World Bank President James D. Wolfensohn thinks globalization isn't curing world poverty and that many economic gains are fleeting. He believes governments, aid agencies, and banks focus too much on financial, rather than social and structural, factors. He spoke to Senior News Editor Pete Engardio and Senior Writer Owen Ullmann about the Bank's new ''comprehensive development framework,'' which has been adopted by 12 countries.


Q: What's wrong with the way we look at developing nations?
A: The traditional method of analyzing countries and rescue plans has been essentially financial. We look at GDP-per-capita statistics or debt outstanding. When your publication reports on a crisis, you focus on the size of the package, if the balance of payments can sustain the currency, and on interest rates.

Improving financial institutions is important. But there are certain elements in a society and its development that are equally as important as money. Things like social services, governance, the justice system, the environment, roads, and water. Without addressing themyour statistics are subject to reconsideration. It gets down to people.


Q: Can you get private banks to see that?
A: It may be difficult to get business to discuss levels of poverty, the legal system, or whether or not the social situation is progressing. But if you don't take these things into account, you will get wrong results. You will not restore confidence. Often, decisions you make in the short term can have massive social impact. If you look at Russia, the issues that are of the greatest concern are cultural, social, and political. I think one-on-one, just about everyone agrees with this proposition. But in times of crisis, the immediate issue becomes how do we solve the financial situation. If you know that you will have 17 million more people in the streets, you may balance your economic policies.


Q: But can there be uniform standards?
A: I think you can have some pretty good standards on corruption. But when you talk about legal systems and social safety nets, they can't be imposed by us. It depends on the culture. There are many systems that work. In some countries, the family social safety net is very effective. So the last thing you want is to say you need a bureaucratized social system when what they have is perfectly adequate.


Q: Aren't some governments too corrupt to follow your advice?
A: We can't order a Suharto to change. But by talking about corruption, you can empower a lot of people to speak out. It used to be that you didn't use the ''C word'' at the Bank because the board got upset. But [at the 1997 World Bank conference] every other sentence by finance ministers was about corruption. This is a quantum leap.


Q: Given another chance, what would you do differently in Russia?
A: First, I would be more confident in talking with leadership about the totality of what needs to be done. We would deal with issues like social safety nets, private ownership, and clean government. I would have been more rigorous on the justice system and financial systems. That would have helped me and the Russians get our priorities right.


Q: How will the bank change?
A: We are trying to think out of the box. It involves a huge culture change for us. Traditionally, we have been very bureaucratized. We need to move away from megaprojects and refocus our institution on people. We're not trained to listen to indigenous people, and very often, they know a bloody spot more than we do. We are looking at delegating greater authority to the field. This approach is galvanizing this place. We are working more closely with nongovernment organizations. For example, some religious groups have the best knowledge-distribution systems on earth.


Q: Weren't private capital markets supposed to meet emerging markets' needs?
A: They overshot. Five years ago, everyone came to us. In the past five years, nobody wanted to know us because the private markets met their needs very readily. But then commercial banks loaned billions without rigorous financial analysis. Returns were seen as terrific, but they were still bad debts. What's interesting now is that everyone wants us back.



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