CGD President Nancy Birdsall and senior fellow Arvind Subramanian were quoted in a Financial Times article on the World Bank transition.
Robert Zoellick, who on Wednesday announced his departure as president of the World Bank, calmed an institution reeling from the chaotic departure of his predecessor, Paul Wolfowitz, after an ethics scandal.
Yet development experts say that, in a world in which the bank plays less of a pivotal role in providing aid and technical assistance to developing countries, the institution is still looking for a definitive fresh direction.
Nancy Birdsall, director of the Centre for Global Development in Washington, said: “Zoellick was a solid president who steadied the bank after the Wolfowitz fracas and secured new resources.” But she said: “He will most likely be remembered as a transitional president – he has taken the institution back to a place where it can be effective, but it is still searching for a new mandate.”
One of the first indicators of change at the bank will come with the process of selecting Mr Zoellick’s successor, and whether the US wants to assert its traditional de facto authority to nominate the president. Mr Zoellick, a Republican, was in effect appointed by the administration of George W. Bush, and the Obama administration, which was cool on reappointing him, is likely to want a Democrat as a replacement.
Press speculation has focused on Hillary Clinton, secretary of state, and Larry Summers, former White House chief economic adviser and World Bank chief economist, as potential successors. Mrs Clinton has denied that she is interested in the job. Mr Zoellick will step down on June 30.
“The bank has to be more than an institution used by the rich countries when they want to get something done,” Ms Birdsall says. “There are several very good American candidates, but it needs to be an open process”.
In the aftermath of the global financial crisis, as capital flows dried up and the financing pressures on developing countries rose, Mr Zoellick secured the first capital increase for the bank in over 20 years, after a sometimes bruising battle with shareholder countries, and increased contributions to the arm of the bank that gives conditional lending and grants to very poor countries. He also threw open the bank’s vast collection of data to free public use.
Mr Zoellick told the FT on Wednesday that he had pushed to make the bank more collaborative and co-operative: “Part of modernising multilateralism meant moving from a hierarchical system...and trying to fit as a critical node in a network model,” he said.
Yet Ms Birdsall said that the bank, which has increasingly been dwarfed by private capital flows and lending from new official sources such as China, was still searching for legitimacy and a new role. “The machinery of the bank remains capable of churning out its traditional products, largely lending to middle-income countries,” she said. “But it remains a twentieth-century institution”.
The bank has moved towards a more eclectic and less prescriptive approach to development than its traditional focus on economic liberalisation. During Mr Zoellick’s tenure, Justin Lin, a Chinese academic with much more interventionist views than the bank’s traditional position, was appointed chief economist. But outside economists say that the opening up of debate has yet to result in a clear change in bank policy. “Zoellick has contributed to that debate, but it remains open how much concrete action his presidency provided in giving the bank a new direction,” said Arvind Subramanian at the Peterson Institute of International Economics in Washington.
Mr Zoellick also raised some eyebrows inside the bank and the economics profession with interventions on subjects which are more usually the responsibility of the bank’s sister institution, the International Monetary Fund, such as using the gold price as an guide in setting monetary policy – an idea rejected by most monetary economists – and commenting on Germany’s role in the eurozone crisis. “Some of his major public pronouncements have been on subjects other than development issues,” Mr Subramanian said.