HLBsu09_9112

Not on His Watch

Credit: David Deal

In the global financial crisis, will Robert Zoellick hold rich nations accountable to the developing world? Bank on it.

Summer 2009

Credit: David Deal

In 25 years of public service, Robert B. Zoellick ’81 has been on duty during transformative times, including German unification and the end of the Cold War, the collapse of the Soviet Union, the debt crises in Latin America and China of the ’80s and ’90s, the aftermath of Sept. 11, and the Southeast Asia tsunami of 2004. Now, as the 11th president of the World Bank Group, Zoellick is front and center, dealing with another epochal event: the global economic crisis.

When Zoellick was appointed by President George W. Bush in 2007, the bank was in turmoil following the resignation of his controversial predecessor, Paul Wolfowitz, and in need of refocusing to strengthen its global relevance and meet new challenges—among them, keeping rising nations such as Brazil and China engaged in its initiatives, and addressing pushback from impoverished countries dealing with unintended consequences of foreign aid, such as corruption.

World leaders welcomed Zoellick’s appointment. So did U.S. political figures. “Bob Zoellick is someone who has a passion for development,” observed Henry Paulson, then U.S. Treasury secretary. “He has trust, respect and support from all regions of the world.” Commenting on his longtime protégé, former Secretary of State James A. Baker III went straight to the point: “Zoellick is a man who gets things done.”

The World Bank, which has 185 nation shareholders, provides technical assistance and more than $11 billion annually in zero- and low-interest loans, credits, and grants to developing countries for projects in health and education, infrastructure, financial and private-sector development, agriculture, and environmental and natural resource management. Founded in 1944 to facilitate post-World War II reconstruction and development, the bank has expanded its mission to focus on poverty reduction and sustainable development in the world’s poorest countries. Other priorities: assisting post-conflict countries, tailoring services and financing to priorities of middle-income states, and addressing cross-border regional and global issues including climate change and infectious diseases.

One of Zoellick’s first challenges heading the bank was dealing with problems relating to malnutrition—through maternal/child health and school feeding programs, for example—as well as a food crisis in 2008 as prices shot up worldwide. Mass starvation remains a threat in the worsening global recession. Zoellick fears its rippling effects will devastate the fragile safety-net programs of the world’s poorest countries, with political implications for some. “There’s tremendous pressure in the developing world to cut back on basic social programs, which makes life harder, and undermines investment in their own people,” he said. In particular, “if kids get poor nutrition, it handicaps their ability to learn and be productive all their lives.”

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0.7 percent of the stimulus package should go to the poorest countries, Zoellick urged.

Zoellick is famously adept at targeting issues, then translating ideas into strategy and solutions. In his own words, he likes “to ‘close,’ whether transactions, agreements, treaties or projects.” To keep pace with global change, he wants his team to develop a “fingertip feel” for issues, and be “faster and flexible in trying to respond. We’ve got to be client-focused,” serving not merely “as financial analysts but helping people within client nations to solve problems.” This involves building on past experiences. He cited the example of China, which during its financial crisis of 1997-1998 invested in infrastructure to create jobs but also to ensure future growth: “These are lessons to be used to help other countries now.”

Within days of fellow alumnus Barack Obama’s inauguration, Zoellick called on the new president to lead in fighting global poverty. He urged Obama to commit 0.7 percent of the $825 billion stimulus package to the “Vulnerability Fund” Zoellick has established to aid the world’s poorest populations, who can’t afford bailouts and are shut out of the credit markets. (The U.N.’s target for foreign aid is 0.7 percent of an economy.) With even the wealthiest nations hard-pressed by domestic economic woes, “we have to be pragmatic, to help them sell [their forms of assistance] to their publics,” explained Zoellick. Japan, for example, “is providing $2 billion to recapitalize banks because trade finance is important to them,” whereas, in addition to trade, the United States and Britain are interested in safety-net support.

In the midst of billion-dollar bailouts, “we don’t want to lose sight of the role of smaller private enterprises” as dynamic job creators, Zoellick added. The World Bank is seeking ways to help the microfinance industry, which provides banking services to unemployed or low-income individuals or groups otherwise shut out of the financial system. Another initiative is a “one percent fund” calling for sovereign world funds to channel 1 percent of their resources to enterprises in impoverished sub-Saharan countries—“to diversify while doing good.”

Zoellick’s internationalist perspective harks back to his childhood in rural Naperville, Ill., when he developed a passion for history. As a third-grader, he sped through the Bobbs-Merrill “Childhood of Famous Americans” series at his public library, moved on to another history series, then another. His father’s military mementos from serving in the U.S. Army in World War II in Korea, and the Civil War centennial that began when he was 8, contributed to a fascination with military history that has drawn Zoellick to old battlefields, where he likes to think about “strategies and tactics in the midst of confusion,” to contemplate the great, distant clashes that “brought out the best and worst of humankind.”

“History opened the world to me: different periods, peoples, geography, political and economic systems. It is also a window on human character,” he said. “That deeper understanding has helped me around the world; it’s been well-received.”

As an undergraduate at Swarthmore, Zoellick built on his knowledge of U.S. and European history with courses on Africa and Latin America. At Harvard he pursued a joint HLS/Kennedy School of Government degree—“I think in interdisciplinary terms”—with a yearlong interruption to work in Hong Kong.

After graduation, Zoellick clerked for Patricia M. Wald in the U.S. Court of Appeals for the District of Columbia and then joined the law firm of Joseph A. Califano Jr. ’55. In 1985 Zoellick joined the Reagan administration and was promoted several times by Treasury Secretary Baker, under whom he served until 1993, first as deputy assistant secretary for financial institutions policy and later at the State Department as undersecretary of state for economic and agricultural affairs and as counselor of the department. He was also briefly the deputy chief of staff at the White House and assistant to President George H.W. Bush.

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He likes to visit old battlefields and think of "strategies and tactics in the midst of confusion."

During these years, Zoellick was entrusted with high-level policy work and diplomacy that immersed him in international debt crises, the S&L debacle and the Cold War’s surprisingly peaceful end. As the lead U.S. official in the 1989-1990 Two Plus Four process of German unification, dealing with NATO and the concerns of Russia, he learned “to see problems in their multiple dimensions,” he said. “The perfect textbook solution is worthless unless you can implement it.” From his powerful mentor Baker, Zoellick assimilated “a sense of being very attuned to power and trying to use it to get things done. It’s essential to build cooperative solutions: No country can do these things by itself.”

Leaving government service in 1993, he spent four years as executive vice president of Fannie Mae. He also had a pivotal role in the historic fallout of the 2000 presidential election, when he was enlisted by Baker to help lead George W. Bush’s team in the 36-day battle over the Florida recount.

In 2001 Zoellick became U.S. trade representative for President Bush’s administration. After the Sept. 11 attacks, he wrote in The Washington Post: “The terrorists deliberately chose the World Trade towers as their target. While their blow toppled the towers, it cannot and will not shake the foundation of world trade and freedom. Our response has to counter fear and panic, and counter it with free trade.”

From 2001 to 2005 he made good on his conviction, defining an activist, results-oriented approach that linked free trade to development and foreign policy. He helped launch global trade negotiations at the World Trade Organization meeting in Doha, Qatar, in 2001, with follow-up meetings at Cancun, Geneva and Hong Kong. Zoellick worked with ministers from nearly 150 economies and negotiated FTAs with some 15 countries. He also oversaw China’s and Taiwan’s accessions to the WTO. The Doha talks have since run aground, but Zoellick has remained a free trade proponent. But “trade liberalization will only take you so far,” he noted, and under his leadership the bank emphasizes aid for trade’s development side, including building ports and improving logistics.

In 2005 Zoellick was named deputy secretary of state. He led efforts to mediate the violent conflict in Sudan, visiting four times in seven months. The wristband he wore to a Darfur refugee camp, inscribed “Not on our watch,” captured international attention. Professor William Alford ’77, who has spoken at length with him on his visits to HLS, including a dialogue they shared before an audience of graduate students last year, said, “I am very taken with the way that Bob Zoellick blends analytical brilliance, adroit political skills and a deep passion about issues that really matter. You could see this in his efforts to stop the slaughter in Darfur.”

Zoellick also launched major policy initiatives with China and coined the phrase “responsible stakeholder” to characterize the role the emerging superpower ought to assume in international affairs. A 2006 photograph of him cradling Jing Jing, a female panda cub, sparked intense analysis in China. Given that the panda is seen as a symbol of U.S.-China political cooperation, Zoellick’s staff pondered beforehand how the Jing Jing-Zoellick photo-op might be construed. Zoellick had a personal reason for going ahead with it, however: His wife, Sherry Ferguson, a novelist as well as an amateur ornithologist and animal lover, wanted a picture of him with the cub.

After his resignation from State in 2006, Zoellick went back to the private sector, becoming vice chairman of international operations at the investment firm Goldman Sachs, and chairman of the bank’s international advisers. But soon the call came to head up the World Bank, where he has taken on wave upon wave of fast-breaking challenges.

This spring, media worldwide quoted Zoellick’s comments that 2009 will be “a very dangerous year”—that the global economy is shrinking for the first time since 1945 (by 1 to 2 percent) and trade has suffered its greatest drop in 80 years. “These are dangerous numbers,” he said. He co-wrote a Washington Post piece calling for the United States and China to team up as the “G-2” and “become the engine” for the Group of 20’s efforts to fix the global economy. He also gave a speech warning G-20 leaders their stimulus programs would be no more than a “sugar high” unless supported by decisive steps to get the credit system working again.

Leading up to the G-20’s April meeting in London, Zoellick met with Prime Ministers Gordon Brown and Kevin Rudd, with the G-20 finance ministers in Rome and with Chancellor Angela Merkel in Germany. His goal was to use the London Summit to lay the groundwork for the G-8’s summer meeting, including partnering with the G-20 to develop multibillion-dollar funds to rebuild trade liquidity in developing countries, and to help stabilize the reeling banking system of Central and Eastern Europe.

The London Summit concluded with G-20 leaders including Obama committing to a $1.1 trillion package to tackle the global crisis. Many priorities Zoellick has championed were funded, including $250 billion to boost global trade, beefing up the International Monetary Fund’s budget to $750 billion and providing $100 billion to the poorest countries.

On the heels of that meeting, Zoellick was already focusing on his next travels, to East Asia. One of the histories he was taking along was Mike Rapport’s “1848: Year of Revolution.” He’d also packed his running shoes. For many years he was a cross-country and marathon runner (his best time is 2:32). While he no longer races, Zoellick particularly likes to run when he travels. “It’s the one time I break free of officialdom and meetings,” he noted. Those early-morning runs let him more fully “see and sense” his foreign locale.

After 25 years, Zoellick is at home in every time zone. His connections and collaborations span the globe. Throughout his career, the World Bank president says his approach has been to “be straight, honest, direct. When people think of negotiations, they tend to see them as one-offs. I don’t. If we work together, we share the credit, and we build the basis to solve other problems in the future.”