Calls to fundamentally change the way governments appoint the heads of the International Monetary Fund and the World Bank have been growing louder in the past decade, and rightly so. But these demands for a merit-based process have failed to overcome America’s and Europe’s grip on a feudal entitlement that suits their interest but is unquestionably outdated and harmful.
Now that it is time to select a new World Bank president, I have the feeling that perhaps some progress may finally be made, not because of the enlightened vision of governments, but due to the courage of some highly-qualified individuals.
First, the bad news. Despite public comments to the contrary, neither America nor Europe appear willing to support a better-functioning and more representative multilateral system. Rather than allow qualifications, transparency and competition to drive the selection process, they have done all they can to maintain a system that overwhelmingly favours them, as it is based on nationality, internal connections and bureaucratic largesse.
The consequences have been especially exasperating and detrimental in recent years. Both the appointment of Robert Zoellick to the presidency of the World Bank and Christine Lagarde last year to the IMF came on the heels of the sudden resignations of prior leaders, which damaged the external standing and internal functioning of these institutions and internal functioning of these institutions. It also highlighted the extent to which the credibility and legitimacy of the new leaders risks being undermined, not by their qualifications, but by the manner in which they are appointed.
If these two institutions were publicly traded companies, their shares would include a huge discount on account of the appalling way in which their chief executives are chosen. Most existing shareholders would be agitating against the minority that exercises undue influence in the selection process. Activists would be looking to get on the executive board to improve governance, enhance due diligence, unlock value and counter brand erosion. The media would be pointing to the companies as examples of crony capitalism
This is where the good news comes in. With key governments appearing still hesitant to reform the process, prominent and courageous experts from the development economics field are taking a public stand and seeking to disrupt the feudal selection process. There is also encouraging talk of other credible candidates from both developing and advanced economies, but they are yet to confirm their interest.
Though not their primary motivation, highly-regarded and unquestionably qualified individuals from across the political spectrum – including Jeff Sachs, the Columbia University professor and director of the Earth Institute, and Mike Spence, the Nobel Prize winner who teaches at New York University and led the work of the Growth Commission – are challenging a system that has failed miserably to reform itself. Rather than wait for their country’s bureaucrats to anoint them, they are bravely stepping forward to express interest and, in the process, are publicly taking on the current selection process.
Such individuals have the experience, talent and knowledge to lead. Unlike some that were granted the post in the past by government largesse, they would not wait to first step into the corner offices and then embark on a steep learning curve. Nor would they hesitate to propose that the two institutions reposition themselves to help member countries better navigate global realignments.
The global economy would be well served if the brave actions of such individuals were to serve as a tipping point. Let us hope that they provide the much-needed catalyst that prompts other qualified and interested candidates to also step forward, that effectively energises emerging countries to support strong candidates, and that forces Europe and the US to finally adopt the type of approach that they have no hesitation in advocating for others: one that is open, transparent, competitive and merit-based.
Call me an eternal optimist, but rays of hope may finally be emerging on an issue that is important for the wellbeing of the global economy.
The writer is chief executive of Pimco. While his name has been suggested by some as a candidate for the World Bank presidency, he has informed the FT that is not interested in being considered