Alexander Pannett 7.15am
There are three very well qualified candidates, who all promise to change an institution that has suffered severe criticism in recent years about its approach to global development.
The World Bank has a real opportunity to select a President from a developing nation and break out of its image as being run at the behest of the World’s richest nations (i.e. the West~).
In this regard, there is a clear favourite in Nigeria’s finance minister, Ngozi Okonjo-Iweala (pictured above). As well as being an economics graduate from an Ivy League university and a former managing director of the World Bank itself, she has a proven track record as a finance minister of a major developing nation. She also has the backing of the African Union. Who better to reform the World Bank and revolutionise its approach to the developing world?
Unfortunately, every president since the bank’s creation in 1946 has been an American. This is the consequence of a gentleman’s agreement with European nations. They support an American candidate for the World Bank and, in return, the Americans support a European for the head of the International Monetary Fund (IMF), its sister organisation.
Voting at the IMF and the World Bank has also been weighted in favour of richer, Western nations. Thus the global financial institutions of the Bretton Woods system have been dominated by westerners since their inception.
Such a bias towards the developed world has attracted criticism that the conditions of economic funding to developing nations are often unsuited to those nation’s particular needs, concentrating on short-term GDP growth rather than long term stability. The results have often led to painful restructuring of traditional societies, local industries and employment practices as economies are forced to open up to global free markets in return for capital from the World Bank.
The experiences of Russia, Eastern Europe, Asia and Latin America in the 1990s, are all demonstrative of this economic “shock therapy”, which often achieves more harm than good by forcing countries to accept structural adjustment packages which are tied to strict conditions resulting in a developing country deepening its dependence on foreign financial flows.
The consequences have been spiralling debt, massive unemployment, rising economic inequality and widespread social depredation as social services crumbled.
Developing countries that accept credit from the World Bank to ease desperate liquidity concerns have ceded economic sovereignty to World Bank supervision, where World Bank consultants can intervene and recommend private investor infrastructure ‘partnerships’ in areas ranging from health and education to utilities.
This transfers economic authority to the IMF, World Bank and foreign investor interests, leaving the developing country with little option but to accept strict conditions in order to ensure continued access to credit in order to meet its debts. Structural adjustment packages have deepened and prolonged financial crisis and underdevelopment in many cases and undermined the sovereignty of developing countries.
This is why a World Bank president who understands the harm that neo-liberal economic policies can impose on un-prepared markets is vital if developing nations are to secure lines of credit that promote sustainable development rather than trap nations in debt.
Regrettably, the chances of a non-American becoming president are nil. With the Europeans having secured the American vote for the election of their candidate, Christine Lagarde, to lead the IMF, they are certain to return the favour. Moreover, it is election year in the United States and President Obama will not want to be seen as weak by becoming the first US President to fail to have their World Bank candidate elected.
This is not to say that President Obama’s nomination, Jim Yong Kim, is not an excellent candidate, with an impressive reputation in international development. He is also a doctor and former World Health Organisation official. The fact that President Obama has selected an individual with deep experience in development rather than a former politician or banker, as all former American nominations have been, suggests he is starting to address concerns that the World Bank be changed to meet the needs of developing countries rather than be a mere Jesuitical proponent of laissez-faire economics.
Yet until the World Bank and IMF appoint candidates according to merit rather than arcane arrangements, we will carry on wasting chances to help developing nations in a sustainable way and alleviate the grave poverty and environmental concerns that will continue to afflict both humanity and the biosphere we live in for the foreseeable future.
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