Wednesday, November 26, 2014

Obama’s Blunder at the Bank

NEW YORK – The selection of a successor to Robert Zoellick as President of the World Bank was supposed to initiate a new era of open meritocratic competition, breaking the traditional hold that the United States has had on the job. Indeed, Zoellick’s own appointment was widely regarded as “illegitimate” from that perspective. But US President Barack Obama has let the world down even more distressingly with his nomination of Jim Yong Kim for the post.

To begin with, it should have been clear that a most remarkable candidate – Ngozi Okonjo-Iweala – was already at hand. She had impressive credentials: degrees in economics from Harvard and MIT, experience working on a wide variety of development issues as a managing director of the World Bank, and stints as Finance Minister and Foreign Minister of Nigeria. (She also possesses and has amply demonstrated that rarest of qualities: a willingness to fight corruption at the expense of her job.)

Moreover, Okonjo-Iweala is witty, articulate, and no wimp when it comes to taking on shoddy arguments. She is a dream candidate to lead the World Bank.

What, then, does Obama’s choice tell us about the sincerity of his feminist rhetoric? Does he draw the line wherever it suits him? In fact, if Obama and his advisers could not stomach Okonjo-Iweala on the ground that she is not American, surely they could have nominated an American woman who was also vastly superior to Kim for the job.

At least two come to mind: Laura Tyson (my former MIT student), who chaired the President’s Council of Economic Advisers under Bill Clinton, and Lael Brainard, who is both a superb scholar and is now Under Secretary of the Treasury for International Affairs.

Perhaps Obama believed that picking Kim, a Korean-American and public-health specialist who is currently President of Dartmouth College, would advance his immediate security agenda in Seoul (where he arrived immediately after announcing the nomination), as well as America’s medium-term economic agenda in Asia. But one may well ask: Is what is good for the US necessarily good for the world?

In the same vein, American backing for South Korea’s Ban Ki-moon to become United Nations Secretary-General has delivered what the US wants on international economic issues. Whereas Ban’s predecessor, Kofi Annan, was independent enough to endorse efforts to conclude the Doha Round of global trade negotiations, and advance a global compact on immigration (I advised him on both issues), the Obama administration has shied away from these issues. So has Ban.

But perhaps the most compelling factor in Obama’s choice seems to have been a fundamental misunderstanding of what “development” requires. Micro-level policies such as health care, which the Obama administration seems to believe is what “development” policy ought to be, can only go so far. But macro-level policies, such as liberalization of trade and investment, privatization, and so forth, are powerful engines of poverty reduction; indeed, they are among the key components of the reforms that countries like India and China embraced in the mid-1980’s and early 1990’s.

Such reforms turned these countries from stagnation to stellar growth. The anti-reform lobbies reacted by arguing that poverty and inequality had worsened. But new empirical studies show otherwise: growing economies benefit the poor not because wealth “trickles down,” but because growth “pulls up” those at the bottom.

In fact, it is the rapid acceleration of economic growth in the major emerging countries that has reduced poverty, not only directly, through jobs and higher incomes, but also by generating the revenues governments need to undertake the public-health, education, and other programs that sustain poverty reduction – and growth – in the long term. India followed this path. So did Brazil’s former president, Luiz Inácio Lula da Silva – after the reforms undertaken by his predecessor produced the revenues that could then be spent on programs to aid the poor further.

The problem with Kim, and presumably with the Obama administration’s development experts, is that they do not understand that successful development requires big-payoff pro-reform, pro-growth policies, not just small-payoff micro-level policies. Bangladesh has gone down that road, substituting such policies for macro-level reforms, and is developing at a far slower pace than India, where macro-level reforms came first.

Kim is hardly likely to understand this dynamic. A decade ago, he cheered on the tirades against “neoliberal” reforms that, in fact, were the harbingers of higher growth and lower poverty around the world. The World Bank presidency should not be an apprenticeship.

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    1. Commentedcaptainjohann Samuhanand

      Even if President Obama has put a Donkey as candidate he would be elected with EU already having the French woman supported by USA at IMF. For USA development is not the issue but using World bank to make the third world countries to toe its line so that dollar gains at the expense of third world currencies.It uses the Green card aspiring third world's leaders sons and the World Bank, IMF postings of the leaders to have its agenda. The selection process is the real culprit.

    2. CommentedJonathan Lam

      Gamesmith94134: Obama's Blunder at the Bank

      Mr. Joe Perreta,

      I do not think Jagdish bhagwati is question on Mr. Jim Yong Kim's credentials or his function in WHO; it was the scope of vision that Mr. Obama perceived how would World Bank servicing in the welfare of the poor. But many economists see the World Bank should represent more in the functionary financial world that implies in both macro and micro economics is better resolution to up-scale the poor to another level. Instead of stretching another arm for alms, one might lose his arm to build up his future.

      Gamesmith94134: A world bank for a new world

      “The world’s greatest shortage is not of oil, clean water, or food, but of moral leadership. With a commitment to truth – scientific, ethical, and personal – a society can overcome the many crises of poverty, disease, hunger, and instability that confront us.” of ‘The power of living in truth’. You would express gratitude to Václav Havel, however, I thought he was only a hero to Poland. But, I think your expression gave the description to the parameter on the Leadership of the World Bank in our global financial system that imbues “Yet power abhors truth, and battles it relentlessly” in serving the truth; if the world should not accept the status quo. Therefore, I regret to say American do not deserve its leadership, the next leadership should not repeating the past neglects, or persisting the bearer of the World Bank to a New World
      For much of the backfiring on US and badly hurting the world, I worry of more ribbons cutting for our Club Med, Green projects that have no locale innovation and short in sustainability to development; and who is the bearer of the failure? Since there is more projects have catered to US corporate interests rather than adapt to the needed; how are Americans can face with those suffered afterward? Apparently, The Bank lacked a clear direction and it did not short of long-term strategic expertise either; in fact, the operators of the World Bank have not committed to power abhors truth, and battles it relentlessly; whenever crisis arises. I blame on its ethics that it only catered to US corporate interest than adapt to the needed. The World Bank must reconstruct to the new world in facing the status quo; and the entity of World Bank must come to term of the global development and finance, and “Yet power abhors truth, and battles it relentlessly” with its moral leadership to the World.

      After the financial crisis like Lehman Brothers in 2008, I recommend the World Bank to service the sovereignty debts instead of the corporate or politicians. By far, the present European Union debt crisis, ECB and FED turned themselves into FDIC; with much the interventions from the G20, the situation turned worse that German have taken over the tax and even union of the Greeks forsake of the federation. Who is the best to serve as the custodian of the welfare and beings of nations, if it was not World Bank?

      And my vision of the financing sovereignty debts, the sovereignty must put localization to innovate the processing of the projects, after the decentralized of the public institutions through the political process. The sovereignties should establish their National Infrastructure Bank to provide the finance by borrowing directly, attracting private-sector funds, or a mixture of the two. Then, the supervision and monitory can be developed its oversights in bi-level environment and balance itself through the private and public levels.

      Perhaps, I am talking of the Sovereignty bonds should be trade through the State Banking system or National Infrastructure Bank to the central banks or World Bank, then, the transfers to the Development Bank. Then, the equitable can be purchased through Insurance companies or equitable entity to ensure supervision and monitory system function properly; and the public institutions are yield to the scrutiny of the public monitories. Eventually, I am certain that the insurance companies can do a better inspection of the progress over time and ensure the necessity of alternation and adjustments. Perhaps, such process can avoid further interruptions and succeed in completion of the projects with proper appropriation and timely financing.

      The World Bank can supervise the processes of the transitory and monitory system that can establish certain trust, then, In due time, through the transparency of system that World Bank modifies. Then, the private investment can participate to its secondary after the proposals; if only the system allows the genuine bi-level supervision and monitory are put in effects. Eventually, the World Bank and Insurance companies, or private Accounting firms can made this bi-level system sound and safe for everyone.

      “Now many members, including Brazil, China, India, and several African countries, are raising their voices in support of more collegial leadership and an improved strategy that works for all.” the participants to World Bank comprises of the developed nations and emerging market nations, and its operators in World Bank must be proportionally correct to those contribute. It is sad if the sovereignties defy World Bank if it cannot function to create its safety net for its society of sovereignties. And, it may as well turn in its title to exchange for World Bank of USA only if World Bank cannot function faithfully to its members as in “a society can overcome the many crises of poverty, disease, hunger, and instability that confront us.”

      May the Buddha bless you?

    3. CommentedJoe Perretta

      and you say stuff like this, "The problem with Kim, and presumably with the Obama administration’s development experts, is that they do not understand that successful development requires big-payoff pro-reform, pro-growth policies, not just small-payoff micro-level policies," but i mean, how do you know what Jim Kim thinks? like, i dunno, a bunch of this is you just ranting and people accept it as more than that because you're important and teach at columbia and are on the CFR, but all of it's just bullshit man. honestly. it's like you had to write this piece so someone would write it, but it's just baseless.

    4. CommentedJoe Perretta

      tand saying that kim's appointment is predicated at all on the president's desire to increase ties with south korea is kinda of racist and makes no sense.

    5. CommentedJoe Perretta

      ok but this doesn't speak at all to why jim yong kim is a bad choice. or to his history as a health technology expert, especially in the developing world—which is in greatest need of the bank's focus. laura tyson isn't qualified by virtue of being (your former MIT student), and she's nothing more than a member of the military-industrial complex now. kim is a thinker, and not that okonjo-iweala isn't qualified—of course she is—but just because someone doesn't appoint a woman to a position doesn't mean that they're not being true to their "feminist rhetoric"—which, by the way, our president does not have, when's the last time someone accused him of being a feminist? maybe some men, but not any women. i just think this article is a bunch of crap.