Barber B. Conable, Jr. (born 1922), headed the most important lending institution committed to financing economic projects in developing countries, the World Bank, from 1986 to 1991. His tenure was noted for a complete overhaul of the bank and its personnel and a vital capital increase campaign. He piloted the bank through times of turbulent Third World debt defaults and restructuring.
Barber B. Conable, Jr., was born in Warsaw, New York, on November 2, 1922. After receiving his Bachelor's degree from Cornell in 1942, Conable joined the United States Marine Corps, serving out the end of World War II (1942-1946) and serving again during the Korean conflict (1950-1951), reaching the rank of colonel. He graduated with honors from Cornell's law school in 1948 and became a member of the New York State Bar that same year. Conable practiced law first in Buffalo (until 1950), then Batavia (until 1964). His career in the public sector began in the New York State Legislature (1963-1964), and from there he went on to become the 30th District representative to the U.S. House of Representatives, a post he successfully held for 20 years (1965-1985).
As the ranking Republican on the House Ways and Means Committee, Conable was respected as one of the most influential and knowledgeable legislators on tax issues, with important contributions to laws on trade (1974), capital gains (1977), and social security (1977). Yet his appointment to head the World Bank in 1986 was seen as somewhat of a surprise, since Conable had no banking experience, only slight management experience, and virtually all of his legislative experience related to domestic rather than international issues. Nevertheless, what the Reagan administration desired was an insider on Capitol Hill who could successfully lobby for a capital increase for the institution, but an outsider to the bank who could reign in its perceived bloated bureaucracy and change its culture away from central planning toward market-oriented solutions.
The World Bank was created after World War II to channel funds for economic and social development projects from modern industrial nations to poor agricultural and newly industrializing nations in Latin America, Africa, and Asia. Because the United States provided the largest share of equity capital, the bank's president had traditionally been an American and its headquarters located in Washington, D.C. Three affiliated institutions make up the bank—the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), and the International Finance Corporation (IFC).
The IBRD makes interest-bearing loans for public development projects (roads, dams, energy, communications, schools) and provides technical assistance, using funds raised by issuing bonds on world capital markets. These bonds are backed by the 151 member countries of the bank, thus generating a pool of funds for poor countries that on their own would lack the necessary credit rating to issue bonds. The IDA provides additional capital to the poorest countries on a below-market interest rate (i.e., part grant), while the IFC makes additional capital available to private industrial enterprises in developing countries.
During the 1970s, developing countries also borrowed heavily from private commercial banks in the United States, Europe, and Japan. Following the second oil shock of 1979 and the world-wide recession in the early 1980s, however, developing countries could not find export markets for their products except at much lower prices. While export revenues declined, debt service payments rose owing to much higher interest rates, creating a financial squeeze. Unable to obtain dollars to repay the interest and principal on the $1 trillion debt, many countries in Latin America and Africa suspended payments, leading to the crisis. As a result, new loans dried-up, thereby reducing economic growth by preventing countries from importing capital equipment, spare parts, and other items needed to expand production.
The World Bank acted slowly in seeking a solution. To switch from project lending to broader adjustment lending for macroeconomic assistance meant a capital campaign was needed. While the other member nations of the World Bank were in support, the U.S. Congress had its own fiscal deficits and resisted helping the bank, which was perceived to be over-staffed and inefficient. To rectify this perception, Conable's first task was reorganizing the bank's structure and personnel in 1987. This created internal conflict and a lowering of morale as 10 percent of the work force of 6,500 professionals was retired or fired.
Critics charged that Conable's handling of the restructuring was inept since he was an outsider and relied too heavily on the advice of those who stood to gain by internal politics. Many top managers, particularly those skilled in financial market aspects, resigned the bank in favor of private sector jobs. Furthermore, since the multilateral bank is staffed by a pool of international civil servants, intense nationalism and favoritism were alleged in the selection process.
Despite these pitfalls, the reorganized bank was able to obtain the desired capital increase in 1988 and to expand lending to over $21 billion by 1989. Conable led the bank toward a greater emphasis on market-oriented solutions to development over central planning, in keeping with the debt solution put forth by U.S. Treasury Secretary Nicholas Brady in 1989. The Brady Plan called for private commercial banks to write off some of their outstanding loans, thereby reducing the crippling indebtedness of poor countries. In return, the remaining private claims would be guaranteed, and a new infusion of loans from wealthier nations would occur through the auspices of the World Bank and the International Monetary Fund.
After retiring from Congress, Conable served on the boards of directors of the New York Stock Exchange and various corporations, in addition to being senior fellow at the conservative "think-tank" the American Enterprise Institute and distinguished professor at the University of Rochester. He also served as chairman of the Museum of the American Indian in New York City and on the boards of the Urban Institute, the Dole Foundation, and the Smith Richardson Foundation.
Citing his age and poor health, Conable announced his resignation from the World Bank effective September 1, 1991. At the end of his successful five-year term, he retired to his home in Alexander, New York. The Bush White House announced that his successor would be Lewis T. Preston (born 1926), a long-time executive with J. P. Morgan & Company.
A general overview of international mechanisms and institutions may be found in J. C. Pool and S. Stamos, The ABCs of International Finance (1987). For an evaluation of the handling of the debt crisis see Shafigul Islam, "Going Beyond the Brady Plan," Challenge (July/August 1989). Excellent statistics on developing nations are incorporated in the World Bank Development Report, which is updated annually. □