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A New Start for the World Bank?

The opening up of the contest for World Bank president is a historic change whose significance has not been fully appreciated. This is not surprising, given the widespread misunderstanding of the Bretton Woods institutions (the IMF and World Bank).

The IMF’s loss of power over most middle-income countries, which has occurred since the late 1990s, is probably the most important change in the international financial system in the past 40 years. Yet it has gone largely unnoticed in the press. The Fund had been Washington’s most important avenue of influence in developing countries. It pressured governments to adopt “neoliberal” policies, sometimes known as the “Washington consensus.” These included abandoning state-led industrial and development strategies, tighter (and often pro-cyclical) fiscal and monetary policies, and often indiscriminate opening to international trade and capital flows. In Latin America especially (but also in many other countries) these policies coincided with a collapse of economic growth and therefore a drop-off in poverty reduction.

The World Bank has been part of a “creditors’ cartel” with the IMF, together pressing for neoliberal policy changes in many countries. This is still true today in some countries, but fewer, because so many middle-income countries no longer borrow from the IMF.

President Obama’s choice of Jim Yong Kim for World Bank president represents a huge break with the past. Even though the Korean-born Kim is an American citizen, he is not a politician or banker, as all of the past 11 presidents have been. Even better, he has spent most of his adult life working to improve public health. He is co-founder of Partners in Health, one of the most successful and progressive public health organizations in the world.

Mark Weisbrot is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This article originally appeared in Folha de São Paulo (Brazil).

Although Kim would still be the U.S. “choice” – thus continuing an indefensible 68-year unwritten rule – he is not really Washington’s choice at all, and is as unlikely as anyone of any nationality to do Washington’s bidding. It is well known that President Obama wanted to appoint Larry Summers or some other political crony. A radical change in the U.S. choice was caused by a number of factors, including oppositionfrom governments and civil society; and a reframing of the debate in the media, which began to accept the demand for an “open, merit-based selection.” Economist Jeffrey Sachs’ insurgent candidacy also played an important role in moving the debate, and Obama was looking to avoid any unnecessary controversy in an election year.

Brazil has nominated Jose Antonio Ocampo — one of the most interesting, knowledgeable, and experienced (he headed the UN Economic Commission on Latin America and the Caribbean and also its Department of Economic and Social Affairs) economists in the hemisphere. He is also a prominent critic of neoliberal policies. And Ngozi Okonjo-Iwealanominated by African countries, is Nigeria’s finance minister and a former Managing Director of the World Bank.

The new president will still face tough battles with the U.S. and its allies on the Bank’s Board of Directors. But Washington’s loss of control over the World Bank is a huge change that will benefit many millions of people.

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Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

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