by Kola Dairo
This week, the three candidates nominated for the position of President of the World Bank Group (WBG) will be interviewed for the job. Since its establishment 67 years ago, the WBG has been headed by 11 Americans, chosen by the President of the United States (U.S). But for the first time, the ‘selection’ process which was hitherto closed is being challenged.
Going by tradition, Washington has a strong monopoly of appointing the WBG President and is clearly not ready to relinquish its implicit privilege in such matters. However, as developing countries are beginning to play a larger role in the global economy, they are demanding a greater participation at a decision-making level in the WBG. The nominees for the top job are Jim-Yong Kim, Jose Antonio Ocampo and Ngozi Okonjo-Iweala.
Dr. Kim is the man to beat. A South Korean born American, backed by President Barack Obama, Kim seems to have the right balance of qualities. He is the current President of Dartmouth College and a former Director of the HIV/AIDS department at the World Health Organisation (WHO). He co-founded Partners In Health – a non-profit healthcare organization dedicated to providing universal access to primary health care. He has spent a lot of his time engaging the poor directly and was even listed as one of the “100 Most Influential People in the World” by Time Magazine in 2006. He has been described as a very practical man who is at the vanguard of championing social and health justice. Being an outsider who has been willing to critique the WBG in the past, he is likely to infuse some new thinking which perhaps would create a new vision for the future of the Bank.
However, his expertise and experience is narrowly skewed to public health and this has raised prudent concerns in development circles. Also, some of the views expressed in his book – Dying for Growth, appear to be more or less unorthodox. In that book, he criticized corporate led economic growth, arguing that such policies in many cases make the poor in developing countries even poorer. This position has not been well received by Economists as the empirical evidence shows that economic growth has lifted millions of people out of poverty and is in fact strongly correlated with reductions in infant mortality and illiteracy. The WBG certainly doesn’t want a President who is ‘anti-growth’ and this is probably a perspective Kim would have to negotiate with.
Jose Antonio Ocampo
Dr. Ocampo is an even stronger contender. A respected Colombian Economist who has the backing of Brazil, he has served as a United Nations Under-Secretary-General for Economic and Social Affairs and is currently a Professor and member of the Committee on Global Thought at Columbia University. He is best known for reforming the UN Economic Commission for Latin America & the Caribbean as Executive Secretary. Within the Colombian government, Ocampo has held important positions such as Finance Minister, Minister of National Planning, Minister of Agriculture and Rural Development and Chair of the Central Bank board. His policies as finance minister were crucial in helping Colombia to withstand the effects of the Asian and Latin American financial crisis. He is highly respected in academic circles and is a winner of the Leontief Prize for Advancing the Frontiers of Economic Thought.
Ocampo’s experience is incredibly vast and his reputation as a reformer is an enviable one. He has a global perspective and his experience is a perfect blend of economics, government/policy formulation, and finance both in academia and in the real world. The need for reforms in the WBG has been reiterated in development circles and Ocampo is the best candidate for such a tough task.
Ngozi appears to be the overwhelming favourite. A former Managing Director at the World Bank, she seems to be the ideal candidate who has been groomed for the job. Like Ocampo, Ngozi trained as an economist in top U.S schools, but she went a step further by specialising in regional economic development. She has held multiple positions within the Nigerian government as Minister of Finance, Foreign Affairs Minister and Coordinating Minister for the Economy.
She is best known for negotiating an $18 billion write-off of Nigeria’s debt with the Paris Club of Creditors. As Finance Minister and Head of Nigeria’s Economic Team, she helped instil transparency in the polity and facilitated Nigeria’s receipt of its first ever credit rating. If Ngozi gets the top job, she is expected to broaden the WBG’s development agenda and ‘hit the ground running’ immediately. Moreover, she will command the respect of equally brilliant economists at the WBG.
Ngozi possesses the edge of being well acquainted with the internal workings of the World Bank right from the Young Professionals level to that of Managing Director. Although, being an insider, she might be constrained in carrying out far-reaching reforms within the WBG. She is also viewed as a conventional economist and her tacit support for the removal of fuel subsides in Nigeria without adequate palliative measures is an episode which is still fresh in the minds of her countrymen.
The Selection Process Needs Reforms
The voting arithmetic clearly favours Jim Yong Kim if the decision comes to a vote by the WBG’s Board of Governors – thanks to the weighted voting system employed by the Bank. Simply put, voting power is determined by ownership shares and in turn capital contribution. This easily gives the U.S.A a hefty share of 16.45% as a percentage of total votes (see table and link below). Europe, with a collective voting weight of about 30% is likely to support Washington’s candidate in order to maintain the gentlemen’s agreement under which a European gets to run the International Monetary Fund (IMF) while an American heads the World Bank Group. Effectively, both the U.S and Europe wield over 45% of votes. Add Japan (which has 7.89% of the votes and is likely to support the American candidate) to the equation and America has its majority.
World Bank Group: Constituencies, Executive Directors and Voting Status
Vote as % of total vote
Source: S. Griffith-Jones (2001)
Evidently, the voting system is flawed and needs as much reforming as the institution itself. The relatively small voting share of low- and middle-income countries is a sharp contrast to the fact that they represent over 80% of the world’s population and bank membership. This needs to change. Prior to now, there has been a strong rationale for the U.S (being the largest shareholder) to protect its interests by appointing the President of the WBG, but such a monopoly seems trite today, as the global rebalancing of the economic pie is increasingly apparent. The glass ceiling over the leadership of the WBG has to be removed and replaced with a selection process that involves competition, transparency and merit.
Kim’s nomination is actually a smart move by President Obama and suggests a compromise from Washington. The Obama administration seems to believe that the clamour by developing countries (and largely the East) for greater representation at the top hierarchy of the WBG is manageable, and that it can tack between the demands of the East, the development practitioners and the Republican Party. However, with over $43bn lent out by the WBG in 2011 alone, a critical understanding of the specific problems of development finance is essential for the individual who heads the World Bank. The President of the WBG should command the respect of the major shareholders, be capable of demonstrating leadership which staff support and possess proven credibility on the development front. That person is Ngozi Okonjo-Iweala.