David Dollar
November 21, 1954 - October 6, 2023
David Dollar, who passed away on October 6, was the World Bank’s country director for China and Mongolia from 2004 to 2009. David was also my boss, mentor, and friend and we remained in regular touch ever since our days in Beijing. David was an outstanding economist who believed in fact-based dialogue, and who dedicated his working life to research on development, on China, and on the increasingly fraught US-China relationship. This is my tribute to him.
David held several other World Bank positions, including Director of Development Policy in the World Bank’s Development Economics Department. After leaving the World Bank, he became the U.S. Treasury’s Economic and Financial Emissary to China (2009–2013), where he was central to the Strategic and Economic Dialogue between China and the USA. At the time of his death from complications of a viral pneumonia, he was a Senior Fellow at the Brookings Institution in Washington DC, focusing on China’s economy and US–China economic relations.
When David landed in China to take op his post in 2004, he was hardly new to the country. Almost 20 years before, he had taught economics at the China Academy of Social Sciences, where he also met his wife Paige. At the time, David was assistant professor in economics at the University of California Los Angeles, after receiving his PhD from New York University. Besides economics, he had also studied Chinese since his undergraduate days, including on a scholarship in Taiwan.
In between his two China stints, David had joined the World Bank in 1989, where he made a major impact as the economist for Vietnam during a period that lending from the World Bank to Vietnam was suspended. The Vietnamese remarked that David was the most valuable Dollar the country ever received from the World Bank. David had managed, and participated in a series of exchanges between the Vietnamese authorities and international experts on the question of how Vietnam’s Doi Moi reforms should be managed. Officials from that time credit the Bank with “holding our hand” as the country re-engaged with the world.[i] David was the main author of Vietnam: Transition to the Market,[ii] which summarizes the lessons from the country’s transition and recommendations for Vietnam at the time.
After his Vietnam years, David moved to the World Bank research department, where he quickly built a reputation as a leading scholar of development and development assistance. Aart Kraay, a colleague in the research department, recalls that David had an uncanny knack for asking deceptively simple questions that got to the heart of key policy issues, and then answering them in compelling ways that never failed to get the attention of policymakers. His work, notably on the effects of growth on the poor (done with Aart Kraay), and on aid effectiveness (with Craig Burnside), settled important issues in development, shaped the way development aid was allocated, and made their ways into the top academic journals.
The research on the effects of growth and the poor shed light on the debate between those that favoured redistribution as a means to poverty alleviation, and those that favoured growth. David found that the poor benefit as much from growth as the rest of the population, thus growth should be the priority. The analysis of aid effectiveness showed that aid effectiveness depended on the policy conditions in which such aid was provided. Thus, economic reforms and reform dialogues are as important, if not more, than actual aid provided. This is a highly positive message for developing countries—they had their future in their own hands, and by implementing pro-growth policies, the aid they received would be all the more effective.
David became country director for China after a challenging time for the China-World Bank relationship. China had graduated from IDA, the World Bank’s financing arm for the poorest countries in 1999, prematurely in the eyes of the authorities. Moreover, a planned poverty reduction project in the late 1990s, after much preparation and discussions, had not been funded by the World Bank. With David came a new start in the relationship, and the cooperation flourished in the years of his directorship. This was in no small manner due to David’s deep understanding of China, his easy way in interacting with the government, and his masterful management of the World Bank’s country team.
Ever since the People’s Republic of China assumed the seat for China on the World Bank’s Board of Executive Directors in 1980, the role of the World Bank in China was clear. Indeed, Deng Xiaoping himself has reputably said to World Bank President Robert McNamara at the time: ““We are determined to modernize and develop our economy. We can do it without the World Bank, but we can do it quicker and better with you.” China was always going to be the architect of its own development, but the World Bank could play a role in supporting the direction the government wanted to take. And it did.
In the early days of reforms, the World Bank was engaged in the big debates on orientation and speed of reforms, through analytical work, reports, conferences, and of course money.[iii] Perhaps the peak of the policy contribution was in 1993, when in the run-up to the 3rd Plenum of the 14th Central Committee, which adopted the reforms to implement the socialist Market Economy, the World Bank had worked with the Systems Reforms Committee to debate the necessary reforms in China’s economic system to realize the new concept. Much of the World Bank lending program in the 1990s was to support implementation of thee reforms, including modernizing the tax administration, the central bank, housing reforms, social security reforms, and more.
By the 2000s, priorities had shifted. Economic growth and poverty reduction was still paramount, and the World Bank continued to provide advice on broad development strategies, most famously the “China 2030” study together with the Development Research Centre of the State Council. This report, done in 2012-3 spelled out a future growth path for China, based on productivity increases and innovation rather than capital accumulation and surplus labour. The market was to play a decisive role in this. But other issued had emerged in David’s term, notably addressing serious environmental degradation that had been the result of rapid industrialization. As David put it:
“By the time I started as Country Director, China was taking strong measures to clean up the environment, and there was already measurable progress (for example, increased forest coverage nationwide, reduced air pollution in major cities like Beijing between the mid-1990s, and the mid-2000s). But environmental challenges remained severe, and there was growing public awareness of the human and economic costs of air and water pollution. Central and local governments asked for our assistance, and this was a good area for World Bank focus because most of the environmental solutions involved a mix of investment and policy reform. Hence the combination of demonstration projects, often with policy reform and analytical work was the right medicine. The World Bank assistance program was able to contribute to progress in three specific areas: reforestation, cleaning up rivers and lakes, and reducing air pollution.”[iv]
The deeper engagement on environment started with a bang. In cooperation with Chinese and international experts and SEPA, the environmental protection agency, the World Bank produced a first estimate of the costs of environmental pollution in China.[v] The draft report estimated the economic cost of air and water pollution in the order of 7.5 percent of GDP. Highly controversial at the time was the estimate of excess deaths 350,000 for air pollution and 50,000 for water pollution. The draft report was never officially published, but the numbers were a wake-up call for the government to take pollution seriously, which it did—and it eventually resulted in the national action plan for air pollution control in 2013.[vi] Under David’s leadership, the World Bank’s lending portfolio shifted more and more to environmental management as a result.
A second major impact David had in China was in the run-up to the global financial crisis (GFC). I had joined David as country economist, and we had made regular monitoring of China’s economy a key task—and the China Quarterly Update was (and is) widely read. When the first signs of troubles in the US housing market emerged in mid-2007 with the closure of several investment funds, David received a request from the authorities in August 2007 to assess the risks involved for China. Based on our analysis David and I concluded that there was a substantial risk for the world economy emanating from the US financial sector, and we informed the authorities of our finding.
We suggested two things for the authorities to consider: one, because China had abundant fiscal space at the time, we proposed that China prepare a fiscal stimulus in case of need. Second, we suggested that the Chinese authorities connect with their counterparts in the US to ensure communication lines were open, as the US Treasury and the Federal Reserve had played a central role in previous crises.
The second recommendation did not go far, as there was little concern on the US side, and the Fed and Treasury saw the market turbulence as a minor correction. In contrast, the Chinese authorities too the first recommendation to heart. When the demise of Lehman Brothers sparked the global financial crisis in October 2008, China was ready with a targeted and prioritized fiscal stimulus. As a result, China’s growth hardly budged during the GFC, and much infrastructure was built as part of the stimulus. True, the stimulus never went away, and China ended up over-building and over-indebting local governments, but that is a story for another day.
Both these instances signify David at his best: when the numbers are done, we should not be afraid of the consequences of the analyses, and help the authorities to address the problems. I sometimes joked with David that he was a true Dengist in the World Bank: seeking truth from facts (实事求是) could well have been his motto.
David continued his analytical work even while carrying the heavy duties of country director. Among the more famous articles at the time was “Das (wasted) Kapital: Firm Ownership and investment Efficiency in China” together with Shang-Jin Wei of Columbia University.[vii] The paper was based on a large enterprise survey conducted in 2002-4, which was implemented across member countries of the World Bank to determine constraints on firm productivity. For China, David and Shang-Jin Wei had two key findings: (i) capital allocated to private enterprises was more productive than that to state-owned enterprises, even controlling for other differences; and (ii) provinces and municipalities that had a low share of state-owned enterprises in 1978 had fared better in the course of reforms.
These were important findings at the time, and illustrated the continued need for SOE reforms, even 25 years after the start of reforms, and a decade after the onset of the socialist market economy. David, though, was not the man to draw sharp policy conclusions on the basis of such findings. He preferred to inform the debate rather than argue for specific reforms: “It is their country” he said on occasion when a staff member was overly passionate about the need for reforms in a particular area, or the goals a particular operation should pursue.
After his time as country director, David wanted to stay engaged in China. This suited his family—very important to David—and it suited his strong commitment to China’s development and the most important relationship of this century, that between China and the United States. As special representative of the US Treasury, he was the in-country point person for the economic part of the Strategic and Economic Dialogue (SED) between the two countries.[viii] After his return to the US, he joined Brookings, the world’s top-ranked Think Tank, and further pursued his analysis of China, and the US-China engagement. Among the many things he did in this sphere was advising Jin Liqun on how to make the Asian Infrastructure Investment Bank (AIIB) a world class development bank, even at a time when “engagement” has become a dirty word in Washington DC. At Brookings, he also returned to his old passion—international trade. His podcast “Dollar and Sense”[ix] was obligatory listening for economists and policy makers around the world.
Having worked under him for 4 years, I can attest that David was a manager one can only dream of. He was supportive, provided clear guidance when you needed it, always found the money for good ideas, and focused on the big picture rather than on micro-management. At my goodbye as lead economist for China, he quipped: “every morning I come into the office to an inbox full of emails (from Washington). I then have these hard decisions to make—do I delegate this to Elaine (Elaine Sun, his operations manager) or do I delegate this to Bert.” When he delegated, he delegated. He was keen to see results from projects as well as analytical work, but left the teams alone while they were producing a constant stream of project loans and policy papers. And he always put his people central in performance evaluation. His favourite opening question in such reviews was “he would begin every annual performance review discussion with me by asking one simple question: “Are you happy?”
David was also an outstanding research manager. Aart Kraay recalls that he learned a lot from David, particularly on how to focus on the important questions, how to answer them as simply as possible, and how to ensure that the results reached – and influenced – policymakers. While David's research didn't always change minds, it certainly forced many minds to work harder, to think through his arguments and his evidence, and to try to rebut them.
Many others have already spoken on David as a person.[x] He was kind, accessible and easy going, serious about work and play, and completely dedicated to his family. Mara Warwick, now World Bank country director for China, adds a term to this vocabulary, which I believe very well captures his persona: David was very grounded. Grounded in economics and data, grounded in his commitment to China’s development, grounded in his devotion to his family. This grounding drove much of his choices and actions, and they were better because of it. If those choices worked out, his American, almost boyish enthusiasm came through: “Fantastic!” was among his favourite expressions when he saw what he liked.
In David, we lost a wonderful person, and outstanding economist, and a man who believed in the benefits of fact-based dialogue to further common goals. We will miss him.
Dollar is survived by his wife L. Paige Whitley and his two children, Evan and Isabel Dollar.
(a version of this tribute also appeared in Caixin Global: https://www.caixinglobal.com/2023-10-27/weekend-long-read-david-dollar-an-outstanding-economist-who-believed-in-fact-based-dialogue-102121025.html).
[i] World Bank: Vietnam and the World Bank, a Strong and Enduring Partnership: A Brief Annotated History.
[ii] World Bank: Vietnam Transition to the Market, https://documents1.worldbank.org/curated/en/577081492717048780/pdf/multi0page.pdf
[iii] See, for instance, Julian Gewirtz, 2017, Unlikely Partners, Harvard University Press, Cambridge MA.
[iv] World Bank, 2021, At the Front Line: Reflections on the Bank’s Work with China over 40 Years.” https://documents1.worldbank.org/curated/en/643531627030598596/pdf/At-the-Front-Line-Reflections-on-the-Bank-s-Work-with-China-over-Forty-Years-1980-2020.pdf
[v] World Bank and SEPA, 2007, Cost of Pollution in China, Conference Edition, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/782171468027560055/cost-of-pollution-in-china-economic-estimates-of-physical-damages
[vi] Much later, the Lancet estimated that deaths from ambient air pollution was even higher—well over 800,000 people in 2017. The Lancet, The effect of air pollution on deaths, disease burden, and life expectancy across China and its provinces, 1990–2017: an analysis for the Global Burden of Disease Study 2017, https://www.thelancet.com/article/S2542-5196(20)30161-3/fulltext
[vii] https://www.nber.org/system/files/working_papers/w13103/w13103.pdf
[viii] See Bob Davis, 2023, An Economist at the Heart of US-China, The Wire October 15, https://www.thewirechina.com/2023/10/15/an-economist-at-the-heart-of-u-s-china-engagement/
[ix] https://www.brookings.edu/tags/dollar-and-sense-podcast/
[x] See, for instance, Bob Davis, 2023, An Economist at the Heart of US-China, The Wire October 15, https://www.thewirechina.com/2023/10/15/an-economist-at-the-heart-of-u-s-china-engagement/ and
Brookings, 2023, Brookings Colleagues Remember David Dollar. https://www.brookings.edu/articles/brookings-colleagues-remember-david-dollar/
Beautiful tribute to an excepcional man. Thank you.
Thanks Bert for your moving tribute.