In the normal course of events, Kim would sail through, with the US and Europe both voting for his candidacy. Until a few years ago, it was an unwritten rule that the US Government would pick the head of the World Bank, while the European Union would decide the head of the IMF. The intergovernmental organisations were set up in the aftermath of World War II, in a world dominated by the US and Europe, which also have the majority of voting power in these institutions.
However, not this time. Leaders of some developing and emerging economies have refused to support President Obama’s unexpected choice of Jim Yong Kim to lead the bank.
A number of African countries have nominated Nigerian finance Minister Ngozi Okanjo Iwelea as their candidate for President. Iwelea has better credentials than Kim, according to many, and has the additional advantage of having worked in both the World Bank, in its number 2 job of Managing Director, and in a developing country in a top leadership role.
Some Latin American countries, lead by Brazil have nominated Colombian Finance Minister, Jose Antonio Ocampo, as their candidate, arguing that his academic credentials as an economist and his leadership experience in Colombia, made him a very strong candidate.
Interestingly enough, both developing country candidates, in addition to their developing country experience, have training that is probably more relevant to the World Bank’s overall mission, as well as far more senior leadership experience in government as well as international organizations.
In fact, Lant Pritchett , Professor of the Practice of International Development at the Kennedy School of Government at Harvard says the US has shot itself in the foot by nominating a weak candidate. In 2010, the United States and other World Bank shareholder-countries pledged support for an “open, merit-based and transparent” selection process for the post of Bank president.
“I think Kim is much weaker than Ngozi and Ocampo so I don’t understand why the Americans want the process to be open. The US had to agree to have an open election process because of the growing power of the BRICS and the other emerging market countries but then once you have done that they should at least go through the trouble of nominating a viable candidate” exclaims Pritchett.
The issue of whether the traditional US-European lock on World Bank – IMF positions makes sense in a world where the balance of economic power is shifting arose last year as well, when the IMF Managing Director’s job fell open after Dominique Strauss Kahn was accused of sexual assault. However, Europe quickly rallied around a candidate whose merits were unquestioned and French Finance Minister Christine Lagarde landed the job.
According to economist, Jagdish Bhagwati Obama’s pick is a strategic move to install a “yes man” in the post. “They wanted somebody basically whom they could rely on. One of the reasons they back Koreans — whom I admire a lot — is that they get along with the United States. If you look at Ban ki Moon, the way he has behaved ever since he got in with US support he has not done a thing which is contrary to what US would want. Ban ki Moon is practically a yes man,” says Bhagwati, University Professor of Law and Economics at Columbia University.
In a changing world, where developing countries have much easier access to capital from financial markets, and to development advice from academics and non-profits like the Gates Foundation, the power and relevance of the World Bank are both in decline. Like many international institutions created in the aftermath of the Second World War, it will need to be reinvented if it is to stay relevant. Already, BRIC countries have been contemplating creating their own financial institutions, as a response to their inadequate influence at the Bretton Woods institutions. The question the World Bank’s board needs to answer is, is a complete outsider, with little in common with the Bank’s staff by way of training and experience, and no experience at all in finance or government, best positioned to accomplish this? Or is a classic economic technocrat, albeit one with top leadership experience in a developing country, likely to be the best person for the job? And, perhaps most importantly, if the answer is the latter, it needs to figure out a way to politely suggest to the US that it let Kim’s candidacy fail, in order to keep the World Bank relevant.