Sunday, November 23, 2014

What Should the World Bank Do?

NEW YORK – I have been honored by World Bank directors representing developing countries and Russia to be selected as one of two developing-country candidates to become the Bank’s next president. So I want to make known to the global community the principles that will guide my actions if I am elected – principles based on lessons learned from development experience.

That experience has taught me that successful development is always the result of a judicious mix of market, state, and society. Trying to suppress markets leads to gross inefficiencies and loss of dynamism. Trying to do without the state leads to unstable and/or inequitable outcomes. And trying to ignore social actors that play an essential role at the national and local levels precludes the popular legitimacy that successful policymaking requires.

Indeed, the specific mix of markets, state, and society should be the subject of national decisions adopted by representative authorities. This means that it is not the role of any international institution to impose a particular model of development on any country – a mistake that the World Bank made in the past, and that it has been working to correct. Because no “one-size-fits-all” strategy exists, the Bank must include among its staff the global diversity of approaches to development issues.

Development is a comprehensive process that involves economic, social, and environmental dimensions – the three pillars of sustainable development.

And, frankly, I have concerns about some of the World Bank’s views and priorities in recent decades. For example, while the Bank has made important contributions to the nurturing of deep financial sectors, it still has much to learn about financial inclusiveness and the role that well designed development banks have played in fostering sustainable and inclusive growth in countries around the world. We should never forget, in this regard, that the World Bank is itself a global public-sector development institution.

The Bank contributed significantly in its early decades to the development of high-quality physical infrastructure, a critical area that, unfortunately, was later marginalized. The return of this issue to the center of the Bank’s focus is a welcome development.

Above all, I believe that economic development should be viewed as a process of persistent structural change, which, if successful, supports constant technological upgrading of production and trade. This approach was central to the World Bank’s activities up to the 1970’s, and, while it has been partly revived, it is still far from being incorporated into the Bank’s operations.

The goal of development is greater and more equitable human welfare. Human development is about much more than the generation of human capital: it is essentially about expanding the scope of human freedom. And that can be achieved only with universal education, health care, and social protection.

Targeting can be a useful instrument of universal policies, but it can never serve as a substitute for them. Likewise, social protection goes beyond the narrow concept of the “social safety net” that has dominated debate in recent decades. The concept of the “social protection floor,” recently proposed by the Bachelet Report (produced by the International Labor Organization under the leadership of former Chilean President Michelle Bachelet) provides better intellectual grounding.

Equity and inclusiveness require placing the advancement of the poor and other marginalized groups at the center of development specialists’ concern. In particular, gender equality deserves special attention, an approach that the World Bank today rightly characterizes as smart economics.

Guaranteeing these objectives is not just about compensating for market outcomes and social forces that generate or reproduce inequalities. It is also about incorporating these objectives into economic policymaking, by placing the creation of fulfilling jobs and well-developed welfare institutions at the center of the economic agenda, and by respecting the role of cultural diversity in economic development.

This approach also applies to the environmental pillar of development: intervention to counter damage generated by the economy is not enough. Environmental concerns must be fully assimilated into economic policymaking – that is, into the incentive structure that drives decisions. Only then can economic development be made compatible with the contributions that developing countries must make to mitigating climate change and preserving our planet’s remaining natural forests and biological diversity.

The World Bank’s capacity to contribute to achieving these goals depends on it remaining a true global institution with a special responsibility vis-à-vis the world’s poorest countries and a commitment to helping middle-income countries face their own challenges. It must count on the vision and contributions of more advanced nations, as well as those of emerging powers. And it must do so as part of the system of global governance, strengthening its cooperation with other multilateral organizations, in particular those in the United Nations system and regional and subregional development banks.

These are the development principles and priorities for which I stand. If elected to head the world’s leading development institution, I will work with all of its members to fulfill them.

This column was produced within the framework of the EC-funded “V4Aid” project. The views expressed do not necessarily represent the view of the EU.

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    1. CommentedStephen Pain

      I believe that the World Bank plus all the financial stabilising agencies should reform the bond market and the rating agencies, both which while enjoying the merit of being at times objective and neutral indicators of a nation's financial condition, can and have done for a long time had a deleterious impact on national economies, often goading others into panic selling and buying, and more importantly having a greater influence over what are sovereign policies. To bring about the reform I suggest that the circle or ring used in banking be applied to the bond market - here limits will be set of say eight percent of the nation's wealth - and that when a country suffers a decline - the bond market relating to that nation either its own national bonds or those bought abroad - be immediately firewalled so that it cannot influence adversely the economy further - with regard to the rating agencies - their remit be severely reduced so that they cannot be allowed to assess sovereign debt or matters pertaining to a nation's economy. Next there should be a move toward restoration of the ratio in nation's economies - here making the industrial/agricultural greater than the service - i.e., a return to real economics and not souffle economics.

    2. CommentedPer Kurowski

      What of this does not reflect the views of the other two candidates?

      I do absolutely agree with that "the Bank must include among its staff the global diversity of approaches of development issues", but the sad part is that the global diversity discourse is very often just used to impose the limited views of a global mutual admiration network, diverse in much but opinions... and so how Jose Antonio Ocampo would try to achieve real diversity is something I would like to hear more about.

      And if Jose Antonio Ocampo really wants to do something about the financial sector then perhaps more than going to the World Bank he should try to get into global financial regulatory bodies such as the Basel Committee for Banking Supervision and the Financial Stability Board... those entities have not been in the forefront of equity and inclusiveness, for instance by selling the world capital requirements for banks based on perceived risks of default, which odiously and stupidly discriminate against those perceived as risky, those who precisely because of that are already being sufficiently discriminated against by the markets.

    3. CommentedJonathan Lam

      Gamesmith94134: A World Bank for a New World


      Thank you for the link to agroecology, I bang at the door of the World Bank is not only the small landlord or impoverished farmer; as the cash flow shifts from the Developed Nations in the EU crisis toward “The South” as in the south Hemisphere in South Africa and South America, it is pipeline of cash capital infusing the regions, There must be a entity like World Bank in receiving the funds and monitoring them, besides such system to confront instability. It must empower itself to capture the moment to improvise the local innovation.

      You may think of exploitation of land and refugees, but sustainability is relying on the investment and redistribution both of its investors and locals. It is how United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2009. And Transnational Corporations, Agricultural Production and Development, New York/Geneva, 2009 should make the exposure to its investors and the locals that the transition towards low external input and sustainable agriculture is needed in all regions, including industrialized countries is not sufficient to meet the New World.

      As much investors cares only how much is copper, corn and rice is sold, who is going to read Agroecology, except me, of course? My concern is how World Bank can organize the transactions that turn refugee camp to township, and where my caterpillar stays and how Monsanto delivers in a place, where or how my investment is guaranteed with sustainability and profitability. This is how redevelopment of the region can be done; “The South” should seize the sustainable moment to grow and redevelop with the inflow of cash capitals. Then, much of the Peace Corps or researchers can service these townships and watch out for them. Perhaps, World Bank can be a broker or medium to all necessity to perform it duties to overcome crisis including corrupted officials.
      Perhaps, I would suggest such input of cash investment may turn on the land uses and labor forces in plantations with refugees camp combines. In establishing its functionary profitability, these investors can rely on these refugees to run under the agreement with one like World Bank and investors; and both can profit from their farms after the co-op to enterprising plantations. This is how the World Bank can come in to guarantee the process and distribution of the wealth shares among the investors and the tribes or locals and the goods transports to the people and the world.

      This is the system that the World Bank and United Nations can use its facilities and utilities to expand its foundation to survive as well, if the developed nations became dependant ones even for US or EU. It is not only for the small landlords to push its produce to market only; I am talking about putting a grain into the hand of the Africans or Latinos to grow, and turn its land to plantation, mills to overseas, crops to commodities markets and so on……. the whole deal in developing its revival to growth.

      Teaching one to fish is not bad for a family, what if the World Bank can turn them to “Fisherman of Men” with investors, does it sound reasonable?

      May the Buddha bless you?

    4. CommentedJonathan Lam

      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. 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?

    5. CommentedZsolt Hermann

      I like and agree with objectives outlined in the article, but I feel the approach is lacking.
      It sounds too much top heavy, a "from top downwards" approach which has been failing us on all fronts recently.
      The "market, state, society" approach is especially worrying, since the markets are only serving a small minority, mostly described as 1-10%, moreover the markets are failing and collapsing as a result of the unsustainable socio-economic structure they represent.
      The state is also failing, all the leading politicians, economical or financial experts are standing desperately helplessly in the midst of the global crisis, and they simply serve the same small minority the markets represent, and even our core belief in freedom and democracy is fundamentally shaken both in Europe and in the US.
      And as I understand the authors description of "society", it means the same "experts, and decision makers" who also belong to or serve the top layers, thus exactly those social, public masses the World bank would help are not represented in the planning and decision making process.
      The outline also represent the present attitude that banks are decision making institutions, when in fact they should simply finance projects other, more suitable, responsible decision/policy making bodies decide on.
      As the global crisis rages on and forces us to change our attitude and thinking, and finally to change the socio-economic system we exist in, we need to plan the next state of our evolutionary process, what human system is suitable for the global, integral world of the 21st century.
      And as we have to cater for a single, united, interconnected and intermingled human society, the old top heavy, narrow minded, fragmented, subjective decision making and executive institutions have to change to truly represent the global public's need and opinion, and our present political and financial/economical institutions will simply serve as servants and executive arms for the decisions the supra-national public decision making bodies will make.