The Banker Fighting Against Poverty

All those who love their work usually harbor the hope that it is also useful to society, that it has a higher purpose which transcends personal satisfaction. On this score, Patrizio Pagano is well covered, because the World Bank, the international agency where he is executive director representing Italy, is a very special bank, which was founded after WWII to assist in the economic development of countries experiencing difficulties. In 1947, the beneficiaries were Europe and Japan, now they are the emerging economies of Africa, Latin America, Asia and Eastern Europe, including the so-called BRICs. In the corridors of the World Bank in Washington, sandwiched between the gardens of the White House and the headquarters of the International Monetary Fund, people are working for a stated goal, which is as ambitious as it is precise: to abate extreme poverty, by promoting inclusive economic growth, in order to bring down to 3% the proportion of the world's population living in extreme destitution by 2030.

Let's look at this goal more closely. Considering that today the percentage is a little less than 10%, is the target really attainable?

I think so. Keep in mind that in 1999 the corresponding value was 29% and this means, in absolute terms, that the number of people living on less than $2 a day has dropped by more than one billion, mainly due to the economic expansion of countries like China and India, while world population has grown by almost a billion and a half people in the meantime. This achievement is by no means trivial, although the hardest part lies in store, because, as athletes well know, the final meters tend to be the hardest. Going from 10% to 3% is quite a feat, especially now that China seems to be slowing down and many emerging countries are facing difficult predicaments. It will require a significant volume of investment, which, as is already happening, will not only come from the World Bank or government aid, but it will be increasingly undertaken by private actors.

What are the economic and non-economic levers which the World Bank activates to address the economic situation of a country in difficulty?

The bank basically dispenses funding. The solutions, therefore, tend to be financial. Creative finance, which in the recent crisis has often been distorted to the benefit of the few, is actually one of the most effective tools to align the interests of everyone around a needed economic intervention. This year, the World Bank Group, consisting of four institutions - two that finance the public sector and two which work with the private sector - will lend almost $68 billion to countries around the globe. This is a huge figure, though it pales in comparison to the amount of private capital flowing to developing countries. However, sometimes the case study may suggest that the best solution is not a complex financial transaction, but could be for example a simple cash transfer. It is always about understanding what is the most appropriate instrument to achieve the best result.

Considering your position, at what stage of the process do you intervene most? In project design, in the definition of loans, in diplomatic work with national governments?

As Executive Director for Italy, but also for Albania, Greece, Malta, Portugal, San Marino and East Timor, my job is more political than managerial. I sit on the board, which comprises the representatives of shareholders, i.e. member countries, having to wear two hats, that of representative of the countries I mentioned but also the bank officer's hat, because when I am voting on projects, I have to do it in the bank's interest, too.

In spite of the quick pace of change in the world economy and global finance, results in a job like yours are likely to be appraised over a time-span of several years, if not decades. Which are the tools that help you most make decisions for the long term?

Slowness and complexity in the way we operate are real problems and create a lot of frustration, because they clash with the urgency of the problems to be dealt with. One thing that helps a lot in these cases is to go on the field. This happens fairly often, since by custom the bank's board goes into the countries where the targeted projects are located, in order to make the necessary checks and talk with stakeholders, i.e. the local population. Here we realize the difficulty of operating in a plurality of sectors, from justice to education, from health to infrastructure, and having to manage many trade-offs: any decision will have negative implications for someone, We maintain our faith in the pivotal principles of our institution, namely that the implementation of projects falls upon local insitutions, and therefore it is national governments that have to manage procurement contracts, albeit within the framework of rules set by the bank.

From Soverato in Calabria, where you grew up, to Bocconi in Milan, from Italy to Washington... What felt like the bigger leap? Is the gap larger between the Italian province and a big city like Milan, or between Italy and the United States?

When I arrived in Washington I felt prepared for the job I was appointed to do. I had been to London in the years after graduation, and then in the US for a period of research. So I was not afraid. But when I think back about the trip from Soverato to Milan when I was still a teen, then yes, that was really a leap in the dark, which I took enthusiastically, while being aware about the large gap, geographic and otherwise, between the two realities.