TRANSCRIPT: Do the Global Poor Have a Champion in the World Bank? The View From Its President, David Malpass
David Malpass:
Even before COVID-19, there was an inequality that was growing in the world of the advanced economies moving up much faster than the poor economies. In order to narrow inequality, we have to have a situation where poorer countries can grow faster than the advanced economies, and that just wasn't happening.
Ian Bremmer:
Hello. And welcome to the GZERO World podcast. Here you'll find extended versions of interviews from my show on public television. And today, a dire warning from the World Bank the biggest global recession since World War II could create a lost decade of economic growth. That's unless policy makers step up to the plate, bolder moves, and we've seen so far. My guest World Bank President David Malpass, we talk about how the Coronavirus Pandemic has only widened the inequality gap globally. And what that means for all of us if the trend is reversed. Let's get right to it.
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Ian Bremmer:
David Malpass, President of the World Bank. So good to see you again.
David Malpass:
Very good to see you, Ian.
Ian Bremmer:
Let me start with the news of the day, the news of the week. The United States is going through unprecedented political turmoil. You're someone that needs rule of law and needs to impress rule of law upon other countries around the world. How is this affecting your ability to do your job?
David Malpass:
Well, it's hard to express the depth of concern. I was appalled by the developments. From the standpoint of world development, it distracts attention at a time when we need a lot of attention on how to help countries actually develop and get beyond COVID and get back to growth path.
Ian Bremmer:
And I mean, just to have on record, you're a Trump administration appointee, but you accept that this was a free and fair election and that Biden is the president-elect of the United States.
David Malpass:
Yes. And I left the Trump Administration in April of 2019, so it's been a full job at the World Bank. I work for the World Bank and for the shareholders of the World Bank. So I'm very focused on how do we get development going? We'll be working with the Biden administration. The World Bank has worked traditionally very well with both Republicans and Democrats, so we look forward to a very good relationship with the Biden administration.
Ian Bremmer:
Now, the biggest news for you is not what's happening in Washington, it's what's happening around the world, and that is this persistent pandemic, extraordinary contraction hitting every country that you are engaged with. What is the World Bank able to do? How constrained are you as we face the economic component of this crisis?
David Malpass:
I don't think of us as being constrained, but being challenged. So the goal for the World Bank is to interact with each country as best we can in helping them raise living standards. And principally right now, that's a response to COVID and to the economic shutdowns that have gone on in 2020. We started this in April of 2020, to try to be very quick in having resources available to the countries for masks and for personal protective equipment. And then in August and September we wanted to develop quickly the ability to extend that to vaccines. What that means is assessing for each country what they need in order to carry out vaccinations. That means the computer systems or the checkoff systems, the registry of people. And then as the vaccines begin arriving, we can help purchase them, meaning with both grants and with very low interest rate loans, that's good for the whole world to have more people vaccinated. So we're working on that and I hope that will go relatively quickly in 2021 though, as you know, this is a big challenge for the world to actually deliver vaccines and vaccinate people.
Ian Bremmer:
Now, the infrastructure clearly, I mean, has been a challenge even here in the United States and in Europe, nevermind in countries that don't have anything close to the same healthcare infrastructure. Where do you see the biggest gaps right now? Where are the biggest open questions as to are they going to get it right or not as we look ahead to 2021, 2022?
David Malpass:
It's a variety, and quite a bit of it is technical. For example, there are so many countries, it would be very helpful to have a standard contract with the various vaccine manufacturers. So we're working on that. So we can help design a standard contract and then help countries work with their vaccine choices. They will be choosing safe approved vaccines and then to quickly contract and get delivery schedules. That's proving to be one of the challenges. Another thing is the liability. The vaccine manufacturers want to not get into situations where they will be tangled up in endless lawsuits in the countries.
So having the countries develop a liability shield or some legal technique to invite the vaccine manufacturers to actually deliver. Intellectual property is another challenge. So the World Bank can help cut through that by working directly with each country and say, we have money available, we have technical advisors available, and we want to help you get the vaccines that you choose and help actually deliver them to people. Make the vaccinations using the staff in the countries. We work closely also with UNICEF, with Gavi, the international organizations that are involved in these efforts.
Ian Bremmer:
Now, the Chinese government is one of the leaders in vaccine production, particularly in terms of the vaccines that don't require the cold chain, in other words, are more useful to the countries that you're serving. Have you had any challenges around contracting, around transparency in your work with the Chinese government around vaccines?
David Malpass:
We are working with vaccines that are approved by stringent regulatory agencies. That's a term of science in the field, stringent regulatory agencies, and also by WHO, which hasn't completed the approval process. So the we're not working with the Chinese vaccine, but with those that have been approved through other processes. The cold chain part of that operation turns out to be possible for lots of countries. I was mentioning earlier the other challenges are turning out to be the first challenges that the countries face. How do you get a contract? How do you get it signed within your country? And then how do you get delivery schedules from the manufacturers?
Ian Bremmer:
Well, what are some of the other issues on the ground? I mean, as we see vaccines roll out, do you have an education program, for example, to help reduce the amount of anti-vaxxer sentiment and disinformation in many of these countries? I mean, again, I see that this is being really undermined by politics in some of the sub-Saharan African countries, for example. What can the World Bank do to help with that?
David Malpass:
That's part of our vaccine. We want to start with the contact with the country, what's going to be most helpful. And then different countries are very different in terms of whether it's more the hospital system or the shortage of medical personnel to make the vaccinations. For some countries it's anti-vaccine sentiment. So there can be a communications program that's very effective in the country to encourage the vaccinations. The World Bank has a lot of historical experience with vaccination campaigns, for example, for HIV, for polio, for measles, and other vaccines for Ebola. So the part of this is getting the efforts in the country focused on getting as many people and vulnerable population vaccinated early in this process, if that can be achieved.
Ian Bremmer:
So the question right now in the United States is when individuals are getting their vaccinations. As you look around the developing world, how much uncertainty and what's your timeframe for what vaccination rollout actually looks like?
David Malpass:
Unfortunately, much of this may actually occur in the second half of 2021 or even in 2022. Part of the challenge is the advanced economies have reserved a lot of the vaccine doses. There's an international organization called COVAX that's trying to get multiple doses and then have a process to deliver those equitably and fairly to the developing countries. We work closely with them, but we also have funding available to go directly with the manufacturers if that will accelerate some of the delivery dates. But the availability of vaccine is important and also the readiness of the country to deliver it promptly once it arrives in country. Those are the practical challenges.
Ian Bremmer:
So to pivot from vaccines to the economy, as you're thinking about your forecast, I mean there's a huge difference in how countries are going to rebound economically between second half of 2021 and first half of 2022. How impossible is it for you economists at the World Bank to do your job with this level of uncertainty?
David Malpass:
Yeah. Well, you don't want to count too much on the forecast themselves. What we've done is a range of outcomes, and that depends on how well the vaccine program works. Also, the reopening in the developed countries, that's very important. They provide markets for the developing world. Think of extremely poor people around the world. One of the critical variables in their life over the next two years is going to be, when does the developed world really start operating at a more normal process? That means imports of food into the advanced economies, much of which comes from developing world. That's one.
But also tourism is a very important part of this, and a critical component is remittances. One of the biggest sources of support for people in poverty around the world is the remittances that come from their families who may work across the border, in some other country and restarting that process is going to be critical in their survival. Extreme poverty has gone up, and there's also food insecurity that as prices have been rising on food that creates its own new set of challenges for people in the developing world.
Ian Bremmer:
Now, this is, I think the first time I've seen when numbers of people around the world in extreme poverty, that projection is going up very significantly. Talk about what it means, what life is like for an individual in extreme poverty and how that's going to be affected in the next year, two years.
David Malpass:
One measure is extreme poverty, which is people that live on less than $2 a day. That means not enough food. That means not healthcare, not education. So we have over 100 million people slide back into extreme poverty. And then another even bigger segment of the global population is in what we would call severe poverty. And that means still nutrition problems, stunting problems. That means when children don't get enough food or they don't get enough clean water to be able to grow normally. And that still is a pervasive problem in the developing world. So this is the first time in at least 20 years that poverty rates have been going up instead of down. And that's severely concerning. It has to do with the debt levels, it has to do with the slow growth. But above all, with the shutdowns in the advanced economies.
Ian Bremmer:
Now the debt levels in so many of these developing countries are going up. Are there countries now that are at the brink of implosion as a consequence of that?
David Malpass:
There are several countries that are in deep debt distress. So Zambia has been in the news with the default. We're working very closely with Chad right now and with the IMF on ways to have the creditors permit and agree to a dramatic reduction in the level of debt. Otherwise, the government of the country ends up paying money to creditors that is desperately needed by people for food, for children, for education, for vaccinations and so on, for the healthcare system. I should note, with our vaccination program, a lot of it is in the form of grants, and the countries will be able to take advantage of that.
But even then, you need some resources from the governments in order to help make the health system in the country operate and function. And that can't be done if the cash flow is going to creditors. So we're working with a number of countries to have a deep debt reduction. In Sudan, which has had severe problems over many decades. They're finally beginning to emerge, and we're already putting substantial aid into Sudan, and I'm hopeful that we can put much more aid in 2021, which will help with that crisis situation.
Ian Bremmer:
I mean, despite the fact that the numbers in terms of coronavirus in sub-Saharan Africa are actually quite low, I mean the economic outlook that I'm hearing from you are that once again, sub-Saharan Africa is the part of the world that gets crippled the most greatly when we have a major economic crisis.
David Malpass:
That's right. There's been a huge inequality, and there's multiple parts of that. One is even before COVID 19, there was an inequality that was growing in the world of the advanced economies moving up much faster than the poorer economies. In order to narrow inequality, we have to have a situation where poorer countries can grow faster than the advanced economies, and that just wasn't happening. That's a catch up part of the process. Then when COVID hit, many of the impacts from COVID hit hardest on the poor people around the world. Even poor people in advanced economies were severely hurt because they lost their jobs. But in developing countries, they lost more than their jobs. Often they lost their access to any education in healthcare, for example.
And then one other point I would make, the stimulus in the response that was done by the advanced economies tended to make worse the inequality, because the fiscal stimulus often went to existing companies or existing people that had formal sector jobs, and that left out the informal sector economy, and they got hit hard. They were the people that send remittances back to their family in a developing country, for example.
Ian Bremmer:
Also hit women a lot harder. Yeah.
David Malpass:
It hit women, it hit children harder. So a big chunk of the stimulus went to people that were already in the top half of the income scale.
Ian Bremmer:
So what's your view of debt forgiveness generally to the poorer countries as a consequence of all this?
David Malpass:
There needs to be a dramatic deep reduction in the amounts of debt on the poorest countries. That's clear. Even prior to COVID, there was an over-indebtedness for many of the countries because of the environment leading into it. And I'd like to come back to that, but then since COVID, the burden on the poor, on people in these indebted countries has gone up dramatically with the changes in the world economy and with the deep recession that the world suffered. But going back to the antecedents, the debt had been going up because interest rates were low and there was a reach for yield among bond investors, for example. So the private sector debt, even of the poorest countries, went up dramatically.
And then a second factor was China's giant success with its economy, which also showed up as a big expansion of the debt that they were extending to the developing world. So that's left the countries with lots of debt and not much ability to repay it. So I think we have to be looking at deep debt reduction, and that's what we were doing in 2020. And I think it will extend into 2021. It's going to take work, and even the legal systems are set up in a way that right now favors the creditors. And I think we need to look for ways to have a more level playing field.
Ian Bremmer:
As we look specifically at China, which you mentioned, and the amount of corporate debt on their books, many of the poorest countries are massively indebted to China. Is there a growing sustainability issue of China's economic trajectory in your view?
David Malpass:
China showed in 2020 its ability to grow even in a year when the world had massive recessions. One way that they were doing that is expanding the supply from their economy. So they exported a lot more that buoyed their economy, but it meant that production elsewhere in the world didn't pick up as much. So I think there are big challenges for China in how to have more of its growth come from internal demand. And that means incomes, for example, of working people in China can go up faster than they have been doing. I think that would be useful both for China and for the world. As far as the debt, I would take note that their currency has been relatively stable. As the world suffered this severe recession, currencies in the major economies were more stable than they had been in the past relative to each other. And that I think helps with the recovery and with the new investment that needs to occur.
Ian Bremmer:
Now, I haven't asked you yet about climate, and I mean obviously it's not been the single most urgent headline right now, but governments around the world are certainly moving in a much greater degree to make their policies more climate sustainable. How do you convince the poorest countries, the developing countries, that also have very carbon intensive energy that they need to be a part of this given the economic strains that they are under?
David Malpass:
What I think we can do as a practical matter is try to help each country meet the goals that they establish for their economy that's better for climate. So one chunk, and I want to mention it, is agri business. The agriculture sector produces a lot of the greenhouse gas emissions, and that can be improved, I think substantially around the world. The World Bank is the biggest financier of climate co-benefits and climate investments, and we're expanding that rapidly. So that's something that I think is going to help.
The reality though, is most of the carbon dioxide emissions are coming from advanced economies and China. So as you look at Germany, the UK, the US, Japan, China and India, the carbon output is still very large. So the developing countries, the poorer countries get the brunt of the impact in terms of climate changes, and yet they are not the big producers of the huge amounts.
Ian Bremmer:
So before we close, Biden is clearly a very different president than Trump has been. Do you think the United States role in the World Bank is going to change at all? And if so, how with the Biden administration as opposed to Trump?
David Malpass:
The World Bank works well with both sides of the aisle. So the US is the biggest shareholder in the World Bank, but the World Bank as I mentioned, is already the world's biggest financial source for climate change related investments. And that means that I think the Biden administration will be consistent and supportive of those efforts, and I look forward to working with them on a range of topics. The World Bank focus is good development outcomes for every country, and that means development outcomes that raise the living standards of people, raise the median incomes, are environmentally sensitive. So all of those goals are consistent with I think what the major shareholders want, including the United States.
Ian Bremmer:
2021 is a pretty challenging year for all of us. Give us your surprising glimmer of hope for 2021, something people may not be thinking about, you think is going to go better than they expect.
David Malpass:
I'm going to fall back, Ian, on the promise of humanity and of technology, people working together with communication where they can share ideas, allows an incredible advance for living standards. We can wonder if farmers in poor countries know what farmers in more advanced economies are doing, aren't they going to be able to really increase their yields in a way that's environmentally sustainable and provide food around the world? I think it's a problem that can be addressed with knowledge, with cooperation, and with technology and the world's well situated to do that, to make big advances.
Ian Bremmer:
Huge investments in knowledge and technology and innovation going through this pandemic, no question. David Malpass, President of the World Bank. Thank you so much, sir.
David Malpass:
Thank you, Ian.
Ian Bremmer:
That's it for today's edition of the GZERO World Podcast, like what you've heard, come check us out at gzeromedia.com and sign up for our newsletter signal.
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