World Bank's new chief needs vision to reclaim global view

PUBLISHED : Saturday, 30 June, 2012, 12:00am
UPDATED : Saturday, 30 June, 2012, 12:00am


Can Dr Jim Yong Kim heal the World Bank or, if not, do something to alleviate the ills of a world reeling under economic and environmental pressures to which the established politicians have no answer?

At a time when the global economy is slowing and the multilateral system that has underpinned recent rapid growth is under threat, it is important that the World Bank should rediscover its role and its soul. Kim, a medical doctor, health pioneer and university administrator, with little experience of banking, finance, economics or government, takes over as bank president tomorrow.

From my own experience working at the bank, its professional staff - experts in a host of specialisations, from 168 countries - are among the most talented in the world. All care about development without any of the cynicism or political calculation that mark discussions among the bank's government shareholder owners.

They do suffer from several political deficits. They can be naive about the devious ways of developing country politics, including corruption. More damagingly, the internal politics of the bank can curb their honesty.

Most notoriously, a frustrated Joseph Stiglitz, when he was the bank's chief economist, dared to speak out against the IMF's savage austerity in the Asian financial crisis. 'Stiglitz is finished: he'll never get another job,' said a senior bank staff member, appalled that Stiglitz had committed the mortal sin of criticising the IMF. Stiglitz won the Nobel Prize, is in the forefront of critical economic thinking and the World Bank lost a creative enfant terrible who could have established it as the centre for brainstorming global economic issues.

Nancy Birdsall, founder president of the Centre for Global Development and a former director of the World Bank, says that 'developing countries don't trust the World Bank' because the old, industrialised countries that set it up in the dying days of the second world war to be an agent for their reconstruction do not want to yield their power on the bank's board. The United States is the only country with a blocking 15 per cent vote, followed by Japan, with just under 7 per cent, and China. The smallest Pacific island countries have just 0.03 per cent.

The preoccupation with national influence is one of the bank's biggest problems. It needs a global view on the issues facing people.

The last few World Bank presidents have accepted a diminished role for their institution on the assumption private sector capital will provide funds. This might seem reasonable, but it is short-sightedly optimistic and led to the bank doing less than it should.

Some countries have prospered with the infusion of private capital. China clearly has. But others have lagged. India is in desperate need of infrastructure funding, but there has been no inflow of private capital to build roads to the farms where 40 per cent of crops go to waste as they cannot reach the markets in time. More obviously, fragile, weak, failing and war-torn states have been left behind, and private money is not interested.

Even within the success stories of great growth there are failures, including massive sprawling, soulless and polluted cities with mansions for the rich and endless slums for the poor. There is also a steady destruction of the fragile fabric of the planet, with essential resources now being consumed 50 per cent faster than the earth can replenish them.

Birdsall suggests that an imaginative bank president would promote setting up an agency within the bank for the protection and improvement of the global commons - the goods that belong to everyone and cross national borders - such as land, water, fisheries, food supplies, the environment and climate change.

With his background, Kim would be an ideal person to promote such an agency. Kim is an American and the US has neither the money nor the political will to fund a new body that might criticise it. But he is also of Asian origin, where there is money that could be used to fund an agency that could help the World Bank rediscover its role and mission as the world's premier development agency. Does Kim have the vision to lead, and the guts to challenge his US sponsor if necessary?

Kevin Rafferty was managing editor at the World Bank from 1997-99