A New ‘World’s Banker’

from Washington D.C.


Exactly a week ago the Executive Board of the World Bank announced that Dr. Jim Kim, the U.S. nominee, will be the new chief of the global development institution. “It was a contest, but with a preferred candidate”, is what a top World Bank official told me over lunch in D.C. later that day. The choice came as no surprise. Since its establishment, the head of the Bank would go to an American, the head of the IMF to a European, and the head of the ADB to a Japanese – an unwritten, gentlemen’s agreement that has gone largely unchallenged, until now. For the first time in the sixty eight-year history of the Bretton Woods institution there was a contest for the top post. Along with Colombian Finance Minister, Jose’ Antonio Ocampo, Nigerian Finance Minister (and a popular former Managing Director of the Bank) Ngozi Okonjo-Iweala, managed to raise the level of debate on the need to move away from this entrenched practice and pursue governance reform of the institution more aggressively. Leaders of most emerging markets backed her candidacy fully. However, as expected, the U.S. nominee prevailed.


If anyone was seriously expecting any shaking up of the status quo this year, it was unrealistic. Not this year, an election year in the US, where any loss of US control of the choice would have been trumpeted by President Obama’s opponents as a sign of weakness. Nobel laureate, Joseph Stiglitz, a former Chief Economist of the World Bank (but later its biggest critic) has written that, “It is more important for the US to retain that control than it is for emerging and developing countries to obtain it”. Yet, one supposed achievement of the G-20 was an agreement to reform how international financial institutions are governed, particularly how their leaders are chosen. Stiglitz remarked that, “since expertise on development by and large lies within the emerging and developing countries – after all, they live development – it seems natural that the World Bank’s head would come from one of those countries”. This is particularly true in the changing landscape of fundraising for these IFIs, where emerging markets are increasingly becoming a key source of funds for the World Bank and IMF.


Macro vs. Micro – Two Very Different Candidates?


Okonjo-Iweala had impressive credentials – economics degrees from Harvard and MIT, experience in working on a variety of development issues as a Managing Director of the World Bank and stints as Foreign Minister and Finance Minister of an emerging African economy, Nigeria. Leading international economics professor Jagdish Bhagwati wrote in a column prior to the final announcement that, “She also possesses and has amply demonstrated that rarest of qualities – a willingness to fight corruption at the expense of her job”. He added, “Moreover, Okonjo-Iweala is witty, articulate, and no wimp when it comes to taking on shoddy arguments. She is a dream candidate to lead the World Bank”. I was in several sessions where Robert Zoelick spoke at the Spring Meetings over the past week, and while I don’t doubt his astute leadership and economics acumen, he is far from a charismatic and ‘connecting’ speaker.


Bhagwati is well known as a proponent of open trade and investment and of macro-level policies to promote growth and development. He argues that by nominating someone who has only worked in a narrow area of development, i.e., public health, President Obama and his administration has a flawed understanding of what it takes to spur “development”. He argues that, “Micro-level policies such as health care, which the Obama administration seems to believe is what “development” policy ought to be, can only go so far. But macro-level policies, such as liberalization of trade and investment, privatization, and so forth, are powerful engines of poverty reduction”. He argues that successful development requires “big-payoff pro-reform, pro-growth policies, not just small-payoff micro-level policies. Bangladesh has gone down that road, substituting such policies for macro-level reforms, and is developing at a far slower pace than India, where macro-level reforms came first”. There are arguments for and against this point of view and there is hardly any consensus.


But it must be recognized that Dr. Kim’s appointment comes at a time when the Bank’s role is evolving. It is moving from looking at big picture macro-policies and reforms of the type Bhagwati refers to (which, along with the IMF, made the Bank very unpopular due to the earlier Structural Adjustment Policies), to more sector-specific interventions and micro-level, people-centered development experiments (like its Gemidiriya programme in Sri Lanka). For this, Kim may be better equipped. He has worked in development (albeit mainly in one sector, health) at all levels – from the international level as a top official of the World Health Organization and at the national and grassroots level as founder of the NGO Partners in Health. Dr. Kim’s hands-on experience with development at the most local level, with poor communities, is a stand-out characteristic of the new World Bank chief compared to his predecessors, and will give him a significant advantage in understanding complex development challenges at the field level.


His appointment also comes at a time when the Bank is trying to reposition itself and reinvent its image, particularly with respect to its relationships with CSOs or Civil Society Organizations (the new jargon for NGOs). The large CSO representation and CSO engagement through Civil Society Policy Forums at Spring and Annual Meetings is reflective of this, and is being touted as an important new feature of the institution’s approach to development. So, in this context, having a President who himself heads a global CSO, and would empathize with CSO viewpoints, seems to fit in nicely.


Development Professional, not Political Insider


Meanwhile, other experts have argued differently, like the Columbia University economics professor and author of ‘The End of Poverty’, Jeffrey Sachs, who was also briefly in the running for the top post, but withdrew as Kim’s nomination was made by the US. He had called for the Bank to be led by a global development expert rather than a political insider, and in Dr. Kim, that is exactly what the Bank has got. Sachs wrote in an article following the confirmation of Dr. Kim’s appointment that, “Kim is one of the world’s great leaders in public health. He has worked with another great public-health leader, Paul Farmer, to pioneer the extension of treatment for AIDS, tuberculosis, and other diseases to the world’s poorest people. More recently, he has been President of Dartmouth College, a leading American university. He therefore combines professional expertise, global experience, and considerable management know-how – all perfect credentials for the World Bank presidency”.


From my week at the Spring Meetings in D.C. and my associations with the Bank’s work and its staff, it is clear that the institution has the experts needed to tackle development effectively. Their understanding of development challenges and eclectic expertise within its cadre means that it can take a holistic look at development. So the jury is still out on whether the World Bank explicitly needs a President who is a development professional, to make sure that development remains at the heart of its work. Whereas charting a new course for the Bank at a strategic level, exploring new areas of assistance for the world’s poor, navigating changing global economic power dynamics, championing reforms of quotas and voices of emerging economies in the Bank’s governance structure, communicating complex development challenges to the global citizenry and engaging them on advocacy of these issues, and becoming a knowledge partner for the developing world, might be more important areas that need strong leadership. Dr. Kim has worked only in global health and has never held a national political leadership position. It remains to be seen how much of a handicap this would be. Even Sachs’ glowing endorsement doesn’t make a convincing case of why Kim and not Okonjo-Iweala (just considering merit, of course, putting aside obvious political considerations).


But, none of this takes away from the fact that Kim showed breakthrough leadership while heading the HIV/AIDS programmes at the WHO and demonstrated phenomenal commitment to development with hands-on experience through Partners in Health.


Development Experience – Necessary, not Sufficient Condition?


Unlike Kim, who’s development experience is largely limited to one sector, both Okonjo-Iweala and Ocampo have been at the cutting-edge of overall national development, as Ministers of Finance of their countries, and experience in working with International Financial Institutions and its role in delivering global public goods. Stiglitz wrote, “Kim’s specialty, public health, is critical, and the Bank has long supported innovative initiatives in this field. But health is only a small part of the Bank’s “portfolio,” and it typically works in this area with partners who bring to the table expertise in medicine”.


Successive heads of the World Bank have been known to leave their own individual mark on the institution’s approach to development. A book by journalist Sebastin Mallaby entitled ‘The World’s Banker’ captures this evolution well. James Wolfonsohn, for example, was instrumental in decentralizing the Bank’s operations away from D.C., shifting more resources and autonomy to the Bank’s field offices. He was also involved in incorporating non-economics disciplines more integrally into World Bank projects, bringing in sociologists and anthropologists, and promoting people-centered development (with the influence of Scott Guggenheim at that time). Dr. Kim is likely to bring in a strong results-oriented culture to the Bank, and focusing on evidence rather than being guided by development ideologies. In an interview with the BBC, Kim said, “I am a physician. Physicians work on evidence, rather than working from a single ideology, rather than working from a particular political point-of-view”.


Mark Weisbrot of the Centre for Economic and Policy Research in Washington has remarked, “There’s just no comparison between him and any of the prior World Bank presidents […] the others were political insiders […] Kim, by contrast, has spent most of his life trying to improve the lives of poor people”. But the top World Bank job is not just about “improving the lives of poor people”, as Weisbrot asserts. Dealing astutely with political wrangling, tough national governments, and competing power dynamics both within the Bank and between the Bank and countries/governments, are as much part of the job. Okonjo-Iweala may have been more adept at balancing these given her experience on both sides of the game – at the Bank and as a top government official. But only time will tell how Dr. Kim fares, leading the Bretton Woods institution into a new and challenging development era.