The World Bank, American ego, and what’s right for the world

Here's an iron-clad rule of the global economy:

When you've won the Nobel Prize for economics, your words about economic policy carry more weight.

So in that spirit, you should check out this piece today in Slate by Joseph Stiglitz, who expertly deconstructs the absurd debate over who should run the World Bank, while demolishing the underlying arrogance of US policy in this area.

First, the background:

President Barack Obama has nominated Dartmouth president Jim Yong Kim for the job.

Kim is a fine choice, and has the important global experience of running the World Health Organization’s HIV/AIDS department.

But in a move that reflects the growing economic and political clout of the rest of planet earth, the World Bank's eleven executive directors from emerging and developing countries put forward two other candidates to challenge Obama and Kim:

Ngozi Okonjo-Iweala of Nigeria and Jose Antonio Ocampo of Colombia.

And here's where Stiglitz pounces:

"I have worked closely with both of them. Both are first-rate, have served as ministers with multiple portfolios, have performed admirably in top positions in multilateral organizations, and have the diplomatic skills and professional competence to do an outstanding job. They understand finance and economics, the bread and butter of the World Bank, and have a network of connections to leverage the bank’s effectiveness."

So, the argument naturally flows, either one of these candidates would be a better World Bank chief that Kim.

The problem, of course, is politics. The United States and Europe controll the bulk of World Bank votes, and they've struck a deal. 

The United States has traditionally reserved the right to name the head of the World Bank, and yes, always gives the job to an American like Kim. 

Europe, meanwhile, gets to pick the head of the International Monetary Fund, and yes, that always goes to a European (like current IMF chief Christine Lagarde of France).

That arrangement, coincidentally, leaves out key emerging economies like India, Russia, Brazil, China, and, yes, Nigeria and Colombia.

Moreover as Stiglitz points out, this year's US presidential election makes the current World Bank debate even more political.

After all, what red-blooded American leader would cede control of this important global institution to a — gasp! — foreigner?

But our man Stiglitz has an answer for that, too:

"Much is at stake. Almost 2 billion people remain in poverty in the developing world, and, while the World Bank cannot solve the problem on its own, it plays a leading role. Despite its name, the bank is primarily an international development institution. Kim’s specialty, public health, is critical, and the bank has long supported innovative initiatives in this field. But health is only a small part of the bank’s “portfolio,” and it typically works in this area with partners who bring to the table expertise in medicine."

As I haven't won a Nobel Prize, I'll let our man have the final word.

It's a point that's pretty difficult to disagree with:

"Should America continue to insist on controlling the selection process, it is the bank itself that would suffer. For years, its effectiveness was compromised because it was seen, in part, as a tool of Western governments and their countries’ financial and corporate sectors. Ironically, even America’s long-term interests would be best served by a commitment—not just in words, but also in deeds—to a merit-based system and good governance."