Speaking to a crowd of think-tankers in March, Robert Zoellick addressed the hot debate over who should succeed him as head of the World Bank when he formally leaves June 30, warning we should “be careful … what the net effect will be” if the United States is pushed out of the system. Though he detailed at length the changing global order, the departing president emphasized the need for an American to continue at the helm of one of the most influential international bodies on the planet.
Zoellick’s speech at the Council on Foreign Relations occurred on the eve of the World Bank’s first open competition for its presidency in almost seven decades. Until now, tradition has dictated that the United States would appoint one of its own as president, while the head of the International Monetary Fund goes to a European. The results of the bank’s election, however, once again elevated an American, Dr. Jim Yong Kim, to the top spot.
While this news clearly disappointed observers who had hoped for a more dramatic turn away from precedence, the fact that the World Bank undertook an open and competitive process to fill its apex vacancy is seen as a first step in bringing the institution up to speed in a changing world where its dominance in development has faded as more emerging economies challenge American and European control of multilateral development organizations.
This shift did not emerge out of nowhere. The World Bank has been moving in this direction over the past five years under Zoellick. As with many aspects of the World Bank, the recent changes during his tenure, though, maintain a preference for gradual progress and continuity.
Zoellick’s election as president in 2007 came as his predecessor, Paul Wolfowitz, resigned amid a highly publicized scandal involving a generous pay raise and promotion he gave to a female companion at the bank. With a lengthy background at the U.S Treasury and the State Department for previous Republican administrations, Zoellick had most recently served as a U.S. trade representative and deputy secretary of state under President George W. Bush.
From the onset, Zoellick was determined to change how the bank functioned. At a speech at the National Press Club early in his term, he highlighted the need for a “differentiated business model for the middle-income countries,” adding that the bank must continue to move toward being a “knowledge bank” as much as a financial one.
Over the past five years, the volume of financing from the bank has risen while its costs have held steady. Even as the credit crunch hit soon after Zoellick’s ascension to the presidency, the bank doubled its lending to meet increased demand from a developing world suffering from the repercussions of the Lehman Brothers collapse and the resulting global shock.
Zoellick also embraced the bank’s strength as a premier source of development knowledge and information. It opened up its data to everyone in the world by posting it on the Internet. Under this new open-source approach, the bank shares data with its clients and collaborates with software developers to find more innovative ways to take advantage of its vast reserves of information and technical know-how.
For instance, Sebastian Mallaby of the Council on Foreign Relations, writing in the Financial Times piece “The Quiet Revolutionary Who Saved the World Bank,” pointed out that one such invention was an application to help pregnant women with mobile phones access health information.
“The old leftist tirades painted World Bankers as ‘Lords of Poverty’ — fat-cat economists who justified austerity for poor countries with mysterious spreadsheets,” he wrote. “The new face of the Bank is the Piper PA-31 Navajo aircraft that took aerial photographs of Haiti after the 2010 earthquake. The Bank immediately uploaded the photographs so that 600 engineers in 21 countries could brainstorm about the best way to rebuild Haiti’s capital. The reign of the World Bank’s in-house experts ended. Open-sourcing ruled instead.”
Outside of these changes in the bank’s business model, Zoellick also made the institution more reflective of the world’s changing economic dynamics, in which newer powers are rapidly catching up to Europe and the United States. The bank filled nearly half of its vacancies with candidates from the developing world, including the notable appointment of a Chinese chief economist.
These changes were necessary as much as they were revolutionary, however. The bank is no longer the global heavyweight it once was. As an aid donor to poor nations, the bank’s funds pale in comparison to assistance given by developed nations and groups such as the Bill & Melinda Gates Foundation. Moreover, even poorer developing countries are now much more able to attract private investment given their expanding economies.
Domenico Lombardi, a senior fellow at the Brookings Institution, wrote that the World Bank is still an “important but no longer dominant actor alongside entities like church groups, nongovernmental institutions and private philanthropists, all with the ability to leverage substantial resources.”
That’s why Nancy Birdsall, president of the Center for Global Development, has long argued that the World Bank needs to redefine its mission to stay relevant in the 21st century, in part by extending its mandate to the “global commons” — cross-border challenges such as climate change, drug-resistant pathogens and destabilizing water and other natural resource scarcities.
“The bank is the only development institution that works on a global level,” she said in a recent Global Prosperity Wonkcast. “It provides a setting in which all nations at different levels of development can talk, learn from each other, argue, collaborate, fuss and hopefully move forward on the great development problems we face this century.”
And one of the bank’s greatest challenges as it tries to modernize will be to adapt to the new reality in which it lives. “I think the biggest challenge is to work with the many members of the bank on how to set new directions,” she said. “In particular, how to interact with the dynamic emerging economies like China, India, Brazil and several others who are now in a position to have influence in the way the bank operates.”
Indeed, as the rise of countries such as China, Brazil and India continues, so too does their desire to hold a more important place at the global table. These emerging powerhouses have not only become major investors and lenders for poorer developing countries, they’ve provided much-needed capital to the World Bank itself. They’ve also driven much of the economic growth since the global recession and have increasingly come together on the multilateral stage as well. For instance, at the last BRICS summit in March, a political agreement was reached to create a new special bank for the developing world run by Brazil, Russia, India, China, South Africa and other emerging economies.
With these winds blowing, the bank’s continued legitimacy in the developing world requires it to recognize the power that developing nations wield. These members’ growing clout was on view when Zoellick persuaded the bank’s shareholders to increase its capital for the first time in decades — and developing countries provided nearly half of the money.
Having become so widely associated with opening the bank up to developing partners, Zoellick startled some experts with his Council on Foreign Relations talk this March. “It was a little bit surprising that Zoellick publicly stated that the presidency should remain in the hands of the United States,” the CFR’s Stewart Patrick told The Diplomat.
However, Patrick noted practical considerations may have influenced Zoellick’s outlook: “There are questions whether Congress, especially given a Republican-controlled House, would be able to fund a bank led by a non-American,” he said.
Regardless of Zoellick’s personal views, the bank under his stewardship went on to hold what it claimed to be a competitive process to select its new president. Three candidates stood for the presidency: Kim as the American nominee, Ngozi Okonjo-Iweala, the finance minister of Nigeria, and José Antonio Ocampo, the former minister of finance and public credit of Colombia.
Pressure for this process to be merit-based rather than rooted in realpolitik came from many directions. In April, 39 former World Bank senior managers wrote an open letter calling on the bank’s executive board to make their decision on merit and further endorsed Okonjo-Iweala as their preferred candidate. A bevy of academics and policy professionals also backed either Okonjo-Iweala or Ocampo.
At the end though, Kim came out of the process as the president-elect with support from not only the United States, Europe and Canada, but also an endorsement from Russia, among others. In a major shift, Kim was elected in a majority vote of the bank’s 25-member board. Previously, the president had been chosen by an artificial consensus.
The nomination of Kim, a Korean-born academic, itself came as a surprise to many analysts, who’d speculated the post might go to high-profile names such as Lawrence Summers, Jeffrey Sachs, Susan Rice or even Hillary Clinton. The choice to go with a global health expert, as opposed to an economics guru, is also a notable break from World Bank tradition.
Kim, the former president of Dartmouth College, co-founded the nonprofit group Partners in Health alongside Paul Farmer and is one of the few bank presidents to have directly worked with extremely poor communities — fitting given his new role heading an institution intended to lift people out of poverty. As President Obama himself put it, “It’s time for a development professional to lead the world’s largest development agency.”
Kim’s background is also well suited to continue the reforms Zoellick started. Despite certain criticism of Kim’s lackluster economic credentials, some see this as a hidden strength.
Eswar Prasad, a professor of trade policy at Cornell University and also a senior fellow at Brookings, wrote in the New York Times that given the limited progress macro-economists have made in understanding the drivers of growth, “an open-minded approach to seeing what works and what doesn’t rather than being bound by any specific models or theories might actually be an advantage.” He added that “Kim seems to have the intellectual self-confidence to surround himself with competent people, including iconoclasts, who can ask tough questions and seek answers that are not bound by ideology but are largely pragmatic.”
Prasad also noted, however, that Kim’s “willingness to question conventional wisdom about growth and its benefits implies that he will face significant resistance from the entrenched bureaucracy at the World Bank.”
Laurie Garrett at the Council for Foreign Relations also wrote in an expert brief that Kim’s previous experience battling a complicated bureaucracy during his stint with the World Health Organization could help him at the World Bank, which has a 10,000-member staff and deals with some 130 nations.
Yet given hopes that the position might finally go to someone from the developing world, the question remains whether Kim will face resistance for being yet another American president.
Patrick of CFR told The Diplomat that he doesn’t believe this will be a problem for Kim. “The BRICS countries, of whom Russia did support Kim, won’t withdraw their support in any measurable way, but there may be a redoubling of efforts on quota reforms and governance reforms to better reflect the realities of the global economic system,” he said.
Others said Kim will be able to leverage his own diverse resume.
“It is hard to emphasize enough the importance of Dr. Kim’s experience running a major university and what that brings to his role at the World Bank,” said Wayne Decker, a development studies professor at the University of Arizona who has worked with the World Bank for decades. “You cannot run a university in an authoritarian manner,” he told The Diplomat, noting Kim’s time as president of Dartmouth will likely help him navigate the labyrinthine bureaucracy of the World Bank.
Kim agrees. In his statement to the World Bank Board of Directors, Kim stressed six major reasons why he would bring effective leadership to the institution, two of which rested on his tenure at the Ivy League university. He said he would have an advantage over other candidates because he has steered a large administration with a sizable organizational budget in tough economic times and, perhaps most importantly, because of his history at an institution geared toward the dissemination of knowledge.
If Kim is indeed able to draw on his university experience in this regard, then it will be in line with Zoellick’s advancements framing the financial institution as a “knowledge” bank. This also fits the pattern of gradual reform and continuity that has characterized the bank’s broader reforms over the past decade. Building on the work of his predecessor, Kim will likely enact an even more competitive, transparent and merit-based process to select his own replacement.
About the Author
Talha Aquil is a freelance writer based in Toronto.