The force of free-market capitalism seems capable of dominating global initiatives for development. What has been the most effective strategy for balancing the demands of market forces in such a way that environmental and social infrastructure can still be maintained?

You definitely need to look at this problem in a balanced way. I think you have to recognize that there are many things that the market is incapable of achieving. There are things in the environmental and social domain that the market will not accomplish on its own. One example of this is climate change due to its long-term qualities. The varied markets tend to operate on the short-term, but sustainable development and the environment tends to produce dividends over a very long period of time. So, I think there is a mismatch at heart, but that does not mean you have to reject the market. What you have to do is think about how you can encourage market-based solutions where they make sense and recognize there may be some cases where they do not make sense. There is no sort of universal standpoint from which one can decide the right balance between market forces and state intervention; it depends on a country’s circumstances and the kind of issue at hand.

For climate change, a national policy is not good enough; you need an international public policy to guide work on climate change. In the case of an international umbrella policy like the Kyoto Protocol for climate change, you can then orchestrate national and regional rules and within that framework of enlightened public policy, you can look to the private sector and markets to play a role in regulation. The carbon markets present a good example of this with respect to climate change. Additionally, though, we have seen it in forestry, where you can also get enlightened public policy. You can get third party certification, and you can allow the private sector to operate within the bounds of reasonable and sensible rules. There may, of course, be other areas where the role of the national government will be have to be larger than the private sector; it will vary from country to country. But we do have lots of cases where the public and private sectors have come together.

One notable success is the Montreal Protocol, where I think in the next few years we should be able to, in a way, tick a box that says we were successful at reducing ozone-depleting substances into the atmosphere and have protected the ozone layer. This outcome has largely come about via enlightened international public policy, enlightened domestic public policy in many countries in the world, and enlightened response by the private sector. I think that provides a good example of our success. And I do not mean to indicate just the World Bank; in general, the international community has done very well. So, I think there are many cases where you can look to enlighten public policy and then link it with market forces to achieve a common global good.

What role, if any, is the World Bank Group playing in the rebuilding of post-conflict Iraq?

More generally, we have played a major role in post-conflict work. Let me talk about what we do not do and then let me talk about what we do do. The World Bank has no competence in peacekeeping, obviously, which is largely negotiated through the United Nations, nor in humanitarian assistance. It is not that we do not care about those things, but we just simply cannot play a role in them. Our role comes in at the beginning of the development phase of post-conflict nations. We have a post-conflict unit here in my group that deals with the 30 or 40 countries in need of post-conflict assistance. The unit provides grants for helping countries through this transition from humanitarian assistance to addressing the development phase. And what we have learned is that often countries move back and forth from the humanitarian to the development phase, and they fluctuate between these two states. Obviously, one issue for us is security of our own staff and that has been a factor in how quickly we have been able to work in Iraq, especially as we begin to see the transition unfold from humanitarian relief work to development work.

The World Bank has stood ready to work on those programs. What is interesting about our work on reconstruction is that a number of years ago, the logical place to put a post-conflict unit would have been presumably in an infrastructure department because it was the reconstruction of physical infrastructure that mattered. What we have discovered is that we must learn to balance the physical reconstruction with, if you like, the reconstruction of societies. As a result, we have put a lot of emphasis on community-driven development and getting communities to move and organize themselves. This includes ultimately understanding how better to prevent conflict, which is often rooted in social distress, not simply in the rebuilding of physical or political infrastructure.

To what extent does socially sustainable growth depend on public health initiatives and what are some examples of the World Bank’s commitment to international health?

I think the issue of public health serves as a constant reminder that we are living in an increasingly globalized world where communicable diseases are not just national threats, but regional and often global threats. Thus, we work very closely with the World Health Organization (WHO) on these issues. WHO runs a major fund for global health initiatives for, among other things, HIV/AIDS and tuberculosis. We therefore work with them very closely. Our job is to fund systematic healthcare improvements at the national level and that means working with ministries of health in diagnostic work and then deciding what needs to be accomplished and financed at the national level. It also means becoming increasingly sensitive to the underlying causes of ill health, which are the environmental factors that I spoke about earlier. Health lending has grown quite appreciably over the past ten years, which coupled with education comprise about 25 percent of our portfolio now. Twenty years ago, they were probably less than 5 percent. But I think our role in public health is to make sure we take a broader view of it, but we must also ensure that health facilities are built, maintained, and stocked with the kinds of drugs that are needed. It is also about ensuring that poor peoples’ incomes rise, so we need to look at the economic dimension as well. One of the reasons poor people do not go to clinics is not just because there are no available doctors, but because they cannot afford to. And it is looking at these types of underlying causes of ill health that becomes important for the Bank.