• • • ADDRESS BY EUGENE R. BLACK, PRESIDENT OF THE BANK, IN PRESENTING THE SIXTH ANNUAL REPORT OF THE BANK TO THE BOARD OF GOVERNORS, SEPTEMBER 10, 1951 When we met in Paris a year ago, the Let me put this achievement against the world was just beginning to measure the im­ background of previous fiscal years. Our plications of new and grave international first loans for projects in the less developed tension. I said at that time that unless the countries were made in 1948; in that year, worst should happen, the International Bank we made two development loans totaling 16 must and would carry on its work at an ac­ million dollars. In the following 12 months celerated pace. The Annual Report you have we made three more development loans before you shows that we have done so. amounting to 109 million dollars. In fiscal As your Chairman has remarked, the past 1950, the figures rose to eight loans and 134 fiscal year was the largest in our history. It million dollars. In this year on which we was largest in the number of loans, largest now report to you, we have made 21 loans, in the amount lent, and largest in the extent totaling nearly 300 million dollars, for de­ of the activities we have carried on in our task of helping our member nations to in­ velopment projects in 11 different countries. crease productivity and raise standards of This is twice the volume of lending for de­ living. velopment in any previous year. In fact, it [5] is more than the volume of development lend- economic development in our member states, ing in all our earlier years put together. to the extent that those needs ought prop- As you know, the Bank considers the man- erly to be met on a long-term loan basis. ner of putting money to work to be no less In view of the record, it seems strange in- important than the amount. We always have deed that suggestions are still heard that new been ready to help provide technical assist- ways must be found to increase many times ance in both the preparation and execution over the amount of intergovernmental loans of loan projects. This type of activity, in for development purposes. Such suggestions, the past year, has been an increasingly sig- in my experience, are usually based on large nificant part of our lending operations. but hazy calculations of what is available and Quite apart from specific Bank financing, what really can be used in the form of loan we have made growing progress in helping capital for development. They are made our member countries to assess and to real- without consideration of the seriousness of ize more effectively their full economic po- the obligation a country assumes when it tential. One of our instruments for pro- incurs debt. They ignore the frustration and viding such assistance is the comprehensive bitterness a country invites when it shoulders economic survey mission, which suggests to an obligation greater than it can afford, and the receiving country policies and investment before it is really ready to put capital effec- programs that appear most likely to accel- tively to work. erate its development. Last year we were I would like to record my emphatic dis- able to inform you that one such mission had agreement with suggestions of this kind. If completed its work in Colombia. This year, they divert members from a proper use of the we report that the work of this group has financial facilities available to them, if they produced specific action; we present you with distract developing countries from concrete the findings of four other groups that have objectives, they can do great harm to the worked in Turkey, Guatemala, Cuba and orderly progress of development. Uruguay; and we announce work of a similar That is not to say that there may not be kind being completed or contemplated in five other useful instruments in the field of pro- other countries of Latin America and the viding capital, on an international basis, for N ear and Far East. economic growth. The idea has been ad- Finally, during the year, we have increased vanced, for instance, of an international au- our own resources; we have broadened our thority to allocate grants for development. base in the private capital markets which Under present world conditions, it does not provide the bulk of our loan funds. We sold appear likely that any significant amount of the first public offerings of our bonds in the grant capital will be provided on a truly in- United Kingdom and in Switzerland, and ternational basis; but the idea has merits are continuing to explore opportunities to that might well be considered in a later and issue our securities outside the United States. happier day. In the American market, we raised new money for the first time since 1947 with a The proposal also has been made that an bond issue last February. The market itself international finance corporation be estab- welcomed the news that from now on we lished as an affiliate of the International expect to be offering dollar securities, not at Bank to do two things that the Bank does widely spaced intervals as in the past, but not do: that is, to make equity investments more frequently, as our lending operations and to make loans for private enterprise require. Preparations for another offering without some form of governmental guar- of dollar bonds are now virtually complete. antee. It may be that a corporation of this All this demonstrates the considerable and kind could do much to stimulate private in- growing strength of the International Bank. vestment, both local and foreign. Such a It is my opinion, which I think the record result would be of the greatest advantage. adequately supports, that unless the inter- The Bank is giving the proposal serious national situation deteriorates further, we study, and will report on the matter to the will be able to meet all the capital needs of United Nations Economic and Social Coun- [6 ] cil, at the request of that body, early next standards is through greater production. Not year. long ago, the world emerged from a great For the first time in the history of the war which made it necessary, in many areas, world the problems of development are be- to suspend normal processes of economic ing attacked on an organized international growth. The nations have had to engage in basis. At the same time, the awakening peo- tremendous effort and to spend enormous ples within the under-developed countries sums of money to repair the loss of those have been pressing strongly for economic years. Surely we would now court disaster betterment. These two movements have if economic development were again to be joined to bring real progress: a rise in pro- treated as a secondary problem and more ductive capacity and the building of sound years were to be lost. foundations for further expansion. But The very increase in production which is while progress has been made, the problems now required must be based on balanced are so enormous and the attack upon them is growth. Rising industrial production cre- so new that none of us can be satisfied with ates demands for additional supplies of raw the advances so far achieved. materials; while developed countries them- There has been extensive discussion of selves can do much to increase their output ways and means to speed up the development of these materials, and especially of food, process. Inevitably, much of that discussion new production elsewhere is also imperative. has been in political forums, and more from The under-developed countries can hardly be the viewpoint of politics than of economics. expected to continue to supply basic com- We are familiar with the customary lines of modities, without some reasonable return in argument-from the under-developed coun- equipment and machinery that will enable tries that they need more assistance than them to raise their own standard of living. they are now getting, and from the developed It is therefore less than ever possible to countries that the other nations are not do- divide production problems neatly between ing enough on their own account. There nations that are highly industrialized and are elements of truth in both assertions. those that are not; the fact is that sound in- We are fortunate here today in that we can vestments in raw materials production and approach the subject of development from an in industrial growth, in either kind of coun- economic-and technical-standpoint, with try, are potential contributions to the solu- fewer political overtones. It is for that rea- tion of a common problem. son that I believe it may be helpful to state- I wish I could assure you that this premise, or, rather, restate-a few of the fundamental of the importance of economic development, principles which, as I see it, should be guide- is universally accepted. But I cannot. Some posts in our attack on the problems of de- countries have acted on it with vigor and velopment. wisdom, but there is still much that others The first such principle-and it is a truism could do. Let me mention two widely differ- indeed-is this: Economic development is an ing aspects of the problem as they are ob- important objective for the entire commu- served in the Bank's operations. nity of nations. It is important to less de- As you well know, our member countries veloped countries in terms of production, of have subscribed to the capital of the Bank standards of living and of continuing na- partly in their own currencies, which are tional growth. It is not less important to ultimately intended for use in the Bank's countries that already have reached a high lending operations. We appreciate the diffi- stage of development. Their own livelihood culties involved in releasing significant and their own future depend on the progres- amounts of these capital subscriptions in the sive expansion of world production and com- circumstances of today; yet we feel that it merce. would be worthwhile, in the pursuit of our The present international situation should common objective of development, to put illuminate rather than obscure these truths. more of these resources at the Bank's dis- The only way to support defense prepara- posal. Since development does serve the tions and at the same time protect living common good of all the members, we are not [7] asking for an unrewarded export of capital the fundamental conditions of which the from developed nations, but for an invest- fever may be only a long-delayed symptom. ment which will redound to their interest Aid to development will be wasted unless and to the interest of less developed coun- there is continuity in providing it, and, al- tries as well. Release of the members' cur- most equally important, unless there is a rencies, in some instances, may well mean reasonable assurance of such continuity. the difference between a useful development Moreover, if economic assistance is cast investment, including dollars, and no invest- solely in the mould of historical friendships ment at all. or strategic considerations, it will neglect On the other side of our lending opera- useful resources that should be developed for tions, I am sorry to have to report to you that the common good. many of the Bank's borrowers are slow in Thirdly, let me say that in my opinion too putting money to work. We certainly ap- much emphasis is often placed on capital, preciate the care that must be taken in the particularly foreign capital, as the prime in- commencement of any undertaking; yet I gredient of development. think we have more instances than we should We are familiar with the complaint that of an interval of many months-sometimes lack of capital impedes progress in under- amounting to a year or more-between the developed countries, and this is undoubtedly signing of our loan contract and the accom- true. Yet there are many other factors in- plishment of the preliminary steps that are volved in development. Most of our member necessary to allow a development project to nations could profit by giving much more proceed. Our rate of disbursements, in rela- attention to these factors than they do. tion to commitments, is low enough to be a The social institutions of the country, the cause of concern. distribution of wealth and opportunity These are but two instances in which the among the people, the effectiveness of the Bank finds that the importance of economic educational effort, the energy and compe- development is not fully appreciated-in- tence of government administration, and the stances in which development is retarded character of the policies governing the use of from causes not by any means beyond the the country's resources-these are all factors control of member nations. which bear quite as directly as foreign capi- My second proposition is this: Economic talon the rate of development. development cannot be based on expediency Proper action in these fields is not only -political or any other kind. worthwhile in itself, but is indispensable to Political processes, of course, are the es- the productive use of capital. It could do sence of democratic governments; and it is much to mobilize capital resources which ex- true that in a democratic society it is often ist in nearly every under-developed country difficult for a government to take the long- but are not fully available for development. term view. Yet development is a long-term We all know of many cases in which local process. It cannot be carried out sporadi- capital is sent abroaq, or hoarded in the form cally; it must be approached as a matter of of gold, commodities or land that is not put broad and continuing public interest-not a to productive use. We know of countries means of promoting the interests of a par- where individual wealth finds speculative ticular area of the country, not a means of trading profits more appealing than invest- winning votes in a critical electoral district, ment in manufacturing or other productive not a means of satisfying the ego of political enterprises. So long as governments and sponsors. peoples do not pay sufficient attention to the The more developed nations, too, need to environment in which capital must grow and remind themselves continually that interna- work, it is hard to see how the case could be tional aid for development ought not to be otherwise. Yet if a country cannot induce based on expediency. To be really effective, its citizens to put their own capital into pro- they should not relate their efforts to fever ductive investments at home, it cannot rea- charts of international tension, but rather to sonably expect to attract capital from abroad. [8] My fourth proposition is that we must con- think, have a coherence and impact far stantly work to improve the effectiveness of greater than at present. technical assistance. So far as concerns the sectors of the econ- The shortage of trained personnel at every omy directly concerned with production- level is one of the greatest and most intract- agriculture, industry, mining, power, trans- able obstacles to development. Recent pro- portation and the like-there is need for far grams of technical assistance, undertaken closer association of technical assistance with both bilaterally and internationally, are a financial assistance. In these fields particu- constructive effort to help the under-devel- larly, recommendations for improvements, oped countries meet this difficulty. Consider- however sound, are apt to go unheeded unless able progress has been made. Many capable at the same time capital is made available to and devoted men are now hard at work, help carry out the recommendations. Good under these programs, in under-developed advice is rarely welcomed for its own sake; countries throughout the world. They daily experience demonstrates that if the advice is provide proof that the programs are sound in to be effective, it must usually be accom- purpose. panied by something more tangible. In other As we gain experience in technical assist- words, technical assistance in these fields ance, however, it is becoming clear that some should not be regarded as a separable activ- revisions of approach are necessary. ity. To the extent possible, it should be in- In an effort to get these programs started, tegrated with financial help in pursuance of a too much emphasis has been put on sending single development objective. out into the field as many experts as possible My fifth and last premise is that develop- in just as short a time as possible. Too little ment is primarily the responsibility of the emphasis has been put on getting, in ad- developing country itself. vance, a clear definition of their duties, re- There is not, and cannot be, any substitute sponsibilities and status. The result often for internal effort. Foreign capital cannot has been frustration on the part of the ex- be broadly effective in the absence of local perts; and in some recipient countries there capital. Foreign advice will be useless unless has been bewilderment at a multiplicity of there are roots for it to nurture. advisers without defined functions, and a At best, outside aid can provide only a breeding of antagonism toward the whole margin over and above what a people are concept of technical assistance. doing for themselves. It can be the margin It is essential, I think, that certain under- between failure and success, but only when standings should be reached before any tech- there is substantial local effort. And there nical expert is sent to the field. There should can be such an effort only when a nation has be a convincing demonstration both of a a will to develop-when there is a drive need and a desire for his services, a clear within the country itself to improve the liv- agreement on the work he is to perform, and ing standards of its people, and a government a precise understanding of his relationship which reflects that drive. to the official whom he is to serve. Let me conclude by restating what, as I see I believe there has been far too much scat- it, we are all seeking in this process of eco- tering of effort in the technical assistance nomic development. Expanding world com- programs. Assistance has been asked and merce and higher living standards are provided over the whole vast range of eco- phrases that mean something important, but nomic and social activity, without much con- they may obscure the fact that both the sideration for relative orders of importance. source and the object of our efforts is the There is need for more concentration of ef- individual human being. In him is the motive fort on the fundamentals-on such things as power of what we can do, and for him are improvement of agricultural techniques, edu- the rewards of what we can accomplish. cation, health and public administration. More clearly today than ever before, we Concentrated on these fundamentals, the pro- know what happens when men live and are grams would be more understandable, more treated as masses, as statistics, as servants manageable, more effective-they would, I of privileged classes or as creatures of the [9 ] state. All during our lifetimes, we have seen Variety of choice is one of the things we them erupt in riot and bloodshed; we have are talking about when we talk about free- seen them hypnotized and driven to self-de- dom. In far too much of the world today, struction in war. The threat that faces us this element of freedom does not exist. Men today does not lie in the wilfulness of a few are likely to think they have a choice only men; it lies in their ability to control people between extremes; between slow starvation in masses, and to appeal to other masses who and quick revolution; between complete in- may be willing to exchange one form of sub- ertia and regimented obedience to political jugation for another. leaders who themselves may represent ex- In that perspective, economic development tremes. can be one of the most significant and con- I think it is obvious that a world of free structive activities of our time. Through men would be far more stable and peaceful development, we can help give men a chance than the one around us today. I think it is to satisfy their aspirations not as a mob but obvious that economic development is an in- as individuals. For one of the striking char- dispensable tool for providing the richness acteristics of a developed society is the great of alternatives that makes up a world of free variety of choice it can offer to individuals; men. If I am right, that our objective is to a choice not merely of one 20th century con- protect and enlarge the freedom of the in- venience over another, but a choice of work, dividual, it is an objective that is surely of careers, of living places, of ideas and of worth all the energy we can devote to its leadership. achievement. • • [10 ]