The World of International Organizations Explained

World Bank turnover tests politics of aid

The World Bank in Washington (ARÊTE/John Heilprin)

World Bank President Jim Yong Kim’s surprise departure at the start of February sets up an unexpected test for an international organization at the crux of international development.

The ball is in U.S. President Donald Trump’s court to name a replacement. Kim’s sudden announcement that he will leave his post three years before his term was set to expire has stirred trepidation in the development community.

As the representative of the United States —the largest shareholder in the 189-nation World Bank — Treasury Secretary Steven Mnuchin will work with the bank’s 24-member executive board to pick Kim’s permanent successor.

Based in Washington, the bank is the biggest intergovernmental source of low-cost loans for international development. Americans have headed it since its creation at the end of World War II, but now Bulgaria’s Kristalina Georgieva, who is the World Bank’s first CEO, will step in as interim president. Until 2017, she was a vice president of the European Commission in charge of its budget and human resources.

The bank’s sister lending agency, International Monetary Fund, also based in Washington, provides emergency loans for nations to weather economic crises. The IMF is traditionally led by Europeans; the latest head is France’s former finance minister Christine Lagarde.

The World Bank and IMF are so-called “Bretton Woods” institutions, because they were set up to rebuild postwar Europe and promote international cooperation at a U.S.-led meeting of 43 nations at Bretton Woods, New Hampshire in July 1944. Since that time, and especially in the 21st century, their missions have shifted to focus more on development and poverty.

Not surprisingly, the patterns of American and European leadership have been an affront to non-Western nations, particularly China and other Asian leaders, even with Kim’s dual national status as a Korean-American medical doctor and anthropologist. He worked as a professor at Harvard Medical School and served as president of Dartmouth College.

“It was high time the president of the World Bank was selected among the most qualified candidates anywhere, rather than among qualified American candidates,” said Turkish economist Dani Rodrik, a professor at Harvard’s John F. Kennedy School of Government and president-elect of the Barcelona-based International Economic Association. “With Kim’s resignation during Trump’s tenure, I fear we will get a non-qualified American candidate.”

Soon after starting his first term in 2012, as then-U.S. President Barack Obama’s pick to lead the World Bank, Kim told the board of governors at the World Bank and IMF annual meetings in Tokyo that it was “time for us to write the next chapter in our evolution: it is time for us to become a ‘solutions’ bank.”

“We must listen, learn, and partner with countries and beneficiaries to build bottom-up solutions,” he said in a speech. “This is how we will increase our relevance and our value in today’s and tomorrow’s global economy.”

Before his reappointment to a second term, which would have expired in June 2022, the board insisted on creating Georgieva’s role as CEO to run the bank’s day-to-day operations. Kim was rumored to be job hunting since then. In his departure note to staff, Kim said partnering with business was key to closing a gap on developing countries’ financing needs.

“I have therefore decided that it’s time for me to take on new challenges and fully focus my efforts on leveraging private finance for the benefit of people around the work,” he wrote.

The private role

Kim’s surprise announcement caught veteran observers like development economist Justin Sandefur, a senior fellow at the Washington-based Center for Global Development, off guard.

“Fascinating that Kim is leaving to work in private finance. He’s pushed the idea at the [World Bank] that more money is what matters — contra most bank staff who see policy advice as its core product — and private finance is where the money is,” said Sandefur.

“Though they disagree enormously on the details, the fetish of finance links the left and right in lots of development debates,” he said. “Faith that more cash will solve problems.”

Kim led the World Bank’s adoption of twin goals: working to end extreme poverty by 2030 and boosting shared prosperity focused on the bottom 40 percent of the population in developing countries. “These goals now guide and inform the institution in its daily work around the globe,” according to a World Bank statement.

In a TED talk, Kim credited smartphones and the Internet — backbone of the new digital economy — with helping fuel development aspirations of shared prosperity around the globe.

His emphasis on the private sector, also a top priority of the Trump administration, would seem to be at odds with the bank primary mission: in the past year, it lent $64 billion to developing countries and it plans to invest $200 on fighting climate change over five years.

Kim is leaving to join an undisclosed private infrastructure investment firm. During his tenure, the bank responded to the Ebola epidemic and migration crises in Europe, the Middle East and Africa. Kim also is rejoining Partners in Health, a U.S.-based international organization he co-founded, which works to improve health care in the least wealthy nations.

“I feel like I have brought the preferential option for the poor to the World Bank Group,” he said.

Negotiations over the bank’s future could touch off more international tensions, given Trump’s repeated and emphatic dismissal of the importance of leading multilateral institutions, including the role of foreign aid, and of the science behind climate change.

But his administration, after some resistance, supported giving the bank a $13 billion capital increase last year, as long as it agreed to lower its lending to China, which, despite its status as a major economy, is still counted among the ranks of developing nations that get aid.

Fish drying on racks at a beach in Gujarat, India (Arête/Nevil Zaveria)

Critical voices

The World and IMF say their approach to lending is geared towards increasing social protections, which are those policies meant to protect and help the poorest and most vulnerable populations, including people who are young and old, disabled, unemployed or ill.

But some critics say the organizations undermine social protections and serve as debt-burdening tools of industrialized nations, imposing too many conditions on loans they provided to developing nations.

“Although the World Bank and IMF argue that their approach to social protection is pro-poor and progressive, in reality, the opposite is the case,” said Stephen Kidd, CEO and senior social protection specialist at U.K.-based Development Pathways.

“Not only are the majority of those living in poverty likely to be excluded as a result of their policy advice,” he said in an article published by Bretton Woods Project, a London-based watchdog group, “there is a danger that both institutions may, ultimately, undermine democracy while weakening economic growth and national social cohesion, a dangerous tactic in an increasingly uncertain world.”

A case before the U.S. Supreme Court has become grounds for a closer examination of the immunity rules that international organizations are widely granted on the basis that staff need protection from courts to fulfill their missions independently.

Justices are deciding if the World Bank Group’s financial lending arm, the International Finance Corporation, or IFC, has the same immunity as nations. They heard the case on October 31 and are expected to issue an opinion by next summer.

The case was brought by villagers who live near a power plant in Gujarat, India that was built with IFC’s help and want to hold it accountable for discharges of hot water and coal ash that damaged their local fishing and farming livelihoods. The hot water polluted their drinking and irrigation water, and the coal ash contaminated their crops and fish laid out to dry.

On the health front, the Los Angeles-based AIDS Healthcare Foundation said it welcomed Kim’s resignation, because the leadership change offers a chance for the bank to rethink how it classifies nations’ status by wealth and to ensure those in need get the most help they can.

“As someone who has often touted his roots in the activist community, Jim Kim’s refusal to change the World Bank’s unfair and immoral definition of middle income countries is a terrible disappointment and a missed opportunity,” said AHF’s President Michael Weinstein.

For the past five years, AHF’s “Raise the MIC” campaign called on the World Bank to classify all places where people earn just a few dollars a day as low income instead of middle income countries, which pay higher prices for medicine and other development aid despite being home to 75 percent of the world’s poorest and two-thirds of people globally living with HIV.

“Developing countries throughout the world are struggling to provide medicines and healthcare to people who are dying every day from diseases that are 100 percent treatable and preventable, like HIV/AIDS and TB,” Weinstein said. “It’s time for someone to take the helm at the World Bank who will ensure vital support gets to the people who need it most.”

The world of international organizations explained.

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