Ocampo: Applying Lessons from Development Experience

April 8, 2012

Project Syndicate: Jose Antonio Ocampo

The World Bank: Applying Lessons from Development Experience

by José Antonio Ocampo (04-04-12)

José Antonio Ocampo, former United Nations Under-Secretary-General for Economic and Social Affairs and former Finance Minister of Colombia, is Professor and Member of the Committee on Global Thought at Columbia University.

I have been honored by World Bank directors representing developing countries and Russia to be selected as one of two developing-country candidates to become the Bank’s next president. So I want to make known to the global community the principles that will guide my actions if I am elected – principles based on lessons learned from development experience.

That experience has taught me that successful development is always the result of a judicious mix of market, state, and society. Trying to suppress markets leads to gross inefficiencies and loss of dynamism. Trying to do without the state leads to unstable and/or inequitable outcomes. And trying to ignore social actors that play an essential role at the national and local levels precludes the popular legitimacy that successful policymaking requires.

Indeed, the specific mix of markets, state, and society should be the subject of national decisions adopted by representative authorities. This means that it is not the role of any international institution to impose a particular model of development on any country – a mistake that the World Bank made in the past, and that it has been working to correct. Because no “one-size-fits-all” strategy exists, the Bank must include among its staff the global diversity of approaches to development issues.

Development is a comprehensive process that involves economic, social, and environmental dimensions – the three pillars of sustainable development.

And, frankly, I have concerns about some of the World Bank’s views and priorities in recent decades. For example, while the Bank has made important contributions to the nurturing of deep financial sectors, it still has much to learn about financial inclusiveness and the role that well designed development banks have played in fostering sustainable and inclusive growth in countries around the world. We should never forget, in this regard, that the World Bank is itself a global public-sector development institution.

The Bank contributed significantly in its early decades to the development of high-quality physical infrastructure, a critical area that, unfortunately, was later marginalized. The return of this issue to the center of the Bank’s focus is a welcome development.

Above all, I believe that economic development should be viewed as a process of persistent structural change, which, if successful, supports constant technological upgrading of production and trade. This approach was central to the World Bank’s activities up to the 1970’s, and, while it has been partly revived, it is still far from being incorporated into the Bank’s operations.

The goal of development is greater and more equitable human welfare. Human development is about much more than the generation of human capital: it is essentially about expanding the scope of human freedom. And that can be achieved only with universal education, health care, and social protection.

Targeting can be a useful instrument of universal policies, but it can never serve as a substitute for them. Likewise, social protection goes beyond the narrow concept of the “social safety net” that has dominated debate in recent decades. The concept of the “social protection floor,” recently proposed by the Bachelet Report (produced by the International Labor Organization under the leadership of former Chilean President Michelle Bachelet) provides better intellectual grounding.

Equity and inclusiveness require placing the advancement of the poor and other marginalized groups at the center of development specialists’ concern. In particular, gender equality deserves special attention, an approach that the World Bank today rightly characterizes as smart economics.

Guaranteeing these objectives is not just about compensating for market outcomes and social forces that generate or reproduce inequalities. It is also about incorporating these objectives into economic policymaking, by placing the creation of fulfilling jobs and well-developed welfare institutions at the center of the economic agenda, and by respecting the role of cultural diversity in economic development.

This approach also applies to the environmental pillar of development: intervention to counter damage generated by the economy is not enough. Environmental concerns must be fully assimilated into economic policymaking – that is, into the incentive structure that drives decisions. Only then can economic development be made compatible with the contributions that developing countries must make to mitigating climate change and preserving our planet’s remaining natural forests and biological diversity.

The World Bank’s capacity to contribute to achieving these goals depends on it remaining a true global institution with a special responsibility vis-à-vis the world’s poorest countries and a commitment to helping middle-income countries face their own challenges. It must count on the vision and contributions of more advanced nations, as well as those of emerging powers. And it must do so as part of the system of global governance, strengthening its cooperation with other multilateral organizations, in particular those in the United Nations system and regional and subregional development banks.

These are the development principles and priorities for which I stand. If elected to head the world’s leading development institution, I will work with all of its members to fulfill them.

On Obama’s Nominee for Presidency of The World Bank

March 29, 2012

Project Syndicate: Sachs on Obama’s World Bank President Nominee

On Obama’s Nominee for Presidency of The World Bank

by Jeffrey D. Sachs (03-27-12)

Jeffrey D. Sachs is a Professor at Columbia University, Director of its Earth Institute, and a special adviser to United Nations Secretary-General Ban Ki-Moon. His work focuses on economic development and international aid, when he was Director of the UN Millennium Project from 2002 to 2006. His books include The End of Poverty and Common Wealth.

Last month, I called for the World Bank to be led by a global development leader rather than a banker or political insider. “The Bank needs an accomplished professional who is ready to tackle the great challenges of sustainable development from day one,” I wrote. Now that US President Barack Obama has nominated Jim Yong Kim (Ph.D.) for the post, the world will get just that: a superb development leader.

Obama has shown real leadership with this appointment. He has put development at the forefront, saying explicitly, “It’s time for a development professional to lead the world’s largest development agency.”

Kim’s appointment is a breakthrough for the World Bank, which I hope will extend to other global institutions as well. Until now, the United States had been given a kind of carte blanche to nominate anyone it wanted to the World Bank presidency. That is how the Bank ended up with several inappropriate leaders, including several bankers and political insiders who lacked the knowledge and interest to lead the fight against poverty.

In order to break this tradition, and to underscore the critical importance of putting a development leader in charge of the Bank, I entered the campaign myself, and I was deeply honored by the public support that I received from a dozen countries, and by the private support of many more. Kim’s nomination was a win for all, and I was delighted to withdraw my candidacy to back him.

Kim is one of the world’s great leaders in public health. He has worked with another great public-health leader, Paul Farmer, to pioneer the extension of treatment for AIDS, tuberculosis, and other diseases to the world’s poorest people. More recently, he has been President of Dartmouth College, a leading American university. He therefore combines professional expertise, global experience, and considerable management know-how – all perfect credentials for the World Bank presidency.

I have worked closely with Kim over the years. He is a visionary, seeing the possibility of providing care where none is yet available. He is bold, ready to take on great challenges. And he is utterly systematic in his thinking, designing new protocols and delivery systems for low-income communities. He led the effort by the World Health Organization to scale up AIDS treatment for people in low-income countries, and he did an exemplary job.

The US appointment is not the end of the story. The World Bank’s 25 Executive Directors, representing 187 member countries, must now confirm the choice from among three nominees. He faces a challenge from Nigeria’s esteemed Finance minister, Ngozi Okonjo-Iweala, and Colombia’s former Finance Minister, José Antonio Ocampo. Yet Kim is the overwhelming favorite to get the position, especially given his stellar global record of accomplishment.

The past month has brought other reminders of why the Bank counts so much, and why I emphasized the urgent need to professionalize its leadership. Tragically, the government of Mali was overthrown in a military coup. Ironically, an election was scheduled for this spring, so the country was to have a new government soon.

I link the coup and the World Bank for the following reason: Mali is yet another example of a country where extreme poverty, hunger, disease, drought, and famine cause political instability and violence.

I know the country well. Indeed, the Earth Institute (which I direct) has a large office in Mali. Several years ago, Mali’s government appealed to me for help to fight the country’s worsening poverty. I tried to rally global support for Mali, but the Bank and others barely responded. They did not see the dangers that were so evident to all of us working in villages around the country.

Of course, poverty is not the only cause of Mali’s instability. Ethnic divisions, the extensive market in weapons, spillovers from Libya’s violence, and other factors have played a large role. But, around the world, poverty is the basic condition that accelerates and intensifies violence.

This year’s drought made a bad situation in Mali much worse. I have been saying and writing for years that the dry land regions stretching West to East – from Senegal to Mali, Niger, Chad, Sudan, Somalia, Yemen, Iraq, Iran, Pakistan, and Afghanistan – are a growing tinder box, where climate change, drought, hunger, and population growth are creating ever greater instability.

That instability erupts into war with terrifying frequency. As a development specialist working on the ground in the dry lands, I know that no military solution can stabilize this vast region as long as people remain hungry, face famines, lack water, and are without livelihoods and hope. Sustainable development is the only path to sustainable peace.

The US government is finally waking up to this new and frightening reality. An assessment by America’s intelligence agencies, released in February, argues that, “during the next 10 years, water problems will contribute to instability in states important to US national security interests.”

Of course, not only US security is at stake; so are global security and the survival and well-being of vast numbers of people. And there is no need to wait for the coming 10 years: the grim reality predicted in the report is already with us.

All of this underscores the importance of the World Bank and Kim’s role at the helm. The Bank can be where the world convenes to address the dire, yet solvable, problems of sustainable development, bringing together governments, scientists, scholars, civil-society organizations, and the public to advance that great cause. This is a global imperative, and we can all contribute to fulfilling it by ensuring that the World Bank is an institution truly for the world, led with expertise and integrity. Kim’s nomination is a tremendous step toward that goal.