Voice

Race to lead the World Bank heats up

We may be in the thick of a presidential race, but on 19th street in Washington the thousands of World Bank employees can be forgiven for being more interested in the significantly more opaque process of selecting a new Bank president.  The term of Robert Zoellick, the Bank's current president, ends later this year. In a fully meritocratic world, a global talent search would be conducted to find a top-notch successor to lead the huge enterprise. In the real world, the Bank presidency has always gone to whomever the president of the United States desires to have the post (Zoellick was George W. Bush's selection to replace his first man at the Bank, Paul Wolfowitz).

The custom that Washington names the Bank president while Europe names the IMF managing director has come under strain in recent years, but there's no sign that it's in immediate danger of collapse. For all the talk of a new, more balanced era in international relations, the emerging powers failed spectacularly last year in challenging Europe's hold on the IMF. France's Christine Lagarde trumped Mexico's Agustín Carstens, the only serious alternative.

The script may well be the same at the Bank. As a formal matter, the United States is the only country with enough voting share to block any candidate it opposes. If the U.S. insists on an American, no coalition of other countries can force the issue. At the moment, there are no signs that the emerging powers are planning to mount a coordinated campaign to pressure Washington into allowing a genuine campaign. Indeed, Bloomberg reports that the Treasury Department is hard at work compiling (tantalizing) names for Obama's consideration, including Larry Summers:

While a Summers nomination may draw criticism from some Democrats who disagree with his past stances on deregulating the financial industry, he has support inside the administration from top officials, including Treasury Secretary Timothy Geithner and current NEC Director Gene Sperling, said one of the people.

Secretary of State Hillary Clinton is also being considered, along with other candidates, said the other person. Both spoke on condition of anonymity to discuss internal White House deliberations.

So the next Bank president will almost certainly be a prominent American. Unless, that is, the Obama administration decides, in a fit of good global citizenship, to renounce its traditional prerogative. Felix Salmon argues that President Obama should do just that:

[G]iving the job to any American is a bad idea. We’re long past the point at which it makes any sense at all that the president of the World Bank should always be an American, and I was quite heartened, back in 2009, when a trial balloon was floated suggesting that Obama might appoint Lula, or Manmohan Singh, to the job. My own favored candidate would be Ngozi Okonjo-Iweala — she should ideally have got the job back in 2007, but better late than never. And accepting it would give her a gracious way of departing her current gig, which doesn’t seem to be going so well.

Obama is the most multilateral president the US has ever had, and as such it makes perfect sense for him to show a bit of modesty with respect to the World Bank. An American has run it since 1946; it’s about time some other nationality got a chance.

I wonder how many Bank employees would agree. The current practice is obviously unfair, and in some cases it has yielded subpar Bank presidents (it's also produced some quite good ones). But the existing custom has one powerful virtue from the Bank's perspective: it keeps the world's leading economic and political power hitched to the institution in a way it might not be otherwise. Having an American at the top of the Bank eases relations with Congress and has generally meant that Bank funding does not get the kind of harsh scrutiny UN funding requests often receive. Just last month, the Congress quietly approved the Treasury Department's request for a general World Bank capital increase. Would a Bank with a Brazilian, Nigerian, or Turkish president get the same treatment?  

The Multilateralist

US insists that an IMF firewall is not needed

As the International Monetary Fund canvasses its member states about boosting the Fund's lending power, the United States is standing by its position that there's no need for an international firewall for the Eurozone. Via Bloomberg:

Europe has the capacity to solve its problems,” the U.S. Treasury said today, reiterating its position. “The IMF cannot substitute for a robust euro area firewall We have told our international partners that we have no intention to seek additional resources for the IMF.”

My guess is that this will be looked back upon as a critical failure of leadership by the world's leading power. Ultimately, it does not matter that Europe should have built a firewall of their own; it only matters that there is a firewall. An administration that came to office committed to restoring America's committment to building coalitions and strengthening multilateralism is failing on what may be the critical test of its first term. Current domestic politics means that nobody is calling them on it, but that won't be much consolation when the crisis hits.