Untapped Resource: World Bank President Robert Zoellick Knows More about International Governmental Institutional Arrangements Than Anyone in the World. He Should Lead the Effort for a New Global Growth Agenda. an Exclusive Interview

The International Economy, Fall 2011 | Go to article overview
Save to active project

Untapped Resource: World Bank President Robert Zoellick Knows More about International Governmental Institutional Arrangements Than Anyone in the World. He Should Lead the Effort for a New Global Growth Agenda. an Exclusive Interview


[ILLUSTRATION OMITTED]

TIE: Is the developed world becoming like Japan--in other words, mired in debt and unable to grow at more than mediocre levels? For 2012, Japan is expected to grow at a higher rate than the rate achieved by both the eurozone and the United States. Do you agree with this "We're all becoming Japan" scenario?

Zoellick: The core issue for growth is to go back to the fundamentals. I'm not sure how much more can be done with monetary policy one way or the other. Federal Reserve Chairman Bernanke's Jackson Hole speech did a service because he pointed out that most fundamental decisions now lie with Congress and the executive branch.

Beyond fiscal policy, the real answer to your question about Japan is whether countries are willing to address the structural elements of growth to free private sector potential. When I talk about growth, I'm not talking about Keynesian macroeconomic management. I'm talking about the fundamentals of growth and productivity, for example the work of Robert Solow. At the World Bank, I see many developing countries working in this structural growth framework. As a striking example, when early in the crisis I attended a G-20 finance ministers meeting in Scotland, the mood was as dour as the sky. Then I flew to Singapore for an APEC session, and the Asian countries were more upbeat, saying, "We've seen versions of this movie before, and we're going to have to focus more on how we deregulate, expand opportunities for private-sector dynamism such as in services, and invest to create fundamentals of growth."

TIE: How would you improve the fundamentals of growth in the industrialized world?

Zoellick: The moods and coalitions of democratic politics matter, so one needs to look beyond textbook economics. For example, one can sense that across constituencies and political groups, there's a movement for broad-based tax reform: broadening the base and cutting the rates, as in the tax reform enacted when I was at Treasury in 1986. Discussions and interest--like earlier in the 1980s--is a long way from enacting major legislation. But tax reform could be a very good signal to drive investment and productivity growth. That would be high on my agenda.

Second, you can't ignore spending, debt, and deficits, but so far the United States government has been focused on discretionary spending. That's a start, but not fundamentally where the real bucks are. The challenge for policymakers is entitlements. Social Security is one area where by now people know the variables quite clearly. Social Security reform would send one beck of a confidence signal to businesses that are sitting on cash and to the world that the United States can fix its problems.

An odd political dynamic has been created by both parties. Democrats don't want to see so-called "cuts" in Social Security--it's part of their political base strategy. Republicans want to show that they're disciplined on spending so they want to emphasize the size of "cuts." People in a fast-paced media world will turn off very quickly if one talks about "cuts."

But you can start by saying you'll protect people who retire by guaranteeing what they're getting from Social Security today plus cost of living increases. That's not a cut. That's a respectable way to secure Social Security. The government would use the CPI for increases as opposed to a wage index. Then add a year or two to the retirement age. That just reflects the changed demographics and years of life. If you want to make Social Security more progressive, add means testing to limit increases. Social Security is just sitting there on the table waiting to get done.

First, we should do broad-based tax reform for growth, then Social Security reform. The third element--one of the best drivers of structural change--is free trade in an open economy. Our trade policy has been stagnant.

TIE: Is that it?

Zoellick: There are other good possibilities out there.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Untapped Resource: World Bank President Robert Zoellick Knows More about International Governmental Institutional Arrangements Than Anyone in the World. He Should Lead the Effort for a New Global Growth Agenda. an Exclusive Interview
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?