Development

Why Obama Should Keep Control of the World Bank


Jim Yong Kim, president of Dartmouth College and the U.S. nominee for World Bank president

Photograph by Tomohiro Ohsumi/Bloomberg

Jim Yong Kim, president of Dartmouth College and the U.S. nominee for World Bank president

President Obama’s surprise Rose Garden announcement on March 23 nominating Jim Yong Kim to be the next president of the World Bank has heightened debate about the traditional prerogative of the White House to choose the bank’s leader. This arrangement has incited grumbling since the bank’s founding 68 years ago, but this time it’s different.

Two credible international candidates, Nigeria’s Ngozi Okonjo-Iweala and Colombia’s Jose Antonio Ocampo, are challenging Kim for the bank’s presidency. Controversy over Kim’s credentials (does he have the right experience? Is he anti-growth?), coupled with the White House’s awkward handling of his nomination (why an unknown—and why so last minute?) have critics of the U.S.-driven selection process clamoring for a more open contest. In their eyes, it’s long past time for the bank to appoint a non-American to its top post.

Count me skeptical. There’s no question that the World Bank must adapt to the new balance of power in the global economy. But there may still be value in having an American at the bank’s helm who’s close to the White House .

Those pushing change are of course right that the current system stinks. Any global company would be foolish to restrict selection of its chief executive to only the left-handed or redheads or some other accident of birth. By the same logic, it’s detrimental that the president of the World Bank has to be an American. A competitive, meritocratic selection process would be more likely to choose the candidate most qualified for the job (in this case, that is almost certainly Okonjo-Iweala, Nigeria’s finance minister and a former World Bank managing director).

It’s also true that the current system is deeply unfair. The World Bank has 25 board members representing 187 countries. Why, in an age of declining American economic dominance, should the U.S. president just get his way? The initial rationale for bestowing the White House with authority to appoint the bank’s president was to calm Wall Street, since U.S. bondholders would be providing the bulk of the bank’s capital. Today, of course, buyers of World Bank bonds are global, and anyway, it’s silly to argue that American investors invest only in firms headed by fellow citizens.

Defenders of the U.S. prerogative argue that if the U.S. “loses” the World Bank, it will be harder to persuade Congress to provide it with financial support. This is arguably true, but also overly parochial. Congress contributes to other, similar organizations, such as the African Development Bank, which are headed by (gasp!) non-Americans. And even if the U.S. reduced its commitment to the World Bank, burden sharing might be a good thing, if such other nations as China or Brazil are ready to step up.

Yet as sound as these arguments for a broader and more open selection process might be, there’s no guarantee they will win the day—or even that they should. At a time when the institution faces an existential crisis, there are equally valid reasons to want an American running the World Bank who has a direct line to the U.S. president.

The World Bank’s soft-loan window is on the verge of losing half its clients. India, Ghana, Vietnam, and two dozen more low-income countries are about to graduate out of the bank’s cheap money window. That means the bank’s remaining concessional clients will soon be mostly fragile and post-conflict African countries—where the bank has had the least success in the past and where it needs a new, more flexible approach. The World Bank’s middle-income clients, meanwhile, can find plentiful capital and expertise elsewhere. And most challenging of all, the bank is being pushed to deal with a range of global problems, such as clean energy, for which its traditional lending instruments are patently unfit.

In the past half-century, the World Bank became the principal global development institution because of strong American leadership and backing. Now, with its entire raison d’être up for grabs, the bank needs maximum support from the U.S. If critical decisions about the bank’s future have to be taken, its president will need access to the corridors of American power. Is this moment of deep uncertainty really the ideal time to push the sole superpower and world’s biggest economy out of the chair? Are we confident enough that China, Brazil, and others are ready to lead?

The view from the White House is understandably even more skeptical. Why would President Obama, facing an election and an increasingly isolationist electorate, voluntarily cede control of the bank? All the sensible technical reasons for an open nomination fly in the face of realpolitik. No administration, in the U.S. or anywhere else, gives away a plum international seat just because it’s the right thing to do.

If a deal on the World Bank presidency is to be worked out, it would have to involve broader reform of the international patronage system. Bretton Woods architect John Maynard Keynes proposed a nonresident board for the bank, for example, but travel was impossible in 1944 because of German U-boats. Having a board that meets twice a week, costs $70 million, and hounds the bank’s management is also an inefficient anachronism.

And why stop at the World Bank? If the U.S. loses its privilege of running the World Bank, Europe will have to cede the IMF. The U.N. agencies, packed with patronage appointments and nationality quotas, should also be radically fixed. But I doubt there is any appetite to take on such an ambitious reform agenda of the multilateral system.

In the absence of a grand bargain and amid potential for chaos, maybe what the World Bank needs right now is more Pax Americana, not less.

Todd Moss is Vice President and Senior Fellow at the Center for Global Development in Washington DC. He is the author of "African Development: Making Sense of the Issues and Actors" (2nd edition, July 2011).

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