Weill calls economic growth an answer to global poverty and conflict

By Linda Myers

Worldwide economic growth, while not a panacea, seems to offer the most potential for bettering the world and creating a climate where conflicts will diminish and peace will flourish. That was the overall message of financial leader Sanford Weill's Hatfield lecture April 2 in a packed Schwartz Auditorium in Rockefeller Hall.

Sandy Weill speaks to a group of Johnson School students, during his visit to campus as Cornell's 2003 Hatfield Fellow. University Photography

The chairman and CEO of Citigroup, one of the world's largest financial services conglomerates, discussed the role that financial services might play in such a world, stressing its ability to create access to capital as a way to reduce poverty and help people realize their economic potential. Weill -- a 1955 Cornell alumnus, a trustee emeritus and a member of the board of overseers of the Joan and Sanford I. Weill Medical College and Graduate School of Medical Sciences of Cornell -- also called for better corporate self-governance to avoid even the appearance of impropriety and criticized the financial services industry for its role in recent corporate scandals.

"While the world's problems cannot be solved by economic growth alone, economic development is part of the agenda," said Weill, who promoted further lifting of restrictions and opening of borders to increase trade and the flow of capital and help grow GDP. "Any [country's] growth agenda has to include integration into the global economy," he said.

Although some claim "the world is going to hell in a handbasket," because of globalization, "the facts suggest otherwise," Weill stated. Developing nations are experiencing improved conditions, and global poverty is at record low levels, he asserted, with fewer than 25 percent of the world population living on less than a dollar a day in 2000, a drop from 63 percent in 1950 and 44 percent in 1980. However, in some places, for example sub-Saharan Africa, poverty has actually risen, raising "serious concerns," he said. Policymakers and leaders around the globe need to make changes so that economic growth continues and benefits everyone everywhere, Weill told the audience

One of Citigroup's mechanisms to improve local conditions in the 100 countries where it operates is to provide "microfinancing" to would-be entrepreneurs, with loans as small as $260 on average. So far, the investments are paying off, with a repayment rate at about 95 percent, Weill reported. Another strategy is to gain a better understanding of local needs by hiring 90 percent of its employees locally.

"I truly believe that economic growth is the best answer to global poverty," said Weill. "Countries that have created broad-based economic health among their people tend to focus less on conflict." He cited as an example the enlightened policy of the allied victors following World War II that led to postwar economic growth in Germany and Japan, contrasting it with the punitive treatment of Germany following its defeat in World War I and the resulting economic chaos that led to the rise of Hitler.

Healthy economic growth may also help resolve conflicts in places where fighting is deeply entrenched, such as the Middle East, Weill said, offering as one example the medical college that Cornell is helping to build in Doha, Qatar. "We can change the way people feel about each other by focusing on our humanity," he added.

On recent U.S. corporate accounting scandals, Weill said, "The great majority of people in this industry are ethical, but they are tarnished by a few bad apples." Nevertheless, corporations and the financial service industry, his own firm included, have a special obligation to restore the public's confidence, he said. Decrying fraud and self-dealing, Weill called for a separation between IPO analysts and investment banking underwriting activity, independent boards to whom executives are truly accountable, "bullet-proof" auditing by impartial external agencies and executive compensation based on stock performance. In addition, he said that corporations should fully report all revenues and expenses in an understandable "common language," so that investors have a clear idea of what they are investing in.

Asked for advice to students interested in financial services, Weill said, "Don't swing for the grand-slam home run, but keep going for the singles." He also advised establishing a broad base of knowledge in order to recognize opportunities others might miss, and being willing to take risks and learn from mistakes.

To queries from student activists in the Cornell Greens and the Rainforest Action Group about Citigroup's attitude toward globalization initiatives that threaten the environment, such as drilling for oil in rainforests, Weill stated that his company seeks to find ways to work with environmental groups to make the world a better place.

During the question-and-answer session, silent protesters who rose to display a banner, "destroying old growth forests isn't cool," were escorted out of the auditorium, without disruption.

Weill also informally recounted how, in the spring semester of his senior year at Cornell, a family crisis caused him to miss a critical accounting exam, leading to the delay of his formal graduation. At Commencement, he was handed an empty diploma envelope, and he finally received the actual document in the fall. Because of the delay, he was forced to postpone plans to enter the U.S. Air Force as a commissioned second lieutenant, and instead took a job on Wall Street with Bear Stearns. The rest, as they say, is history.