Shelley Marshall and Sanjay Pinto, guest bloggers
On Friday, August 10, 2012, in a move that can be seen at least in part as an attempt to counterbalance the selection of an American, Jim Yong Kim, as head of the Word Bank, Jin-Yong Cai, a Chinese national, was announced as the CEO and Executive Vice President of the International Finance Corporation, the Bank’s private lending arm. Two strong developing country contenders—Jose Antonio Ocampo of Colombia, and Ngozi Okonjo-Iweala of Nigeria—had been in the running for the Bank’s top leadership post, and President Obama had earlier mentioned former Brazilian President “Lula” as a strong potential candidate. Many were critical, then, when the US monopoly over the position was maintained.
Since the founding of the two Bretton Woods organizations, the head of the Bank has always been selected by the US, and Europe has always appointed the President of the International Monetary Fund (IMF). Last year’s scandal involving previous IMF chief Dominique Strauss-Kahn raised hopes that the position might go to someone from a developing country—hopes that were dashed with the appointment of another French national, Christine Lagarde (who does have the distinction of being the first female President of either the IMF or the Bank). And, then, this year brought a similar outcome at the Bank.
Unequal country representation at the two Bretton Woods organizations runs deep. In addition to controlling the top leadership positions, Western powers also hold most of the voting power. Recent changes in the vote shares allocated to different countries have begun to reflect the growing influence of middle-income and large developing countries. But, as noted by several contributors to a recent volume on New Visions of Market Governance that we co-edited with Kate Macdonald, further reforms are needed that would make these organizations more fully representative of different countries, including the smallest and poorest ones.
Unequal representation in the Bretton Woods organizations cannot be solved, however, simply by focusing on the vote shares of different countries, or where the leaders of these organizations were born. Yes, there is an important sense in which Jin-Yong Cai’s appointment as head of the IFC expands the representation of the developing world in the Bank’s upper echelons (and, in particular, it helps to consolidate China’s rising profile, with Chinese national Justin Yifu Lin having just completed his term as the Bank’s chief economist). However, given Cai’s background as a top executive with Goldman Sachs, his presence also enhances the already outsized influence of those with backgrounds in the major global investment banks.
In fulfilling its role of lending to the private sector, the IFC has come under criticism in recent years for often promoting private sector growth without ensuring that poor people see significant gains. “Working for a world free of poverty” is a key aim of the Bank, and it has taken some measures in recent years to ensure that the “voices of the poor” are better incorporated into its poverty reduction initiatives (even while coming under criticism for failing to address the broader structural conditions that produce poverty). However, a 2011 report by the Bank-commissioned Independent Evaluation Group (IEG) found that “most IFC investment projects generate satisfactory economic returns but do not provide evidence of identifiable opportunities for the poor.”
It would be unfair to make assumptions about exactly what orientation Cai will bring to his position based purely on his occupational background. It is also wrong to think, however, that appointing leaders from developing countries—including those whose primary job it has been to promote high returns for global investors—will do anything to ensure that the interests of the most disadvantaged people in the developing world are better addressed.
From the standpoint of refocusing the Bank on its stated role in fighting poverty, Jim Yong Kim’s appointment may be considered a welcome development. An anthropologist and physician who has devoted much of his career to expanding healthcare access for poor and disadvantaged people in the developing world, Kim brings a different professional background, disciplinary perspective, and substantive focus than previous Bank Presidents. Still, it remains to be seen whether Kim will push for additional measures ensuring that the voices and interests of poor countries—and poor people within these countries—are more fully incorporated into the Bank’s decision-making processes. Absent further progress along these lines, the Bank’s legitimacy and effectiveness as an organization devoted to fighting poverty will continue to be seriously limited.
Shelley Marshall is a Senior Lecturer in the Department of Business Law and Taxation at Monash University, Australia. She is a graduate in Arts and Law, and in Development Studies from the University of Melbourne and the London School of Economics and Political Science respectively, and has made regular comment in the Australian media about the financial crisis.
Sanjay Pinto recently completed his Ph.D. in Sociology and Social Policy at Harvard University, and will be starting a post-doctoral fellowship at Columbia University’s Committee on Global Thought this fall.
Together with Kate Macdonald, Shelley and Sanjay co-edited New Visions for Market Governance: Crisis and Renewal (Routledge 2012), which considers possibilities for reforming market governance institutions following the recent financial crisis. They also organized a special section of the journal Politics & Society titled “Global Governance Reconsidered.”