Friday, April 6, 2012

Which Way for the World Bank?

I’ve seen two general themes in discussions about the three-way race for World Bank president.  One is about the pledge to open up the process, fairly and transparently, to all candidates from all countries by jettisoning the custom that the US picks the top post at the Bank, while Europe gets the IMF.  This is long overdue; does anyone openly defend the US prerogative?  The second is about experience and bureaucratic savoir-faire; Jim Kim, the US pick, is obviously untested in the sort of organizational leadership challenges that await him at the Bank if he gets the job.  The other two, Colombia’s Ocampo and Nigeria’s Okonjo-Iweala, have more relevant profiles.

But there is a third, overarching issue, perhaps the biggest of all: what is the position of the World Bank, and its sister Bretton Woods spawn, the IMF, in the framework of global governance?  In particular, what is its relationship to the UN system and the global partnerships that have spun off from it?  In a way, this is the same as issue #1, but it is much more encompassing and involves substance as well as process.

The UN system—by which I mean the many specialized UN agencies, and not primarily the security apparatus housed in New York—is relatively democratic in the world of states: the richest countries do not rule by themselves but must find agreement with the others.  From time to time, for instance, a dispute flairs up in which UNESCO or some other agency annoys the US.  Americans withhold money, perhaps even withdraw, but the agency goes on, modified perhaps but not subservient.  If you read the agenda documents of these agencies, they are generally far to the left of the permissible space given to US politics, and on the leftward side of political space in Europe.

The Bank and the Fund, on the other hand, are largely controlled by the richest countries, and even within that sphere, by the US and the EU.  Their stated goals have historically been further to the right, sometimes directly conservative, as in their espousal of labor market “flexibility” and financial liberalization.

The split between the two international systems reached its peak during the Washington Consensus years of the 1990s, when the Bretton Woods twins (and their younger sibling, the WTO) were steeped in orthodoxy.  Since then there has been a partial rapprochement.  After the East Asian financial crisis the Fund retreated from its taboo against any form of capital controls, for instance, and the Bank’s embrace of the Millennium Development Goals symbolized its new openness to UN-ish progressivism.  In recent years this shift has become even clearer.  The IMF is now, astonishingly, a voice for relative fiscal heterodoxy, particularly in the European context, while the Bank has broken from its erstwhile endorsement of fees for education and health, and has participated in the Leading Group on Innovative Financing and, more recently, the Social Protection Floor Initiative.  One should not exaggerate, however, since there remains a significant gap between Bretton Woods and San Francisco (the UN).  Joint work often requires compromise: one example is the restriction of the MDG education targets to primary education only.  This reflects the Bank’s view at the time, and, in my opinion, it is symptomatic of a narrow, even paternalistic approach to development.

So what now?  At least as far as perceptions are concerned, both Kim and Ocampo favor even further movement toward a UN-centered conception of the Bank’s objectives; in fact, both have UN backgrounds.  To be honest, I was surprised at Kim’s selection by Obama, since the Obama administration has been hostile to much of the UN agenda, such as the program of the Leading Group.  It almost looks like a mistake.  In any case, if either of these two is ultimately chosen, there will be more impetus for tying the bank more closely to the UN.  On the other hand, and again from the vantage point of perceptions, Okonjo-Iweala is the insider candidate, more oriented to maintaining the Bank’s existing priorities and less open to the UN.

I will be honest and say that I have no basis for predicting how these three individuals would actually perform in office.  Maybe the perceptions are right, and maybe they aren’t.  Nevertheless, I think it’s useful to see the politics of these two branches of global governance clearly; how they evolve is what matters and not the optics of who is from where or what their last job was.

Disclosure: I have done a lot of work with the International Labor Organization, a branch of the UN system, over the years.  I like and respect the individual Bank people I have worked with, but sometimes the political gap between their outfit and mine has been a problem.

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