New Leadership at the World Bank: shaping a new era of global development?

11 Jul 2012

Patrick Holden

Jim Yung Kim, a South Korean born US citizen, was selected as President of the World Bank on the 1st of July 2012. As with every previous World Bank President, Kim was the nominee of the United States government. In this case the process of his appointment was more transparent than previous episodes. There was competition from two other official nominees, José Antonio Ocampo (former Finance Minister of Columbia and UN official) and Ngozi Okonjo-Iweala (Nigerian Finance Minister and former Bank official). Each candidate was interviewed by the Executive Directors of the Bank (representatives of contributing governments). There has been increasing criticism from emerging nations of the traditional understanding between the US and Europeans under which the Managing Director of the IMF is a European while an American nominee heads up the World Bank. Christine Lagarde’s ascent to the IMF position last year received substantial opposition, but, despite all the controversy, and the procedural reforms, the end result is the same as ever; with a European and American in position. Nevertheless Dr Kim is a potentially significant appointment. As with other elements of the global economy, the global development landscape is changing rapidly. Given the rise of countries such as China and the apparent stagnation of the West, the question of models of development has been reopened. Official aid from cash-strapped Western governments is on the decline. There is great hope for ‘South-South’ cooperation meaning finance, technical assistance and other forms of cooperation between stronger developing countries such as Brazil, India and China and poorer states. The role of global institutions such as the Bank is also in flux.

The IMF is much more important to Europeans than the World Bank these days, for obvious reasons. However this complex institution (which consists of 5 different bodies) is more significant when it comes to international development policy. It disburses approximately $15 billion a year in cheap loans to low-income countries through the International Development Association. The International Bank for Reconstruction and Development lends money to governments of wealthier developing countries and other arms of the Bank assist the private sector directly. At least as important as its financial muscle is its global agenda-setting and intellectual leadership role. Some years ago it set itself the goal of becoming a ‘knowledge bank’ and it has shaped the global agenda on issues such as governance and the role of the state. Its annual World Development Report (this year’s is on gender and development) is a high profile document, which informs the policies of other international organisations, governments and NGOs. Such is the prestige of the publication that governments and other stakeholders take a keen interest in the content and lobby for their views to be articulated. (The European Union has tried to emulate the World Bank’s soft power with its European Report on Development but it currently lacks its prestige and research capacity). The Bank’s approach to development has evolved somewhat in the past few decades. It was fiercely criticised in the 1980s for its austere Structural Adjustment Programmes and in the following decade it announced a more ‘pro-poor’ focus while it moderated its free market support, by putting greater emphasis on the role of the state in providing public goods.

In regard to this Mr Kim’s background is interesting. As noted by The Economist, with some dismay, he is not an economist by training; he is a physician and anthropologist. While much of his career has been spent in academia, he has substantial experience in the third sector and in the World Health Organization. Therefore Kim is by no means the least qualified nominee of the US government for the Bank Presidency. Indeed, many previous nominees had no qualifications in the field of development, Paul Wolfowitz being an obvious recent example. What distinguishes Mr Kim is his apparent leftward tendency. The same article in The Economist notes previous comments he made disputing the benefits of aggregate national economic growth for ‘development’ (in terms of health outcomes) and praising certain policies of the Cuban government. This explains much of the controversy surrounding his appointment. Since his nomination, he has articulated a more mainstream vision of support for economic growth. His acceptance statement emphasised the importance of the private sector, but also strongly emphasised the need for social safety nets for the poor. It underlined the global nature of the Bank’s role, even if its primary instruments are geared towards developing countries. The crisis in the Eurozone has already impacted upon the poorest developing countries and that will be his immediate priority.

The World Bank is not the only candidate for leader of the global development community. The Development Assistance Committee/DAC of the Organisation for Economic Cooperation and Development has also been influential, as has the United Nations Development Programme, while the WTO has also taken an explicit interest in development. However, they are hampered by a limited membership, lack of funding and a limited thematic focus (respectively). ‘The Bank’ thus remains the premier institution. Dr. Kim’s acceptance statement emphasised the need to “ensure that the Bank’s distinctive strengths are aligned with the needs of a world in transformation and transition.” He may well be better placed to do this than some of his critics think.

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