And the nominees are:
- Jim Yong Kim – a US National and President of Dartmouth College, New Hampshire
- José Antonio Ocampo – a Colombian National and Professor at Columbia University, New York
- Ngozi Okonjo-Iweala – a Nigerian National and Coordinating Minister of the Economy and Minister of Finance, Nigeria.
On a political point, the emerging and developing economies were desperate to have a head of the World Bank that isn’t American. Indeed, to that end, Ocampo withdrew his candidacy and threw his hat in favour of the Good Lady from Nigeria. Although, that said, if you read his translated-into-English statement, the issue seems to be more of this game is political; I don’t have political support; Dominican Republic thanks for trying; damn you Colombia for not; this process is not merit-based; if it were <heavy unspoken implication>; Ngozi, rather you than my Dartmouth rival.
And then there were only two candidates in the running. I find myself asking the following question:
- What difference does it make?
- What exactly does the World Bank do anyway?
So the World Bank started back at Bretton Woods in 1944, where the Americans and the Brits had a fantastic sound-off as to how the World would run after the War (ever the planners, they started planning before the War was over – clearly, self-doubt was not an issue). Interestingly, the two key players in this debate were Harry Dexter White (the US-side economist) and John Maynard Keynes (the UK-side economist). And for the most part, Harry Dexter White won – a great many of Keynes’ ideas were never implemented and/or were side-lined. For example, Keynes was all for the establishment of a world currency unit (the “bancor”) that would function as an independent currency of reserve. White was in favour of the US dollar functioning as the world’s reserve currency.
White 1: Keynes 0.
But that aside, the IMF and the World Bank (or just the International Bank for Reconstruction and Development, as it was then) were set up to be the bankers to nations in the years post 1944. Which made a lot of sense – most countries had just experienced the ravages of two World Wars. Defence had been expensive; the large part of the working force was either dead or returning from years of war in need of education and reintegration; many industries had been subverted into war-driven products and were lacking the infrastructure of the years of peace; cities had been bombed and were in need of repairs; world trade had been heavily stifled by war politics; most governments were new and lacking the strength to drive through recovery policies; and reparation payments needed to be negotiated and wrung out of soon-to-be-freshly-defeated nations that had little hope of meeting their obligations.
Solution (in part): the World Bank. “You come to us for loans to rebuild, we’ll give them to you; and in about 50 years time, an artist called Bono with an extraordinarily large collection of sunglasses will run around asking us to forgive the debts of those that haven’t managed to pay them back”.
Solution (another part): the IMF. “You come to us for short-term loans when you can’t maintain your exchange rate/balance of payments; and we’ll tell you how to do it better. Agree to do it like we said, and we’ll give you the money”.
So in effect, the IMF was all about short-term financing; and the World Bank was all about long-term financing. Approximately.
- Countries are not always ready for free market forces immediately. For example, if a country is forced to de-nationalise a parastatal like a Water Authority, the entity in its original form is probably quite inefficient, and unlikely to be self-reliant. Forcing self-reliance could cause the industry to collapse long before the free market forces have enough time to step in and fill the gap. And then there would be a water crisis.
- Structural adjustment requires a natural order of events. Before factories can be put in place to process agricultural products, the farms have to be put in order. In order for the farms to be put in order, there need to be improvements to the transport system (to carry the product) and to the water system (to irrigate the newly planted crops). Then there is the need for sufficient power supply to govern all of that. The point that I’m trying to make is that the process requires some forethought, and probably some experience in rebuilding economies – structural investment without forethought is, at best, unhelpful.
- At the same time, structural adjustment in weak economies can create unhealthy free market structures (such as monopolies), which do more damage than good.
- And, for that matter, structural adjustment in weak economies can draw attention to a key incentive imbalance. If a leader that has previously been repressed suddenly attains power, how likely is it that they would be able to resist abusing it? Particularly if that person were unsure of how long they could maintain their position. I think that the human reaction would involve being a lot more interested in self-preservation and/or self-enrichment than in the improvement/enrichment of the economy. Add to this a sudden influx of foreign funds? Hmmm.
- His lack of official economic background. And by this, what I mean is that he’s probably going to be quite practical. Here is a man that has set up health programs in developing countries. I mean – I’m not sure how involved he was. But if he was as involved as everyone assumes, that means that he got his hands dirty. He dealt with issues and dealt with people and made things happen. In my mind – economics is just the study of human behaviour on both an individual and a collective level. Do we really think that a physician is going to be any less understanding of human behaviour than a formally-trained economist? Frankly, if the recently-late former-President of Malawi, Mr Mutharika (who used to be World Bank economist) is anything to go by – thanks, but I’ll take the good doctor.
- His attitude toward economic growth (he was accused of being anti-growth). Read a little closer, and you’ll see that the book generating the criticism was actually against economic growth purely for the sake of economic growth. The argument is that economic growth needs to be sustainable, and it needs to have purpose. Not all growth is like that. For example, economic growth that leads to every person owning two cars because they can afford to have one – is that really useful? Does that make the growth in the car manufacturing industry sustainable? I agree with the book – too much growth is potentially cancerous. I would hope that is Kim’s view too.
- He’s not Ngozi. It’s an African bias – I freely confess it. But other than that – I tend to like most of the things that his critics dislike.
- Her economic background. She is well-established in the field, and has achieved significant economic reform in Nigeria.
- Her principles. From what I can tell, when she disagreed with Nigerian President Obasanjo in 2006, and he removed her from an economic team that she was heading up, she resigned immediately and joined the World Bank as a managing director. She also voted to abolish the fuel subsidies in Nigeria (the fuel subsidy cost is a significant drain on Nigeria’s finances). I like those positions. The second, in particular, was not populist: and she was not popular when she made that call.
- Her continent of origin. Africa is, in many ways, the least developed continent. Ngozi has firsthand successful experience in swimming those waters, and must be aware of the corruption at play. If she can navigate it successfully – that’s a quality that Kim will be unable to replicate.
- Her continent of origin. Has she been touched by the corruption at play? There are definitely some scandals floating around her name.
