Most of us know little more about the World Bank than that it's an arm of the United Nations (UN) where poor countries go to borrow money. That doesn't begin to cover the complexity of it, nor does it show the United States' profound influence over the bank.
The World Bank was founded shortly after the UN itself, as the International Bank for Reconstruction and Development. Since then, it's added four similar organizations under its controlling influence, each tasked with lending money to poor countries and other organizations that would otherwise have trouble getting credit. Together, they operate as the World Bank Group (WBG). But unlike in the free market, where the people with the worst credit pay the highest interest rates, the World Bank Group views creditworthiness as a negative. It's not a perfect correlation, but generally speaking, the less a lender's ability to pay, the more cheaply it can borrow money from the World Bank Group.
Because the U.S. government holds more shares of the WBG than any of the other 186 member nations that are shareholders, the presidency of the WBG has always gone to an American nominated by the U.S. president. No other member country has complained loudly enough about this to make a difference. There has been one sort-of exception. Sir James Wolfensohn, whose presidency straddled the Clinton and George W. Bush administrations, is an Australian who secured U.S. citizenship before ascending to the World Bank presidency.
The current president, Robert Zoellick, took office in 2007 and his traditional five-year term is about to expire. To succeed him, President Obama recently nominated Jim Yong Kim, the South Korean-born president of Dartmouth College.
You'd figure that the president of the World Bank would be a banker, or at least an economist, but you'd be wrong. Kim is a physician, with a resume wrapped in multiple strands of Ivy (not just the presidency of Dartmouth, but an undergrad at Brown, a master's degree and a doctorate at Harvard.)
Dr. Kim's nomination represents a catalog shift in the qualifications expected for the job. His predecessor was a managing director at Goldman Sachs. His predecessors included a political scientist/diplomat, a master of business administration recipient, the congressman who invented the 401(k), two bank presidents, an automobile company president and an assistant cabinet secretary.
So why nominate someone who would appear to be more comfortable in academia, or perhaps a research hospital? A lot of it has to do with the World Bank's stated goal – poverty eradication. In 2007, Zoellick's stated strategic themes for the World Bank Group, translated from its original stilted high English, which read something like this:
- Create wealth and spur sustainable growth in poor countries, particularly in Africa.
- Look out for countries that have just finished a war and/or could fall into anarchy.
- Economically diversify average countries – get more goods into bigger markets. (Possibly. The actual quote is "play a more active role in fostering regional and global public goods that transcend national boundaries.")
- Develop and grow opportunities in the Arab world.
Dr. Kim is obviously bright and hardworking, but is he suited for the job? Competence in one field, even a demanding one such as medicine, doesn't imply competence in every (or any) field.
Except that Dr. Kim does more than diagnose illnesses and write prescriptions. At the age of 27 he helped found an organization that provided tuberculosis care to poor Haitians (at 1% of what the cost would have been in the U.S.), that now operates in over a dozen poor countries around the world.
So he's a humanitarian, too, and an effective one. But will his impressive credentials translate into a capacity for lending money and grants where they'll be best spent?
The major criticism of previous World Bank administrations is that the organization's free-market policies aren't suitable for every situation. First, that implies that goods and services should be exchanged at prices and quantities determined by parties other than the ones doing the exchanging. Second, it implies that lending money that's ultimately collected from taxpayers in the first place, is somehow indicative of a "free market." More pragmatically speaking, the World Bank at least wants to see something approaching a return on its loans and giveaways.
The Bottom Line
The World Bank's projects are diverse, and fairly specific. In the last month, these have included $10 million to get Tajik farmers to operate free of government interference, $166 million for a power plant in Kenya and $15 million that seems to have gone down a rabbit hole in Niger. If Dr. Kim is going to be an effective World Bank president, he'll need to have the same ability to weigh costs versus benefits that any adept business executive should.
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