President Obama’s nomination of College President Jim Yong Kim to head the World Bank is a politically brilliant, innovative and risky move. The World Bank and its sister organization, the International Monetary Fund, were created in nearby Bretton Woods, N. H. after World War II to promote economic development and financial stability. Both institutions act like a credit union in which the 187 member countries contribute to the capital base (a “quota” based on their share of world gross domestic product) that is subsequently loaned out and repaid on a revolving basis.
As a former IMF staff member for 10 years and a Fund consultant since coming to Dartmouth, I have witnessed the delicate political balancing act that the World Bank and the IMF play between the countries that provide the resources and the countries that use the resources. Kim will need to be a liaison between these two groups, which are evolving with changes in the structure of the world economy.
Wealthy, advanced countries currently provide the majority of the World Bank’s funds. The bulk of the Bank’s $50-60 billon annual loans goes to projects and programs that help developing countries in such areas as education, health, infrastructure, agriculture, water and energy. The Bank’s annual lending is a drop in the bucket compared to the estimated $1 trillion in global private capital flows, but it is still critical for many poor developing countries, which receive World Bank grants and loans at concessional rates and terms and might not otherwise qualify for private loans. The Bank also provides important technical expertise ranging from governance and business regulations to education, health and everything in between.
If his nomination is approved, Kim will play a key role in helping the Bank achieve an $85-billion expansion in its capital base, which will increase its lending capacity. Kim’s experience in fundraising for Dartmouth and for Partners in Health, as well as in navigating the international bureaucracy at the World Health Organization, should help in this endeavor. At Dartmouth, we have seen firsthand how Kim can inspire students and alumni, which has contributed to his success in expanding the College’s endowment. His experience with the difficult task of reorganizing the staff and containing costs in the aftermath of the financial crisis to close Dartmouth’s $100-million budget deficit should also be invaluable.
If confirmed, Kim will need to demonstrate to the World Bank’s primary donors that he can run the large bureaucracy in an efficient and cost-effective manner. The Bank’s own staff of over 5,000 could benefit from a new approach and a dynamic leader, although previous incoming Bank presidents have been thwarted in their efforts to reform the institution. People who have worked closely with Kim have noted that he is a “can-do” person who leads by setting direct and ambitious goals and pushing against bureaucratic hurdles. We will see whether he can successfully traverse the high politics at the World Bank and change or redirect a very entrenched institution.
Somewhat surprisingly, Kim would also be one of the first World Bank presidents with substantial direct experience working in developing countries. Thus far, Kim’s professional focus in developing countries, and indeed here at Dartmouth, has been on health care issues and reform. By contrast, the Bank has a much broader portfolio. Kim’s relatively narrow emphasis on global health is the primary risk to his appointment. The danger will be that Kim could fall back on his comfort zone and emphasize the area of health care where he has technical expertise at the expense of other important areas for economic and social development.
Another related concern is that he lacks experience and background in economic and financial policies. As World Bank president, Kim will need to clearly demonstrate good policy judgment across a range of development issues upfront in his tenure, which will probably involve relying on the advice of his cadre of vice presidents and directors who have considerable experience in the policy areas. However, Kim’s scientific approach to evidence-based analysis should reinforce his ability to make good policy decisions and aid in his transition to the Bank’s empirical approach to policy.
Despite these risks, the nomination is a shrewd political move. In recent years, emerging giants like China, India and Brazil have pushed to have more of a say in the operations of the IMF and the World Bank, which have been dominated by the United States and Western Europe since their inception.
Traditionally, the IMF managing director has been a European, while the World Bank president has been an American, chosen by a process where the voting power is based on a country’s share of world GDP. With the appointment of the French Finance Minister Christine Lagarde to the IMF last year, pressures have been mounting for a candidate from the group of countries that have been driving world growth in the past decade to be put at the helm of the World Bank. As a Korean born Asian-American with development experience across Asia, the Western Hemisphere and Africa, Kim has already been able to rally support across the world’s emerging markets.
Kim’s appointment as World Bank president would add to Dartmouth’s growing prominence in the policy realm. Perhaps this is the opportunity to which Kim referred in his oft-cited quote from Dartmouth President John Sloan Dickey ’29: “The world’s troubles are your troubles … and there is nothing wrong with the world that better human beings cannot fix.”