James Wolfensohn is not a typical investment banker. After all, how many in his profession have dedicated their career to redistributing the world’s wealth from the rich to the poor.
Wolfensohn has. In his decade as president of the World Bank he was able to indulge his passion for development. It was a decade in which several hundred million people were taken out of poverty — a very small first step to righting the world’s imbalances.
He was in London last week as a guest of Tzedek, a Jewish charity he rates highly for daring to reach beyond the community to pursue projects in the developing world. With his shock of white hair and sideways look, he speaks shrewdly, if guardedly, in an Australian accent untouched by his many years in the United States.
In 1995 Wolfensohn was appointed president of the World Bank, an institution formed following the Second World War to rebuild the countries devastated by the conflict. It has since mutated into a medium for investing in the developing world. His aim was to start to correct some staggering economic anomalies.
“When I took over, there were roughly five billion people in the developing world and 1 billion in the developed world. The billion in the rich world had about 80 per cent of the world’s income and the five billion in the developing world had 20 per cent. Around one billion of those people were living on less than a dollar a day.”
He decided that the bank’s activities needed to be re-thought. “At the time we were heavily involved in financing projects like roads, dams — things like that. I wanted to shift things to make the core of our activities more human. The strength of a society is not in having an extra dam or a new building but in its people. We also had to look at the environment. If you ignore this issue, hundreds of millions of lives will be threatened by rising water levels.”
During his time at the World Bank he had close dealings with many Muslim countries. He made no attempt to hide or even play down his Jewishness and maintains that this was never a problem for him.
“I was totally upfront about the fact that I was an observant Jew. I couldn’t always get kosher food when I was flying around the world but I made a point of not eating pork or shellfish. I was concerned about what the reaction would be in the Arab world but on my first visit to Saudi Arabia, during a lunch, one of the leaders said he knew that I was a little concerned about being a Jew there but that I should put that out of my mind. He said that he considered Jews to be his cousins and that the Saudis were great friends of the Jews — they just differed a bit on Israel. Since then, in my own charitable foundation, I have done work in the Arab world.”
Perhaps in part because he had close contacts with both the Arabs and with Israel, he was approached by President George W Bush in 2005, following his his retirement from the World Bank, to become the Gaza Envoy for the Quartet — a group comprising the United States, the EU, the UN and Russia. He had been looking forward to a few months travelling, rather than being pitched into the one of the world’s most intractable conflicts. Yet, he decided to accept the challenge. “I was asked by the President, and when he asks you to do something you have to give it serious consideration.”
But it was a frustrating year. His primary role was in liaising over the Israeli withdrawal from the Gaza Strip. This was accomplished successfully, but since then the situation has worsened. “We achieved the Gaza withdrawal, or rather Prime Minister Sharon did. It looked as if it was going to be the first step towards an overall settlement but sadly this didn’t happen. There are tectonic shifts among the Arabs along faith and political lines and huge problems in terms of the economy. Gaza is a non-functioning entity. It’s a prison. You can’t get in and you can’t get out. You can’t trade with anyone else. Sixty per cent of its people live in poverty.”
As for a solution, Wolfensohn, as ever, chooses his words very carefully. “I have no inside information into what is happening although I do have some insights. I cannot imagine anything being successful other than a unified Palestinian state.”
At 75, he is still working hard — his foundation is active in development projects around the world and he advises large organisations and governments on economic policy. So what advice would he give Gordon Brown? “I have met him regularly over the years, going back to 1997 when he became Chancellor. I think he is doing a very good job. His leadership in terms of focusing the world on issues during the financial crisis has been his finest hour. He understands the situation as well as anyone at the moment. I have a great regard for his knowledge of the international economic scene. I’m a great admirer of his.”
Wolfensohn has managed to guide his own investment company through the recession without suffering huge losses. However, in common with most in the financial world, he did not see the crisis coming. “I didn’t predict it. I was just the same as everyone else. Just over a year ago the only thing people were worried about was the housing situation. No-one called the collapse of Lehman Brothers. Everybody had to adjust to a crack in the system which was not anticipated.”
While he sees hopeful signs for the world economy, he cautions against over-optimism. He feels there are still big underlying problems in the housing market, the restoration of consumer spending, in the banks’ ability to lend and public debt. “We are not talking about trivial amounts,” he says with a banker’s understatement.
Beyond the immediate crisis, he anticipates seismic shifts in the world economy. “Our children and grandchildren will be growing up in a very different world. In the next few decades, the developed countries will drop from having 80 per cent of the world’s income to 35 per cent. The largest economy in the world will be China and the second largest will be India. Third will be the USA, and the UK will be some miles behind and no longer part of the G7. This will be happening very soon.”
Although his primary focus has been on banking and development, he has also been heavily involved in other areas. He has been honoured for his activities in the arts world — he studied cello with his friend Jacqueline du Pré and still plays occasional concerts.
He also represented Australia at the Melbourne Olympics in 1956 at fencing. In fact, he is toying with training for a veteran’s event. But he has a problem with his nationality. “I feel proud to be American but I’m also proud to be Australian. When I became a US citizen I was not allowed to have dual citizenship but now you can and I’m about to recover my Australian passport. So I’ll be able to represent them again,” he laughs.
Born: December 5 1933, in Sydney, Australia
Early life: Educated at the University of Sydney and Harvard. Served as an officer in the Royal Australian Air Force
Career: Senior executive at Salomon Brothers. Founded his own firm, James D. Wolfensohn, Inc. Was appointed President of the World Bank in 1995. Appointed special envoy for Gaza in 200.
Family: Married to Elaine, has three children and four grandchildren.
On Jewish identity: “We need to engage our community in issues that go beyond our religion. This strengthens us and our relationships with the wider world”