Last week the World Bank Board closed the three-week window, announced in late August, for member countries to nominate candidates for the presidency of the World Bank. Jim Kim, the US nominee and incumbent since his election in 2012, was formally nominated by the United States at 12:01 a.m. at the opening bell, so to speak. He is the sole candidate in what appears to have been a kind of insider coup by the United States (called a “charade” in a World Bank Staff Association letter to its members) of the procedures agreed by World Bank members in 2011. Those procedures were meant to make selection of presidents “open, transparent, and merit-based”—as called for by the G-20 in 2009. That sustains—well beyond its time—the 1944 deal brokered at the founding of the International Monetary Fund and the World Bank between the US and Europe in which the United States decides who runs the World Bank and the Europeans decide who runs the IMF.
Examples of the resulting outcry on the part of close watchers of the World Bank are here, here, here, here, here, and here .
Here are four comments and a modest suggestion for members of the World Bank Board.
First: as a US citizen, I’m chagrined. By short-circuiting the process the United States puts the long-term relevance, effectiveness, and most fundamental legitimacy of the world’s premier development institution at risk.
That the emerging markets and big borrowers are going along is not a surprise. Most smaller and poorer economies see little point in irritating the White House on whose support they count for trade, security, and aid matters. With their own growth success in the last 15 years, the big emerging markets increasingly see the World Bank as a relatively small matter, providing below-market loans but no longer an honest broker bringing top--quality advice along with its money; it’s easier (and quicker and less annoying) to self-finance investments, borrow on the private capital market, or turn in tough times to the regional development banks where they have greater ownership. China has created its own multilateral bank, and a second one together with the other BRICS (Brazil, Russia, India, South Africa), reflecting their eagerness for a bigger role in global governance and their frustration with the continuing grip of the traditional Western powers on the World Bank. Finally, the Europeans stay quiet to protect their own “right” to appoint the head of the IMF.
Second: selection of its leadership in a process that is opaque and non-competitive is not only a blow to the legitimacy and relevance of the World Bank.
It’s a blow to the international economic cooperation in the fight against global poverty that has, since the end of World War II helped bring prosperity to billions of people—as much through the bank’s role in the orderly extension of open, liberal markets (the liberal order invoked earlier this week by President Obama at the United Nations) as through its billions of dollars in lending. Moreover the gradual disaffection of developing countries makes it hard for any leader to bring its shareholders together on raising and deploying resources, not for loans to one country at a time, but for grants and loan subsidies to deal with this century’s most pressing global challenges to development and continued poverty reduction: climate change, pandemic controls, refugee resettlement, clean public transit in megacities (instead of resorting to cars), ending dangerous deforestation, investing in new medicines, and new agricultural technologies for global food security—all investments in and for developing countries with benefits for the entire world that no single borrower from the bank can fully capture.
Third: the US monopoly of leadership selection reflects and reinforces a deeper problem: structural flaws in corporate governance of the bank.
The presidency of the World Bank is a powerful position, with command over a huge budget, thousands of jobs, billions of dollars in annual lending—and if an effective leader, a virtual free hand on overall strategy and priorities. As a corporate governance body, the bank board is weak relative to the bank president; as a result, once elected, bank presidents are not in a practical sense accountable to the bank board—whether for policy or individual performance. That the president is the Chair of the Board is the least of it. The founders apparently imagined a useful tension between a corporate role for the Board members and a political role; its members are both international civil servants and political appointees of their own governments. They are two-hatted, representing the interests of the institution as a whole and representing the interests of their governments. For the institutional hat to be effective, geostrategic rivals need to collaborate with each other (raise interest rates or not; clamp down on corruption or not; call out the performance of the president or not). In their political role they represent their countries’ immediate interests, which for the borrowers makes challenging the chair/president potentially costly, and for rich country allies of the US, hardly worth the trouble.
Fourth: the concerns of current staff and former staff about Jim Kim’s performance in the last four years deserve attention.
It is too easy to dismiss the complaints of well-paid professionals as the usual grousing. The bank’s effectiveness is enabled by the work of thousands of committed, highly trained, hard-working (yes hard-working), civil servants dedicated to getting it done every day. It is too easy to dismiss them as faceless bureaucrats or coddled “elite” professionals. Maybe not all their concerns (“a crisis of leadership”) are warranted; maybe the controversial restructuring and personnel changes of Jim Kim’s first term will be redeemed in his second term—as has been the case with former bank presidents and former US presidents. But a failure to acknowledge those concerns and work with Jim Kim on how to deal with them, before he is confirmed for another term, is unfair to him and, more important, puts at risk his credibility and effectiveness going forward -- at a critical time when the bank’s relevance and legitimacy are under challenge.
My suggestion: that following its private discussion with the candidate on his past performance and future priorities, the board make public its performance assessment and any recommendations for strengthening performance.
The board could also build into its normal procedures annual performance assessments of future presidents. Jim Kim’s own credibility and effectiveness can only benefit in a second term; and in the medium term the bank’s waning legitimacy might be at least partly salvaged.