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The World Bank: Changed Actions or Rhetoric?

As Jim Yong Kim takes over as President of the World Bank, Think Africa Press speaks to his predecessor, Robert Zoellick, and Peter Chowla of the Bretton Woods Project.
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Robert Zoellick, the outgoing World Bank President. Photograph by World Economic Forum.

The World Bank, an institution set up to provide loans to developing countries and reduce global poverty, is often criticised in development circles. Much of this is directed at its failed structural adjustment programmes in the late-1980s which broke a trend of state-led development and introduced a market liberal approach. Failure has led to adaptation. The Bank has expanded its remit and expertise to almost every area of development.

Questions remain, however, over whether these changes are fundamental or merely cosmetic and whether the Bank is really concerned with broader issues of mitigating climate change, gender equality and social security.

To answer these questions, Think Africa Press spoke to former World Bank President Robert Zoellick – replaced yesterday by Jim Yong Kim – and Peter Chowla of the Bretton Woods Project, an institution which aims to challenge the power of the World Bank and International Monetary Fund while opening the policymaking space and promoting alternative approaches.

The new president: a healthy change?

On the subject of the recent contest for the World Bank presidency in which US-backed candidate and President of Dartmouth College Jim Yong Kim competed against Nigeria’s Finance Minister Ngozi Okonjo-Iweala, Zoellick told Think Africa Press: “I think that both are highly accomplished individuals but they bring different skills. And having worked with Ngozi Okonjo-Iweala, I have very high regards for her. At the same time, having talked with Dr Kim, I think he brings not only high intelligence and accomplishment, but he has also done some tremendous things on the medical side for the poorest people and I think his skill as a scientist will serve him very well.”

The World Bank has increasingly focused on African development and Zoellick does not see this trend being discontinued just because the African presidential candidate’s bid was unsuccessful. “The Bank’s strength lies in drawing people from all experiences, different cultures, and trying to leverage that to the service of Africa”, he said.

“What I find distinguishes development in Africa today, as compared to maybe ten years ago, is a sense of optimism that Africa can become a future pole of growth in the future global economy. Africa is moving beyond being seen as a case for charity or dependency, to recognising that it has got its own potential.”

Regarding the election of Jim Kim, Chowla argues “the selection process left a lot to be desired, it was far from open, merit-based or transparent”. Yet, he is not necessarily displeased with the result it produced. “Of the two candidates who were left at the end, I think Dr Kim brings a much more interesting and different background to the Bank than Ngozi would have” he says. “She was clearly an establishment, neoclassical economist and she would have come to the Bank and changed very little about its operation and the way it works. And if we think the Bank needs to be reformed, we are probably more likely to see real reform under Doctor Kim.”

What types of reforms does he envision? Chowla explained, “He should hopefully be able to bring some deep reforms to the way the Bank works in social sectors and I trust that he will. The question is whether he will be able to successfully grab hold of the power structures in the Bank which are pushing a lot of the private sector work and preferences to foreign investment.”

Working to change the climate but in whose interest?

Last month’s Rio+20 United Nations Conference on Sustainable Development saw governments, policymakers, NGOs and activists from all over the world gather to discuss multiple issues surrounding sustainable development and climate change. The World Bank’s World Development Report in 2010 has previously emphasised the connections between poverty and climate change.

Some have argued that the Bank’s $3 billion investment in a coal-fired power plant run by the South Africa’s state utility Eskom this April undermines its green credentials. Zoellick defends the project in the name of equity. “If you ask yourself about the 30% of the people…in Africa that have electricity and then you ask how they’re going to grow, I don’t think you’re going to be able to do it totally with alternative energies. The United States produces about 40% of its electricity from coal, and oil and gas are very big in terms of European development, so I think it’s a little unfair of developed countries to say [that]…in Africa, you’re only supposed to use a very limited energy…”

“At the same time there’s a lot that can be done in terms of energy efficiency…There’s a huge amount of money wasted subsidising fuels and gasoline, and yet as you saw in Nigeria or Egypt it is politically very difficult to remove those subsidies.”

Chowla, however, believes the Bank’s emphasis is in the wrong place. “For the 21st century, when we have climate change problems and we need to adapt to climate change worries, we need more off-grid renewables” he says. “This is to allow people to be able to have local energy supplies which are not connected to some big national grid or some big giant power plant. Instead they should have renewable energy that’s available locally, that’s small high-growth solar cells, wind-farms, etc. And these technologies are improving rapidly, but it is also where the Bank’s focus, energy and investment could facilitate them improving even faster, and the Bank could have big added value.”

Instead, Chowla argues, “the Bank is focusing on giant mega projects which all evidence from the past 30-40 years [suggests] don’t benefit poor and rural people; they actually end up benefiting industry.”

Gender equality as “smart economics”

The 2012 World Development Report focuses on gender equality, arguing that while gender equality is important in its own right, it is also “smart economics”. When asked about the relevance of gender equality and the increasing commentary from the Bank on the issue, Zoellick tells Think Africa Press, “I think the evidence is building, and the importance of a gender lens on development was certainly supported by some of the Millennium Development Goals”.

Zoellick continues, “The idea that you would ignore the potential of 50% of your public strikes me as something that this is clearly going to hold you back…In addition to being the right and fair thing to do, it’s smart economics”.

But for Chowla, “asking whether it is smart economics to have gender equality is not the right question. It may be smart economics, but frankly I don’t care if it’s not smart economics, we should be doing it anyway – it’s a human rights issue…The Bank needs to get out of this mindset that we need to do some economic analysis of whether women should have equal rights and to realise that it’s a moral issue and a legal issue more than anything.”

Extending social safety nets

For Zoellick, “one of the lessons coming out of the 1990s is the criticality of effective social safety nets. We are trying to help all countries have some basic social safety net protection. The uncertainty of the world economy is such that you’re not going to control oil prices or food prices, but you can have fiscally responsible steps that protect those that are most vulnerable.”

Zoellick maintains that “achieving macroeconomic stability isn’t enough if the price of that is improper nutrition and children getting thrown out of school because their parents can’t afford the fees”. He refers to the successes of Brazil’s Conditional Cash Transfers, which some consider the best form of social security when giving income support to “the bottom 15% or 20%”. “In return”, he argues “the families send their children to school and get preventative health check-ups”.

For Chowla, the concern is the fact that there emerges an “inequality between those who have got rights and those who are in the informal sector”. “Rather than tying things to labour systems”, he suggests, “what you need is universal social protection systems where you provide benefits and floors to everybody”.

“There’s a reason why people who are worried about issues of justice and equity and issues such as gender equality are worried about these private systems. They end up being tied to formal market participation or the ability to have money and pay in to these systems, and that’s why people focus on the more publicly provided options because you’re pooling risk better and you’re providing more equality, particularly for women or those in the informal sector that may not be able to access the privatised systems.”

Poverty vs. Strategy

Robert Zoellick has a genuine concern for those in the developing world, and sees free market economics as crucial to his endeavours. “My view is that market incentives are important”, he says, “you can decide whether you can have life for free or not, and there’s a lot of ways I think you can help those truly in need, but in a way that’s efficient and effective.”

Chowla says, “Poor people should be directing things themselves. So you need to listen to what poor people have to say…There are two aspects to it; there’s good planning, but there’s also participation, by people who are directly affected.” Responding to Zoellick’s comment about needing to “learn poor people”, Chowla comments, “I don’t think anybody needs to learn poor people, I think poor people need to be empowered to have their voices heard”.

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