April 5th, 2012
06:27 PM ET

Bhagwati: Obama's blunder at the World Bank

Editor's Note: Jagdish Bhagwati is University Professor of Law and Economics at Columbia University and a senior fellow at the Council on Foreign Relations. For more, visit Project Syndicate's excellent new website or follow it on Facebook and Twitter

By Jagdish Bhagwati, Project Syndicate

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.

The views expressed in this article are solely those of Jagdish Bhagwati.


soundoff (17 Responses)
  1. jal

    It is important to understand that the human brain is, for all likes and purposes, addicted to progress. What then happens when there is a lack of progress, or a retraction of progress can be the new definition of the term "scary". We have means to simulate progress in the brain (drugs, shopping, bossing people around) but as we watch the world crumble, we know it is not genuine. Just don’t blame me, as my ankles are sprained from praying.

    April 5, 2012 at 9:45 pm | Reply
  2. Rz

    What a weird world! On one hand, you have a so called "developing country" (China) with a population of over a billion trying to be wealthy, and on the other hand, a so called "wealthy country" (USA) trying to develop into what?...; a population of over a billion? What the heck is everyone trying to develop and grow into anyhow? We got the underdeveloped penniless homeless hungry sick people trying to kill each other, being helped to do so by the filthy rich with 3 mansions overweight kids and expensive wives (who apparently can only further develop themselves by artificial means).

    GET A GRIP ON REALITY ! THERE ARE LIMITS TO GROWTH AND DEVELOPMENT ! A SHIP CAN ONLY SUPPORT SO MANY RATS ! And once it gets out of hand, something's gotta give. We better stop. Hey, what's that sound ? Everybody look what's going down !

    April 6, 2012 at 1:51 am | Reply
  3. Sigrun

    So speaks the economist:Health care is only micro-level policies in contrast to macro-level economic policies as an engine for poverty reduction. Both impact health outcomes – the life and health of people. So does environmental policies. Making people count, and macro-level economic policies, macro-level environmental policies and macro-level health policies serve to protect and promote health is the new opportunity. That is why the nomination of Jim Kim is a good move for a new kind of leadership for the WorldBank

    April 6, 2012 at 2:47 am | Reply
  4. j. von hettlingen

    This is the first time the World Bank has to choose between candidates since its creation more than 60 years ago. Developing countries as well as some of Asia's rapidly-growing economies have voiced dissatisfaction with what they say is their lack of influence in the IMF and World Bank. Now the executive board of the Bank has to choose between Nigeria's finance minister, Mrs Okonjo-Iweala, a former World Bank managing director, Jose Antonio Ocampo, a former finance minister of Colombia, and the Korean American Jim Yong Kim, a public health expert and president of Dartmouth College. A group of former World Bank officials has written a letter backing Ngozi Okonjo-Iweala, to be its next president. We'll see, who's going to be elected.

    April 6, 2012 at 5:34 am | Reply
    • theglobalroundhouse

      I like that there are three viable candidates for the position and that it is no longer assumed the US will have the leadership pick. DIversity. Seriously qualified candidates, this is very good and bodes well for global democracy. That said, change does not come quickly. Kim's nomination was solid; his expertise in healthcare would provide much needed additional attention to this sector. Frankly, my satisfaction with having three candidates is far greater than my dissatisfaction would be if Kim ultimately secures the position.

      http://www.theglobalroundhouse.com

      @GlobalJackie

      April 6, 2012 at 9:19 am | Reply
  5. S.V.P.YADAV

    Respeccted, Jagdish Bhagavati Garu, Mr.Obsma Garu over confidence will make more mistakes. And not yet he find out about his mistakes, may be forthcoming elections will teach a lesson to him.

    April 6, 2012 at 6:40 am | Reply
  6. theglobalroundhouse

    Don't macro and micro politices have to go hand-in-hand? As you see, I am not a finance person! So, pardon the "elementary question/observation."

    As for Obama's "blunder" – I don't see it that way. I think the reality that a single candidate from the US is no longer considered a shoe-in is an indication of major progress. I am well pleased. Agreed, Okonjo-Iweala would be a most impressive ultimate selection but as you noted, she is no shy and retiring damsel; her influence will resonate no matter her position. The nomination of Kim, a leader in global health, may focus on health matters a bit differently and in ways sure to capture an address the nuances of global health needs. However, as you note, the US relationship with Korea is part of this puzzle and long-term US interests surely played a part in Kim's selection. Globally, it would be beneficial if N. Korea could be brought closer to the table of democracy and if some assurances against weapons development and deployment could be curtailed.

    April 6, 2012 at 9:34 am | Reply
  7. krm1007

    Notwitstanding it is a dinosaur, the dilemma with World Bank extends beyond the leadership to demograhics of its employees.

    April 6, 2012 at 10:53 am | Reply
    • Patrick

      "demographics of its employees"
      Explain yourself Abdul.

      April 7, 2012 at 1:06 pm | Reply
  8. Ezenwugo Makuochukwu

    the heart of the king is in the hand of the LORD, I strongly believe that Ngozi Okonjo Iweala (NOI) is better qualified for the job if sentiments will be ruled out of the picks/votes... this will prove whether the advanced countries do what they preaches on equality.... or whether they have a double standards when it come to issues that affects them...
    I'm waiting to hear the final verdict on morrow: let justice prevail

    thanks!

    April 15, 2012 at 3:01 pm | Reply
  9. desert voice

    To me, they are all suspect! The one from Nigeria reminds me that Nigerian Banking system is run by the most sophisticated banking mafia. The Coombian, with all their cocaine is also bad news. As for Jim Yong Kim, I also suspect him of banking mafia connections. He is good news for the other Kim, Kim Jong Un! North Korea could use the World Bank!

    April 16, 2012 at 3:22 pm | Reply

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