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The world according to Wolfensohn

25 Jul 2008

As we struggle with the day-to-day issues that occupy our waking thoughts, it is difficult to glimpse the world as it may be in our old age. At a recent conference of financial professionals, former World Bank president James Wolfensohn painted a vivid picture of the world as it may be for our children and grandchildren.

The next four decades will see a remarkable shift in the world economic powers. Wolfensohn - who visited 120 countries in his time at the Bank pursuing poverty and environmental issues - suggests that, sometime between 2030 and 2040, five of the current G7 countries will no longer be members of the club for the world's biggest economies. The only existing members to retain their seat (if not their position) will be the US and Japan. Germany, the UK, France, Italy and Canada will all be overtaken by countries such as China, India, Russia and Brazil. While no one can tell the precise numbers or timings so far ahead, Wolfensohn is confident about the general trends.

And in many ways, those general trends are positive: China and India will see their per capita growth rise substantially, although not to the level of Europe or the US. However, those figures stand in sharp contrast to Africa, which seems likely to miss out on the promise of escaping poverty. Here, per capita income is predicted to be a few thousand dollars in a couple of decades, representing miniscule economic growth.

The question for Wolfensohn that emerges from these figures is this: is it sustainable to have a situation where, of nine billion people on the planet, two billion or so live on so little? In this world, those poorest people will not be devoid of information. Even today, there are people in Africa with every sort of communication device. Mass communication is bound to grow. It is no longer an ignorant world, and the poor of the future will be well informed about the huge differences.

Wolfensohn says there are some fundamentals to economics and development that affect everybody. People want a chance. And in the end, it is not possible to have a stable society without something approaching social equity.

The poverty crisis is already upon us, with the World Bank calling in April for an immediate $500m of food aid to help an estimated 100 million people who are being pushed deeper into poverty by spiralling food prices. We don’t have to look to the future to see the spectre of food shortage riots in Africa, consumer protests in Europe and panic in food-importing countries. That has all happened this year.

In the last 12 months, the prices of rice and wheat have doubled - partly as a result of increased demand for food and the high price of energy, which is encouraging food-to-fuel agriculture. Climate change has also contributed to falling agricultural productivity. Wolfensohn used as an example his Australian homeland, where in the Northern Territories rice was once grown over huge, highly productive areas. Now, after five years without any significant rainfall, the industry has gone. Climate change is showing a colossal impact on food production, and subsequently on our economies.

Wolfensohn talked about the need to consider the fundamental shifts in the way in which our planet is developing. In 2005, the world saw a year of campaigning in a bid to make poverty history. At the time, there was huge optimism that a generation had been inspired to end the global differences between the 'haves' and the 'have nots'. But if the talk then was about making poverty history, Wolfensohn's vision appears to be one where poverty is permanent. But we are not just passive spectators. Accountants work with others to make decisions over jobs, investments and wealth creation. As we go about our daily lives, we have to understand and believe that those decisions we make today reverberate down the years.

Peter Williams is a journalist and a chartered accountant. He writes on accounting, financial reporting and auditing issues.

This article appears in the June 2008 edition of Accounting and Business.