Soon after he took office as president of the World Bank, A.W. (Tom) Clausen talked frankly about the problems he faced, and the philosophy that will govern the new administration of the bank in a detailed interview with Washington Post economics correspondent and columnist Hobart Rowen.

Clausen, former chief executive officer of the Bank of America, takes over an institution that has been a "one-man show" for Robert McNamara for the past l3 years. In style and philosophy, things will be different under Clausen.

Extracts from the interview with Rowen:

CLAUSEN: Since I last saw you I've been going through some learning about what's here at the bank.

ROWEN: What have you found?

A: Well, I've found some fascinating things. I'm more impressed with the quality of professionalism and expertise in this institution than what I had imagined. I'm also impressed with the dedication -- the oneness if you will -- of the purpose, the sense of mission, common mission of the staff. . . . And I'm here for probably the same reason everyone else is here. . . . There's a real talent to be tapped, if we can find a way to tap it and put it on-stream where it can work and do good. It has been doing good. Now we've got to find, given the magnitude of the problems, ways of becoming more efficient and more effective . . .

Q: How do you define that sense of mission?

A: Well, obviously the problems are so enormous you can't solve the problems only by one route. I have a better appreciation of the dialogue around the question of bilateral versus multilateral approaches to foreign aid and official development assistance. There's a different rationale and a necessity for each of those approaches. I sense that the focus, not just here in the United States, but elsewhere, is in the direction of bilateral aid.

Q: Focus more toward the bilateral?

A: More toward the bilateral because of the fact that I perceive weaker political power bases in individual countries. . . . The domestic economies are . . . less strong today than they have been in the past. And the outcropping of that, the fallout is: 'I've got a weak political power base, I've got to stay in office. I'm concerned about votes, I'm concerned about appeasing and appealing to my voting constituencies, and therefore am I going to get more votes from Iowa or from Bavaria, or from Manchester or wherever, Bordeaux, by going and giving to a multilateral financial institution that then lends or gives grants? Is that going to get me more votes, or (should ) I go straight bilateral?' That's part of the issue. But I think the problems are so great out there in the decade of the '80s that we have to use all ways, including the private sector, and we need to find ways for greater cooperation and compatibility, less redundancy between the World Bank and other multilateral development agencies, the regional development banks. That to me is the objective; how to do it, I don't know. That's the challenge. You can't do it all by the private sector, and you can't do it all on bilateral. And the beauty of multilateral is that it's not politicized, it cannot be politicized. I've said it before. I've only said it because it's right that the World Bank must not be politicized. It must remain that way. It seems to me the priorities are, the World Bank first has to got to be a bank and it's got to retain the confidence of its shareholders and of the marketplace. If it loses that, then we're down the tubes.

Q: And has there been any danger of that?

A: Well, I think that that's the growing trend.

Q: I mean any danger of losing confidence? Of shareholders and the markets losing confidence?

A: I think that, you bet! The U.S. government is raising the question -- I'm really talking about the Congress. The administration is supportive of the World Bank, not as supportive in a utopian sense as I would hope for. Put it in a broad sense: It's a real world that we live in. Congress, in its mission and in its charge and as it interprets its mission with this administration, is being maybe a bit more reluctant to come forward. IDA-6 (the current replenishment of funds for the bank's concessional-aid agency) has been kicking around now for how long? Two administrations, two Congresses and it's still not there, and part of the reason why it's not there is to go to your question. Is the World Bank, is a multilateral financial institution, the way to go? Shouldn't we maybe go more on bilateral and therefore we'll be able to leverage the money, get the credit we're giving?. . . . We need both, is what I'm saying. And I think the track record of the World Bank is good. It's not perfect. The perception of the U.S. public, I think, misses the mark. I've been asked whether I'm going to change things. Well, I can only be what I am and what I've done in the past. Yeah, I like to change things, I like to mold it. And I won't deny that there will be some changes. But the biggest change I see on a relative basis is to change the perception that . . . we're socialists, that we're throwing money at the problem, or that we are pracaticing the wrong economic policies or permitting the wrong economic policies to stay in place. Or that we're not supply-siders. As a whole litany of charges. Well, that's not the fact, that's the perception. The biggest change that I see, hopefully, is to get the perception closer to what we do, and at the same time, improve what we're doing, if I can.

Q: Let's stay with that for just a minute, and come back to IDA. You were saying that the administration is supportive, perhaps not as supportive as you'd like, and the problem you have is in Congress. But isn't the problem really with the "spin" the administration has put on things since taking office -- all this stuff about socialism because you deal with governments, and the need to turn things over to the private market and so on? And if so, how are you going to meet that specific challenge, which is just right down the avenue here?

A: Well, I guess the honest answer is I don't know; what do you suggest? You know my incarnation has been in a different field, and so I've got to feel and probe my way in this. And I'm not going to be bashful about doing that because I feel a commitment. And I've got to say 'no,' I don't think it's as big a problem in the administration as it is in Congress. I think the administration, recognizing -- let me back off and approach this another way. How can you and I disagree with economic policies of a country representing, say, slightly more than a quarter of the total GNP in the world? And how can we disagree with policies that are designed to reduce the inflation of more than 25 percent of the total GDP, GNP in the world? Because we've gotta get the rate of inflation down in the U.S. economy below double digits. How can the Third World have a chance with that chunk of the universe running at double-digit inflation? They can't. Well, my mother told me never to say 'I can't.' But it makes the problem more difficult, and therefore we ought to be supportive of economic policies that try to reduce inflation, because if we can get that down then interest rates will fall, then the debt servicing of Third World countries will fall, inflation prices will adjust and we get a more stable environment. So we're in favor of that in a macro sense. The question is whether the economic policies will do that. And the administration also said that they are going to keep their commitments (on IDA). It's important that the U.S. honor its commitments. I believe that very strongly. You know, if the United Sates, the strongest nation in the world, doesn't support IDA-6, if the Congress doesn't support IDA-6, then, you know, we've got real problems. And I think that would be very unfortunate. Now, (considering the) impact on the budget and the fight against inflation, I think the Reagan administration's proposal to phase in (the $3.2 billion IDA contribution) . . . makes sense. Sure it'd be great if they gave us the $3.2 billion now . . .

Q: I guess when I asked you if you weren't worried more about the administration, what I really had in mind was, shouldn't you be more worried at this point about IDA-7 than IDA-6?

A: Well, how can you worry about the next horse that you want to get into the barn when the current horse is not getting into the barn?

Q: Because, as you said, they did put forward a program for the $3.2 billion, even if it's, you know, phased in a different way, but from my conversations around town, what I sense is that this is a kind of a last gasp, that when it comes to doing an IDA-7 there are no commitments.

A: That's right.

Q: And then there's this general U.S. review coming up of multilateral lending agencies and programs, and you don't know where that will lead.

A: You're right. You're dead right. But I'm not sure how much I should talk with you about IDA-7.

Q: I leave that to you.

A: I would be less than candid if I didn't say we've been doing a lot of thinking about that. And I'm continuously -- you're right, the mood in the world today for ever-increasing grants -- you might underline that word -- is extremely difficult, and it seems, on looking over the horizon, it's not going to get any easier. So a good manager would go to the drawing boards and say, what do we do now? What are the alternatives? What are some possibilities? And I've always liked to think of myself as a good manager.

Q: Last June, when we talked about the energy affiliate, you seemed favorably disposed toward it. Now, I don't know whether you feel the energy affiliate has been overtaken by events. You also said that getting more energy was more important than how you get it.

A: Yes. The energy is the "what" and the instrumentality is the "how". The focus is on the "what" is the important thing. You can go guarantees, you can go insurance, you can go capital increase, you can relocate, you can have an energy affiliate, you can have some of that, none of that, all of it, or something else. But the important thing, backing off, is how can you have economic development in a Third World country that imports its energy or an appreciable proportion of its energy, without focusing attention on energy policy. . . .The United States developed its economy, cheap, inexpensive, subsidized energy; we're subsidizing consumption, use more so we can have a stronger economy. Those days of cheap energy are gone. And the real problem is for those nations whose economies are not developed is -- how do they develop their economy with oil at these prices, let's say $35 a barrel or equivalent. . . ? It's far more difficult, not impossible, far more difficult. So there has to be a focus on energy. And that's the war now -- the battle over the affiliate is one. I said to you then, I said now, well yeah, the principal attraction of the affiliate to me was the gearing ratio. . . . Talking to you now that I'm on this side of the fence, I would probably have changed the language, I would have been a little more careful of my language. Instead of the word gearing I would prefer to use leverage. And I think it's important that the World Bank find ways to leverage what it is and what it can do and what it can bring to the party as a catalyst for economic development. And that is getting more funds, getting more cofinancing, getting a bigger bang for the buck, and increasing its capital,

Q: You're talking about things in general, not just energy now?

A: I'm talking about things in general, but so that it can increase its focus on energy. There has to be an increase. There already had been, in the last two or three years, a bigger proportion of funds from both the bank and IDA that have gone to energy.

Q: Let me make sure I understand. Leverage is opposed to gearing, leverage means bank participation with private funds, umbrella relationships and that kind of thing?

A: Yes. And gearing is the one-to-one constitutional limit (holding the total amount of loans to the total amount of capital.)

Q: But you haven't given up the idea of liberalizing the gearing ratio, have you?

A: I've not given up any ideas.

Q: Even (Treasury Secretary Donald) Regan seemed to be willing to talk about it.

A: Yes, I think he's talking longer term. I don't think this is the right environment. That one-to-one ratio was set in a far different era, set at a time when the question was, 'Would Europe recover, could it reconstruct itself; could Japan reconstruct itself?' And the answer to that is yes, it not only could but did. And so in 35 years there's never been a default. It's a different world now. So after three and a half decades the track record of the World Bank is proven. It's super. And therefore, it ought to be entitled to a recognition in the market-place to a perception closer to the fact of what it is. I'm not screaming about the premium that we paid over U.S. governments, but we are we have a better recognition on our bonds and the market, say, what it costs us to borrow in other currencies, in other countries, closer to what governments borrow than here in the United States.

Q: How long do you think it would be before you could work out in a practical way something significant that would give you greater leverage, that would permit you to increase your focus on energy? Would you have anything ready, for example, to present to the annual meeting in the fall?

A: I think that's too optimistic.

Q: Okay.

A: I want to disagree with the inference in the question, and the inference was that we're not going to increase our focus on energy until it happens. The contrary, we've got to increase our focus on energy before that happens. Even while we're waiting, (there is the) general capital increase that will go on stream, and as those funds come that can be leverage. That's another $40 billion over time, over the next three, four, five years, in the case of the United States, six years. Then (we must) get an equivalent amount from the marketplace. . . . What we want to do is to get IDA-6, and the second is to get the capital increase and simultaneously to increase our focus on energy, particularly among the poorest of the Third World countries. . . . We also must change the perception of the World Bank to get it closer to the fact, (which is) that we're very efficient now, but somehow we've got to find a way to become more efficient. . . .

Q: Have you had a chance to focus at all on individual areas of the globe, for example, the generating needs of China? In McNamara's speech at the last meeting, of course, he focused on the big demands that China would put on the bank as one of the basic reasons for the expansion of bank resources.

A: In May, the World Bank approved its first credit to the People's Republic of China, $200 million -- $100 million from the bank and $100 million from IDA. But as a general proposition, when IDA-6 was negotiated, the People's Republic of China and that one billion people were not in the consideration. That only dramatizes the need for us to become more efficient. And for the (International Monetary) Fund and the private sector and governments to collaborate and get rid of some of the redundancy and all of us to become more effective. Now that's a lot of theory, but I'm convinced that we can get more mileage if we do that.

Q: You've now mentioned several times that one of the goals is for the bank to become more efficient. You've also said that it is a pretty efficient multilateral institution. If I hear you right, you're saying that perhaps the bank isn't quite as efficient as some private-sector institutions?

A: Yeah, I'd say that is true.

Q: Could you bring that generality down to something that ordinary readers could grapple with? Where, what sort of inefficency do you see or where do you see that the bank would be more efficient? Is it working? You also mentioned redundancy. Does that mean that the bank is duplicative of the effort with other agencies?

A: With other agencies, and with other development institutions. I'm still formulating my ideas (and) I don't want to be . . . specific.

Q: But the efficiencies you seek -- do they relate to getting a better return on lending operations, are or you talking of efficiency in a more mechanical sense of the workings of the bank bureaucracy?

A: Both, they're both. And there's a bureaucracy here, there's a bureaucracy -- there might be a bureaucracy in The Washington Post.

Q: Oh there is, I guarantee it. Has the bank grown too big, as some people have suggested?

A: I'd say 'No,' very clearly, and there again it's my private-sector bias that prompts me to respond in this way. The limitations on bigness are one's ability to manage, and so, has the bank grown bigger than what it can manage? The answer to that is 'No.' Another limitation is, you know, in the eye of the beholder. It's the latter that I think is where the bigness issue comes, and that could say, well, that maybe the bank has not done the job that it could or should or will, vis-a-vis extolling and telling the public what it really's all about, what its mission is, so we can get the big change, to change the perception closer to what we are.

Q: Your predecessor used to be fond of saying, among other things, that the American public didn't have a good understanding of not only the mission of the bank but of the broad-scale needs of an impoverished Third World. And he was seeking ways of getting his message across. Is that one of the things that you see as well?

A: It's a two-prong thing. That's one of the prongs, but I think a rather neglected prong is the other one, that I think is a more practical, pragmatic prong, and that is the vested-interest prong. That is, it is really in the vested interest of the United States and of Germany and United Kingdom and the developed world to give funds through a professional, proven, non-politicized instrumentality owned by the governments of the world to be the catalyst for economic development in the Third World countries so that we can have more jobs here in the United States, to widen our markets, our wares and services and products? For every dollar that the United States gives to the World Bank, $3 comes back; 36 percent of the exports of the United States goes to Third World countries, developing countries. If we can help get those economies going, then that is the vested interest of the United States. . . .

Q: Let me turn to the Saudis and other oil-exporting nations. Do you see their clout growing in the bank and other multilateral agencies? And then there's the collateral problem of the PLO, which I'd like to talk to you about, too.

A: I think it's only a natural thing as the strengths of nations in the world over time vary, that they, that the percentage, their clout as you put it, or weight of their voice in the institutions, varies in accordance. That to me is common sense, and so as the Arab nations continue to strengthen their largesse and surpluses and financial impact on the world, it's only natural that there be an accommodation on the World Bank side. The internal politics of how that comes about I am less certain about, I don't know yet, I haven't gotten into that, vis a vis the PLO -- that is, that is a governmental problem; the World Bank is owned by governments. I wonder if it's proper to express this -- well, I'll express it anyway: I have been struggling within myself whether it's proper for, say, the management -- now, you're talking to the management of an institution owned by governments -- whether management should have a view. I find myself talking sometimes as an American citizen and I haven't been here long enough to to really rid myself of that. Not that I want to rid myself -- you may not believe this, you probably expect me to say I'm terribly proud to be a Norwegian. Well I am, but I'm a U.S. citizen and I'm terribly proud of that. But I'm an international civil servant now. I don't know, the PLO is a serious problem and it's a real problem in the Middle East, and particularly some parts of the Middle East, it's a real problem for governments elsewhere. It's, you know, it's a political problem. And if we perceive ourselves as an instrumentality of government through which to help economic development in a nonpoliticized way, then we're at the beck and call of the executive directors, not that we in management shouldn't influence the governments who own our shares. That's the politics part of this, and the interface with governments is the part that I must learn. You know, in my past incarnation, it was real easy. In the out-box on my desk, I just put two words: fix it. And I find here that there are other things to consider rather than just 'fix it.' I put a little note in my box the other night, and the next morning I came in and I had a little note in my box that said, "You gotta be kidding!"