governance systems, transparency systems?

Then, as you get to other countries, in the Gulf, for example, that don't necessarily need our money, or let's take Libya as a -- we had the Libyan prime minister here. They don't need our money, but what they will need is the ability to frankly develop public financial management systems so that the money is effectively used, so it's not stolen, and more effective -- more importantly, how do you avoid the resource curse?

So this is an issue in much of the development in sub-Saharan Africa. Many countries have great natural resources, but how do you do it in a way that has inclusive growth, avoids the Dutch disease on the exchange rate and sort of builds for a longer term?

So we're working -- you know, we do some just -- we get paid sometimes for some of our knowledge work with some of the Gulf countries, not so we don't do loans, to be able to share that information. And this is, again, the neat thing about what's happening in the world. You're finding that there's more and more countries that now -- for example, I was thinking about the Gulf -- some of them are looking at -- on Singapore as a logistics model. I'm going to be speaking to the Panamanians here in town in a couple days. They're trying to develop this as a model.

So I think it's a very healthy think that people are sort of looking more broadly, and if we can share the information about choices, and that there's an increasing number from the developing world and being able to draw on it.

This wasn't your question, but I want to -- I'll take it one step further, because that's sort of -- I find it intriguing and so may some of you.

You know, as China's invested in sub-Saharan Africa, there's been a lot of focus on resource development or infrastructure or others. And literally there's a small publication we have come out, and I had -- was -- in discussion I had in China in recently, in Guangdong, we were talking about it. China has about 85 million low-wage manufacturing jobs. They got to move up the value added chain if they want higher wages, they're going to have higher wages, and part of their whole strategy is increased productivity, higher wages.

Sub-Saharan Africa has about 8 million of those jobs, North Africa maybe 1 (million) to 2 million, so you got about 10 million of those jobs. We're in discussions with the Chinese, both officials and companies, to say what is it that we could do to help the enabling environment -- you know, ports, energy, infrastructure, customs rules, and also maybe IFC private investment, to help some of that low-wage manufacturing move to sub-Saharan Africa?

Because if you have 85 million versus 8 (million) to 10 million, even if you just get 5 million, you've increased it by 50 percent. So I say that not that it's going to happen overnight. And when I was in Guangdong province talking to the provincial party secretary about this, my former colleague, Ngozi Okonjo-Iweala, who is now the Nigerian economic coordinating minister, had been there visiting companies that developed this. It will require some interesting intersectoral, interministerial work in sub-Saharan Africa to make it happen. But it just gives you a sense of how fast this is changing and if the bank as an institution can help prod it or push it or interconnect it, you could have bit payoffs economically, politically and in stability terms.

QUESTIONER: (Inaudible.)

QUESTIONER: (Off mic.)

ZOELLICK: Is this my euro zone question? Don't I get a euro zone question? (Laughter.)

QUESTIONER: No, no, no, it's not a euro zone. But you can't answer a question that hasn't been asked to you. That's typically what de Gaulle used to do.

No, in the last --

ZOELLICK: (Inaudible.) (Laughs.)

QUESTIONER: In the last five years or so, the IMF has been at the forefront of all debates on the global, economic and financial governance, and this not only because of mistrust or scandal. Apparently, the World Bank has been less on the forefront of the debate, less visible. So my question is, how do you assess today the importance of the role of the World Bank in the global economic governments debate? And to put it more sharply, could we live without the World Bank?

ZOELLICK: Well, you know, you -- your -- (even ?) -- you're such a strategic thinker, Terry (sp), your perspective is a little short term. (Laughter.) Actually five years ago, we were kind of in the news too at the bank on some governance issues. (Laughter continues.) So, to be honest, I take this as a --

MR. HAASS (?): (Laughs.) (Inaudible) -- indirect compliment for the --

ZOELLICK: -- to stewardship.

No, the World Bank has been very much a part of this as well. I think the IMF -- and actually, five years ago, the IMF was more -- there was as a sense of, what's its role in the system? But the international crisis, with its macroeconomic nature, you know, sort of pushed that to the forefront.

As for whether you could live without a World Bank, I think the title of my article is, "Why We Need the World Bank." So you got to -- (inaudible) --

HAASS: "Why We Still Need" it.

ZOELLICK: -- "Why We Still Need the World Bank" -- but it really goes to this point that I've touched on, Terry (sp), which is, is that I think that the international system actually has a dearth of these intermediating institutions. And so -- and you know, so we have one in the IMF and -- so we have one in trade, and we have one in macroeconomic, and we have one in sort of microeconomic structural. You've got the U.N. system, some of which is political, some of which is some very valuable operational arms. You've got some of the regional loan banks. In some cases, you have sort of military alliance.

But given the nature of the interdependency and interconnected problems -- and what I think will be the big issue for the rest of our time, which is the fast rise of emerging markets and powers in the system -- I think it helps enormously to have structures, institutions, regimes, whatever you want to describe them as, that can play a mediating role to try to come together cooperatively on problems.

And let me just take two dimensions of this. And I bet Carla and Charlene might have this sense too.

You know, this is sort of serendipitous, but I became USTR in 2001, and now it's 2012. So it's a little bit over a decade. In historical terms, that's a rather short period of time. And so I had the USTR, the State Department, briefly at Goldman, then at the bank. What I have seen in terms of the role of emerging markets, development, trade, investment, you know, climate change and, I think, increasingly, security (issues ?), it's just ramped up enormously, OK? And so it's hard for me to conceive of an issue now that can be addressed without their engagement and involvement.

But -- and this is the big "but" -- the -- a number of those countries, understandably, are still relatively poor. And so they want -- they're concerned about having all the responsibilities of the developed countries. But then we had this economic crisis, so then the developed countries are worried about sort of their sense of responsibility. So I know if you're going to discuss this in your governance session, how you get that, quote, right -- you know, and we were talking a little bit before as we were just coming in -- you know, the Kagan view of do you need sort of a prime player to guide the system, which was a little bit -- in the economic sphere, it was the Kindleberger view about the causes of the Great Depression. Britain was used to world leadership, no longer had the capabilities in the '20s and '30s; U.S. had capabilities, wasn't used to the leadership. How does the change in this system -- or the Eikenberry view that the rules and norms of the international order are in place enough, and so you -- that's going to be a very big topic.

But what I've seen in a practical way and what you'll see in the things I've written is it's fun to talk about this stuff, but the reality is then you have to do it, OK? And so the best way to make it -- to make a difference is to show how you can bring parties together. I have 187 shareholders -- (chuckles) -- in very different countries.

But you know, you could look at the record on things from, you know, climate change to trade and structural reform and new capital infusion, $90 billion raised for the poorest countries for IDA. We're able to bring people together in the process. And if you didn't have the institution, that wouldn't happen.

And again, let me give you another practical one from the climate area. You know, Hank Paulson, when he was secretary of the Treasury, you know, came to me and we had this idea about creating global climate investment funds. And so he and I went and got about $6 billion of contributions from primarily developed countries, in different forms. It's gone up a little bit. And we created some for technology, some for energy efficiency, some for adaptation. We've been able to leverage that to about $50 billion and about 30 to 40 percent from private sector of that 50 billion (dollars), the other from other bank and regional bank resources and so on and so forth.

And equally important, we've now had sort of projects launched in about 45 emerging market countries, and every time you launch one of these projects, their investment in the climate change issue becomes somewhat different. And the key example I'll give you is, with India, you know, it's a very proud country about its role and sensitive to some of the climate change topics. They wanted to do a project with us through the Climate Investment Fund, so as to give the Climate Investment Fund additional legitimacy. So that was -- they wanted to do that support, because we worked out the governance structure and the financing.

Now this might just seem like it's, you know, sort of an obscure thing, but you open up the newspaper and you've got endless discussions about the green fund in the U.N., OK? So -- and people are still, you know, mapping stuff on paper.

Now and then I have to kind of pinch myself because you got endless discussions about the green fund -- we got one up and running with $50 billion that we'll learn lessons from.

So I use that as an example of saying that at the end of the day, you still have to make stuff happen, and then we as an institution have to be more rigorous in measuring results, in learning where we screw it up and sort of adapt the process. So for those reasons, if -- or post-conflict states -- you know, we're probably the most effective player in Afghanistan today. So if you think the bottom billion matters, if you think that climate change matters, if you think that trade matters, if you think that emerging markets in the international system and how they fit in matter, then I think there's a role for the bank, and for me that's a pretty clear exposition of why you do need it.

HAASS: Do we have any non-European hands here?

MR. : (Laughs.)

HAASS: Sure. (Inaudible.)

MR. : (Laughs.)

QUESTIONER: (Off mic) -- non-European.

HAASS: Oh, Turkey's -- I'm not sure how we include Turkey on that one.

QUESTIONER: This is, I suppose, partly European. Elizabeth Sidiropoulos, but from the South African Institute of International Affairs. A question around a recent initiative by -- spearheaded, seemingly, by India, which apparently will be publicly announced at the end of this month, around the establishment of a BRICS development bank. I attended a presentation by one of the concept writers in that regard, and he said, you know, could it play a role that the World Bank played after World War II. And is it -- and my question is, I mean, how would you at the World Bank view such an initiative, notwithstanding that I think the concept still has to be further explored and defined, and also its purpose.

ZOELLICK: Yeah, I'm going to be in India in about two weeks, so I'll have a better sense when I talk with people. And it -- and your -- the last phrase that you -- (the clause ?) -- that those are actually kind of important, because you had -- you had a Bank of a (sic) South movement here led by Chavez that I didn't fight because I didn't think it was going to do anything and it didn't do anything, you know. And -- but also, as part of that, you have to decide what they resisted. In that case, I think it was sometimes openness, transparency, governance, things I think are good things.

I think in this case what's driving it is an Indian concern that because of some of the borrowing limits the bank has had, that it's running up against (ceilings ?) about sort of investable money. I think that's a serious issue, and actually it's a -- I've had to actually fight my board on this because I feel that if the bank takes itself out of dealing with the Indias, the Brazils and the Chinas, as I said, it's bad for these countries and the international system.

How we engage can be very different. So with China, actually a lot of it is more analytical work, and they use programs to -- as pilots that they test.

India's at a stage where it is -- it's -- it's -- is concerned for infrastructure development. I really don't know for sure how much of it is capital and how much of it is the enabling environment. I kind of get mixed messages about that. But one of the things, just to give you a sense, is, I actually pushed for an expansion of our borrowing limit for India -- if we could get the Indians, for example, to invest in some of our securities, which would offset it, so we've actually expanded it another 4 1/2 billion (dollars) or something.

I think for infrastructure, it relates to this public-private partnership model.

So I think what is often the case when somebody promotes something, it's important to know kind of what is driving it, OK? Now, that's separate from the issue of will this be -- is this positioning or reality. So -- because -- you know, it'd be interesting to decide whether the BRIC countries decide to actually fund it, and where, for example, will they put it, you know? So -- but I don't mean to be -- I think it's a -- it's an idea that you need to understand what is driving it and to try to address it. And if we as an institution can't address it effectively, well, then there may be other ways that people try to address it. So I mean, I'm not a monopolist. (Chuckles.)

HAASS: Brenda (sp). Brenda (sp) there in the first table.

QUESTIONER: Your -- is this working?

HAASS: Yeah. Go ahead.

QUESTIONER: Your comment about --

HAASS: Where are you from?

QUESTIONER: I'm from Turkey.

HAASS: Turkey, great.

QUESTIONER: Your comment about moving some manufacturing jobs from China to sub-Saharan Africa -- I think that's indicative of a broader question in that given the demographic expectations, probably sub- Saharan Africa and parts of the Indian subcontinent is where we expect the youth bulge. And that's probably bringing them into the global system. Global trade and commerce will be a priority. But when that happens, if that happens, the abundance of labor will probably impact intrastate income equality across the world, including the Western world. I don't know if that's sustainable politically.

So I'm wondering if when you look at the broader picture in a 10, 20-year perspective, are we only talking about interstate sort of equality and convergence and moving people -- sort of the average upwards, or do we also care about intrastate equality as a development objective?

ZOELLICK: I think we definitely have to. In our work in emerging-market countries, in developing countries, we're very much focused on that, what we call inclusive growth. And in some cases, it starts with having the fundamentals of nutrition and education. And in every country I deal with -- and I'm going to come to the developed countries as well -- there's a huge interest in this connection between education, skills and workforce. And our next World Development Report is actually on jobs, just as we did one on gender and post-conflict. And this may seem, well, that's obvious. But what we were trying to get at is when I studied labor economics, now getting to be quite distant, it -- the field actually didn't strike me as too interesting because it was either discussions of kind of unions and economies or kind of the labor market was a derivative of your macroeconomic policies.

This is trying to look at the -- from a different issue about the social capital that's developed, the productivity of individuals, how to sort of see this as part of your development model. And the work isn't done yet, but it's an example of where I hope we can make an added contribution, though the way that you started the question is -- let me just say that I think is going to be a big issue for developed economies, OK, and their willingness to sustain and participate in an open international system and resist protectionism and populism and so on and so forth.

And I think that's extremely important. It happens not to be the remit of the bank -- (chuckles) -- although one of the things I've tried -- you know, and I do this with the Congress as well as other forums in the United States -- to try to say there's actually some very interesting lessons out there coming from emerging markets that you should be -- can be able to draw from, OK?

So I mentioned the infrastructure one. But in education, you know, it's very interesting. You see the debate in the United States about measurement and performance standards. At least in the developing countries I deal with, it's a no-brainer. Of course you've got to measure what the performance is. You know, how else are you going to know what the results are, you know? And -- but here if you test, oh, you might learn something, you know? So I'm hopeful that over time -- you know, each of these things create a risk and an opportunity that you could actually create a greater flow of information and experience that developed countries could manage as well.

But the core point that I just -- I want to emphasize is -- was the one sort of inherent in this. Look, there's problems in the international system, but by and large if you look at the growth rates for sort of the whole world over the past 50 or 60 years, it hasn't been too darn bad, OK? And in -- from historical terms. But this is not pre-ordained. You could lose this, you know? And these factors that I mentioned in the answer to Terry (sp), you know, the emerging markets feeling, oh, well, they have to take on additional responsibilities, but you know, what's their say in the system, and have they really -- you know, they've still got a lot of development issues.

The developed countries, particularly ones that are aging -- (inaudible) -- sort of their sort of role in the system.

And that really goes back, I guess, to the question that Terri (sp) and Richard (sp) mentioned. It's why institutions like the World Bank -- (chuckles) -- they're important to try to interconnect people, and as opposed to shout at each other, try to come up with cooperative solutions. But the other piece of it is my difference with sort of -- it's not enough just to have the institution and talk to each other; you have to try to resolve real problems.

HAASS: I know there's several of you who still have questions. I -- OK, we'll do one last question. I want to make sure -- (inaudible) -- from Japan -- I -- and then we'll do that.

QUESTIONER: (Through interpreter.) I come from Japan. I have -- just have a couple of questions. The World Bank and China are doing 2030. And what is the significance of conducting this kind of a research, right -- investigation at the time when China is to change their guards in Beijing, so to speak? And what's your view on the dollar- renminbi relationship in 2030 if the structural, you know, improvement succeeds?

ZOELLICK: Well, let me focus on the first question -- (laughter) -- because it's actually the more important question, just so people have a little sense of this.

The bank has had a very good brand in China, dating back to Robert McNamara opening relations in 1980 with Deng Xiaoping. And over the course of some 30 years, there were points in the idea development process in China where the bank seemed to play a catalytic role.

There -- I know this from talking -- is more to the Chinese counterparts. In 1985 there was a floating seminar down the Yangtze River for four or five days that led to a report. In the late '90s there was something held in Dalian. And the relevance of this was -- a Chinese official actually came to me before the 30th anniversary. And he said, Bob, you know, everybody thinks China loves anniversaries and that we just want to celebrate, and he said, that's true, but when you come for the 30th anniversary, he said, what about planting the idea of a report that would deal with some of the issues that are stirring in China, like how to avoid the middle-income trap, and kind of how do we -- we've talked in the next five-year plan about rebalancing domestic demand, consumer -- but how do you really do that?

And quite intriguingly, he also said -- he said, as you know -- so you work a lot with China; people in Washington think, you know, people are waking up in Beijing trying to take over the world every day. And he said, most of the time they're trying to just, you know, work on the problems in Beijing and China. So he said, what would be the implications of this internationally?

First off -- and then -- so then I went to China. I proposed this study. And Li Keqiang, the next -- or it looks like the next premier, was very enthusiastic about it and, quite importantly, asked us to work with the Development Research Council, which is the State Council under -- is the -- is the research think thank under the State Council. We also work with the Ministry of Finance. And it was blessed by President Hu and Xi Jinping, but Li Keqiang is kind of the godfather of the process. And we've been at it for about 18 months. We had a -- in September, we had a draft; we had various international commentaries about, and so on and so forth.

Now, the first -- from a strategic perspective, since all of you aspire to strategy, I find it very impressive that China after 30 years of 10 percent growth could say, you know what, this may not work in the future; we got to rethink this model, OK? Whether they accomplish it, that's a different question. But again, I would suggest that maybe the U.S., Europe and Japan without 10 percent growth should be thinking a little bit in these terms.

The second thing is that what I think is also going on was that this is to contribute to their own internal debate and discussion and to be catalytic. So I asked Justin Lin, our chief economist from China. And I said, Justin, what do you think is going on here? Because you know, Chinese economists could come up with a lot of this. And he said, yes; he said, but as you know, in any country, people work on their own particular piece of the problem. This is a catalyst to get people to look at the economywide pieces. And frankly, he said, the bank's got a very good standing and reputation, and so it will be taken very seriously as we come in with it together.

Next point is, of course, the devil will be in the details of implementation. But you know, even the summary report is 450 pages long.

So I wouldn't expect everybody to have read it. But you'll see, if you skim it, there's things about phasing, transition, (quick wins ?) -- and going back to this question a little bit -- how do you build public participation in it to build support along the process? So I think it's a very serious exercise.

Now, the bottom line, my own guess -- but it's only a guess -- is, is that, you know, this will wait until the 18th party congress; there'll be some settling down after that. I don't expect China to follow a "big bang" approach, like Margaret Thatcher did, because that's not the Chinese way. But my best guess is you'll see these ideas pursued in pilots at local level, in some sense, to kind of test them as they move forward.

And again, you know, some people are quick to judge, oh, well, will China do this or this? And I just think it's important to also look at how other countries are doing this. And then, again, what I suggested is in my comments on the international side, there are some very interesting opportunities here for creative minds to kind of develop some win-win agenda.

And the last point is -- you know, what's quite interesting, the reaction -- and this is what I'd hoped for -- we're getting -- one of my colleagues was in Brazil last week. The topic was a very -- the report was a very big topic because people are facing similar problems. And this also gives you, going back to where I started, a little idea that if the bank were only working on the 79 poorest countries, we'd actually miss out on this. And this question of rebalancing the international system, how middle-income countries fit in the system, you know, their own growth model -- those are going to be important questions for the world. So I'm -- at least so far, I'm very pleased with the report.

HAASS: We have a tradition here where we end meetings on time, and today we violated that tradition because we went a few minutes over, but I'm glad we did.

Bob, thank you for being with us today, and I think more important, thank you for all you've done over the last five years at the bank. It's a -- (inaudible). (Applause.)

RICHARD N. HAASS: Well, good afternoon and welcome to today's lunch program of this first ever -- but we hope first of many -- gathering of the Council of Councils, as we are calling it.

Just a couple of housekeeping remarks for a second. If people would please turn off your cellphones, that would be a great help -- BlackBerrys and all such devices. Secondly, this session is on the record. Let me just say that.

Let me -- and we'll repeat later, but just let people know -- the building we're meeting in is only several years old, and it's environmentally, shall we say, advanced. It's a Gold LEED building. And what we'd like to do -- if anyone would be interested, after the last session today at 3:45, we are more than happy to give you a tour of the building, just so you can see what sorts of things have been done here, both environmentally, but also in audio-visual type things and all that, which might be (of) interest to some of you from other organizations.

As I said, this is the inaugural meeting of the Council of Councils, which is a network of policy institutes from around the world, and the whole idea is to discuss, identify global challenges as well as global opportunities. And hopefully out of the discussions will emerge some ideas, some initiatives that people then can take home and introduce either into their own respective public debates or possibly as well into decision-making circles within their own countries.

Some 20 countries or so are represented here today, roughly tracking the G-20, the difference being that the agenda here is far more comprehensive. The agenda here is not simply economic or even economic and energy and environmental issues, but deals also with the full range of political challenges -- for example, humanitarian intervention, those questions -- as well as security challenges.

We just spent an hour and a half discussing -- we didn't quite solve, but discussing the challenge to the nonproliferation regime posed by -- posed by Iran. We also had a general conversation about global governance, the whole challenge of coming up with common rules and norms and, ultimately, institutions to bolster what Hedley Bull would've called the society part of international relations, as opposed to the anarchical dimension of international relations.

I would like to offer special thanks to the Robina Foundation, who have made not just this possible, but the larger program, the council's program on international institutions and global governance. And I'd also like to pay a special welcome to one of my bosses, to Carla Hills, who is the co-chair of the board of directors of the Council on Foreign Relations and a former U.S. trade representative. Indeed, she is one of two former U.S. trade representatives with us today -- actually, one of three; we have Charlene, Carla -- Charlene Barshefsky -- and Bob Zoellick. So probably nowhere in the world at this moment are there more U.S. trade representatives, and -- (laughter) -- who knew? And so any of you tweeting can tweet that. (Laughter.)

I'm thrilled to welcome Bob Zoellick. Bob is the 11th president of the World Bank Group. And he's a longtime personal friend. Let me get the conflict of interest out on the table. We've worked together for more years or decades than either of us probably care to remember. And he's also been a longtime supporter and active member of the council. He first spoke here in the early 1990s, roughly two decades ago, and he served on the council's board. And our statisticians tell us that he's actually spoken here more than 20 times. Did you know that? For no fee -- I should point that out.

Bob is in the nonprofit business, as are we. (Chuckles.)

I won't spend a lot of time on his bio. I already pointed out he was U.S. trade representative. He was deputy secretary of state as well as several other positions in the State Department. And Bob played, I thought, an extraordinary role -- and if I were still teaching at the Kennedy School, I would highlight him to show how in government, you can be entrepreneurial. And Bob was truly entrepreneurial after the fall of the Berlin Wall in stitching together what became the German unification inside of NATO. It was policymaking, I thought, at its highest and finest.

What we're going to do is have a conversation for a few minutes about economic issues and the Bank and all that, and then we're going to open it up to you all. And I won't go on to -- I won't filibuster, even though we're in the city of filibusters. And when we get around to Q-and-A, we'll hand out microphones, and we'll just ask you to identify yourself before you speak.

You OK there, sir?

Again, welcome, Bob.

A few weeks ago you published a piece in our magazine, Foreign Affairs, which was titled "Why We Still Need the World Bank." OK, let's start with that. Why do we?

ROBERT ZOELLICK: Well, first, let me thank all of you for taking time to come to this. Richard explained to me a little bit to me about this concept, and I think it's a great one. So I know for many of you, it required a little bit of a journey, but it sounds like a superb idea to be able to get the councils together.

It's like trick questions, because aren't they supposed to read the article? (Laughter.)

HAASS: Give him -- give him the Cliff Notes. (Laughs.)

ZOELLICK: Well, let me -- let me take this approach. When I came to the World Bank Group about a little less than five years ago, I had a slightly different perspective than some had in that some who come purely from the economics profession or even development economics -- and that is I view the World Bank as part of this very thin tissue of multilateral institutions that was created during and after World War II to try to deal with the problems that were seen as -- the political-economic problems that were seen as driving the crisis in the '30s and leading to the world war.

And this includes the IMF; it included at that time the GATT that became the WTO for trade; it's got the World Bank, other institutions.

And it's striking if you go back and you look at the issues that people were concerned about: currency in international capital flows, you know, free trade, reconstruction of broken states, development, investment flows. Those remain very vital issues, but obviously, the circumstances changed enormously.

So I saw part of the challenge for the Bank and my challenge as a leader of the bank as how do you modernize multilateralism; how do you -- recognizing that nation-states are still going to be the dominant player, how do we take this thin interconnecting tissue, if you want to call it, related to global governance, and make sure that it's updated for the current age. That gives you a slightly different strategic perspective.

So for example, if you look at this solely from an economics perspective, in 2007 you'd say, well, in 1945 you didn't really have private capital flows, and so -- but now you had a whole large flow of private capital that dominate the official sector, so why do you need this anymore. OK, well, problem number one is that what economists thought in 2007 -- (chuckles) -- turned out not to be the case.

In 2008, 2009, we learned economists can be wrong. But even more than that, it missed the fact that a lot of what the Bank does is not just invest money; it's the knowledge and learning and interconnecting transfer.

Or another perspective -- this, again, seems obvious to me, but it may come back as a debating item. When I came to the Bank, there was a school of thought that said, really, the middle-income countries should just be sort of taken out; you just focused on the poorest. Well, if you believe in this as a multilateral institution, that would be a strategic mistake of huge proportions because actually you want to get -- first off, there's some huge development challenges in the so-called middle-income countries. About, you know, 75 percent of the people living under $2 a day are in those countries. But, in addition, you actually want to get those countries to be responsible stakeholders in the system.

And so just to give you a very current example, the Bank's got a lot of attention recently because of a report we did called "China 2030," which is looking at the structural changes of China, that it will need to have a different growth model. And I've found this has got interest in other middle-income countries; it's got the investment community; it's got the interest of Congress. You know, if you said, well, we weren't supposed to deal with the Chinas of the world, then you wouldn't be doing reports like that. And yet it's fundamental to the rebalancing.'

So part of what I try to do in the article is talk about the intellectual and strategic position of the Bank, but then I also talk about some of the challenges of modernizing the institution and opening it up, changing the development model so there's not a monopolist of sort of people with Ph.D.s from certain universities and sort of democratizing the development process. So that's part of the challenge.

HAASS: I've noticed from your previous lives -- and we've talked about it before -- you're a great believer in institutions. Let me take a second, because it's so close to this -- what we're talking about here, governance. What do you see as the real advantage of institutions? Why are they so important?

ZOELLICK: Well, since you got a pretty erudite group here, I mean, I could talk about Edmund Burke and kind of the view of institutions that --

HAASS: He couldn't come today, but we've got -- (inaudible) --

ZOELLICK: (Chuckles) -- he couldn't come today, but he'll be here in the evening session when you do the Ouija Board.

HAASS: (Laughs.)

ZOELLICK: Well, I think that the institutions, whether domestic or international, play critical organizing roles, intermediating roles. It -- and in an international system, I think what sometimes people underappreciate is they can play a role in identifying issues, sometimes helping to bring people together in a mutual fashion on -- try to address those issues, sometimes they can bring additional resources to bear. And so they're the heart of problem-solving.

If you think about challenges, whether it be private sector or public sector, it's a little hard to do in an atomistic way. So institutions become the enabling power; they become the societal -- the social capital. They become the glue. But a critical point: Institutions have to adapt too. And I think one of my lessons from the public sector is that, in the private sector, the market demands are such that institutions are compelled to adapt or die; in the public sector, they can drift for a long time.

And so this is -- this has implications for how you open up the institution to criticism and engagement (and ?) others, but it also has implications for the nature of how you lead the institution because you really -- you have to keep folk -- there's a tendency in public sector institutions where process becomes all controlling. So I have this debate sometimes in other international forum(s) where people talk about quote, "legitimacy," as -- and they define it simply by the participation. My view is legitimacy also has to be driven by effectiveness.

My view is legitimacy also has to be driven by effectiveness. The League of Nations had one legitimate model that turned out not to be very effective, OK, so the U.N. overhaul was designed to partly deal with that. But I find when I deal with other international institutions like some of those in the U.N. system, they've drifted a little further away from the effectiveness model. And I think that it's incumbent on people running international institutions to try to sort of get that balance right.

HAASS: Before you said the World Bank does a lot more than dispense money. It's almost something of a misnomer. So if you could rename it, what would you call it?

ZOELLICK: (Chuckles.) Well, I don't think the name is so bad. I once had a friend who's now deceased who, when he talked to me about the institution, said, look, if you have an institution that has the two worlds -- words "world" and "bank" and you can't do something with it, you know, you're missing -- (laughter) -- but the reason that I highlight the -- why the Bank causes it a problem is that you'll see when many people assess the Bank -- and you see this when it's -- they'll look at the -- sort of the loan flows or -- so you now have people comparing it with some of the big development banks in developing countries or others.

And my view is is that when the World Bank is most effective, it combines three things: One, we really take knowledge and learning from all quarters of the world. And what's really changed with incredible rapidity over the past decade is the degree to which that is now coming from developing countries to other developing countries. And we try to update it, customize it, share it with others.

And then second, you try to have your investments or projects so that they have a multiplier effect. So you're looking at building markets or institutions or capacity.

And then third, what distinguishes us from a university or the OECD is that we can be innovative with different financial ways.

And so, again, many people may not be aware we have a private sector arm, IFC. So we make equity investments. One of the things we created was an asset management company to change our financial intermediation model so that people will invest in a fund that we create. We invest in private equity funds, about 180 around the world. So there's diverse ways of having the financial innovation, and that's again where sometimes I think people, when they think about the Bank, think about it as traditional, you know, 1960s major loan program.

You know, we use rain index futures for countries because you can see, in certain countries, that are (heavy with ?) agriculture that if the rain is below a certain level, you're going to have a huge hit to the crop. You can use insurance programs. So, part of it is how do you use the tools of financial innovation for development, but always keeping an idea on the sharing of knowledge and information.

Let me give you two current examples that I've been focusing on.

The safety net programs -- we're in a world environment where I think we're going to have to expect considerable volatilities and uncertainties. You'll see some policy efforts to try to control those. I'm not sure how successful those are going to be, whether it's food or energy or natural disasters or others. So it makes sense, as a matter of policy, to try to see if you can have effective, efficient, low-cost programs that provide a basic safety net.

Well, many of you may know that there's a program that started in Mexico -- it's got a lot of attention in Brazil -- called "Oportunidades"; "Bolsa Familia" in Brazil -- they're called conditional cash-transfer programs, and they give money to the poorest people in communities. Varies on the program, normally maybe 15 to 20 percent of the population, on the conditions that the families send their children to school, and they get health checkups. So it's probably done more for women's health than anything in the history of the Mexico.

The Bank has worked with over 40 countries to expand this program, OK? And they customize it for different circumstances. And what's striking is in Mexico and Brazil, it's done for about a half of 1 percent of GDP, OK? So if you consider entitlement programs in the U.S. and Europe, this is a pretty darn efficient investment, OK?

Now, you have other countries that may not have the capacity to have those set of programs. But -- so what have we learned about school feeding programs, community-based efforts, so that you have some basic safety-net protection? So that's an area where you take sort of knowledge and learning and expand it across regions but always have to customize.

And I'll give you the direct relevance: You look at a lot of the subsidy programs across North Africa, and they're a huge waste of money. I mean -- and so you're spending a lot of money, not getting much for it, not focusing on those most in need, not protecting people.

So one of the things -- I just came from a function over the weekend, which was talking more about U.S. policy. What I find somewhat striking in the world of so-called development is that there's a -- much more of a -- what I'll call a relentless pragmatism about what works, as opposed to getting locked into ideologies, which I sometimes see in the developed world.

And just to give you one other example that I think will be very important -- and this is true for developed countries as well -- I can't go to a developing country that isn't interested in infrastructure investment, and there's a certain amount you get from the public sector, but obviously, people want to get public-private partnerships, not only for the money, but increasingly, in middle- income countries, it's because they're run more efficiently; they -- the design package makes more sense. So we've created a hub in Singapore that is trying to sort of take the knowledge of that region and others about how to design these models so we can move beyond a series of one-offs.

But to give you a sense of the changing Bank, we're also working with Singapore to create a special infrastructure investment fund that will go along with this process.

So -- and then to bring it back to, say, the United States, obviously, a lot of the states are having financial problems, but people are only looking at the liability side of the balance sheet; they're not looking at the assets. So Mitch Daniels, the governor of Indiana, was able to privatize or monetize his toll road for about $4 billion. It was controversial at the time -- ended up being a big success. The state of Pennsylvania couldn't do it. So I point out to people that, you know, in communist Chongqing, you can monetize a toll road, and in capitalist Pennsylvania, you can't.

So the -- part of the message of this is -- and it's relevant, I think, for a group like this -- there's -- even 20 years ago, OK, when Carla was working -- (inaudible) -- USTR, Charlene, there was still a common assumption about a North-South knowledge transfer. Now it's increasingly South-South, South-North. And that's a good thing.

HAASS: That actually segues naturally to my next question, which is I -- you made the shocking pronouncement a few minutes ago that economists have been known to be wrong. (Laughter.) And it's good we're all sitting down in this room. Where are we now, then, with this debate about models? I remember when I was a graduate student looking -- and studying economic development, and you used to have the debate between sort of top-down and bottom-up approaches, market approaches versus so-called social overhead capital and, you know, large state role. Where's the debate now intellectually? What do -- what -- how has the balance swung, if you will -- and maybe not -- in this debate about markets, private sectors versus public? You just talked about public-private a bit. Where's the theology or the ideology now? What's happening?

ZOELLICK: Well, it varies a huge amount. And my major point is that I think in the developing world, the key is that it's not theological; it's pragmatic about what works.

And I guess I'd take the question and tilt it in one direction that I've been more worried about because it may be relevant for the work of these councils.

There's a lot of focus in the globe today about the macroeconomic stabilization, the -- you know, basic fiscal and monetary policies. One of my concerns is that -- and this is another way of answering your question about debate -- is that there's going to be a need in all countries to focus on the structural change. So if you're talking about models, this is -- really takes you more to the microeconomic. So the China 2030 report was about this in the Chinese context, but it's true in Brazil; it's true in India. And it's definitely true in the United States -- (chuckles) -- Japan and in Europe as well.

And the reason I worry this doesn't quite get enough attention is if political leaders are unable to take this on, what I suspect we'll see happen over the next year or two is that the monetary authorities -- and I'm not being critical of what they've done so far, but the monetary authorities will feel the pressure to use a tool that really isn't designed to fit the problem. And you're going to continue to see monetary policies that are extraordinarily unusual by historical standards, and I think they will plant the seeds of future problems, OK?

Now, the nature of those problems is it's always very difficult to predict, but I'll just give you one. I've spoken to some of the Federal Reserve banks in the United States. I was out at the Kansas City Fed last year. And you know, when you go to places like that, you ask local questions. I was asking about farmland prices. And farmland prices are really going up, really at real levels, as I recall, similar to where they were at the height that led to the farm credit system crisis in the early '80s. Now, right now they're still covered by cash flow, but farm prices are relatively high.

So what I'm -- my point is that I think if the economies, developed and developing, don't focus on the structural issues and the microeconomic issues that are fundamentals to growth, we could see that as we, you know, continue to go to phases of this recovery, we could be planting the seeds for a very serious future problem. And for emerging markets, which are the ones I'm most concerned about, this will mean you'll probably have a rather modest growth environment with lots of volatility and uncertainty, which means go back and build domestic demand, infrastructure and be uncertain and be prepared for difficult moments like I mentioned with safety-net policies.

HAASS: I'll just ask a couple more questions, then we'll open it up. One of the issues historically has been uncertain American and -- popular and congressional support for international institutions. Where does that stand with your institution?

ZOELLICK: Well, at least as of the last year we're a bit of an anomaly, but this is -- let me explain the context. We achieved the first general capital increase in the Bank in over 22 years. The last one, I was actually working for Secretary Baker at the Treasury Department. So in an environment in which people are watching their dollars closely, an environment which is sort of anti-foreign aid, where there's populism, we were able to get this through a Democratic Senate and a Republican House.

There's a actually a little bit of a lesson there. (Chuckles.) And the lesson is I spend a reasonable amount of my time working with legislators -- and I do this in other countries as well -- but part of this, in the case of the United States, was trying to get an appreciation of the value of the Bank, having those that might be against it to recognize -- at least maybe not attack it.

So it's a -- it's an -- I don't want to make too much of it, but I happen to believe that on the key issues that are going to be facing the United States, things like broad-based tax reform and entitlement reform, things can be done, but you're going to need an executive leader, and you're going to have to figure out how to work the system a little bit better than has been done before. But that takes us in another direction.

But I -- but I would -- I guess I would say you got, you know, Charlene here and Carla here too. Let's take trade, where we worked together. You know, in -- it just -- the reality is unless an executive pushes this, it's not going to happen, you know. So don't -- you know, and it was actually kind of amazing that in the case of the three FTAs that got done -- of course, that happened because Congress decided they wanted three, not one, done. So that was to Congress' benefit.

But the reason I say this is -- again, I don't want to get too U.S.-centric here, but I was looking at the fact that, you know, with the Colombia and Panama FTAs done, the United States will have FTAs with about 50 percent of the GDP in the hemisphere, not including the U.S., so not a bad starting point. And we had tried the FTAA -- Charlene and I had tried this, and it ran into difficulties with Brazil. The dynamic has changed, in part because of the rise of China.

So there could be some interesting opportunities here in the Western Hemisphere, but they're not going to come just out of the sky. Somebody is going to have to push them. Again, that means organizing -- by the way, this goes back to the Bank story. In the case of the Bank, I organized the Chamber of Commerce; I organized other groups and so on and so forth, so I could go to members and say, here are people that support it.

And there is -- there is a -- there are -- there are -- if you think about the U.S. role in the world, there's actually a lot of opportunities out there. The United States is still the linchpin on a lot of this. But it -- that doesn't just happen. So going back to working with the Congress on international stuff, you kind of really have to -- the -- it's the responsibility of the executive branch, and then working the others levers in the system.

HAASS: I guess I'll ask you ask one last question, which is close to our intellectual --

ZOELLICK: Just to -- well, just to give you -- just in the spirit, because it might of interest of other people here: Take this "China 2030" report we did.

You take that report apart, and there's a good discussion to be had about what China will do. But there are lots of opportunities there for -- to change what is kind of the zero-sum U.S.-China economic agenda into cross-investment issues, service industry expansion, energy sector, IPR and innovation. So you could build off what China itself wants to do in a win-win fashion.

So does that maybe make a little bit better sense than continuing to have the same debates that people have over the rather narrow issues?

But the point is -- I mean, I was actually pleased Chairman Baucus raised this with the USTR in a hearing. OK. Well, it wasn't accidental, because Chairman Baucus was interested in this, and I've gone up and talked to him about it. But to be honest, it should kind of come from the other side too.

HAASS: Duly noted.

One thing that's come up here in our talks this morning is the relationship between efforts at the regional and global level.

ZOELLICK: Yeah.

HAASS: Could you just say something about -- and you got all these regional development banks. What's the relationship? And is there a conscious division of labor? How does that work?

ZOELLICK: Yeah. Well, you know, my -- this happened in trade as well. I believe multilateralism includes regionalism, and I think, you know, there's a lot that we've learned about while economics are a component of it, but whether it's immigration, whether it's security, whether it's narcotics -- I mean, the whole history of the European Union -- and so people who decry regionalism, I think, are not recognizing sort of realities. And so -- and moreover, the ability to interconnect these regions in an open regionalism, as was discussed in the Asia-Pacific.

So one of the things -- just a small insight -- at the bank when I came, which we really really weren't doing that much of, is that -- (I see Yusuf in the audience ?) -- we started to work much more with regional institutions at institutions, ASEAN as an institution, in Africa not only the African Union but sort of regional institutions.

And so part of our service is to try to understand how to help their capacity. And if you take development issues in sub-Saharan Africa, for example, they're going to be critical to sort of build larger markets and how do you have the infrastructure and how do you reduce the cost.

Now, in the case of regional development banks, one aspect of that was that I tried to organize in a more coherent fashion our cooperation with the regional development banks. In some cases, they may take the lead; in some cases, we take the lead; we work over that. The one part, though, where I think regionalism could go to far is, remember, I talked about a knowledge -- a global knowledge transfer. One of the -- where the Bank is at its best is to -- being able to transfer knowledge across regions. If you're a regional bank, you don't really have that facility. But they undoubtedly will have capacities that the World Bank doesn't have.

So I tend to, in structural terms, look at the world more as a Venn diagram with intersecting circles. And so I -- it doesn't -- in a sense, the -- some people describe multilateralism in a(n) old- fashioned -- what I'll call mid-20th-century hierarchical model. I think that's not going to work; it's a mistake. And I think it doesn't recognize the diversity of the international system.

And I'll just -- I'll give one other little insight on this that some people here might be interested in. You know, climate change is an issue that I first started to work on, actually, when I helped get the Rio agreement through in Bush 41's administration. And the -- what happened in -- with the UNFCCC process is there's kind of -- talking about international governance; I think that was one of your topics -- there is this view, well, we must get all 195 countries to agree to everything big enough for, you know, climate change (for the world ?) all at once. Well, good freaking luck.

You know, and so to be honest, you know, I've been part of more agreements and -- bilateral, multilateral than probably most people, and I -- so I can know what they take to get done.

But I'll give you a very practical aspect to this.

I went down to see President Calderon in Mexico about six or nine months before the Cancun meeting, and I outlined this "weltanschauung." And then I said, you know, what I would do? I said, here's individual papers on building blocks: energy efficiency, technology, avoided deforestation, less plant soil carbon. And if you actually go back and look at the real agreement, it was that countries were supposed to build national action plans.

I said, so what if you have 150 countries agree on combined national action plans? So you don't have 190, but you got 150. And that's exactly the model that they followed, and I -- that's the reason they were successful. And ironically, the more that you don't allow one country to hold it up, the more you're actually going to have a chance of getting it done.

And the key on this was then I went to see him the week of the final meeting, and I said, Mr. President, I said, you know, you probably think that consensus means all countries. (Laughs.) I said, go talk to your lawyers in the Foreign Ministry because there's varying views of consensus. And I said, you might find one country, like Bolivia, that decides it wants to hold you up after you've got everything else all lined up for whatever reason they have. And I said, so, you know, be prepared to think of a way you can describe consensus without a country, and it was one of these forecaster -- (inaudible). It was Bolivia that tried to hold them up.

So the -- I emphasize these because, as you -- as Richard and I both know, there are views in America that say -- that kind of says, oh, well, you can't make any of these multilateral systems work, and they're sort of imperfect. I think that's a terrible mistake. But, on the other hand, I constantly find myself having to sort of issue -- kind of argue a pragmatism or realism against those who argue, you know, a rather utopian view.

HAASS: All or nothing, you may end up with nothing.

Why don't we open it up and, again, just wait for a microphone, and just introduce yourself, your name and your institution, and toss up a difficult question for Bob.

ZOELLICK: Or an easy one. (Laughter.)

HAASS: Or an easy one, if you insist. Sure. Let's start here.

QUESTIONER: Thank you. My name is Kuseni (Dlamini ?) from the South African Institute of International Affairs. My question has to do with the World Bank and its leadership. There've been some debates around the process that's used to choose the head of the Bank. I'll be interested to hear your views, Bob, as you're about to leave this very important institution and having done such a great job. Do you think we should move away from the established practice of having America decide and having Europe decide on the IMF and allow the emerging powers from emerging markets to also contest for the position?

ZOELLICK: Well, the process has gotten better in the sense that our board -- our board meets and decides that there are certain characteristics that they're looking for and whatever nominations will go forward. People will have to present their case and so on and so forth. But the United States has 15 percent of the votes and Europe has a larger amount, so that's the kabal that could guide it in the past.

Let me start this level. I think it is actually critical for the institutions to broaden their engagement at multiple levels with emerging markets, but it's -- and a lot of this focused on voting shares, OK? And we made adjustments in voting shares. I honestly think sometimes that becomes an overstated argument. So let me start with this.

One thing is, we added a chair for sub-Saharan Africa on our board, another chair, which actually South Africa and Nigeria share. And because we don't really take votes, that was probably more important than kind of a voting adjustment.

Second is how you run the institution.

So yeah, you can actually see some of the commentary about the Bank now is that I was -- been very much driven by a client-driven approach, what are the clients interested in, and then share the knowledge, so on and so forth. The -- interestingly, some people who actually would come more from what I'll call the left-of-center side have what I'll call the monopolist view that -- you know, that you should do this, this and this. That's actually, I think, what the Bank needs to get away from.

So -- and then another aspect is the staffing. And as you probably know, I brought -- about half the officers are now women and in much larger numbers from the emerging markets.

Then it just leads to the question on the U.S. And I guess I'll pose -- for the presidency. I'll just pose this part. Some people pose this question to me in an interesting way. They said, is it time for the U.S., you know, not to be president of the Bank anymore, OK? And that's an interesting perspective because it would suggest, in a merit-based system, that an American cannot run the Bank, OK? And here's where I guess I'll -- going to twist this in a little bit different way.

As someone who's worked a lot with multilateral institutions and tried to get the United States to work more effectively in that system, I think it's very important that the United States have the responsibility of running some. And I'm not going to say which ones, but I will say this: There's never been an American who's headed the WTO; there's never been an American who's a U.N. secretary-general; there's never going to be an American who is going to be head of the regional development banks. So you know, there's -- never had an American who's headed the IMF.

So if you're going to change the whole thing, all I'm saying is somewhere in that system, I think it's good for the United States to bear the responsibility of the multilateral system because, going back a little bit to what Richard said, and some of my colleagues in the room here, I've found that my being in that role actually compels people to engage with these institutions more than they might otherwise.

So I won't necessarily say which one and others, but be careful, if you push the U.S. out of this system, what the net effect will be.

HAASS: (Off mic.)

QUESTIONER: Thank you. Gilad Sher (ph), from the Institute for National Security Studies in Israel, and excuse me for being a bit region- oriented.

MR. : (Laughs.)

QUESTIONER: In the absence of the --

MR. : What's the World Bank going to do about the Iranian nuclear program? (Laughter.)

QUESTIONER: No --

ZOELLICK: I was just at the Herzliya Conference. (Laughter.) I know the topic du jour.

QUESTIONER: In the absence of any substantive negotiation process between Israel and the Palestinians, what role do you see for the World Bank in the Israel-Palestinian arena in particular and in the changing Middle East in general? Thank you.

ZOELLICK: Yeah. Very important one.

Well, I've had the good fortune that Prime Minister Fayyad in the Palestinian Authority is somebody I've got the highest respect for, and I think he's got actually a very sound economic and political model, which is he's trying to build the state from the bottom up. And because the Palestinian Authority is not a member of the World Bank, I actually -- to support (by ?) them, we have to make a special allocation out of our income, which we do. But we also, as we do in other areas, run sort of trust funds. So one of the problems in the developing world is people may have good intentions, but if they have 50 or a hundred different programs for one small authority, you overwhelm it. So we will coordinate with that authority.

So I think Fayyad has done a very important job of building the institutions of governments, more transparency, fighting corruption, building capabilities that, at least from my conversations with Israelis, are probably important for Israeli security as well as economic development.

So I certainly think it's short-sighted -- (chuckles) -- when people do things like cut off the money flow of their own tax revenues for those institutions, and I've said that to some of the Israeli authorities. And I think the Israelis, at least the vast majority, recognize it too.

And I think the bigger issue there also is one of contesting in an open fashion kind of a modernization agenda. So I -- when I went to the Herzliya Conference, I also went to see Fayyad in Ramallah; I thought it was a good thing to do. I have no idea what will happen, but he's using modern communication -- Facebook, social media and other things, things his kids have taught him -- to engage Palestinians -- public -- on these issues, to take a sense of responsibility. And he believes, actually, that in an electoral sense, that what he stands for could do better than some people think, because he's been actually trying to build the base up.

Now, the real problem there -- and this is one where I can observe; I don't -- I can't say with great specificity -- much of the growth in the Palestinian Authority has been developed through public sector funding. He's trying to wean it off public sector funding. You need more of a private sector development. And it's going to be very hard to get the private sector development with some of the movement restrictions.

On the other hand, I understand the security logic for some of those movement restrictions. But I think if it were up to me, I'd be testing the border of what more I could do on movement to allow a greater sense of private sector development and, frankly, personal dignity that will be the important part of building that state and capacity.

And I guess the -- what this would also suggest, as I saw -- Dennis Ross, a former colleague, wrote an op-ed not too long ago about whether one could open up other sections of the West Bank to be able to encourage this sort of development. And the logic would lead me into that direction.

HAASS: Do you want to say something about the broader Middle East that would say that where you had regime changes -- places like Egypt, Tunisia, Libya -- what sort of a role the bank is playing?

ZOELLICK: Well, you know, one of the other things -- this gives you a little sense of how I try to guide the bank -- we need to learn too, OK. So we've got a lot of smart people, but the world changes and so on. We're trying to learn our own lessons from this, I mean, not the least of which was, you know, an Egypt that was growing well and frankly had a pretty good economic team, but nevertheless that wasn't sufficient -- and this goes to some of these issues of dignity and also kind of, I think, a system whereby you need to combine economic growth with a sense that people (feel ?), well, it's not crony- and favoritism and others.

What this has led us to is the idea of trying to work with governments to build on their own movements to have greater openness, transparency, social accountability, and this again connects from other regions.

So what you now have with modern telecommunications is the ability to have, you know, people in villages with cellphones be able to comment and guide about the delivery of services. (Right ?). And this is -- this opens up not only anti-corruption things, but it opens up a challenge for sort of bureaucratic performance.

So with countries such as Tunisia and Morocco, we've been trying to take those steps and encourage them. And that will be a big issue for us with Egypt, and -- because we have certain programs that are of investment projects in agriculture or energy or others, but the bank sometimes gives what's called development policy loans. This is money that goes to the budgets, but it's based on various policy changes. And it's my own view that those need to include these types of social accountability and openness and transparency measures. And it's things that we're applying to the bank as well.

So -- and just to give you one other connection, because -- something probably many people may not be aware of, but with your research institutes, I really hope you are -- one of the -- one of the most lasting things that we've done at the bank during my time is we created an Open Data initiative.

So we've taken all our data sets going back decades and made them for -- available for free on the Web.

And there's this interesting little bureaucratic story behind this. (Chuckles.) I used to go to meetings, and I'd have, you know, some slightly wizened professor come up to me and say, oh, you've got some great data sets, but you still charge for them. And I'd go back to my economic staff, just as you would, and say, why are we charging for them? And they'd say, well, we add value, and we need to get compensated. You know, it took me about three rounds to realize it was, like, a $3 million offset to their budget, right, or -- so -- and so finally, we said, OK, we're going to wipe this out, and we're going to open all this up.

And then we started to get our economic staff to work on different applications to make it easier to access. And we created an Apps for Development competition. So we opened up to the software community and said, use our data, and the only requirement is relate it to the Millennium Development Goals and use our data. And so we came up with mapping, games, other things that you could never, you know, even with a very brilliant staff, have been able to produce.

What I'm finding is, as is often with an idea like this, it starts to drive a whole series of other possibilities. So for example, when we're working with countries on gender, another great possibility for growth, it's a little hard to know the effect of the policies if people don't keep gender statistics, or beyond-border trade barriers -- getting beyond the quotas and the tariffs to some of the logistics and the customs systems -- unless you have the information, you can't do it.

So this notion of -- that we've talked about of democratizing development -- so it's the exact opposite of the monopolist model, but openness, transparency -- and the relevance to the broader Middle East is that I think this is going to be -- this is going to take awhile -- (chuckles) -- but I think building in this concept of openness and engagement for the society and the government is important, as well was for the Bank.

QUESTIONER: Michael Emerson, Centre for European Policy Studies in Brussels. Palestinian question. You mentioned Morocco. I wonder whether you could broaden this out to talk a bit about the response to the Arab Spring, or let us call it the Arab political earthquake, that happened last year. I'm sure that you've been faced with the task of defining the World Bank's strategic response to this huge strategic event, earthquake, and I'm wondering what conclusions you -- you came to.

ZOELLICK: Well, just to build on a couple of the points I said: Number one, development has to be owned by the local people. So -- and this is a lesson from everywhere. You could have great money, ideas, so on and so forth, but so this goes to the governance issue. So you have to build your development strategies with the evolution of the governance topic.

And obviously, you have countries at different states. So some have had a revolution and are on the way of developing a political system. Tunisia, Morocco and Jordan have sort of a fast-paced evolution, OK? Egypt is -- I mean, I don't know, coup, partial revolution. I mean, I can't tell yet, right?

And so the key point is, we have to recognize the local ownership but also that it may be going through phases of development, and then what can we share -- and this is the important part about the south- south. So it's not just U.S. or the European, but some of the ideas of what's worked with other developing countries. So if you work in this area, I'm sure you've encountered there's a huge, huge interest in Turkish economic development, but also there's an interest in some of the other models from East Asia as we go forward. And so what can we share about safety net systems, governance systems, transparency systems?

Then, as you get to other countries, in the Gulf, for example, that don't necessarily need our money, or let's take Libya as a -- we had the Libyan prime minister here. They don't need our money, but what they will need is the ability to frankly develop public financial management systems so that the money is effectively used, so it's not stolen, and more effective -- more importantly, how do you avoid the resource curse?

So this is an issue in much of the development in sub-Saharan Africa. Many countries have great natural resources, but how do you do it in a way that has inclusive growth, avoids the Dutch disease on the exchange rate and sort of builds for a longer term?

So we're working -- you know, we do some just -- we get paid sometimes for some of our knowledge work with some of the Gulf countries, not so we don't do loans, to be able to share that information. And this is, again, the neat thing about what's happening in the world. You're finding that there's more and more countries that now -- for example, I was thinking about the Gulf -- some of them are looking at -- on Singapore as a logistics model. I'm going to be speaking to the Panamanians here in town in a couple days. They're trying to develop this as a model.

So I think it's a very healthy think that people are sort of looking more broadly, and if we can share the information about choices, and that there's an increasing number from the developing world and being able to draw on it.

This wasn't your question, but I want to -- I'll take it one step further, because that's sort of -- I find it intriguing and so may some of you.

You know, as China's invested in sub-Saharan Africa, there's been a lot of focus on resource development or infrastructure or others. And literally there's a small publication we have come out, and I had -- was -- in discussion I had in China in recently, in Guangdong, we were talking about it. China has about 85 million low-wage manufacturing jobs. They got to move up the value added chain if they want higher wages, they're going to have higher wages, and part of their whole strategy is increased productivity, higher wages.

Sub-Saharan Africa has about 8 million of those jobs, North Africa maybe 1 (million) to 2 million, so you got about 10 million of those jobs. We're in discussions with the Chinese, both officials and companies, to say what is it that we could do to help the enabling environment -- you know, ports, energy, infrastructure, customs rules, and also maybe IFC private investment, to help some of that low-wage manufacturing move to sub-Saharan Africa?

Because if you have 85 million versus 8 (million) to 10 million, even if you just get 5 million, you've increased it by 50 percent. So I say that not that it's going to happen overnight. And when I was in Guangdong province talking to the provincial party secretary about this, my former colleague, Ngozi Okonjo-Iweala, who is now the Nigerian economic coordinating minister, had been there visiting companies that developed this. It will require some interesting intersectoral, interministerial work in sub-Saharan Africa to make it happen. But it just gives you a sense of how fast this is changing and if the bank as an institution can help prod it or push it or interconnect it, you could have bit payoffs economically, politically and in stability terms.

QUESTIONER: (Inaudible.)

QUESTIONER: (Off mic.)

ZOELLICK: Is this my euro zone question? Don't I get a euro zone question? (Laughter.)

QUESTIONER: No, no, no, it's not a euro zone. But you can't answer a question that hasn't been asked to you. That's typically what de Gaulle used to do.

No, in the last --

ZOELLICK: (Inaudible.) (Laughs.)

QUESTIONER: In the last five years or so, the IMF has been at the forefront of all debates on the global, economic and financial governance, and this not only because of mistrust or scandal. Apparently, the World Bank has been less on the forefront of the debate, less visible. So my question is, how do you assess today the importance of the role of the World Bank in the global economic governments debate? And to put it more sharply, could we live without the World Bank?

ZOELLICK: Well, you know, you -- your -- (even ?) -- you're such a strategic thinker, Terry (sp), your perspective is a little short term. (Laughter.) Actually five years ago, we were kind of in the news too at the bank on some governance issues. (Laughter continues.) So, to be honest, I take this as a --

MR. HAASS (?): (Laughs.) (Inaudible) -- indirect compliment for the --

ZOELLICK: -- to stewardship.

No, the World Bank has been very much a part of this as well. I think the IMF -- and actually, five years ago, the IMF was more -- there was as a sense of, what's its role in the system? But the international crisis, with its macroeconomic nature, you know, sort of pushed that to the forefront.

As for whether you could live without a World Bank, I think the title of my article is, "Why We Need the World Bank." So you got to -- (inaudible) --

HAASS: "Why We Still Need" it.

ZOELLICK: -- "Why We Still Need the World Bank" -- but it really goes to this point that I've touched on, Terry (sp), which is, is that I think that the international system actually has a dearth of these intermediating institutions. And so -- and you know, so we have one in the IMF and -- so we have one in trade, and we have one in macroeconomic, and we have one in sort of microeconomic structural. You've got the U.N. system, some of which is political, some of which is some very valuable operational arms. You've got some of the regional loan banks. In some cases, you have sort of military alliance.

But given the nature of the interdependency and interconnected problems -- and what I think will be the big issue for the rest of our time, which is the fast rise of emerging markets and powers in the system -- I think it helps enormously to have structures, institutions, regimes, whatever you want to describe them as, that can play a mediating role to try to come together cooperatively on problems.

And let me just take two dimensions of this. And I bet Carla and Charlene might have this sense too.

You know, this is sort of serendipitous, but I became USTR in 2001, and now it's 2012. So it's a little bit over a decade. In historical terms, that's a rather short period of time. And so I had the USTR, the State Department, briefly at Goldman, then at the bank. What I have seen in terms of the role of emerging markets, development, trade, investment, you know, climate change and, I think, increasingly, security (issues ?), it's just ramped up enormously, OK? And so it's hard for me to conceive of an issue now that can be addressed without their engagement and involvement.

But -- and this is the big "but" -- the -- a number of those countries, understandably, are still relatively poor. And so they want -- they're concerned about having all the responsibilities of the developed countries. But then we had this economic crisis, so then the developed countries are worried about sort of their sense of responsibility. So I know if you're going to discuss this in your governance session, how you get that, quote, right -- you know, and we were talking a little bit before as we were just coming in -- you know, the Kagan view of do you need sort of a prime player to guide the system, which was a little bit -- in the economic sphere, it was the Kindleberger view about the causes of the Great Depression. Britain was used to world leadership, no longer had the capabilities in the '20s and '30s; U.S. had capabilities, wasn't used to the leadership. How does the change in this system -- or the Eikenberry view that the rules and norms of the international order are in place enough, and so you -- that's going to be a very big topic.

But what I've seen in a practical way and what you'll see in the things I've written is it's fun to talk about this stuff, but the reality is then you have to do it, OK? And so the best way to make it -- to make a difference is to show how you can bring parties together. I have 187 shareholders -- (chuckles) -- in very different countries.

But you know, you could look at the record on things from, you know, climate change to trade and structural reform and new capital infusion, $90 billion raised for the poorest countries for IDA. We're able to bring people together in the process. And if you didn't have the institution, that wouldn't happen.

And again, let me give you another practical one from the climate area. You know, Hank Paulson, when he was secretary of the Treasury, you know, came to me and we had this idea about creating global climate investment funds. And so he and I went and got about $6 billion of contributions from primarily developed countries, in different forms. It's gone up a little bit. And we created some for technology, some for energy efficiency, some for adaptation. We've been able to leverage that to about $50 billion and about 30 to 40 percent from private sector of that 50 billion (dollars), the other from other bank and regional bank resources and so on and so forth.

And equally important, we've now had sort of projects launched in about 45 emerging market countries, and every time you launch one of these projects, their investment in the climate change issue becomes somewhat different. And the key example I'll give you is, with India, you know, it's a very proud country about its role and sensitive to some of the climate change topics. They wanted to do a project with us through the Climate Investment Fund, so as to give the Climate Investment Fund additional legitimacy. So that was -- they wanted to do that support, because we worked out the governance structure and the financing.

Now this might just seem like it's, you know, sort of an obscure thing, but you open up the newspaper and you've got endless discussions about the green fund in the U.N., OK? So -- and people are still, you know, mapping stuff on paper.

Now and then I have to kind of pinch myself because you got endless discussions about the green fund -- we got one up and running with $50 billion that we'll learn lessons from.

So I use that as an example of saying that at the end of the day, you still have to make stuff happen, and then we as an institution have to be more rigorous in measuring results, in learning where we screw it up and sort of adapt the process. So for those reasons, if -- or post-conflict states -- you know, we're probably the most effective player in Afghanistan today. So if you think the bottom billion matters, if you think that climate change matters, if you think that trade matters, if you think that emerging markets in the international system and how they fit in matter, then I think there's a role for the bank, and for me that's a pretty clear exposition of why you do need it.

HAASS: Do we have any non-European hands here?

MR. : (Laughs.)

HAASS: Sure. (Inaudible.)

MR. : (Laughs.)

QUESTIONER: (Off mic) -- non-European.

HAASS: Oh, Turkey's -- I'm not sure how we include Turkey on that one.

QUESTIONER: This is, I suppose, partly European. Elizabeth Sidiropoulos, but from the South African Institute of International Affairs. A question around a recent initiative by -- spearheaded, seemingly, by India, which apparently will be publicly announced at the end of this month, around the establishment of a BRICS development bank. I attended a presentation by one of the concept writers in that regard, and he said, you know, could it play a role that the World Bank played after World War II. And is it -- and my question is, I mean, how would you at the World Bank view such an initiative, notwithstanding that I think the concept still has to be further explored and defined, and also its purpose.

ZOELLICK: Yeah, I'm going to be in India in about two weeks, so I'll have a better sense when I talk with people. And it -- and your -- the last phrase that you -- (the clause ?) -- that those are actually kind of important, because you had -- you had a Bank of a (sic) South movement here led by Chavez that I didn't fight because I didn't think it was going to do anything and it didn't do anything, you know. And -- but also, as part of that, you have to decide what they resisted. In that case, I think it was sometimes openness, transparency, governance, things I think are good things.

I think in this case what's driving it is an Indian concern that because of some of the borrowing limits the bank has had, that it's running up against (ceilings ?) about sort of investable money. I think that's a serious issue, and actually it's a -- I've had to actually fight my board on this because I feel that if the bank takes itself out of dealing with the Indias, the Brazils and the Chinas, as I said, it's bad for these countries and the international system.

How we engage can be very different. So with China, actually a lot of it is more analytical work, and they use programs to -- as pilots that they test.

India's at a stage where it is -- it's -- it's -- is concerned for infrastructure development. I really don't know for sure how much of it is capital and how much of it is the enabling environment. I kind of get mixed messages about that. But one of the things, just to give you a sense, is, I actually pushed for an expansion of our borrowing limit for India -- if we could get the Indians, for example, to invest in some of our securities, which would offset it, so we've actually expanded it another 4 1/2 billion (dollars) or something.

I think for infrastructure, it relates to this public-private partnership model.

So I think what is often the case when somebody promotes something, it's important to know kind of what is driving it, OK? Now, that's separate from the issue of will this be -- is this positioning or reality. So -- because -- you know, it'd be interesting to decide whether the BRIC countries decide to actually fund it, and where, for example, will they put it, you know? So -- but I don't mean to be -- I think it's a -- it's an idea that you need to understand what is driving it and to try to address it. And if we as an institution can't address it effectively, well, then there may be other ways that people try to address it. So I mean, I'm not a monopolist. (Chuckles.)

HAASS: Brenda (sp). Brenda (sp) there in the first table.

QUESTIONER: Your -- is this working?

HAASS: Yeah. Go ahead.

QUESTIONER: Your comment about --

HAASS: Where are you from?

QUESTIONER: I'm from Turkey.

HAASS: Turkey, great.

QUESTIONER: Your comment about moving some manufacturing jobs from China to sub-Saharan Africa -- I think that's indicative of a broader question in that given the demographic expectations, probably sub- Saharan Africa and parts of the Indian subcontinent is where we expect the youth bulge. And that's probably bringing them into the global system. Global trade and commerce will be a priority. But when that happens, if that happens, the abundance of labor will probably impact intrastate income equality across the world, including the Western world. I don't know if that's sustainable politically.

So I'm wondering if when you look at the broader picture in a 10, 20-year perspective, are we only talking about interstate sort of equality and convergence and moving people -- sort of the average upwards, or do we also care about intrastate equality as a development objective?

ZOELLICK: I think we definitely have to. In our work in emerging-market countries, in developing countries, we're very much focused on that, what we call inclusive growth. And in some cases, it starts with having the fundamentals of nutrition and education. And in every country I deal with -- and I'm going to come to the developed countries as well -- there's a huge interest in this connection between education, skills and workforce. And our next World Development Report is actually on jobs, just as we did one on gender and post-conflict. And this may seem, well, that's obvious. But what we were trying to get at is when I studied labor economics, now getting to be quite distant, it -- the field actually didn't strike me as too interesting because it was either discussions of kind of unions and economies or kind of the labor market was a derivative of your macroeconomic policies.

This is trying to look at the -- from a different issue about the social capital that's developed, the productivity of individuals, how to sort of see this as part of your development model. And the work isn't done yet, but it's an example of where I hope we can make an added contribution, though the way that you started the question is -- let me just say that I think is going to be a big issue for developed economies, OK, and their willingness to sustain and participate in an open international system and resist protectionism and populism and so on and so forth.

And I think that's extremely important. It happens not to be the remit of the bank -- (chuckles) -- although one of the things I've tried -- you know, and I do this with the Congress as well as other forums in the United States -- to try to say there's actually some very interesting lessons out there coming from emerging markets that you should be -- can be able to draw from, OK?

So I mentioned the infrastructure one. But in education, you know, it's very interesting. You see the debate in the United States about measurement and performance standards. At least in the developing countries I deal with, it's a no-brainer. Of course you've got to measure what the performance is. You know, how else are you going to know what the results are, you know? And -- but here if you test, oh, you might learn something, you know? So I'm hopeful that over time -- you know, each of these things create a risk and an opportunity that you could actually create a greater flow of information and experience that developed countries could manage as well.

But the core point that I just -- I want to emphasize is -- was the one sort of inherent in this. Look, there's problems in the international system, but by and large if you look at the growth rates for sort of the whole world over the past 50 or 60 years, it hasn't been too darn bad, OK? And in -- from historical terms. But this is not pre-ordained. You could lose this, you know? And these factors that I mentioned in the answer to Terry (sp), you know, the emerging markets feeling, oh, well, they have to take on additional responsibilities, but you know, what's their say in the system, and have they really -- you know, they've still got a lot of development issues.

The developed countries, particularly ones that are aging -- (inaudible) -- sort of their sort of role in the system.

And that really goes back, I guess, to the question that Terri (sp) and Richard (sp) mentioned. It's why institutions like the World Bank -- (chuckles) -- they're important to try to interconnect people, and as opposed to shout at each other, try to come up with cooperative solutions. But the other piece of it is my difference with sort of -- it's not enough just to have the institution and talk to each other; you have to try to resolve real problems.

HAASS: I know there's several of you who still have questions. I -- OK, we'll do one last question. I want to make sure -- (inaudible) -- from Japan -- I -- and then we'll do that.

QUESTIONER: (Through interpreter.) I come from Japan. I have -- just have a couple of questions. The World Bank and China are doing 2030. And what is the significance of conducting this kind of a research, right -- investigation at the time when China is to change their guards in Beijing, so to speak? And what's your view on the dollar- renminbi relationship in 2030 if the structural, you know, improvement succeeds?

ZOELLICK: Well, let me focus on the first question -- (laughter) -- because it's actually the more important question, just so people have a little sense of this.

The bank has had a very good brand in China, dating back to Robert McNamara opening relations in 1980 with Deng Xiaoping. And over the course of some 30 years, there were points in the idea development process in China where the bank seemed to play a catalytic role.

There -- I know this from talking -- is more to the Chinese counterparts. In 1985 there was a floating seminar down the Yangtze River for four or five days that led to a report. In the late '90s there was something held in Dalian. And the relevance of this was -- a Chinese official actually came to me before the 30th anniversary. And he said, Bob, you know, everybody thinks China loves anniversaries and that we just want to celebrate, and he said, that's true, but when you come for the 30th anniversary, he said, what about planting the idea of a report that would deal with some of the issues that are stirring in China, like how to avoid the middle-income trap, and kind of how do we -- we've talked in the next five-year plan about rebalancing domestic demand, consumer -- but how do you really do that?

And quite intriguingly, he also said -- he said, as you know -- so you work a lot with China; people in Washington think, you know, people are waking up in Beijing trying to take over the world every day. And he said, most of the time they're trying to just, you know, work on the problems in Beijing and China. So he said, what would be the implications of this internationally?

First off -- and then -- so then I went to China. I proposed this study. And Li Keqiang, the next -- or it looks like the next premier, was very enthusiastic about it and, quite importantly, asked us to work with the Development Research Council, which is the State Council under -- is the -- is the research think thank under the State Council. We also work with the Ministry of Finance. And it was blessed by President Hu and Xi Jinping, but Li Keqiang is kind of the godfather of the process. And we've been at it for about 18 months. We had a -- in September, we had a draft; we had various international commentaries about, and so on and so forth.

Now, the first -- from a strategic perspective, since all of you aspire to strategy, I find it very impressive that China after 30 years of 10 percent growth could say, you know what, this may not work in the future; we got to rethink this model, OK? Whether they accomplish it, that's a different question. But again, I would suggest that maybe the U.S., Europe and Japan without 10 percent growth should be thinking a little bit in these terms.

The second thing is that what I think is also going on was that this is to contribute to their own internal debate and discussion and to be catalytic. So I asked Justin Lin, our chief economist from China. And I said, Justin, what do you think is going on here? Because you know, Chinese economists could come up with a lot of this. And he said, yes; he said, but as you know, in any country, people work on their own particular piece of the problem. This is a catalyst to get people to look at the economywide pieces. And frankly, he said, the bank's got a very good standing and reputation, and so it will be taken very seriously as we come in with it together.

Next point is, of course, the devil will be in the details of implementation. But you know, even the summary report is 450 pages long.

So I wouldn't expect everybody to have read it. But you'll see, if you skim it, there's things about phasing, transition, (quick wins ?) -- and going back to this question a little bit -- how do you build public participation in it to build support along the process? So I think it's a very serious exercise.

Now, the bottom line, my own guess -- but it's only a guess -- is, is that, you know, this will wait until the 18th party congress; there'll be some settling down after that. I don't expect China to follow a "big bang" approach, like Margaret Thatcher did, because that's not the Chinese way. But my best guess is you'll see these ideas pursued in pilots at local level, in some sense, to kind of test them as they move forward.

And again, you know, some people are quick to judge, oh, well, will China do this or this? And I just think it's important to also look at how other countries are doing this. And then, again, what I suggested is in my comments on the international side, there are some very interesting opportunities here for creative minds to kind of develop some win-win agenda.

And the last point is -- you know, what's quite interesting, the reaction -- and this is what I'd hoped for -- we're getting -- one of my colleagues was in Brazil last week. The topic was a very -- the report was a very big topic because people are facing similar problems. And this also gives you, going back to where I started, a little idea that if the bank were only working on the 79 poorest countries, we'd actually miss out on this. And this question of rebalancing the international system, how middle-income countries fit in the system, you know, their own growth model -- those are going to be important questions for the world. So I'm -- at least so far, I'm very pleased with the report.

HAASS: We have a tradition here where we end meetings on time, and today we violated that tradition because we went a few minutes over, but I'm glad we did.

Bob, thank you for being with us today, and I think more important, thank you for all you've done over the last five years at the bank. It's a -- (inaudible). (Applause.)

-------------------------

(C) COPYRIGHT 2012, FEDERAL NEWS SERVICE, INC., 1120 G STREET NW; SUITE 990; WASHINGTON, DC - 20005, USA. ALL RIGHTS RESERVED. ANY REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION IS EXPRESSLY PROHIBITED.

UNAUTHORIZED REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION CONSTITUTES A MISAPPROPRIATION UNDER APPLICABLE UNFAIR COMPETITION LAW, AND FEDERAL NEWS SERVICE, INC. RESERVES THE RIGHT TO PURSUE ALL REMEDIES AVAILABLE TO IT IN RESPECT TO SUCH MISAPPROPRIATION.

FEDERAL NEWS SERVICE, INC. IS A PRIVATE FIRM AND IS NOT AFFILIATED WITH THE FEDERAL GOVERNMENT. NO COPYRIGHT IS CLAIMED AS TO ANY PART OF THE ORIGINAL WORK PREPARED BY A UNITED STATES GOVERNMENT OFFICER OR EMPLOYEE AS PART OF THAT PERSON'S OFFICIAL DUTIES.

FOR INFORMATION ON SUBSCRIBING TO FNS, PLEASE CALL 202-347-1400 OR EMAIL [email protected].

THIS IS A RUSH TRANSCRIPT.

RICHARD N. HAASS: Well, good afternoon and welcome to today's lunch program of this first ever -- but we hope first of many -- gathering of the Council of Councils, as we are calling it.

Just a couple of housekeeping remarks for a second. If people would please turn off your cellphones, that would be a great help -- BlackBerrys and all such devices. Secondly, this session is on the record. Let me just say that.

Let me -- and we'll repeat later, but just let people know -- the building we're meeting in is only several years old, and it's environmentally, shall we say, advanced. It's a Gold LEED building. And what we'd like to do -- if anyone would be interested, after the last session today at 3:45, we are more than happy to give you a tour of the building, just so you can see what sorts of things have been done here, both environmentally, but also in audio-visual type things and all that, which might be (of) interest to some of you from other organizations.

As I said, this is the inaugural meeting of the Council of Councils, which is a network of policy institutes from around the world, and the whole idea is to discuss, identify global challenges as well as global opportunities. And hopefully out of the discussions will emerge some ideas, some initiatives that people then can take home and introduce either into their own respective public debates or possibly as well into decision-making circles within their own countries.

Some 20 countries or so are represented here today, roughly tracking the G-20, the difference being that the agenda here is far more comprehensive. The agenda here is not simply economic or even economic and energy and environmental issues, but deals also with the full range of political challenges -- for example, humanitarian intervention, those questions -- as well as security challenges.

We just spent an hour and a half discussing -- we didn't quite solve, but discussing the challenge to the nonproliferation regime posed by -- posed by Iran. We also had a general conversation about global governance, the whole challenge of coming up with common rules and norms and, ultimately, institutions to bolster what Hedley Bull would've called the society part of international relations, as opposed to the anarchical dimension of international relations.

I would like to offer special thanks to the Robina Foundation, who have made not just this possible, but the larger program, the council's program on international institutions and global governance. And I'd also like to pay a special welcome to one of my bosses, to Carla Hills, who is the co-chair of the board of directors of the Council on Foreign Relations and a former U.S. trade representative. Indeed, she is one of two former U.S. trade representatives with us today -- actually, one of three; we have Charlene, Carla -- Charlene Barshefsky -- and Bob Zoellick. So probably nowhere in the world at this moment are there more U.S. trade representatives, and -- (laughter) -- who knew? And so any of you tweeting can tweet that. (Laughter.)

I'm thrilled to welcome Bob Zoellick. Bob is the 11th president of the World Bank Group. And he's a longtime personal friend. Let me get the conflict of interest out on the table. We've worked together for more years or decades than either of us probably care to remember. And he's also been a longtime supporter and active member of the council. He first spoke here in the early 1990s, roughly two decades ago, and he served on the council's board. And our statisticians tell us that he's actually spoken here more than 20 times. Did you know that? For no fee -- I should point that out.

Bob is in the nonprofit business, as are we. (Chuckles.)

I won't spend a lot of time on his bio. I already pointed out he was U.S. trade representative. He was deputy secretary of state as well as several other positions in the State Department. And Bob played, I thought, an extraordinary role -- and if I were still teaching at the Kennedy School, I would highlight him to show how in government, you can be entrepreneurial. And Bob was truly entrepreneurial after the fall of the Berlin Wall in stitching together what became the German unification inside of NATO. It was policymaking, I thought, at its highest and finest.

What we're going to do is have a conversation for a few minutes about economic issues and the Bank and all that, and then we're going to open it up to you all. And I won't go on to -- I won't filibuster, even though we're in the city of filibusters. And when we get around to Q-and-A, we'll hand out microphones, and we'll just ask you to identify yourself before you speak.

You OK there, sir?

Again, welcome, Bob.

A few weeks ago you published a piece in our magazine, Foreign Affairs, which was titled "Why We Still Need the World Bank." OK, let's start with that. Why do we?

ROBERT ZOELLICK: Well, first, let me thank all of you for taking time to come to this. Richard explained to me a little bit to me about this concept, and I think it's a great one. So I know for many of you, it required a little bit of a journey, but it sounds like a superb idea to be able to get the councils together.

It's like trick questions, because aren't they supposed to read the article? (Laughter.)

HAASS: Give him -- give him the Cliff Notes. (Laughs.)

ZOELLICK: Well, let me -- let me take this approach. When I came to the World Bank Group about a little less than five years ago, I had a slightly different perspective than some had in that some who come purely from the economics profession or even development economics -- and that is I view the World Bank as part of this very thin tissue of multilateral institutions that was created during and after World War II to try to deal with the problems that were seen as -- the political-economic problems that were seen as driving the crisis in the '30s and leading to the world war.

And this includes the IMF; it included at that time the GATT that became the WTO for trade; it's got the World Bank, other institutions.

And it's striking if you go back and you look at the issues that people were concerned about: currency in international capital flows, you know, free trade, reconstruction of broken states, development, investment flows. Those remain very vital issues, but obviously, the circumstances changed enormously.

So I saw part of the challenge for the Bank and my challenge as a leader of the bank as how do you modernize multilateralism; how do you -- recognizing that nation-states are still going to be the dominant player, how do we take this thin interconnecting tissue, if you want to call it, related to global governance, and make sure that it's updated for the current age. That gives you a slightly different strategic perspective.

So for example, if you look at this solely from an economics perspective, in 2007 you'd say, well, in 1945 you didn't really have private capital flows, and so -- but now you had a whole large flow of private capital that dominate the official sector, so why do you need this anymore. OK, well, problem number one is that what economists thought in 2007 -- (chuckles) -- turned out not to be the case.

In 2008, 2009, we learned economists can be wrong. But even more than that, it missed the fact that a lot of what the Bank does is not just invest money; it's the knowledge and learning and interconnecting transfer.

Or another perspective -- this, again, seems obvious to me, but it may come back as a debating item. When I came to the Bank, there was a school of thought that said, really, the middle-income countries should just be sort of taken out; you just focused on the poorest. Well, if you believe in this as a multilateral institution, that would be a strategic mistake of huge proportions because actually you want to get -- first off, there's some huge development challenges in the so-called middle-income countries. About, you know, 75 percent of the people living under $2 a day are in those countries. But, in addition, you actually want to get those countries to be responsible stakeholders in the system.

And so just to give you a very current example, the Bank's got a lot of attention recently because of a report we did called "China 2030," which is looking at the structural changes of China, that it will need to have a different growth model. And I've found this has got interest in other middle-income countries; it's got the investment community; it's got the interest of Congress. You know, if you said, well, we weren't supposed to deal with the Chinas of the world, then you wouldn't be doing reports like that. And yet it's fundamental to the rebalancing.'

So part of what I try to do in the article is talk about the intellectual and strategic position of the Bank, but then I also talk about some of the challenges of modernizing the institution and opening it up, changing the development model so there's not a monopolist of sort of people with Ph.D.s from certain universities and sort of democratizing the development process. So that's part of the challenge.

HAASS: I've noticed from your previous lives -- and we've talked about it before -- you're a great believer in institutions. Let me take a second, because it's so close to this -- what we're talking about here, governance. What do you see as the real advantage of institutions? Why are they so important?

ZOELLICK: Well, since you got a pretty erudite group here, I mean, I could talk about Edmund Burke and kind of the view of institutions that --

HAASS: He couldn't come today, but we've got -- (inaudible) --

ZOELLICK: (Chuckles) -- he couldn't come today, but he'll be here in the evening session when you do the Ouija Board.

HAASS: (Laughs.)

ZOELLICK: Well, I think that the institutions, whether domestic or international, play critical organizing roles, intermediating roles. It -- and in an international system, I think what sometimes people underappreciate is they can play a role in identifying issues, sometimes helping to bring people together in a mutual fashion on -- try to address those issues, sometimes they can bring additional resources to bear. And so they're the heart of problem-solving.

If you think about challenges, whether it be private sector or public sector, it's a little hard to do in an atomistic way. So institutions become the enabling power; they become the societal -- the social capital. They become the glue. But a critical point: Institutions have to adapt too. And I think one of my lessons from the public sector is that, in the private sector, the market demands are such that institutions are compelled to adapt or die; in the public sector, they can drift for a long time.

And so this is -- this has implications for how you open up the institution to criticism and engagement (and ?) others, but it also has implications for the nature of how you lead the institution because you really -- you have to keep folk -- there's a tendency in public sector institutions where process becomes all controlling. So I have this debate sometimes in other international forum(s) where people talk about quote, "legitimacy," as -- and they define it simply by the participation. My view is legitimacy also has to be driven by effectiveness.

My view is legitimacy also has to be driven by effectiveness. The League of Nations had one legitimate model that turned out not to be very effective, OK, so the U.N. overhaul was designed to partly deal with that. But I find when I deal with other international institutions like some of those in the U.N. system, they've drifted a little further away from the effectiveness model. And I think that it's incumbent on people running international institutions to try to sort of get that balance right.

HAASS: Before you said the World Bank does a lot more than dispense money. It's almost something of a misnomer. So if you could rename it, what would you call it?

ZOELLICK: (Chuckles.) Well, I don't think the name is so bad. I once had a friend who's now deceased who, when he talked to me about the institution, said, look, if you have an institution that has the two worlds -- words "world" and "bank" and you can't do something with it, you know, you're missing -- (laughter) -- but the reason that I highlight the -- why the Bank causes it a problem is that you'll see when many people assess the Bank -- and you see this when it's -- they'll look at the -- sort of the loan flows or -- so you now have people comparing it with some of the big development banks in developing countries or others.

And my view is is that when the World Bank is most effective, it combines three things: One, we really take knowledge and learning from all quarters of the world. And what's really changed with incredible rapidity over the past decade is the degree to which that is now coming from developing countries to other developing countries. And we try to update it, customize it, share it with others.

And then second, you try to have your investments or projects so that they have a multiplier effect. So you're looking at building markets or institutions or capacity.

And then third, what distinguishes us from a university or the OECD is that we can be innovative with different financial ways.

And so, again, many people may not be aware we have a private sector arm, IFC. So we make equity investments. One of the things we created was an asset management company to change our financial intermediation model so that people will invest in a fund that we create. We invest in private equity funds, about 180 around the world. So there's diverse ways of having the financial innovation, and that's again where sometimes I think people, when they think about the Bank, think about it as traditional, you know, 1960s major loan program.

You know, we use rain index futures for countries because you can see, in certain countries, that are (heavy with ?) agriculture that if the rain is below a certain level, you're going to have a huge hit to the crop. You can use insurance programs. So, part of it is how do you use the tools of financial innovation for development, but always keeping an idea on the sharing of knowledge and information.

Let me give you two current examples that I've been focusing on.

The safety net programs -- we're in a world environment where I think we're going to have to expect considerable volatilities and uncertainties. You'll see some policy efforts to try to control those. I'm not sure how successful those are going to be, whether it's food or energy or natural disasters or others. So it makes sense, as a matter of policy, to try to see if you can have effective, efficient, low-cost programs that provide a basic safety net.

Well, many of you may know that there's a program that started in Mexico -- it's got a lot of attention in Brazil -- called "Oportunidades"; "Bolsa Familia" in Brazil -- they're called conditional cash-transfer programs, and they give money to the poorest people in communities. Varies on the program, normally maybe 15 to 20 percent of the population, on the conditions that the families send their children to school, and they get health checkups. So it's probably done more for women's health than anything in the history of the Mexico.

The Bank has worked with over 40 countries to expand this program, OK? And they customize it for different circumstances. And what's striking is in Mexico and Brazil, it's done for about a half of 1 percent of GDP, OK? So if you consider entitlement programs in the U.S. and Europe, this is a pretty darn efficient investment, OK?

Now, you have other countries that may not have the capacity to have those set of programs. But -- so what have we learned about school feeding programs, community-based efforts, so that you have some basic safety-net protection? So that's an area where you take sort of knowledge and learning and expand it across regions but always have to customize.

And I'll give you the direct relevance: You look at a lot of the subsidy programs across North Africa, and they're a huge waste of money. I mean -- and so you're spending a lot of money, not getting much for it, not focusing on those most in need, not protecting people.

So one of the things -- I just came from a function over the weekend, which was talking more about U.S. policy. What I find somewhat striking in the world of so-called development is that there's a -- much more of a -- what I'll call a relentless pragmatism about what works, as opposed to getting locked into ideologies, which I sometimes see in the developed world.

And just to give you one other example that I think will be very important -- and this is true for developed countries as well -- I can't go to a developing country that isn't interested in infrastructure investment, and there's a certain amount you get from the public sector, but obviously, people want to get public-private partnerships, not only for the money, but increasingly, in middle- income countries, it's because they're run more efficiently; they -- the design package makes more sense. So we've created a hub in Singapore that is trying to sort of take the knowledge of that region and others about how to design these models so we can move beyond a series of one-offs.

But to give you a sense of the changing Bank, we're also working with Singapore to create a special infrastructure investment fund that will go along with this process.

So -- and then to bring it back to, say, the United States, obviously, a lot of the states are having financial problems, but people are only looking at the liability side of the balance sheet; they're not looking at the assets. So Mitch Daniels, the governor of Indiana, was able to privatize or monetize his toll road for about $4 billion. It was controversial at the time -- ended up being a big success. The state of Pennsylvania couldn't do it. So I point out to people that, you know, in communist Chongqing, you can monetize a toll road, and in capitalist Pennsylvania, you can't.

So the -- part of the message of this is -- and it's relevant, I think, for a group like this -- there's -- even 20 years ago, OK, when Carla was working -- (inaudible) -- USTR, Charlene, there was still a common assumption about a North-South knowledge transfer. Now it's increasingly South-South, South-North. And that's a good thing.

HAASS: That actually segues naturally to my next question, which is I -- you made the shocking pronouncement a few minutes ago that economists have been known to be wrong. (Laughter.) And it's good we're all sitting down in this room. Where are we now, then, with this debate about models? I remember when I was a graduate student looking -- and studying economic development, and you used to have the debate between sort of top-down and bottom-up approaches, market approaches versus so-called social overhead capital and, you know, large state role. Where's the debate now intellectually? What do -- what -- how has the balance swung, if you will -- and maybe not -- in this debate about markets, private sectors versus public? You just talked about public-private a bit. Where's the theology or the ideology now? What's happening?

ZOELLICK: Well, it varies a huge amount. And my major point is that I think in the developing world, the key is that it's not theological; it's pragmatic about what works.

And I guess I'd take the question and tilt it in one direction that I've been more worried about because it may be relevant for the work of these councils.

There's a lot of focus in the globe today about the macroeconomic stabilization, the -- you know, basic fiscal and monetary policies. One of my concerns is that -- and this is another way of answering your question about debate -- is that there's going to be a need in all countries to focus on the structural change. So if you're talking about models, this is -- really takes you more to the microeconomic. So the China 2030 report was about this in the Chinese context, but it's true in Brazil; it's true in India. And it's definitely true in the United States -- (chuckles) -- Japan and in Europe as well.

And the reason I worry this doesn't quite get enough attention is if political leaders are unable to take this on, what I suspect we'll see happen over the next year or two is that the monetary authorities -- and I'm not being critical of what they've done so far, but the monetary authorities will feel the pressure to use a tool that really isn't designed to fit the problem. And you're going to continue to see monetary policies that are extraordinarily unusual by historical standards, and I think they will plant the seeds of future problems, OK?

Now, the nature of those problems is it's always very difficult to predict, but I'll just give you one. I've spoken to some of the Federal Reserve banks in the United States. I was out at the Kansas City Fed last year. And you know, when you go to places like that, you ask local questions. I was asking about farmland prices. And farmland prices are really going up, really at real levels, as I recall, similar to where they were at the height that led to the farm credit system crisis in the early '80s. Now, right now they're still covered by cash flow, but farm prices are relatively high.

So what I'm -- my point is that I think if the economies, developed and developing, don't focus on the structural issues and the microeconomic issues that are fundamentals to growth, we could see that as we, you know, continue to go to phases of this recovery, we could be planting the seeds for a very serious future problem. And for emerging markets, which are the ones I'm most concerned about, this will mean you'll probably have a rather modest growth environment with lots of volatility and uncertainty, which means go back and build domestic demand, infrastructure and be uncertain and be prepared for difficult moments like I mentioned with safety-net policies.

HAASS: I'll just ask a couple more questions, then we'll open it up. One of the issues historically has been uncertain American and -- popular and congressional support for international institutions. Where does that stand with your institution?

ZOELLICK: Well, at least as of the last year we're a bit of an anomaly, but this is -- let me explain the context. We achieved the first general capital increase in the Bank in over 22 years. The last one, I was actually working for Secretary Baker at the Treasury Department. So in an environment in which people are watching their dollars closely, an environment which is sort of anti-foreign aid, where there's populism, we were able to get this through a Democratic Senate and a Republican House.

There's a actually a little bit of a lesson there. (Chuckles.) And the lesson is I spend a reasonable amount of my time working with legislators -- and I do this in other countries as well -- but part of this, in the case of the United States, was trying to get an appreciation of the value of the Bank, having those that might be against it to recognize -- at least maybe not attack it.

So it's a -- it's an -- I don't want to make too much of it, but I happen to believe that on the key issues that are going to be facing the United States, things like broad-based tax reform and entitlement reform, things can be done, but you're going to need an executive leader, and you're going to have to figure out how to work the system a little bit better than has been done before. But that takes us in another direction.

But I -- but I would -- I guess I would say you got, you know, Charlene here and Carla here too. Let's take trade, where we worked together. You know, in -- it just -- the reality is unless an executive pushes this, it's not going to happen, you know. So don't -- you know, and it was actually kind of amazing that in the case of the three FTAs that got done -- of course, that happened because Congress decided they wanted three, not one, done. So that was to Congress' benefit.

But the reason I say this is -- again, I don't want to get too U.S.-centric here, but I was looking at the fact that, you know, with the Colombia and Panama FTAs done, the United States will have FTAs with about 50 percent of the GDP in the hemisphere, not including the U.S., so not a bad starting point. And we had tried the FTAA -- Charlene and I had tried this, and it ran into difficulties with Brazil. The dynamic has changed, in part because of the rise of China.

So there could be some interesting opportunities here in the Western Hemisphere, but they're not going to come just out of the sky. Somebody is going to have to push them. Again, that means organizing -- by the way, this goes back to the Bank story. In the case of the Bank, I organized the Chamber of Commerce; I organized other groups and so on and so forth, so I could go to members and say, here are people that support it.

And there is -- there is a -- there are -- there are -- if you think about the U.S. role in the world, there's actually a lot of opportunities out there. The United States is still the linchpin on a lot of this. But it -- that doesn't just happen. So going back to working with the Congress on international stuff, you kind of really have to -- the -- it's the responsibility of the executive branch, and then working the others levers in the system.

HAASS: I guess I'll ask you ask one last question, which is close to our intellectual --

ZOELLICK: Just to -- well, just to give you -- just in the spirit, because it might of interest of other people here: Take this "China 2030" report we did.

You take that report apart, and there's a good discussion to be had about what China will do. But there are lots of opportunities there for -- to change what is kind of the zero-sum U.S.-China economic agenda into cross-investment issues, service industry expansion, energy sector, IPR and innovation. So you could build off what China itself wants to do in a win-win fashion.

So does that maybe make a little bit better sense than continuing to have the same debates that people have over the rather narrow issues?

But the point is -- I mean, I was actually pleased Chairman Baucus raised this with the USTR in a hearing. OK. Well, it wasn't accidental, because Chairman Baucus was interested in this, and I've gone up and talked to him about it. But to be honest, it should kind of come from the other side too.

HAASS: Duly noted.

One thing that's come up here in our talks this morning is the relationship between efforts at the regional and global level.

ZOELLICK: Yeah.

HAASS: Could you just say something about -- and you got all these regional development banks. What's the relationship? And is there a conscious division of labor? How does that work?

ZOELLICK: Yeah. Well, you know, my -- this happened in trade as well. I believe multilateralism includes regionalism, and I think, you know, there's a lot that we've learned about while economics are a component of it, but whether it's immigration, whether it's security, whether it's narcotics -- I mean, the whole history of the European Union -- and so people who decry regionalism, I think, are not recognizing sort of realities. And so -- and moreover, the ability to interconnect these regions in an open regionalism, as was discussed in the Asia-Pacific.

So one of the things -- just a small insight -- at the bank when I came, which we really really weren't doing that much of, is that -- (I see Yusuf in the audience ?) -- we started to work much more with regional institutions at institutions, ASEAN as an institution, in Africa not only the African Union but sort of regional institutions.

And so part of our service is to try to understand how to help their capacity. And if you take development issues in sub-Saharan Africa, for example, they're going to be critical to sort of build larger markets and how do you have the infrastructure and how do you reduce the cost.

Now, in the case of regional development banks, one aspect of that was that I tried to organize in a more coherent fashion our cooperation with the regional development banks. In some cases, they may take the lead; in some cases, we take the lead; we work over that. The one part, though, where I think regionalism could go to far is, remember, I talked about a knowledge -- a global knowledge transfer. One of the -- where the Bank is at its best is to -- being able to transfer knowledge across regions. If you're a regional bank, you don't really have that facility. But they undoubtedly will have capacities that the World Bank doesn't have.

So I tend to, in structural terms, look at the world more as a Venn diagram with intersecting circles. And so I -- it doesn't -- in a sense, the -- some people describe multilateralism in a(n) old- fashioned -- what I'll call mid-20th-century hierarchical model. I think that's not going to work; it's a mistake. And I think it doesn't recognize the diversity of the international system.

And I'll just -- I'll give one other little insight on this that some people here might be interested in. You know, climate change is an issue that I first started to work on, actually, when I helped get the Rio agreement through in Bush 41's administration. And the -- what happened in -- with the UNFCCC process is there's kind of -- talking about international governance; I think that was one of your topics -- there is this view, well, we must get all 195 countries to agree to everything big enough for, you know, climate change (for the world ?) all at once. Well, good freaking luck.

You know, and so to be honest, you know, I've been part of more agreements and -- bilateral, multilateral than probably most people, and I -- so I can know what they take to get done.

But I'll give you a very practical aspect to this.

I went down to see President Calderon in Mexico about six or nine months before the Cancun meeting, and I outlined this "weltanschauung." And then I said, you know, what I would do? I said, here's individual papers on building blocks: energy efficiency, technology, avoided deforestation, less plant soil carbon. And if you actually go back and look at the real agreement, it was that countries were supposed to build national action plans.

I said, so what if you have 150 countries agree on combined national action plans? So you don't have 190, but you got 150. And that's exactly the model that they followed, and I -- that's the reason they were successful. And ironically, the more that you don't allow one country to hold it up, the more you're actually going to have a chance of getting it done.

And the key on this was then I went to see him the week of the final meeting, and I said, Mr. President, I said, you know, you probably think that consensus means all countries. (Laughs.) I said, go talk to your lawyers in the Foreign Ministry because there's varying views of consensus. And I said, you might find one country, like Bolivia, that decides it wants to hold you up after you've got everything else all lined up for whatever reason they have. And I said, so, you know, be prepared to think of a way you can describe consensus without a country, and it was one of these forecaster -- (inaudible). It was Bolivia that tried to hold them up.

So the -- I emphasize these because, as you -- as Richard and I both know, there are views in America that say -- that kind of says, oh, well, you can't make any of these multilateral systems work, and they're sort of imperfect. I think that's a terrible mistake. But, on the other hand, I constantly find myself having to sort of issue -- kind of argue a pragmatism or realism against those who argue, you know, a rather utopian view.

HAASS: All or nothing, you may end up with nothing.

Why don't we open it up and, again, just wait for a microphone, and just introduce yourself, your name and your institution, and toss up a difficult question for Bob.

ZOELLICK: Or an easy one. (Laughter.)

HAASS: Or an easy one, if you insist. Sure. Let's start here.

QUESTIONER: Thank you. My name is Kuseni (Dlamini ?) from the South African Institute of International Affairs. My question has to do with the World Bank and its leadership. There've been some debates around the process that's used to choose the head of the Bank. I'll be interested to hear your views, Bob, as you're about to leave this very important institution and having done such a great job. Do you think we should move away from the established practice of having America decide and having Europe decide on the IMF and allow the emerging powers from emerging markets to also contest for the position?

ZOELLICK: Well, the process has gotten better in the sense that our board -- our board meets and decides that there are certain characteristics that they're looking for and whatever nominations will go forward. People will have to present their case and so on and so forth. But the United States has 15 percent of the votes and Europe has a larger amount, so that's the kabal that could guide it in the past.

Let me start this level. I think it is actually critical for the institutions to broaden their engagement at multiple levels with emerging markets, but it's -- and a lot of this focused on voting shares, OK? And we made adjustments in voting shares. I honestly think sometimes that becomes an overstated argument. So let me start with this.

One thing is, we added a chair for sub-Saharan Africa on our board, another chair, which actually South Africa and Nigeria share. And because we don't really take votes, that was probably more important than kind of a voting adjustment.

Second is how you run the institution.

So yeah, you can actually see some of the commentary about the Bank now is that I was -- been very much driven by a client-driven approach, what are the clients interested in, and then share the knowledge, so on and so forth. The -- interestingly, some people who actually would come more from what I'll call the left-of-center side have what I'll call the monopolist view that -- you know, that you should do this, this and this. That's actually, I think, what the Bank needs to get away from.

So -- and then another aspect is the staffing. And as you probably know, I brought -- about half the officers are now women and in much larger numbers from the emerging markets.

Then it just leads to the question on the U.S. And I guess I'll pose -- for the presidency. I'll just pose this part. Some people pose this question to me in an interesting way. They said, is it time for the U.S., you know, not to be president of the Bank anymore, OK? And that's an interesting perspective because it would suggest, in a merit-based system, that an American cannot run the Bank, OK? And here's where I guess I'll -- going to twist this in a little bit different way.

As someone who's worked a lot with multilateral institutions and tried to get the United States to work more effectively in that system, I think it's very important that the United States have the responsibility of running some. And I'm not going to say which ones, but I will say this: There's never been an American who's headed the WTO; there's never been an American who's a U.N. secretary-general; there's never going to be an American who is going to be head of the regional development banks. So you know, there's -- never had an American who's headed the IMF.

So if you're going to change the whole thing, all I'm saying is somewhere in that system, I think it's good for the United States to bear the responsibility of the multilateral system because, going back a little bit to what Richard said, and some of my colleagues in the room here, I've found that my being in that role actually compels people to engage with these institutions more than they might otherwise.

So I won't necessarily say which one and others, but be careful, if you push the U.S. out of this system, what the net effect will be.

HAASS: (Off mic.)

QUESTIONER: Thank you. Gilad Sher (ph), from the Institute for National Security Studies in Israel, and excuse me for being a bit region- oriented.

MR. : (Laughs.)

QUESTIONER: In the absence of the --

MR. : What's the World Bank going to do about the Iranian nuclear program? (Laughter.)

QUESTIONER: No --

ZOELLICK: I was just at the Herzliya Conference. (Laughter.) I know the topic du jour.

QUESTIONER: In the absence of any substantive negotiation process between Israel and the Palestinians, what role do you see for the World Bank in the Israel-Palestinian arena in particular and in the changing Middle East in general? Thank you.

ZOELLICK: Yeah. Very important one.

Well, I've had the good fortune that Prime Minister Fayyad in the Palestinian Authority is somebody I've got the highest respect for, and I think he's got actually a very sound economic and political model, which is he's trying to build the state from the bottom up. And because the Palestinian Authority is not a member of the World Bank, I actually -- to support (by ?) them, we have to make a special allocation out of our income, which we do. But we also, as we do in other areas, run sort of trust funds. So one of the problems in the developing world is people may have good intentions, but if they have 50 or a hundred different programs for one small authority, you overwhelm it. So we will coordinate with that authority.

So I think Fayyad has done a very important job of building the institutions of governments, more transparency, fighting corruption, building capabilities that, at least from my conversations with Israelis, are probably important for Israeli security as well as economic development.

So I certainly think it's short-sighted -- (chuckles) -- when people do things like cut off the money flow of their own tax revenues for those institutions, and I've said that to some of the Israeli authorities. And I think the Israelis, at least the vast majority, recognize it too.

And I think the bigger issue there also is one of contesting in an open fashion kind of a modernization agenda. So I -- when I went to the Herzliya Conference, I also went to see Fayyad in Ramallah; I thought it was a good thing to do. I have no idea what will happen, but he's using modern communication -- Facebook, social media and other things, things his kids have taught him -- to engage Palestinians -- public -- on these issues, to take a sense of responsibility. And he believes, actually, that in an electoral sense, that what he stands for could do better than some people think, because he's been actually trying to build the base up.

Now, the real problem there -- and this is one where I can observe; I don't -- I can't say with great specificity -- much of the growth in the Palestinian Authority has been developed through public sector funding. He's trying to wean it off public sector funding. You need more of a private sector development. And it's going to be very hard to get the private sector development with some of the movement restrictions.

On the other hand, I understand the security logic for some of those movement restrictions. But I think if it were up to me, I'd be testing the border of what more I could do on movement to allow a greater sense of private sector development and, frankly, personal dignity that will be the important part of building that state and capacity.

And I guess the -- what this would also suggest, as I saw -- Dennis Ross, a former colleague, wrote an op-ed not too long ago about whether one could open up other sections of the West Bank to be able to encourage this sort of development. And the logic would lead me into that direction.

HAASS: Do you want to say something about the broader Middle East that would say that where you had regime changes -- places like Egypt, Tunisia, Libya -- what sort of a role the bank is playing?

ZOELLICK: Well, you know, one of the other things -- this gives you a little sense of how I try to guide the bank -- we need to learn too, OK. So we've got a lot of smart people, but the world changes and so on. We're trying to learn our own lessons from this, I mean, not the least of which was, you know, an Egypt that was growing well and frankly had a pretty good economic team, but nevertheless that wasn't sufficient -- and this goes to some of these issues of dignity and also kind of, I think, a system whereby you need to combine economic growth with a sense that people (feel ?), well, it's not crony- and favoritism and others.

What this has led us to is the idea of trying to work with governments to build on their own movements to have greater openness, transparency, social accountability, and this again connects from other regions.

So what you now have with modern telecommunications is the ability to have, you know, people in villages with cellphones be able to comment and guide about the delivery of services. (Right ?). And this is -- this opens up not only anti-corruption things, but it opens up a challenge for sort of bureaucratic performance.

So with countries such as Tunisia and Morocco, we've been trying to take those steps and encourage them. And that will be a big issue for us with Egypt, and -- because we have certain programs that are of investment projects in agriculture or energy or others, but the bank sometimes gives what's called development policy loans. This is money that goes to the budgets, but it's based on various policy changes. And it's my own view that those need to include these types of social accountability and openness and transparency measures. And it's things that we're applying to the bank as well.

So -- and just to give you one other connection, because -- something probably many people may not be aware of, but with your research institutes, I really hope you are -- one of the -- one of the most lasting things that we've done at the bank during my time is we created an Open Data initiative.

So we've taken all our data sets going back decades and made them for -- available for free on the Web.

And there's this interesting little bureaucratic story behind this. (Chuckles.) I used to go to meetings, and I'd have, you know, some slightly wizened professor come up to me and say, oh, you've got some great data sets, but you still charge for them. And I'd go back to my economic staff, just as you would, and say, why are we charging for them? And they'd say, well, we add value, and we need to get compensated. You know, it took me about three rounds to realize it was, like, a $3 million offset to their budget, right, or -- so -- and so finally, we said, OK, we're going to wipe this out, and we're going to open all this up.

And then we started to get our economic staff to work on different applications to make it easier to access. And we created an Apps for Development competition. So we opened up to the software community and said, use our data, and the only requirement is relate it to the Millennium Development Goals and use our data. And so we came up with mapping, games, other things that you could never, you know, even with a very brilliant staff, have been able to produce.

What I'm finding is, as is often with an idea like this, it starts to drive a whole series of other possibilities. So for example, when we're working with countries on gender, another great possibility for growth, it's a little hard to know the effect of the policies if people don't keep gender statistics, or beyond-border trade barriers -- getting beyond the quotas and the tariffs to some of the logistics and the customs systems -- unless you have the information, you can't do it.

So this notion of -- that we've talked about of democratizing development -- so it's the exact opposite of the monopolist model, but openness, transparency -- and the relevance to the broader Middle East is that I think this is going to be -- this is going to take awhile -- (chuckles) -- but I think building in this concept of openness and engagement for the society and the government is important, as well was for the Bank.

QUESTIONER: Michael Emerson, Centre for European Policy Studies in Brussels. Palestinian question. You mentioned Morocco. I wonder whether you could broaden this out to talk a bit about the response to the Arab Spring, or let us call it the Arab political earthquake, that happened last year. I'm sure that you've been faced with the task of defining the World Bank's strategic response to this huge strategic event, earthquake, and I'm wondering what conclusions you -- you came to.

ZOELLICK: Well, just to build on a couple of the points I said: Number one, development has to be owned by the local people. So -- and this is a lesson from everywhere. You could have great money, ideas, so on and so forth, but so this goes to the governance issue. So you have to build your development strategies with the evolution of the governance topic.

And obviously, you have countries at different states. So some have had a revolution and are on the way of developing a political system. Tunisia, Morocco and Jordan have sort of a fast-paced evolution, OK? Egypt is -- I mean, I don't know, coup, partial revolution. I mean, I can't tell yet, right?

And so the key point is, we have to recognize the local ownership but also that it may be going through phases of development, and then what can we share -- and this is the important part about the south- south. So it's not just U.S. or the European, but some of the ideas of what's worked with other developing countries. So if you work in this area, I'm sure you've encountered there's a huge, huge interest in Turkish economic development, but also there's an interest in some of the other models from East Asia as we go forward. And so what can we share about safety net systems, governance systems, transparency systems?

Then, as you get to other countries, in the Gulf, for example, that don't necessarily need our money, or let's take Libya as a -- we had the Libyan prime minister here. They don't need our money, but what they will need is the ability to frankly develop public financial management systems so that the money is effectively used, so it's not stolen, and more effective -- more importantly, how do you avoid the resource curse?

So this is an issue in much of the development in sub-Saharan Africa. Many countries have great natural resources, but how do you do it in a way that has inclusive growth, avoids the Dutch disease on the exchange rate and sort of builds for a longer term?

So we're working -- you know, we do some just -- we get paid sometimes for some of our knowledge work with some of the Gulf countries, not so we don't do loans, to be able to share that information. And this is, again, the neat thing about what's happening in the world. You're finding that there's more and more countries that now -- for example, I was thinking about the Gulf -- some of them are looking at -- on Singapore as a logistics model. I'm going to be speaking to the Panamanians here in town in a couple days. They're trying to develop this as a model.

So I think it's a very healthy think that people are sort of looking more broadly, and if we can share the information about choices, and that there's an increasing number from the developing world and being able to draw on it.

This wasn't your question, but I want to -- I'll take it one step further, because that's sort of -- I find it intriguing and so may some of you.

You know, as China's invested in sub-Saharan Africa, there's been a lot of focus on resource development or infrastructure or others. And literally there's a small publication we have come out, and I had -- was -- in discussion I had in China in recently, in Guangdong, we were talking about it. China has about 85 million low-wage manufacturing jobs. They got to move up the value added chain if they want higher wages, they're going to have higher wages, and part of their whole strategy is increased productivity, higher wages.

Sub-Saharan Africa has about 8 million of those jobs, North Africa maybe 1 (million) to 2 million, so you got about 10 million of those jobs. We're in discussions with the Chinese, both officials and companies, to say what is it that we could do to help the enabling environment -- you know, ports, energy, infrastructure, customs rules, and also maybe IFC private investment, to help some of that low-wage manufacturing move to sub-Saharan Africa?

Because if you have 85 million versus 8 (million) to 10 million, even if you just get 5 million, you've increased it by 50 percent. So I say that not that it's going to happen overnight. And when I was in Guangdong province talking to the provincial party secretary about this, my former colleague, Ngozi Okonjo-Iweala, who is now the Nigerian economic coordinating minister, had been there visiting companies that developed this. It will require some interesting intersectoral, interministerial work in sub-Saharan Africa to make it happen. But it just gives you a sense of how fast this is changing and if the bank as an institution can help prod it or push it or interconnect it, you could have bit payoffs economically, politically and in stability terms.

QUESTIONER: (Inaudible.)

QUESTIONER: (Off mic.)

ZOELLICK: Is this my euro zone question? Don't I get a euro zone question? (Laughter.)

QUESTIONER: No, no, no, it's not a euro zone. But you can't answer a question that hasn't been asked to you. That's typically what de Gaulle used to do.

No, in the last --

ZOELLICK: (Inaudible.) (Laughs.)

QUESTIONER: In the last five years or so, the IMF has been at the forefront of all debates on the global, economic and financial governance, and this not only because of mistrust or scandal. Apparently, the World Bank has been less on the forefront of the debate, less visible. So my question is, how do you assess today the importance of the role of the World Bank in the global economic governments debate? And to put it more sharply, could we live without the World Bank?

ZOELLICK: Well, you know, you -- your -- (even ?) -- you're such a strategic thinker, Terry (sp), your perspective is a little short term. (Laughter.) Actually five years ago, we were kind of in the news too at the bank on some governance issues. (Laughter continues.) So, to be honest, I take this as a --

MR. HAASS (?): (Laughs.) (Inaudible) -- indirect compliment for the --

ZOELLICK: -- to stewardship.

No, the World Bank has been very much a part of this as well. I think the IMF -- and actually, five years ago, the IMF was more -- there was as a sense of, what's its role in the system? But the international crisis, with its macroeconomic nature, you know, sort of pushed that to the forefront.

As for whether you could live without a World Bank, I think the title of my article is, "Why We Need the World Bank." So you got to -- (inaudible) --

HAASS: "Why We Still Need" it.

ZOELLICK: -- "Why We Still Need the World Bank" -- but it really goes to this point that I've touched on, Terry (sp), which is, is that I think that the international system actually has a dearth of these intermediating institutions. And so -- and you know, so we have one in the IMF and -- so we have one in trade, and we have one in macroeconomic, and we have one in sort of microeconomic structural. You've got the U.N. system, some of which is political, some of which is some very valuable operational arms. You've got some of the regional loan banks. In some cases, you have sort of military alliance.

But given the nature of the interdependency and interconnected problems -- and what I think will be the big issue for the rest of our time, which is the fast rise of emerging markets and powers in the system -- I think it helps enormously to have structures, institutions, regimes, whatever you want to describe them as, that can play a mediating role to try to come together cooperatively on problems.

And let me just take two dimensions of this. And I bet Carla and Charlene might have this sense too.

You know, this is sort of serendipitous, but I became USTR in 2001, and now it's 2012. So it's a little bit over a decade. In historical terms, that's a rather short period of time. And so I had the USTR, the State Department, briefly at Goldman, then at the bank. What I have seen in terms of the role of emerging markets, development, trade, investment, you know, climate change and, I think, increasingly, security (issues ?), it's just ramped up enormously, OK? And so it's hard for me to conceive of an issue now that can be addressed without their engagement and involvement.

But -- and this is the big "but" -- the -- a number of those countries, understandably, are still relatively poor. And so they want -- they're concerned about having all the responsibilities of the developed countries. But then we had this economic crisis, so then the developed countries are worried about sort of their sense of responsibility. So I know if you're going to discuss this in your governance session, how you get that, quote, right -- you know, and we were talking a little bit before as we were just coming in -- you know, the Kagan view of do you need sort of a prime player to guide the system, which was a little bit -- in the economic sphere, it was the Kindleberger view about the causes of the Great Depression. Britain was used to world leadership, no longer had the capabilities in the '20s and '30s; U.S. had capabilities, wasn't used to the leadership. How does the change in this system -- or the Eikenberry view that the rules and norms of the international order are in place enough, and so you -- that's going to be a very big topic.

But what I've seen in a practical way and what you'll see in the things I've written is it's fun to talk about this stuff, but the reality is then you have to do it, OK? And so the best way to make it -- to make a difference is to show how you can bring parties together. I have 187 shareholders -- (chuckles) -- in very different countries.

But you know, you could look at the record on things from, you know, climate change to trade and structural reform and new capital infusion, $90 billion raised for the poorest countries for IDA. We're able to bring people together in the process. And if you didn't have the institution, that wouldn't happen.

And again, let me give you another practical one from the climate area. You know, Hank Paulson, when he was secretary of the Treasury, you know, came to me and we had this idea about creating global climate investment funds. And so he and I went and got about $6 billion of contributions from primarily developed countries, in different forms. It's gone up a little bit. And we created some for technology, some for energy efficiency, some for adaptation. We've been able to leverage that to about $50 billion and about 30 to 40 percent from private sector of that 50 billion (dollars), the other from other bank and regional bank resources and so on and so forth.

And equally important, we've now had sort of projects launched in about 45 emerging market countries, and every time you launch one of these projects, their investment in the climate change issue becomes somewhat different. And the key example I'll give you is, with India, you know, it's a very proud country about its role and sensitive to some of the climate change topics. They wanted to do a project with us through the Climate Investment Fund, so as to give the Climate Investment Fund additional legitimacy. So that was -- they wanted to do that support, because we worked out the governance structure and the financing.

Now this might just seem like it's, you know, sort of an obscure thing, but you open up the newspaper and you've got endless discussions about the green fund in the U.N., OK? So -- and people are still, you know, mapping stuff on paper.

Now and then I have to kind of pinch myself because you got endless discussions about the green fund -- we got one up and running with $50 billion that we'll learn lessons from.

So I use that as an example of saying that at the end of the day, you still have to make stuff happen, and then we as an institution have to be more rigorous in measuring results, in learning where we screw it up and sort of adapt the process. So for those reasons, if -- or post-conflict states -- you know, we're probably the most effective player in Afghanistan today. So if you think the bottom billion matters, if you think that climate change matters, if you think that trade matters, if you think that emerging markets in the international system and how they fit in matter, then I think there's a role for the bank, and for me that's a pretty clear exposition of why you do need it.

HAASS: Do we have any non-European hands here?

MR. : (Laughs.)

HAASS: Sure. (Inaudible.)

MR. : (Laughs.)

QUESTIONER: (Off mic) -- non-European.

HAASS: Oh, Turkey's -- I'm not sure how we include Turkey on that one.

QUESTIONER: This is, I suppose, partly European. Elizabeth Sidiropoulos, but from the South African Institute of International Affairs. A question around a recent initiative by -- spearheaded, seemingly, by India, which apparently will be publicly announced at the end of this month, around the establishment of a BRICS development bank. I attended a presentation by one of the concept writers in that regard, and he said, you know, could it play a role that the World Bank played after World War II. And is it -- and my question is, I mean, how would you at the World Bank view such an initiative, notwithstanding that I think the concept still has to be further explored and defined, and also its purpose.

ZOELLICK: Yeah, I'm going to be in India in about two weeks, so I'll have a better sense when I talk with people. And it -- and your -- the last phrase that you -- (the clause ?) -- that those are actually kind of important, because you had -- you had a Bank of a (sic) South movement here led by Chavez that I didn't fight because I didn't think it was going to do anything and it didn't do anything, you know. And -- but also, as part of that, you have to decide what they resisted. In that case, I think it was sometimes openness, transparency, governance, things I think are good things.

I think in this case what's driving it is an Indian concern that because of some of the borrowing limits the bank has had, that it's running up against (ceilings ?) about sort of investable money. I think that's a serious issue, and actually it's a -- I've had to actually fight my board on this because I feel that if the bank takes itself out of dealing with the Indias, the Brazils and the Chinas, as I said, it's bad for these countries and the international system.

How we engage can be very different. So with China, actually a lot of it is more analytical work, and they use programs to -- as pilots that they test.

India's at a stage where it is -- it's -- it's -- is concerned for infrastructure development. I really don't know for sure how much of it is capital and how much of it is the enabling environment. I kind of get mixed messages about that. But one of the things, just to give you a sense, is, I actually pushed for an expansion of our borrowing limit for India -- if we could get the Indians, for example, to invest in some of our securities, which would offset it, so we've actually expanded it another 4 1/2 billion (dollars) or something.

I think for infrastructure, it relates to this public-private partnership model.

So I think what is often the case when somebody promotes something, it's important to know kind of what is driving it, OK? Now, that's separate from the issue of will this be -- is this positioning or reality. So -- because -- you know, it'd be interesting to decide whether the BRIC countries decide to actually fund it, and where, for example, will they put it, you know? So -- but I don't mean to be -- I think it's a -- it's an idea that you need to understand what is driving it and to try to address it. And if we as an institution can't address it effectively, well, then there may be other ways that people try to address it. So I mean, I'm not a monopolist. (Chuckles.)

HAASS: Brenda (sp). Brenda (sp) there in the first table.

QUESTIONER: Your -- is this working?

HAASS: Yeah. Go ahead.

QUESTIONER: Your comment about --

HAASS: Where are you from?

QUESTIONER: I'm from Turkey.

HAASS: Turkey, great.

QUESTIONER: Your comment about moving some manufacturing jobs from China to sub-Saharan Africa -- I think that's indicative of a broader question in that given the demographic expectations, probably sub- Saharan Africa and parts of the Indian subcontinent is where we expect the youth bulge. And that's probably bringing them into the global system. Global trade and commerce will be a priority. But when that happens, if that happens, the abundance of labor will probably impact intrastate income equality across the world, including the Western world. I don't know if that's sustainable politically.

So I'm wondering if when you look at the broader picture in a 10, 20-year perspective, are we only talking about interstate sort of equality and convergence and moving people -- sort of the average upwards, or do we also care about intrastate equality as a development objective?

ZOELLICK: I think we definitely have to. In our work in emerging-market countries, in developing countries, we're very much focused on that, what we call inclusive growth. And in some cases, it starts with having the fundamentals of nutrition and education. And in every country I deal with -- and I'm going to come to the developed countries as well -- there's a huge interest in this connection between education, skills and workforce. And our next World Development Report is actually on jobs, just as we did one on gender and post-conflict. And this may seem, well, that's obvious. But what we were trying to get at is when I studied labor economics, now getting to be quite distant, it -- the field actually didn't strike me as too interesting because it was either discussions of kind of unions and economies or kind of the labor market was a derivative of your macroeconomic policies.

This is trying to look at the -- from a different issue about the social capital that's developed, the productivity of individuals, how to sort of see this as part of your development model. And the work isn't done yet, but it's an example of where I hope we can make an added contribution, though the way that you started the question is -- let me just say that I think is going to be a big issue for developed economies, OK, and their willingness to sustain and participate in an open international system and resist protectionism and populism and so on and so forth.

And I think that's extremely important. It happens not to be the remit of the bank -- (chuckles) -- although one of the things I've tried -- you know, and I do this with the Congress as well as other forums in the United States -- to try to say there's actually some very interesting lessons out there coming from emerging markets that you should be -- can be able to draw from, OK?

So I mentioned the infrastructure one. But in education, you know, it's very interesting. You see the debate in the United States about measurement and performance standards. At least in the developing countries I deal with, it's a no-brainer. Of course you've got to measure what the performance is. You know, how else are you going to know what the results are, you know? And -- but here if you test, oh, you might learn something, you know? So I'm hopeful that over time -- you know, each of these things create a risk and an opportunity that you could actually create a greater flow of information and experience that developed countries could manage as well.

But the core point that I just -- I want to emphasize is -- was the one sort of inherent in this. Look, there's problems in the international system, but by and large if you look at the growth rates for sort of the whole world over the past 50 or 60 years, it hasn't been too darn bad, OK? And in -- from historical terms. But this is not pre-ordained. You could lose this, you know? And these factors that I mentioned in the answer to Terry (sp), you know, the emerging markets feeling, oh, well, they have to take on additional responsibilities, but you know, what's their say in the system, and have they really -- you know, they've still got a lot of development issues.

The developed countries, particularly ones that are aging -- (inaudible) -- sort of their sort of role in the system.

And that really goes back, I guess, to the question that Terri (sp) and Richard (sp) mentioned. It's why institutions like the World Bank -- (chuckles) -- they're important to try to interconnect people, and as opposed to shout at each other, try to come up with cooperative solutions. But the other piece of it is my difference with sort of -- it's not enough just to have the institution and talk to each other; you have to try to resolve real problems.

HAASS: I know there's several of you who still have questions. I -- OK, we'll do one last question. I want to make sure -- (inaudible) -- from Japan -- I -- and then we'll do that.

QUESTIONER: (Through interpreter.) I come from Japan. I have -- just have a couple of questions. The World Bank and China are doing 2030. And what is the significance of conducting this kind of a research, right -- investigation at the time when China is to change their guards in Beijing, so to speak? And what's your view on the dollar- renminbi relationship in 2030 if the structural, you know, improvement succeeds?

ZOELLICK: Well, let me focus on the first question -- (laughter) -- because it's actually the more important question, just so people have a little sense of this.

The bank has had a very good brand in China, dating back to Robert McNamara opening relations in 1980 with Deng Xiaoping. And over the course of some 30 years, there were points in the idea development process in China where the bank seemed to play a catalytic role.

There -- I know this from talking -- is more to the Chinese counterparts. In 1985 there was a floating seminar down the Yangtze River for four or five days that led to a report. In the late '90s there was something held in Dalian. And the relevance of this was -- a Chinese official actually came to me before the 30th anniversary. And he said, Bob, you know, everybody thinks China loves anniversaries and that we just want to celebrate, and he said, that's true, but when you come for the 30th anniversary, he said, what about planting the idea of a report that would deal with some of the issues that are stirring in China, like how to avoid the middle-income trap, and kind of how do we -- we've talked in the next five-year plan about rebalancing domestic demand, consumer -- but how do you really do that?

And quite intriguingly, he also said -- he said, as you know -- so you work a lot with China; people in Washington think, you know, people are waking up in Beijing trying to take over the world every day. And he said, most of the time they're trying to just, you know, work on the problems in Beijing and China. So he said, what would be the implications of this internationally?

First off -- and then -- so then I went to China. I proposed this study. And Li Keqiang, the next -- or it looks like the next premier, was very enthusiastic about it and, quite importantly, asked us to work with the Development Research Council, which is the State Council under -- is the -- is the research think thank under the State Council. We also work with the Ministry of Finance. And it was blessed by President Hu and Xi Jinping, but Li Keqiang is kind of the godfather of the process. And we've been at it for about 18 months. We had a -- in September, we had a draft; we had various international commentaries about, and so on and so forth.

Now, the first -- from a strategic perspective, since all of you aspire to strategy, I find it very impressive that China after 30 years of 10 percent growth could say, you know what, this may not work in the future; we got to rethink this model, OK? Whether they accomplish it, that's a different question. But again, I would suggest that maybe the U.S., Europe and Japan without 10 percent growth should be thinking a little bit in these terms.

The second thing is that what I think is also going on was that this is to contribute to their own internal debate and discussion and to be catalytic. So I asked Justin Lin, our chief economist from China. And I said, Justin, what do you think is going on here? Because you know, Chinese economists could come up with a lot of this. And he said, yes; he said, but as you know, in any country, people work on their own particular piece of the problem. This is a catalyst to get people to look at the economywide pieces. And frankly, he said, the bank's got a very good standing and reputation, and so it will be taken very seriously as we come in with it together.

Next point is, of course, the devil will be in the details of implementation. But you know, even the summary report is 450 pages long.

So I wouldn't expect everybody to have read it. But you'll see, if you skim it, there's things about phasing, transition, (quick wins ?) -- and going back to this question a little bit -- how do you build public participation in it to build support along the process? So I think it's a very serious exercise.

Now, the bottom line, my own guess -- but it's only a guess -- is, is that, you know, this will wait until the 18th party congress; there'll be some settling down after that. I don't expect China to follow a "big bang" approach, like Margaret Thatcher did, because that's not the Chinese way. But my best guess is you'll see these ideas pursued in pilots at local level, in some sense, to kind of test them as they move forward.

And again, you know, some people are quick to judge, oh, well, will China do this or this? And I just think it's important to also look at how other countries are doing this. And then, again, what I suggested is in my comments on the international side, there are some very interesting opportunities here for creative minds to kind of develop some win-win agenda.

And the last point is -- you know, what's quite interesting, the reaction -- and this is what I'd hoped for -- we're getting -- one of my colleagues was in Brazil last week. The topic was a very -- the report was a very big topic because people are facing similar problems. And this also gives you, going back to where I started, a little idea that if the bank were only working on the 79 poorest countries, we'd actually miss out on this. And this question of rebalancing the international system, how middle-income countries fit in the system, you know, their own growth model -- those are going to be important questions for the world. So I'm -- at least so far, I'm very pleased with the report.

HAASS: We have a tradition here where we end meetings on time, and today we violated that tradition because we went a few minutes over, but I'm glad we did.

Bob, thank you for being with us today, and I think more important, thank you for all you've done over the last five years at the bank. It's a -- (inaudible). (Applause.)

RICHARD N. HAASS: Well, good afternoon and welcome to today's lunch program of this first ever -- but we hope first of many -- gathering of the Council of Councils, as we are calling it.

Just a couple of housekeeping remarks for a second. If people would please turn off your cellphones, that would be a great help -- BlackBerrys and all such devices. Secondly, this session is on the record. Let me just say that.

Let me -- and we'll repeat later, but just let people know -- the building we're meeting in is only several years old, and it's environmentally, shall we say, advanced. It's a Gold LEED building. And what we'd like to do -- if anyone would be interested, after the last session today at 3:45, we are more than happy to give you a tour of the building, just so you can see what sorts of things have been done here, both environmentally, but also in audio-visual type things and all that, which might be (of) interest to some of you from other organizations.

As I said, this is the inaugural meeting of the Council of Councils, which is a network of policy institutes from around the world, and the whole idea is to discuss, identify global challenges as well as global opportunities. And hopefully out of the discussions will emerge some ideas, some initiatives that people then can take home and introduce either into their own respective public debates or possibly as well into decision-making circles within their own countries.

Some 20 countries or so are represented here today, roughly tracking the G-20, the difference being that the agenda here is far more comprehensive. The agenda here is not simply economic or even economic and energy and environmental issues, but deals also with the full range of political challenges -- for example, humanitarian intervention, those questions -- as well as security challenges.

We just spent an hour and a half discussing -- we didn't quite solve, but discussing the challenge to the nonproliferation regime posed by -- posed by Iran. We also had a general conversation about global governance, the whole challenge of coming up with common rules and norms and, ultimately, institutions to bolster what Hedley Bull would've called the society part of international relations, as opposed to the anarchical dimension of international relations.

I would like to offer special thanks to the Robina Foundation, who have made not just this possible, but the larger program, the council's program on international institutions and global governance. And I'd also like to pay a special welcome to one of my bosses, to Carla Hills, who is the co-chair of the board of directors of the Council on Foreign Relations and a former U.S. trade representative. Indeed, she is one of two former U.S. trade representatives with us today -- actually, one of three; we have Charlene, Carla -- Charlene Barshefsky -- and Bob Zoellick. So probably nowhere in the world at this moment are there more U.S. trade representatives, and -- (laughter) -- who knew? And so any of you tweeting can tweet that. (Laughter.)

I'm thrilled to welcome Bob Zoellick. Bob is the 11th president of the World Bank Group. And he's a longtime personal friend. Let me get the conflict of interest out on the table. We've worked together for more years or decades than either of us probably care to remember. And he's also been a longtime supporter and active member of the council. He first spoke here in the early 1990s, roughly two decades ago, and he served on the council's board. And our statisticians tell us that he's actually spoken here more than 20 times. Did you know that? For no fee -- I should point that out.

Bob is in the nonprofit business, as are we. (Chuckles.)

I won't spend a lot of time on his bio. I already pointed out he was U.S. trade representative. He was deputy secretary of state as well as several other positions in the State Department. And Bob played, I thought, an extraordinary role -- and if I were still teaching at the Kennedy School, I would highlight him to show how in government, you can be entrepreneurial. And Bob was truly entrepreneurial after the fall of the Berlin Wall in stitching together what became the German unification inside of NATO. It was policymaking, I thought, at its highest and finest.

What we're going to do is have a conversation for a few minutes about economic issues and the Bank and all that, and then we're going to open it up to you all. And I won't go on to -- I won't filibuster, even though we're in the city of filibusters. And when we get around to Q-and-A, we'll hand out microphones, and we'll just ask you to identify yourself before you speak.

You OK there, sir?

Again, welcome, Bob.

A few weeks ago you published a piece in our magazine, Foreign Affairs, which was titled "Why We Still Need the World Bank." OK, let's start with that. Why do we?

ROBERT ZOELLICK: Well, first, let me thank all of you for taking time to come to this. Richard explained to me a little bit to me about this concept, and I think it's a great one. So I know for many of you, it required a little bit of a journey, but it sounds like a superb idea to be able to get the councils together.

It's like trick questions, because aren't they supposed to read the article? (Laughter.)

HAASS: Give him -- give him the Cliff Notes. (Laughs.)

ZOELLICK: Well, let me -- let me take this approach. When I came to the World Bank Group about a little less than five years ago, I had a slightly different perspective than some had in that some who come purely from the economics profession or even development economics -- and that is I view the World Bank as part of this very thin tissue of multilateral institutions that was created during and after World War II to try to deal with the problems that were seen as -- the political-economic problems that were seen as driving the crisis in the '30s and leading to the world war.

And this includes the IMF; it included at that time the GATT that became the WTO for trade; it's got the World Bank, other institutions.

And it's striking if you go back and you look at the issues that people were concerned about: currency in international capital flows, you know, free trade, reconstruction of broken states, development, investment flows. Those remain very vital issues, but obviously, the circumstances changed enormously.

So I saw part of the challenge for the Bank and my challenge as a leader of the bank as how do you modernize multilateralism; how do you -- recognizing that nation-states are still going to be the dominant player, how do we take this thin interconnecting tissue, if you want to call it, related to global governance, and make sure that it's updated for the current age. That gives you a slightly different strategic perspective.

So for example, if you look at this solely from an economics perspective, in 2007 you'd say, well, in 1945 you didn't really have private capital flows, and so -- but now you had a whole large flow of private capital that dominate the official sector, so why do you need this anymore. OK, well, problem number one is that what economists thought in 2007 -- (chuckles) -- turned out not to be the case.

In 2008, 2009, we learned economists can be wrong. But even more than that, it missed the fact that a lot of what the Bank does is not just invest money; it's the knowledge and learning and interconnecting transfer.

Or another perspective -- this, again, seems obvious to me, but it may come back as a debating item. When I came to the Bank, there was a school of thought that said, really, the middle-income countries should just be sort of taken out; you just focused on the poorest. Well, if you believe in this as a multilateral institution, that would be a strategic mistake of huge proportions because actually you want to get -- first off, there's some huge development challenges in the so-called middle-income countries. About, you know, 75 percent of the people living under $2 a day are in those countries. But, in addition, you actually want to get those countries to be responsible stakeholders in the system.

And so just to give you a very current example, the Bank's got a lot of attention recently because of a report we did called "China 2030," which is looking at the structural changes of China, that it will need to have a different growth model. And I've found this has got interest in other middle-income countries; it's got the investment community; it's got the interest of Congress. You know, if you said, well, we weren't supposed to deal with the Chinas of the world, then you wouldn't be doing reports like that. And yet it's fundamental to the rebalancing.'

So part of what I try to do in the article is talk about the intellectual and strategic position of the Bank, but then I also talk about some of the challenges of modernizing the institution and opening it up, changing the development model so there's not a monopolist of sort of people with Ph.D.s from certain universities and sort of democratizing the development process. So that's part of the challenge.

HAASS: I've noticed from your previous lives -- and we've talked about it before -- you're a great believer in institutions. Let me take a second, because it's so close to this -- what we're talking about here, governance. What do you see as the real advantage of institutions? Why are they so important?

ZOELLICK: Well, since you got a pretty erudite group here, I mean, I could talk about Edmund Burke and kind of the view of institutions that --

HAASS: He couldn't come today, but we've got -- (inaudible) --

ZOELLICK: (Chuckles) -- he couldn't come today, but he'll be here in the evening session when you do the Ouija Board.

HAASS: (Laughs.)

ZOELLICK: Well, I think that the institutions, whether domestic or international, play critical organizing roles, intermediating roles. It -- and in an international system, I think what sometimes people underappreciate is they can play a role in identifying issues, sometimes helping to bring people together in a mutual fashion on -- try to address those issues, sometimes they can bring additional resources to bear. And so they're the heart of problem-solving.

If you think about challenges, whether it be private sector or public sector, it's a little hard to do in an atomistic way. So institutions become the enabling power; they become the societal -- the social capital. They become the glue. But a critical point: Institutions have to adapt too. And I think one of my lessons from the public sector is that, in the private sector, the market demands are such that institutions are compelled to adapt or die; in the public sector, they can drift for a long time.

And so this is -- this has implications for how you open up the institution to criticism and engagement (and ?) others, but it also has implications for the nature of how you lead the institution because you really -- you have to keep folk -- there's a tendency in public sector institutions where process becomes all controlling. So I have this debate sometimes in other international forum(s) where people talk about quote, "legitimacy," as -- and they define it simply by the participation. My view is legitimacy also has to be driven by effectiveness.

My view is legitimacy also has to be driven by effectiveness. The League of Nations had one legitimate model that turned out not to be very effective, OK, so the U.N. overhaul was designed to partly deal with that. But I find when I deal with other international institutions like some of those in the U.N. system, they've drifted a little further away from the effectiveness model. And I think that it's incumbent on people running international institutions to try to sort of get that balance right.

HAASS: Before you said the World Bank does a lot more than dispense money. It's almost something of a misnomer. So if you could rename it, what would you call it?

ZOELLICK: (Chuckles.) Well, I don't think the name is so bad. I once had a friend who's now deceased who, when he talked to me about the institution, said, look, if you have an institution that has the two worlds -- words "world" and "bank" and you can't do something with it, you know, you're missing -- (laughter) -- but the reason that I highlight the -- why the Bank causes it a problem is that you'll see when many people assess the Bank -- and you see this when it's -- they'll look at the -- sort of the loan flows or -- so you now have people comparing it with some of the big development banks in developing countries or others.

And my view is is that when the World Bank is most effective, it combines three things: One, we really take knowledge and learning from all quarters of the world. And what's really changed with incredible rapidity over the past decade is the degree to which that is now coming from developing countries to other developing countries. And we try to update it, customize it, share it with others.

And then second, you try to have your investments or projects so that they have a multiplier effect. So you're looking at building markets or institutions or capacity.

And then third, what distinguishes us from a university or the OECD is that we can be innovative with different financial ways.

And so, again, many people may not be aware we have a private sector arm, IFC. So we make equity investments. One of the things we created was an asset management company to change our financial intermediation model so that people will invest in a fund that we create. We invest in private equity funds, about 180 around the world. So there's diverse ways of having the financial innovation, and that's again where sometimes I think people, when they think about the Bank, think about it as traditional, you know, 1960s major loan program.

You know, we use rain index futures for countries because you can see, in certain countries, that are (heavy with ?) agriculture that if the rain is below a certain level, you're going to have a huge hit to the crop. You can use insurance programs. So, part of it is how do you use the tools of financial innovation for development, but always keeping an idea on the sharing of knowledge and information.

Let me give you two current examples that I've been focusing on.

The safety net programs -- we're in a world environment where I think we're going to have to expect considerable volatilities and uncertainties. You'll see some policy efforts to try to control those. I'm not sure how successful those are going to be, whether it's food or energy or natural disasters or others. So it makes sense, as a matter of policy, to try to see if you can have effective, efficient, low-cost programs that provide a basic safety net.

Well, many of you may know that there's a program that started in Mexico -- it's got a lot of attention in Brazil -- called "Oportunidades"; "Bolsa Familia" in Brazil -- they're called conditional cash-transfer programs, and they give money to the poorest people in communities. Varies on the program, normally maybe 15 to 20 percent of the population, on the conditions that the families send their children to school, and they get health checkups. So it's probably done more for women's health than anything in the history of the Mexico.

The Bank has worked with over 40 countries to expand this program, OK? And they customize it for different circumstances. And what's striking is in Mexico and Brazil, it's done for about a half of 1 percent of GDP, OK? So if you consider entitlement programs in the U.S. and Europe, this is a pretty darn efficient investment, OK?

Now, you have other countries that may not have the capacity to have those set of programs. But -- so what have we learned about school feeding programs, community-based efforts, so that you have some basic safety-net protection? So that's an area where you take sort of knowledge and learning and expand it across regions but always have to customize.

And I'll give you the direct relevance: You look at a lot of the subsidy programs across North Africa, and they're a huge waste of money. I mean -- and so you're spending a lot of money, not getting much for it, not focusing on those most in need, not protecting people.

So one of the things -- I just came from a function over the weekend, which was talking more about U.S. policy. What I find somewhat striking in the world of so-called development is that there's a -- much more of a -- what I'll call a relentless pragmatism about what works, as opposed to getting locked into ideologies, which I sometimes see in the developed world.

And just to give you one other example that I think will be very important -- and this is true for developed countries as well -- I can't go to a developing country that isn't interested in infrastructure investment, and there's a certain amount you get from the public sector, but obviously, people want to get public-private partnerships, not only for the money, but increasingly, in middle- income countries, it's because they're run more efficiently; they -- the design package makes more sense. So we've created a hub in Singapore that is trying to sort of take the knowledge of that region and others about how to design these models so we can move beyond a series of one-offs.

But to give you a sense of the changing Bank, we're also working with Singapore to create a special infrastructure investment fund that will go along with this process.

So -- and then to bring it back to, say, the United States, obviously, a lot of the states are having financial problems, but people are only looking at the liability side of the balance sheet; they're not looking at the assets. So Mitch Daniels, the governor of Indiana, was able to privatize or monetize his toll road for about $4 billion. It was controversial at the time -- ended up being a big success. The state of Pennsylvania couldn't do it. So I point out to people that, you know, in communist Chongqing, you can monetize a toll road, and in capitalist Pennsylvania, you can't.

So the -- part of the message of this is -- and it's relevant, I think, for a group like this -- there's -- even 20 years ago, OK, when Carla was working -- (inaudible) -- USTR, Charlene, there was still a common assumption about a North-South knowledge transfer. Now it's increasingly South-South, South-North. And that's a good thing.

HAASS: That actually segues naturally to my next question, which is I -- you made the shocking pronouncement a few minutes ago that economists have been known to be wrong. (Laughter.) And it's good we're all sitting down in this room. Where are we now, then, with this debate about models? I remember when I was a graduate student looking -- and studying economic development, and you used to have the debate between sort of top-down and bottom-up approaches, market approaches versus so-called social overhead capital and, you know, large state role. Where's the debate now intellectually? What do -- what -- how has the balance swung, if you will -- and maybe not -- in this debate about markets, private sectors versus public? You just talked about public-private a bit. Where's the theology or the ideology now? What's happening?

ZOELLICK: Well, it varies a huge amount. And my major point is that I think in the developing world, the key is that it's not theological; it's pragmatic about what works.

And I guess I'd take the question and tilt it in one direction that I've been more worried about because it may be relevant for the work of these councils.

There's a lot of focus in the globe today about the macroeconomic stabilization, the -- you know, basic fiscal and monetary policies. One of my concerns is that -- and this is another way of answering your question about debate -- is that there's going to be a need in all countries to focus on the structural change. So if you're talking about models, this is -- really takes you more to the microeconomic. So the China 2030 report was about this in the Chinese context, but it's true in Brazil; it's true in India. And it's definitely true in the United States -- (chuckles) -- Japan and in Europe as well.

And the reason I worry this doesn't quite get enough attention is if political leaders are unable to take this on, what I suspect we'll see happen over the next year or two is that the monetary authorities -- and I'm not being critical of what they've done so far, but the monetary authorities will feel the pressure to use a tool that really isn't designed to fit the problem. And you're going to continue to see monetary policies that are extraordinarily unusual by historical standards, and I think they will plant the seeds of future problems, OK?

Now, the nature of those problems is it's always very difficult to predict, but I'll just give you one. I've spoken to some of the Federal Reserve banks in the United States. I was out at the Kansas City Fed last year. And you know, when you go to places like that, you ask local questions. I was asking about farmland prices. And farmland prices are really going up, really at real levels, as I recall, similar to where they were at the height that led to the farm credit system crisis in the early '80s. Now, right now they're still covered by cash flow, but farm prices are relatively high.

So what I'm -- my point is that I think if the economies, developed and developing, don't focus on the structural issues and the microeconomic issues that are fundamentals to growth, we could see that as we, you know, continue to go to phases of this recovery, we could be planting the seeds for a very serious future problem. And for emerging markets, which are the ones I'm most concerned about, this will mean you'll probably have a rather modest growth environment with lots of volatility and uncertainty, which means go back and build domestic demand, infrastructure and be uncertain and be prepared for difficult moments like I mentioned with safety-net policies.

HAASS: I'll just ask a couple more questions, then we'll open it up. One of the issues historically has been uncertain American and -- popular and congressional support for international institutions. Where does that stand with your institution?

ZOELLICK: Well, at least as of the last year we're a bit of an anomaly, but this is -- let me explain the context. We achieved the first general capital increase in the Bank in over 22 years. The last one, I was actually working for Secretary Baker at the Treasury Department. So in an environment in which people are watching their dollars closely, an environment which is sort of anti-foreign aid, where there's populism, we were able to get this through a Democratic Senate and a Republican House.

There's a actually a little bit of a lesson there. (Chuckles.) And the lesson is I spend a reasonable amount of my time working with legislators -- and I do this in other countries as well -- but part of this, in the case of the United States, was trying to get an appreciation of the value of the Bank, having those that might be against it to recognize -- at least maybe not attack it.

So it's a -- it's an -- I don't want to make too much of it, but I happen to believe that on the key issues that are going to be facing the United States, things like broad-based tax reform and entitlement reform, things can be done, but you're going to need an executive leader, and you're going to have to figure out how to work the system a little bit better than has been done before. But that takes us in another direction.

But I -- but I would -- I guess I would say you got, you know, Charlene here and Carla here too. Let's take trade, where we worked together. You know, in -- it just -- the reality is unless an executive pushes this, it's not going to happen, you know. So don't -- you know, and it was actually kind of amazing that in the case of the three FTAs that got done -- of course, that happened because Congress decided they wanted three, not one, done. So that was to Congress' benefit.

But the reason I say this is -- again, I don't want to get too U.S.-centric here, but I was looking at the fact that, you know, with the Colombia and Panama FTAs done, the United States will have FTAs with about 50 percent of the GDP in the hemisphere, not including the U.S., so not a bad starting point. And we had tried the FTAA -- Charlene and I had tried this, and it ran into difficulties with Brazil. The dynamic has changed, in part because of the rise of China.

So there could be some interesting opportunities here in the Western Hemisphere, but they're not going to come just out of the sky. Somebody is going to have to push them. Again, that means organizing -- by the way, this goes back to the Bank story. In the case of the Bank, I organized the Chamber of Commerce; I organized other groups and so on and so forth, so I could go to members and say, here are people that support it.

And there is -- there is a -- there are -- there are -- if you think about the U.S. role in the world, there's actually a lot of opportunities out there. The United States is still the linchpin on a lot of this. But it -- that doesn't just happen. So going back to working with the Congress on international stuff, you kind of really have to -- the -- it's the responsibility of the executive branch, and then working the others levers in the system.

HAASS: I guess I'll ask you ask one last question, which is close to our intellectual --

ZOELLICK: Just to -- well, just to give you -- just in the spirit, because it might of interest of other people here: Take this "China 2030" report we did.

You take that report apart, and there's a good discussion to be had about what China will do. But there are lots of opportunities there for -- to change what is kind of the zero-sum U.S.-China economic agenda into cross-investment issues, service industry expansion, energy sector, IPR and innovation. So you could build off what China itself wants to do in a win-win fashion.

So does that maybe make a little bit better sense than continuing to have the same debates that people have over the rather narrow issues?

But the point is -- I mean, I was actually pleased Chairman Baucus raised this with the USTR in a hearing. OK. Well, it wasn't accidental, because Chairman Baucus was interested in this, and I've gone up and talked to him about it. But to be honest, it should kind of come from the other side too.

HAASS: Duly noted.

One thing that's come up here in our talks this morning is the relationship between efforts at the regional and global level.

ZOELLICK: Yeah.

HAASS: Could you just say something about -- and you got all these regional development banks. What's the relationship? And is there a conscious division of labor? How does that work?

ZOELLICK: Yeah. Well, you know, my -- this happened in trade as well. I believe multilateralism includes regionalism, and I think, you know, there's a lot that we've learned about while economics are a component of it, but whether it's immigration, whether it's security, whether it's narcotics -- I mean, the whole history of the European Union -- and so people who decry regionalism, I think, are not recognizing sort of realities. And so -- and moreover, the ability to interconnect these regions in an open regionalism, as was discussed in the Asia-Pacific.

So one of the things -- just a small insight -- at the bank when I came, which we really really weren't doing that much of, is that -- (I see Yusuf in the audience ?) -- we started to work much more with regional institutions at institutions, ASEAN as an institution, in Africa not only the African Union but sort of regional institutions.

And so part of our service is to try to understand how to help their capacity. And if you take development issues in sub-Saharan Africa, for example, they're going to be critical to sort of build larger markets and how do you have the infrastructure and how do you reduce the cost.

Now, in the case of regional development banks, one aspect of that was that I tried to organize in a more coherent fashion our cooperation with the regional development banks. In some cases, they may take the lead; in some cases, we take the lead; we work over that. The one part, though, where I think regionalism could go to far is, remember, I talked about a knowledge -- a global knowledge transfer. One of the -- where the Bank is at its best is to -- being able to transfer knowledge across regions. If you're a regional bank, you don't really have that facility. But they undoubtedly will have capacities that the World Bank doesn't have.

So I tend to, in structural terms, look at the world more as a Venn diagram with intersecting circles. And so I -- it doesn't -- in a sense, the -- some people describe multilateralism in a(n) old- fashioned -- what I'll call mid-20th-century hierarchical model. I think that's not going to work; it's a mistake. And I think it doesn't recognize the diversity of the international system.

And I'll just -- I'll give one other little insight on this that some people here might be interested in. You know, climate change is an issue that I first started to work on, actually, when I helped get the Rio agreement through in Bush 41's administration. And the -- what happened in -- with the UNFCCC process is there's kind of -- talking about international governance; I think that was one of your topics -- there is this view, well, we must get all 195 countries to agree to everything big enough for, you know, climate change (for the world ?) all at once. Well, good freaking luck.

You know, and so to be honest, you know, I've been part of more agreements and -- bilateral, multilateral than probably most people, and I -- so I can know what they take to get done.

But I'll give you a very practical aspect to this.

I went down to see President Calderon in Mexico about six or nine months before the Cancun meeting, and I outlined this "weltanschauung." And then I said, you know, what I would do? I said, here's individual papers on building blocks: energy efficiency, technology, avoided deforestation, less plant soil carbon. And if you actually go back and look at the real agreement, it was that countries were supposed to build national action plans.

I said, so what if you have 150 countries agree on combined national action plans? So you don't have 190, but you got 150. And that's exactly the model that they followed, and I -- that's the reason they were successful. And ironically, the more that you don't allow one country to hold it up, the more you're actually going to have a chance of getting it done.

And the key on this was then I went to see him the week of the final meeting, and I said, Mr. President, I said, you know, you probably think that consensus means all countries. (Laughs.) I said, go talk to your lawyers in the Foreign Ministry because there's varying views of consensus. And I said, you might find one country, like Bolivia, that decides it wants to hold you up after you've got everything else all lined up for whatever reason they have. And I said, so, you know, be prepared to think of a way you can describe consensus without a country, and it was one of these forecaster -- (inaudible). It was Bolivia that tried to hold them up.

So the -- I emphasize these because, as you -- as Richard and I both know, there are views in America that say -- that kind of says, oh, well, you can't make any of these multilateral systems work, and they're sort of imperfect. I think that's a terrible mistake. But, on the other hand, I constantly find myself having to sort of issue -- kind of argue a pragmatism or realism against those who argue, you know, a rather utopian view.

HAASS: All or nothing, you may end up with nothing.

Why don't we open it up and, again, just wait for a microphone, and just introduce yourself, your name and your institution, and toss up a difficult question for Bob.

ZOELLICK: Or an easy one. (Laughter.)

HAASS: Or an easy one, if you insist. Sure. Let's start here.

QUESTIONER: Thank you. My name is Kuseni (Dlamini ?) from the South African Institute of International Affairs. My question has to do with the World Bank and its leadership. There've been some debates around the process that's used to choose the head of the Bank. I'll be interested to hear your views, Bob, as you're about to leave this very important institution and having done such a great job. Do you think we should move away from the established practice of having America decide and having Europe decide on the IMF and allow the emerging powers from emerging markets to also contest for the position?

ZOELLICK: Well, the process has gotten better in the sense that our board -- our board meets and decides that there are certain characteristics that they're looking for and whatever nominations will go forward. People will have to present their case and so on and so forth. But the United States has 15 percent of the votes and Europe has a larger amount, so that's the kabal that could guide it in the past.

Let me start this level. I think it is actually critical for the institutions to broaden their engagement at multiple levels with emerging markets, but it's -- and a lot of this focused on voting shares, OK? And we made adjustments in voting shares. I honestly think sometimes that becomes an overstated argument. So let me start with this.

One thing is, we added a chair for sub-Saharan Africa on our board, another chair, which actually South Africa and Nigeria share. And because we don't really take votes, that was probably more important than kind of a voting adjustment.

Second is how you run the institution.

So yeah, you can actually see some of the commentary about the Bank now is that I was -- been very much driven by a client-driven approach, what are the clients interested in, and then share the knowledge, so on and so forth. The -- interestingly, some people who actually would come more from what I'll call the left-of-center side have what I'll call the monopolist view that -- you know, that you should do this, this and this. That's actually, I think, what the Bank needs to get away from.

So -- and then another aspect is the staffing. And as you probably know, I brought -- about half the officers are now women and in much larger numbers from the emerging markets.

Then it just leads to the question on the U.S. And I guess I'll pose -- for the presidency. I'll just pose this part. Some people pose this question to me in an interesting way. They said, is it time for the U.S., you know, not to be president of the Bank anymore, OK? And that's an interesting perspective because it would suggest, in a merit-based system, that an American cannot run the Bank, OK? And here's where I guess I'll -- going to twist this in a little bit different way.

As someone who's worked a lot with multilateral institutions and tried to get the United States to work more effectively in that system, I think it's very important that the United States have the responsibility of running some. And I'm not going to say which ones, but I will say this: There's never been an American who's headed the WTO; there's never been an American who's a U.N. secretary-general; there's never going to be an American who is going to be head of the regional development banks. So you know, there's -- never had an American who's headed the IMF.

So if you're going to change the whole thing, all I'm saying is somewhere in that system, I think it's good for the United States to bear the responsibility of the multilateral system because, going back a little bit to what Richard said, and some of my colleagues in the room here, I've found that my being in that role actually compels people to engage with these institutions more than they might otherwise.

So I won't necessarily say which one and others, but be careful, if you push the U.S. out of this system, what the net effect will be.

HAASS: (Off mic.)

QUESTIONER: Thank you. Gilad Sher (ph), from the Institute for National Security Studies in Israel, and excuse me for being a bit region- oriented.

MR. : (Laughs.)

QUESTIONER: In the absence of the --

MR. : What's the World Bank going to do about the Iranian nuclear program? (Laughter.)

QUESTIONER: No --

ZOELLICK: I was just at the Herzliya Conference. (Laughter.) I know the topic du jour.

QUESTIONER: In the absence of any substantive negotiation process between Israel and the Palestinians, what role do you see for the World Bank in the Israel-Palestinian arena in particular and in the changing Middle East in general? Thank you.

ZOELLICK: Yeah. Very important one.

Well, I've had the good fortune that Prime Minister Fayyad in the Palestinian Authority is somebody I've got the highest respect for, and I think he's got actually a very sound economic and political model, which is he's trying to build the state from the bottom up. And because the Palestinian Authority is not a member of the World Bank, I actually -- to support (by ?) them, we have to make a special allocation out of our income, which we do. But we also, as we do in other areas, run sort of trust funds. So one of the problems in the developing world is people may have good intentions, but if they have 50 or a hundred different programs for one small authority, you overwhelm it. So we will coordinate with that authority.

So I think Fayyad has done a very important job of building the institutions of governments, more transparency, fighting corruption, building capabilities that, at least from my conversations with Israelis, are probably important for Israeli security as well as economic development.

So I certainly think it's short-sighted -- (chuckles) -- when people do things like cut off the money flow of their own tax revenues for those institutions, and I've said that to some of the Israeli authorities. And I think the Israelis, at least the vast majority, recognize it too.

And I think the bigger issue there also is one of contesting in an open fashion kind of a modernization agenda. So I -- when I went to the Herzliya Conference, I also went to see Fayyad in Ramallah; I thought it was a good thing to do. I have no idea what will happen, but he's using modern communication -- Facebook, social media and other things, things his kids have taught him -- to engage Palestinians -- public -- on these issues, to take a sense of responsibility. And he believes, actually, that in an electoral sense, that what he stands for could do better than some people think, because he's been actually trying to build the base up.

Now, the real problem there -- and this is one where I can observe; I don't -- I can't say with great specificity -- much of the growth in the Palestinian Authority has been developed through public sector funding. He's trying to wean it off public sector funding. You need more of a private sector development. And it's going to be very hard to get the private sector development with some of the movement restrictions.

On the other hand, I understand the security logic for some of those movement restrictions. But I think if it were up to me, I'd be testing the border of what more I could do on movement to allow a greater sense of private sector development and, frankly, personal dignity that will be the important part of building that state and capacity.

And I guess the -- what this would also suggest, as I saw -- Dennis Ross, a former colleague, wrote an op-ed not too long ago about whether one could open up other sections of the West Bank to be able to encourage this sort of development. And the logic would lead me into that direction.

HAASS: Do you want to say something about the broader Middle East that would say that where you had regime changes -- places like Egypt, Tunisia, Libya -- what sort of a role the bank is playing?

ZOELLICK: Well, you know, one of the other things -- this gives you a little sense of how I try to guide the bank -- we need to learn too, OK. So we've got a lot of smart people, but the world changes and so on. We're trying to learn our own lessons from this, I mean, not the least of which was, you know, an Egypt that was growing well and frankly had a pretty good economic team, but nevertheless that wasn't sufficient -- and this goes to some of these issues of dignity and also kind of, I think, a system whereby you need to combine economic growth with a sense that people (feel ?), well, it's not crony- and favoritism and others.

What this has led us to is the idea of trying to work with governments to build on their own movements to have greater openness, transparency, social accountability, and this again connects from other regions.

So what you now have with modern telecommunications is the ability to have, you know, people in villages with cellphones be able to comment and guide about the delivery of services. (Right ?). And this is -- this opens up not only anti-corruption things, but it opens up a challenge for sort of bureaucratic performance.

So with countries such as Tunisia and Morocco, we've been trying to take those steps and encourage them. And that will be a big issue for us with Egypt, and -- because we have certain programs that are of investment projects in agriculture or energy or others, but the bank sometimes gives what's called development policy loans. This is money that goes to the budgets, but it's based on various policy changes. And it's my own view that those need to include these types of social accountability and openness and transparency measures. And it's things that we're applying to the bank as well.

So -- and just to give you one other connection, because -- something probably many people may not be aware of, but with your research institutes, I really hope you are -- one of the -- one of the most lasting things that we've done at the bank during my time is we created an Open Data initiative.

So we've taken all our data sets going back decades and made them for -- available for free on the Web.

And there's this interesting little bureaucratic story behind this. (Chuckles.) I used to go to meetings, and I'd have, you know, some slightly wizened professor come up to me and say, oh, you've got some great data sets, but you still charge for them. And I'd go back to my economic staff, just as you would, and say, why are we charging for them? And they'd say, well, we add value, and we need to get compensated. You know, it took me about three rounds to realize it was, like, a $3 million offset to their budget, right, or -- so -- and so finally, we said, OK, we're going to wipe this out, and we're going to open all this up.

And then we started to get our economic staff to work on different applications to make it easier to access. And we created an Apps for Development competition. So we opened up to the software community and said, use our data, and the only requirement is relate it to the Millennium Development Goals and use our data. And so we came up with mapping, games, other things that you could never, you know, even with a very brilliant staff, have been able to produce.

What I'm finding is, as is often with an idea like this, it starts to drive a whole series of other possibilities. So for example, when we're working with countries on gender, another great possibility for growth, it's a little hard to know the effect of the policies if people don't keep gender statistics, or beyond-border trade barriers -- getting beyond the quotas and the tariffs to some of the logistics and the customs systems -- unless you have the information, you can't do it.

So this notion of -- that we've talked about of democratizing development -- so it's the exact opposite of the monopolist model, but openness, transparency -- and the relevance to the broader Middle East is that I think this is going to be -- this is going to take awhile -- (chuckles) -- but I think building in this concept of openness and engagement for the society and the government is important, as well was for the Bank.

QUESTIONER: Michael Emerson, Centre for European Policy Studies in Brussels. Palestinian question. You mentioned Morocco. I wonder whether you could broaden this out to talk a bit about the response to the Arab Spring, or let us call it the Arab political earthquake, that happened last year. I'm sure that you've been faced with the task of defining the World Bank's strategic response to this huge strategic event, earthquake, and I'm wondering what conclusions you -- you came to.

ZOELLICK: Well, just to build on a couple of the points I said: Number one, development has to be owned by the local people. So -- and this is a lesson from everywhere. You could have great money, ideas, so on and so forth, but so this goes to the governance issue. So you have to build your development strategies with the evolution of the governance topic.

And obviously, you have countries at different states. So some have had a revolution and are on the way of developing a political system. Tunisia, Morocco and Jordan have sort of a fast-paced evolution, OK? Egypt is -- I mean, I don't know, coup, partial revolution. I mean, I can't tell yet, right?

And so the key point is, we have to recognize the local ownership but also that it may be going through phases of development, and then what can we share -- and this is the important part about the south- south. So it's not just U.S. or the European, but some of the ideas of what's worked with other developing countries. So if you work in this area, I'm sure you've encountered there's a huge, huge interest in Turkish economic development, but also there's an interest in some of the other models from East Asia as we go forward. And so what can we share about safety net systems, governance systems, transparency systems?

Then, as you get to other countries, in the Gulf, for example, that don't necessarily need our money, or let's take Libya as a -- we had the Libyan prime minister here. They don't need our money, but what they will need is the ability to frankly develop public financial management systems so that the money is effectively used, so it's not stolen, and more effective -- more importantly, how do you avoid the resource curse?

So this is an issue in much of the development in sub-Saharan Africa. Many countries have great natural resources, but how do you do it in a way that has inclusive growth, avoids the Dutch disease on the exchange rate and sort of builds for a longer term?

So we're working -- you know, we do some just -- we get paid sometimes for some of our knowledge work with some of the Gulf countries, not so we don't do loans, to be able to share that information. And this is, again, the neat thing about what's happening in the world. You're finding that there's more and more countries that now -- for example, I was thinking about the Gulf -- some of them are looking at -- on Singapore as a logistics model. I'm going to be speaking to the Panamanians here in town in a couple days. They're trying to develop this as a model.

So I think it's a very healthy think that people are sort of looking more broadly, and if we can share the information about choices, and that there's an increasing number from the developing world and being able to draw on it.

This wasn't your question, but I want to -- I'll take it one step further, because that's sort of -- I find it intriguing and so may some of you.

You know, as China's invested in sub-Saharan Africa, there's been a lot of focus on resource development or infrastructure or others. And literally there's a small publication we have come out, and I had -- was -- in discussion I had in China in recently, in Guangdong, we were talking about it. China has about 85 million low-wage manufacturing jobs. They got to move up the value added chain if they want higher wages, they're going to have higher wages, and part of their whole strategy is increased productivity, higher wages.

Sub-Saharan Africa has about 8 million of those jobs, North Africa maybe 1 (million) to 2 million, so you got about 10 million of those jobs. We're in discussions with the Chinese, both officials and companies, to say what is it that we could do to help the enabling environment -- you know, ports, energy, infrastructure, customs rules, and also maybe IFC private investment, to help some of that low-wage manufacturing move to sub-Saharan Africa?

Because if you have 85 million versus 8 (million) to 10 million, even if you just get 5 million, you've increased it by 50 percent. So I say that not that it's going to happen overnight. And when I was in Guangdong province talking to the provincial party secretary about this, my former colleague, Ngozi Okonjo-Iweala, who is now the Nigerian economic coordinating minister, had been there visiting companies that developed this. It will require some interesting intersectoral, interministerial work in sub-Saharan Africa to make it happen. But it just gives you a sense of how fast this is changing and if the bank as an institution can help prod it or push it or interconnect it, you could have bit payoffs economically, politically and in stability terms.

QUESTIONER: (Inaudible.)

QUESTIONER: (Off mic.)

ZOELLICK: Is this my euro zone question? Don't I get a euro zone question? (Laughter.)

QUESTIONER: No, no, no, it's not a euro zone. But you can't answer a question that hasn't been asked to you. That's typically what de Gaulle used to do.

No, in the last --

ZOELLICK: (Inaudible.) (Laughs.)

QUESTIONER: In the last five years or so, the IMF has been at the forefront of all debates on the global, economic and financial governance, and this not only because of mistrust or scandal. Apparently, the World Bank has been less on the forefront of the debate, less visible. So my question is, how do you assess today the importance of the role of the World Bank in the global economic governments debate? And to put it more sharply, could we live without the World Bank?

ZOELLICK: Well, you know, you -- your -- (even ?) -- you're such a strategic thinker, Terry (sp), your perspective is a little short term. (Laughter.) Actually five years ago, we were kind of in the news too at the bank on some governance issues. (Laughter continues.) So, to be honest, I take this as a --

MR. HAASS (?): (Laughs.) (Inaudible) -- indirect compliment for the --

ZOELLICK: -- to stewardship.

No, the World Bank has been very much a part of this as well. I think the IMF -- and actually, five years ago, the IMF was more -- there was as a sense of, what's its role in the system? But the international crisis, with its macroeconomic nature, you know, sort of pushed that to the forefront.

As for whether you could live without a World Bank, I think the title of my article is, "Why We Need the World Bank." So you got to -- (inaudible) --

HAASS: "Why We Still Need" it.

ZOELLICK: -- "Why We Still Need the World Bank" -- but it really goes to this point that I've touched on, Terry (sp), which is, is that I think that the international system actually has a dearth of these intermediating institutions. And so -- and you know, so we have one in the IMF and -- so we have one in trade, and we have one in macroeconomic, and we have one in sort of microeconomic structural. You've got the U.N. system, some of which is political, some of which is some very valuable operational arms. You've got some of the regional loan banks. In some cases, you have sort of military alliance.

But given the nature of the interdependency and interconnected problems -- and what I think will be the big issue for the rest of our time, which is the fast rise of emerging markets and powers in the system -- I think it helps enormously to have structures, institutions, regimes, whatever you want to describe them as, that can play a mediating role to try to come together cooperatively on problems.

And let me just take two dimensions of this. And I bet Carla and Charlene might have this sense too.

You know, this is sort of serendipitous, but I became USTR in 2001, and now it's 2012. So it's a little bit over a decade. In historical terms, that's a rather short period of time. And so I had the USTR, the State Department, briefly at Goldman, then at the bank. What I have seen in terms of the role of emerging markets, development, trade, investment, you know, climate change and, I think, increasingly, security (issues ?), it's just ramped up enormously, OK? And so it's hard for me to conceive of an issue now that can be addressed without their engagement and involvement.

But -- and this is the big "but" -- the -- a number of those countries, understandably, are still relatively poor. And so they want -- they're concerned about having all the responsibilities of the developed countries. But then we had this economic crisis, so then the developed countries are worried about sort of their sense of responsibility. So I know if you're going to discuss this in your governance session, how you get that, quote, right -- you know, and we were talking a little bit before as we were just coming in -- you know, the Kagan view of do you need sort of a prime player to guide the system, which was a little bit -- in the economic sphere, it was the Kindleberger view about the causes of the Great Depression. Britain was used to world leadership, no longer had the capabilities in the '20s and '30s; U.S. had capabilities, wasn't used to the leadership. How does the change in this system -- or the Eikenberry view that the rules and norms of the international order are in place enough, and so you -- that's going to be a very big topic.

But what I've seen in a practical way and what you'll see in the things I've written is it's fun to talk about this stuff, but the reality is then you have to do it, OK? And so the best way to make it -- to make a difference is to show how you can bring parties together. I have 187 shareholders -- (chuckles) -- in very different countries.

But you know, you could look at the record on things from, you know, climate change to trade and structural reform and new capital infusion, $90 billion raised for the poorest countries for IDA. We're able to bring people together in the process. And if you didn't have the institution, that wouldn't happen.

And again, let me give you another practical one from the climate area. You know, Hank Paulson, when he was secretary of the Treasury, you know, came to me and we had this idea about creating global climate investment funds. And so he and I went and got about $6 billion of contributions from primarily developed countries, in different forms. It's gone up a little bit. And we created some for technology, some for energy efficiency, some for adaptation. We've been able to leverage that to about $50 billion and about 30 to 40 percent from private sector of that 50 billion (dollars), the other from other bank and regional bank resources and so on and so forth.

And equally important, we've now had sort of projects launched in about 45 emerging market countries, and every time you launch one of these projects, their investment in the climate change issue becomes somewhat different. And the key example I'll give you is, with India, you know, it's a very proud country about its role and sensitive to some of the climate change topics. They wanted to do a project with us through the Climate Investment Fund, so as to give the Climate Investment Fund additional legitimacy. So that was -- they wanted to do that support, because we worked out the governance structure and the financing.

Now this might just seem like it's, you know, sort of an obscure thing, but you open up the newspaper and you've got endless discussions about the green fund in the U.N., OK? So -- and people are still, you know, mapping stuff on paper.

Now and then I have to kind of pinch myself because you got endless discussions about the green fund -- we got one up and running with $50 billion that we'll learn lessons from.

So I use that as an example of saying that at the end of the day, you still have to make stuff happen, and then we as an institution have to be more rigorous in measuring results, in learning where we screw it up and sort of adapt the process. So for those reasons, if -- or post-conflict states -- you know, we're probably the most effective player in Afghanistan today. So if you think the bottom billion matters, if you think that climate change matters, if you think that trade matters, if you think that emerging markets in the international system and how they fit in matter, then I think there's a role for the bank, and for me that's a pretty clear exposition of why you do need it.

HAASS: Do we have any non-European hands here?

MR. : (Laughs.)

HAASS: Sure. (Inaudible.)

MR. : (Laughs.)

QUESTIONER: (Off mic) -- non-European.

HAASS: Oh, Turkey's -- I'm not sure how we include Turkey on that one.

QUESTIONER: This is, I suppose, partly European. Elizabeth Sidiropoulos, but from the South African Institute of International Affairs. A question around a recent initiative by -- spearheaded, seemingly, by India, which apparently will be publicly announced at the end of this month, around the establishment of a BRICS development bank. I attended a presentation by one of the concept writers in that regard, and he said, you know, could it play a role that the World Bank played after World War II. And is it -- and my question is, I mean, how would you at the World Bank view such an initiative, notwithstanding that I think the concept still has to be further explored and defined, and also its purpose.

ZOELLICK: Yeah, I'm going to be in India in about two weeks, so I'll have a better sense when I talk with people. And it -- and your -- the last phrase that you -- (the clause ?) -- that those are actually kind of important, because you had -- you had a Bank of a (sic) South movement here led by Chavez that I didn't fight because I didn't think it was going to do anything and it didn't do anything, you know. And -- but also, as part of that, you have to decide what they resisted. In that case, I think it was sometimes openness, transparency, governance, things I think are good things.

I think in this case what's driving it is an Indian concern that because of some of the borrowing limits the bank has had, that it's running up against (ceilings ?) about sort of investable money. I think that's a serious issue, and actually it's a -- I've had to actually fight my board on this because I feel that if the bank takes itself out of dealing with the Indias, the Brazils and the Chinas, as I said, it's bad for these countries and the international system.

How we engage can be very different. So with China, actually a lot of it is more analytical work, and they use programs to -- as pilots that they test.

India's at a stage where it is -- it's -- it's -- is concerned for infrastructure development. I really don't know for sure how much of it is capital and how much of it is the enabling environment. I kind of get mixed messages about that. But one of the things, just to give you a sense, is, I actually pushed for an expansion of our borrowing limit for India -- if we could get the Indians, for example, to invest in some of our securities, which would offset it, so we've actually expanded it another 4 1/2 billion (dollars) or something.

I think for infrastructure, it relates to this public-private partnership model.

So I think what is often the case when somebody promotes something, it's important to know kind of what is driving it, OK? Now, that's separate from the issue of will this be -- is this positioning or reality. So -- because -- you know, it'd be interesting to decide whether the BRIC countries decide to actually fund it, and where, for example, will they put it, you know? So -- but I don't mean to be -- I think it's a -- it's an idea that you need to understand what is driving it and to try to address it. And if we as an institution can't address it effectively, well, then there may be other ways that people try to address it. So I mean, I'm not a monopolist. (Chuckles.)

HAASS: Brenda (sp). Brenda (sp) there in the first table.

QUESTIONER: Your -- is this working?

HAASS: Yeah. Go ahead.

QUESTIONER: Your comment about --

HAASS: Where are you from?

QUESTIONER: I'm from Turkey.

HAASS: Turkey, great.

QUESTIONER: Your comment about moving some manufacturing jobs from China to sub-Saharan Africa -- I think that's indicative of a broader question in that given the demographic expectations, probably sub- Saharan Africa and parts of the Indian subcontinent is where we expect the youth bulge. And that's probably bringing them into the global system. Global trade and commerce will be a priority. But when that happens, if that happens, the abundance of labor will probably impact intrastate income equality across the world, including the Western world. I don't know if that's sustainable politically.

So I'm wondering if when you look at the broader picture in a 10, 20-year perspective, are we only talking about interstate sort of equality and convergence and moving people -- sort of the average upwards, or do we also care about intrastate equality as a development objective?

ZOELLICK: I think we definitely have to. In our work in emerging-market countries, in developing countries, we're very much focused on that, what we call inclusive growth. And in some cases, it starts with having the fundamentals of nutrition and education. And in every country I deal with -- and I'm going to come to the developed countries as well -- there's a huge interest in this connection between education, skills and workforce. And our next World Development Report is actually on jobs, just as we did one on gender and post-conflict. And this may seem, well, that's obvious. But what we were trying to get at is when I studied labor economics, now getting to be quite distant, it -- the field actually didn't strike me as too interesting because it was either discussions of kind of unions and economies or kind of the labor market was a derivative of your macroeconomic policies.

This is trying to look at the -- from a different issue about the social capital that's developed, the productivity of individuals, how to sort of see this as part of your development model. And the work isn't done yet, but it's an example of where I hope we can make an added contribution, though the way that you started the question is -- let me just say that I think is going to be a big issue for developed economies, OK, and their willingness to sustain and participate in an open international system and resist protectionism and populism and so on and so forth.

And I think that's extremely important. It happens not to be the remit of the bank -- (chuckles) -- although one of the things I've tried -- you know, and I do this with the Congress as well as other forums in the United States -- to try to say there's actually some very interesting lessons out there coming from emerging markets that you should be -- can be able to draw from, OK?

So I mentioned the infrastructure one. But in education, you know, it's very interesting. You see the debate in the United States about measurement and performance standards. At least in the developing countries I deal with, it's a no-brainer. Of course you've got to measure what the performance is. You know, how else are you going to know what the results are, you know? And -- but here if you test, oh, you might learn something, you know? So I'm hopeful that over time -- you know, each of these things create a risk and an opportunity that you could actually create a greater flow of information and experience that developed countries could manage as well.

But the core point that I just -- I want to emphasize is -- was the one sort of inherent in this. Look, there's problems in the international system, but by and large if you look at the growth rates for sort of the whole world over the past 50 or 60 years, it hasn't been too darn bad, OK? And in -- from historical terms. But this is not pre-ordained. You could lose this, you know? And these factors that I mentioned in the answer to Terry (sp), you know, the emerging markets feeling, oh, well, they have to take on additional responsibilities, but you know, what's their say in the system, and have they really -- you know, they've still got a lot of development issues.

The developed countries, particularly ones that are aging -- (inaudible) -- sort of their sort of role in the system.

And that really goes back, I guess, to the question that Terri (sp) and Richard (sp) mentioned. It's why institutions like the World Bank -- (chuckles) -- they're important to try to interconnect people, and as opposed to shout at each other, try to come up with cooperative solutions. But the other piece of it is my difference with sort of -- it's not enough just to have the institution and talk to each other; you have to try to resolve real problems.

HAASS: I know there's several of you who still have questions. I -- OK, we'll do one last question. I want to make sure -- (inaudible) -- from Japan -- I -- and then we'll do that.

QUESTIONER: (Through interpreter.) I come from Japan. I have -- just have a couple of questions. The World Bank and China are doing 2030. And what is the significance of conducting this kind of a research, right -- investigation at the time when China is to change their guards in Beijing, so to speak? And what's your view on the dollar- renminbi relationship in 2030 if the structural, you know, improvement succeeds?

ZOELLICK: Well, let me focus on the first question -- (laughter) -- because it's actually the more important question, just so people have a little sense of this.

The bank has had a very good brand in China, dating back to Robert McNamara opening relations in 1980 with Deng Xiaoping. And over the course of some 30 years, there were points in the idea development process in China where the bank seemed to play a catalytic role.

There -- I know this from talking -- is more to the Chinese counterparts. In 1985 there was a floating seminar down the Yangtze River for four or five days that led to a report. In the late '90s there was something held in Dalian. And the relevance of this was -- a Chinese official actually came to me before the 30th anniversary. And he said, Bob, you know, everybody thinks China loves anniversaries and that we just want to celebrate, and he said, that's true, but when you come for the 30th anniversary, he said, what about planting the idea of a report that would deal with some of the issues that are stirring in China, like how to avoid the middle-income trap, and kind of how do we -- we've talked in the next five-year plan about rebalancing domestic demand, consumer -- but how do you really do that?

And quite intriguingly, he also said -- he said, as you know -- so you work a lot with China; people in Washington think, you know, people are waking up in Beijing trying to take over the world every day. And he said, most of the time they're trying to just, you know, work on the problems in Beijing and China. So he said, what would be the implications of this internationally?

First off -- and then -- so then I went to China. I proposed this study. And Li Keqiang, the next -- or it looks like the next premier, was very enthusiastic about it and, quite importantly, asked us to work with the Development Research Council, which is the State Council under -- is the -- is the research think thank under the State Council. We also work with the Ministry of Finance. And it was blessed by President Hu and Xi Jinping, but Li Keqiang is kind of the godfather of the process. And we've been at it for about 18 months. We had a -- in September, we had a draft; we had various international commentaries about, and so on and so forth.

Now, the first -- from a strategic perspective, since all of you aspire to strategy, I find it very impressive that China after 30 years of 10 percent growth could say, you know what, this may not work in the future; we got to rethink this model, OK? Whether they accomplish it, that's a different question. But again, I would suggest that maybe the U.S., Europe and Japan without 10 percent growth should be thinking a little bit in these terms.

The second thing is that what I think is also going on was that this is to contribute to their own internal debate and discussion and to be catalytic. So I asked Justin Lin, our chief economist from China. And I said, Justin, what do you think is going on here? Because you know, Chinese economists could come up with a lot of this. And he said, yes; he said, but as you know, in any country, people work on their own particular piece of the problem. This is a catalyst to get people to look at the economywide pieces. And frankly, he said, the bank's got a very good standing and reputation, and so it will be taken very seriously as we come in with it together.

Next point is, of course, the devil will be in the details of implementation. But you know, even the summary report is 450 pages long.

So I wouldn't expect everybody to have read it. But you'll see, if you skim it, there's things about phasing, transition, (quick wins ?) -- and going back to this question a little bit -- how do you build public participation in it to build support along the process? So I think it's a very serious exercise.

Now, the bottom line, my own guess -- but it's only a guess -- is, is that, you know, this will wait until the 18th party congress; there'll be some settling down after that. I don't expect China to follow a "big bang" approach, like Margaret Thatcher did, because that's not the Chinese way. But my best guess is you'll see these ideas pursued in pilots at local level, in some sense, to kind of test them as they move forward.

And again, you know, some people are quick to judge, oh, well, will China do this or this? And I just think it's important to also look at how other countries are doing this. And then, again, what I suggested is in my comments on the international side, there are some very interesting opportunities here for creative minds to kind of develop some win-win agenda.

And the last point is -- you know, what's quite interesting, the reaction -- and this is what I'd hoped for -- we're getting -- one of my colleagues was in Brazil last week. The topic was a very -- the report was a very big topic because people are facing similar problems. And this also gives you, going back to where I started, a little idea that if the bank were only working on the 79 poorest countries, we'd actually miss out on this. And this question of rebalancing the international system, how middle-income countries fit in the system, you know, their own growth model -- those are going to be important questions for the world. So I'm -- at least so far, I'm very pleased with the report.

HAASS: We have a tradition here where we end meetings on time, and today we violated that tradition because we went a few minutes over, but I'm glad we did.

Bob, thank you for being with us today, and I think more important, thank you for all you've done over the last five years at the bank. It's a -- (inaudible). (Applause.)

-------------------------

(C) COPYRIGHT 2012, FEDERAL NEWS SERVICE, INC., 1120 G STREET NW; SUITE 990; WASHINGTON, DC - 20005, USA. ALL RIGHTS RESERVED. ANY REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION IS EXPRESSLY PROHIBITED.

UNAUTHORIZED REPRODUCTION, REDISTRIBUTION OR RETRANSMISSION CONSTITUTES A MISAPPROPRIATION UNDER APPLICABLE UNFAIR COMPETITION LAW, AND FEDERAL NEWS SERVICE, INC. RESERVES THE RIGHT TO PURSUE ALL REMEDIES AVAILABLE TO IT IN RESPECT TO SUCH MISAPPROPRIATION.

FEDERAL NEWS SERVICE, INC. IS A PRIVATE FIRM AND IS NOT AFFILIATED WITH THE FEDERAL GOVERNMENT. NO COPYRIGHT IS CLAIMED AS TO ANY PART OF THE ORIGINAL WORK PREPARED BY A UNITED STATES GOVERNMENT OFFICER OR EMPLOYEE AS PART OF THAT PERSON'S OFFICIAL DUTIES.

FOR INFORMATION ON SUBSCRIBING TO FNS, PLEASE CALL 202-347-1400 OR EMAIL [email protected].

THIS IS A RUSH TRANSCRIPT.