Listen to this article
Ernest Stern (always known as Ernie) was a dominant figure at the World Bank for two decades. He was that rare individual: a clever economist, who was also a superb manager. As an economist, he was penetrating and pragmatic. As a manager, he was decisive and demanding. As a human being, he was wise and witty. He was simply unforgettable.
Stern, who has died aged 85, described himself as: “a reasonably bright guy and a reasonably good manager, and a reasonably good thinker. I get to the heart of issues quickly. I’m a good analyst, not theoretically but practically. I think I can judge what is feasible.” This was modest, but correct.
He was brought into the World Bank by then chief economist Hollis Chenery in 1972, to help manage the bank’s economics complex. Robert McNamara, president of the bank from 1968 to 1981 soon noticed his effectiveness, appointing him vice-president of the South Asia office in 1975 and putting him in charge of the first World Development Report.
I was privileged to work under Stern on India and then in the team preparing the report. He became a life-long friend. Stern did not suffer those he viewed as fools gladly. Yet he could also be warm and supportive. All respected him. As single-term presidents came and went, after McNamara, Stern represented stability.
In 1980, he became senior vice-president of operations, the most powerful staff position at the bank. He served under AW Clausen, former head of Bank of America, and then under Barber Conable. Conable imposed a chaotic reorganisation at the bank in 1987. In his contribution to its oral history, Stern comments wryly: “Mr Conable once was heard to say . . . that he had to reorganise the World Bank to get rid of Ernie Stern. A strange compliment.”
Stern was moved to the finance division in 1987, until Lew Preston, a former CEO of JPMorgan, became president in 1991. Then he was appointed one of three managing directors, reassuming his dominant role. He served as acting president after Preston’s death in 1995 and retired shortly after.
Stern was born in Frankfurt to Jewish parents. His father was in the metal trade. Not long after, the family moved to the Netherlands, in order to escape the Nazis. In 1940, after the German occupation, they were sent to Bergen Belsen via the Westerbork transit camp. They survived partly because his father managed to obtain a Honduran passport in 1943.
Stern said of this trauma: “It definitely helped to reinforce the view that very few things are permanent. I don’t take stability for granted.” In 1947, just 14 years old, he was sent to the US on his own to live with an uncle. In 1948 the rest of the family joined him.
He was educated at Queens College in New York and the Fletcher School of Law and Diplomacy, where he studied economics, receiving his PhD in 1967. He served briefly in the US army and then joined the US Agency for International Development in 1959, serving in Turkey, India and Pakistan. In 1971, he served in the White House Council on International Economic Policy.
During Stern’s era, the World Bank was far and away the world’s most influential multilateral development agency. While the role of the private sector as a source of funding was growing, the bank and its affiliate the International Development Association remained the principal sources of long-term development finance, especially for poorer countries.
Stern was the main promoter of structural adjustment lending in the 1980s. It was, he decided, impossible to do good projects in bad environments. The bank had to focus on policies, too — the debt crises of the 1980s made this more urgent. So lending shifted towards supporting policy reform, and power moved from project specialists to economists.
Inevitably, these changes created controversy. Stern insisted that adjustment lending was closely linked to poverty alleviation, because most developing countries imposed heavy implicit taxes on farmers, via distorted prices. He was proud, too, of the bank’s role in reorganising extension services for agriculture.
After leaving the World Bank, Stern was a managing director at JPMorgan (later JPMorgan Chase), focusing on relations with emerging countries. In 2002, he joined The Rohatyn Group, retiring in 2011. Nicolas Rohatyn, the group’s founder, describes him as “our éminence grise”. Stern was a member of the Group of 30, an international body of leading financiers and academics, and was associated with the Institute for International Finance and the Center for Global Development.
He died after a long illness. He is survived by his beloved wife, Zina.
Get alerts on Ernest Stern when a new story is published