An ethical bank?

The World Bank tries to reinvent itself.

The World Bank – the globe’s largest anti-poverty agency – has a new chief. Jim Yong Kim, an activist doctor whose five-year term began on 1 July, will have his work cut out for him. Running the 9,000-employee development powerhouse has always been one of the toughest jobs in the world, and a successful bank chief must be in almost equal measures a diplomat, financier and intellectual.

How to lift people out of poverty – the Bank’s main mission – remains one of the enduring mysteries of modern economics. A vast body of research and experience fails to provide any simple lessons. Like his 11 predecessors as Bank president, Kim will need considerable diplomatic poise. The organisation has 188 member nations all wanting a say in how it works. With a loan book of roughly $200bn, it is a formidable financial institution. Last year alone it committed $57bn to developing nations.

As if this were not challenge enough, the World Bank has gone through something of an identity crisis in recent years. Not long ago it was the biggest single source of lending for many poor countries, funding everything from massive dam and road projects to health and education plans. Recently, however, some of its most reliable clients – notably China and India – have become less reliant on its largesse. Meanwhile, the World Bank is left with crisis-ridden states like Sudan and Haiti, some of the hardest nations to assist. As its financial importance shrinks, the World Bank has needed to forge a new role.

At the heart of the Bank’s soul searching is a surprising statistic. Despite a global recession and surging food prices, poverty has been falling in all parts of the globe for the first time since the World Bank started collecting figures in 1981. In 2010 the number of people living on less than $1.25 a day – the Bank’s definition of extreme poverty – was about half the level it was in 1990. As a result, the world hit the United Nations’ target of halving poverty between 1990 and 2015 five years ahead of schedule. The share of the world’s population below the poverty line has plunged from 43 per cent in 1990 to 22 per cent in 2008.

The biggest progress has been made in China. This nation alone has managed to lift 660 million out of poverty since 1981. But China is not the only nation to be making economic progress. Developing nations through Asia, Africa and Latin America have been enjoying far faster rates of economic growth. "The reward has been ready access to international capital markets, which has meant that World Bank money is less important," says Claudio Loser, a former director of the Western Hemisphere for the International Monetary Fund. Last year the Bank’s net funding for middle-income countries, such as Turkey, was a mere $8bn. That compares to $910bn in private inflows into emerging markets in the same year, according to the Institute for International Finance.

 Dr Kim takes over an institution in flux. Its financial heft has failed to keep pace with expanding global capital flows. It is also less likely to be able to boss poor nations around than it did in the past. Nonetheless, the Bank remains the globe’s leading source of expertise on development. While extreme poverty appears to be retreating, over 2bn people still struggle to meet their basic needs. A dynamic World Bank is as necessary as ever.

This article can be read in full in economia.


Jim Yong Kim, Photograph: Getty Images

Christopher Alkan

Photo: Getty
Show Hide image

Brexiteers want national sovereignty and tighter borders – but they can't have both

The role of the European Court of Justice is a major sticking point in talks.

Why doesn't Theresa May's counter-offer on the rights of European citizens living and working in Britain pass muster among the EU27? It all comes down to one of the biggest sticking points in the Brexit talks: the role of the European Court of Justice.

The European Commission, under direction from the leaders of member states, wants the rights of the three million living here and of the British diaspora in the EU guaranteed by the European Court. Why? Because that way, the status of EU citizens here or that of British nationals in the EU aren't subject to the whims of a simple majority vote in the legislature.

This is where Liam Fox, as crassly he might have put it, has a point about the difference between the UK and the EU27, being that the UK does not "need to bury" its 20th century history. We're one of the few countries in the EU where political elites get away with saying, "Well, what's the worst that could happen?" when it comes to checks on legislative power. For the leaders of member states, a guarantee not backed up by the European Court of Justice is no guarantee at all.

That comes down to the biggest sticking point of the Brexit talks: rules. In terms of the deal that most British voters, Leave or Remain, want – a non-disruptive exit that allows the British government to set immigration policy – UK politicians can get that, provided they concede on money and rules, ie we continue to follow the directions of the European Court while having no power to set them. Britain could even seek its own trade deals and have that arrangement.

But the problem is that deal runs up against the motivations of the Brexit elite, who are in the main unfussed about migration but are concerned about sovereignty – and remaining subject to the rule of the ECJ without being able to set its parameters is, it goes without saying, a significant loss of sovereignty. 

Can a fudge be found? That the Article 50 process goes so heavily in favour of the EU27 and against the leaving member means that the appetite on the EuCo side for a fudge is limited. 

But there is hope, as David Davis has conceded that there will have to be an international guarantor, as of course there will have to be. If you trade across borders, you need a cross-border referee. If a plane goes up in one country and lands in another, then it is, by necessity, regulated across borders. (That arrangement has also been mooted by Sigmar Gabriel, foreign minister in Angela Merkel's government. But that Gabriel's centre-left party looks likely to be expelled from coalition after the next election means that his support isn't as valuable as many Brexiteers seem to think.)

On the Conservative side, a new EU-UK international body would satisfy the words of May's ECJ red line. On the EU27 side, that the body would, inevitably, take its lead from the treaties of the EU sans Britain and the ECJ would mean that in spirit, Britain would be subject to the ECJ by another name.

But it comes back to the Brexit dilemma. You can satisfy the voters' demand for non-disruptive control of British borders. You can satisfy political demand for sovereignty. But you can't have both. May – and whoever replaces her – will face the same question: who do you disappoint?

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.

0800 7318496