Apr 17, 2012

Heading the World Bank

The debate around who had to become the new head of the World Bank has been quite fierce, on blogs and on twitter. Now yesterday it was just revealed (surprise surprise) that Jim, the US's choice, was to become the new boss. Many are angry because this is a continuation of a political arrangement between Europe and the US, rather than a transparent selection process. But having Jim head the bank is certainly gonna be interesting, mostly because he comes as a complete outsider. The Economist had strongly backed the Nigerian candidate, stating that she was by far more qualified. Yet as I outlined in a letter to the editor, it wasn't so clear:

Your leader on who is to head the World Bank is somewhat contradictory. On one hand you say that development is not something rich countries do to poor ones. On the other you claim that an experienced economist should head the Bank because the Bank is about bringing development.
In any case it seems to me the mandate of the Bank goes against recent advances in development economics. One the one hand the randomistas argue that small and targeted aid projects in health and education do have a positive impact on the treated. On the other macroeconomists like Acemoglu and Robinson argue that growth cannot come through outside help. As Easterly reviews their recent book, "Why Nations Fail", he puts it simply: “experts cannot engineer prosperity with the right advice to rulers on policies and institutions. Rulers "get it wrong not by mistake or ignorance but on purpose."”
Has the World Bank helped poor countries by suggesting the right policies? Nope. Can it? Of course not. Why stick to a failed model? Better stick to assistance projects that can actually make a difference. And for that Jim Yong Kim may be the right candidate. For sure it makes no sense to have Obama decide who is to head the Bank. But this doesn’t mean this is an obvious choice. There is no doubt that Ngozi Okonjo-Iweala is one of the world’s best hopes for development. Yet the main advantage of having Jim head the Bank is that Ngozi avoids useless meetings in DC and remains where she can change the world, i.e. in Nigeria.

And a few days later Acemoglu and Robinson said the same thing on their blog:

Perhaps the Bank could focus on doing a few things such as investing in health infrastructure, hospitals, perhaps some educational facilities targeted for the most disadvantaged populations in only the parts of the world that are most in need... perhaps this year offers another historic opportunity: to change the vision and structure of the World Bank.

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