How to Fix the World Bank

Article excerpt

Only by embracing a competitive election process can the U.S. ensure that its pick will have a mandate for reform.

For the first time since the World Bank's creation at the end of World War II, the United States is facing a real challenge over the bank's leadership. Leaders of some developing and emerging economies have refused to support President Obama's unexpected choice of Jim Yong Kim, the president of Dartmouth College, to lead the bank.

As the bank's executive board prepares to vote on April 18, the Americans are likely to get their way, since an 85 percent supermajority of the bank's voting shares are needed to appoint a president, and the United States is the largest shareholder. But the controversy is not going away. The Economist and Financial Times have endorsed Dr. Kim's main competitor, Ngozi Okonjo-Iweala, an economist who is Nigeria's finance minister and a former managing director of the bank. Jose Antonio Ocampo, a former Colombian finance minister and high-ranking United Nations official, has also been put forward as an alternative. Petitions are circulating among former bank officials and economists supporting the alternatives to Dr. Kim.

The controversy around Dr. Kim's nomination is understandable. For decades, America has effectively had unilateral control over who gets to lead the World Bank. Mr. Obama's unconventional pick of Dr. Kim, a physician and anthropologist, has opened the door to developing countries to put forward their own candidates whose economic and banking qualifications more closely resemble those of past leaders of the bank.

Regardless of whether Dr. Kim is the right choice -- and I happen to believe he is an inspired choice -- his candidacy and the bank will suffer unless the United States takes the high ground and uses this controversy to reform how the institution is governed. Only by embracing a competitive election process can the United States ensure that Dr. Kim will have the mandate to revitalize an institution long resistant to change.

Having an American at the helm of the bank partly served to reassure Wall Street, originally the main supplier of the bank's capital. With the globalization of capital markets, this justification for the arrangement is long outdated.

Without a competitive selection process, the best leadership ideas cannot emerge. Conversely, an election based on American citizenship, as opposed to a vision for institutional leadership, limits the support from shareholders that the president of the World Bank needs to enact bold reforms.

As a result, the World Bank remains largely stuck in an operational model of providing country-specific loans and grants that are increasingly irrelevant to its institutional mission of reducing global poverty. With the spectacular economic growth of many developing countries in the last decade, commercial investment in many emerging markets is booming. The typical aid-recipient country receives donor financing worth less than 1 percent of its income.

The pressing challenges in international development have also changed. While fewer countries are very poor, many of their citizens remain so. The number of people living on less than $2 per day has declined as a share of the world's population but has stayed around 2.5 billion since 1981. Income disparities have increased. More than two-thirds of the world's poorest people now live in middle-income countries, where health care, education and environmental regulations lag far behind economic growth. Persistent poverty, when combined with limited governance and unprecedented rates of urbanization, has produced huge slums, which now house nearly one billion people in developing countries. Many of the emerging threats to global prosperity are collective problems that no government alone can solve: climate change, water shortages, inadequate agricultural productivity. …

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