As Ajay Banga becomes World Bank president, this is where he can start

The world needs international financial cooperation. Banga can draw lessons from how John Maynard Keynes and Harry Dexter White to provide intellectual leadership to the World Bank

The nomination of Ajay Banga, a distinguished Indian private sector manager, by US President Joe Biden for the post of World Bank president has created only a mild stir in India. In the past, it would have been a major event to be celebrated as an important achievement of the country itself. Now no one cares very much. 

Indeed, no one cares very much for the World Bank itself. Its decline as the most important source of dollar finance for projects in developing countries started nearly 30 years ago as private capital flows across borders slowly overtook official flows. 

By the end of the 1990s, it was clear that the World Bank era in project finance was over. Even attempts by the Americans to reform it so that it could continue to serve as a tool of US foreign policy have, for all practical purposes, been given up. 

Its main attraction now is that its employees don't have to pay income tax. Nor does anyone who receives any kind of fees from it. True, some economists still find something to do there — no one knows how usefully — but those aren't the sharpest tools in the shed. Only high-profile jobs attract talent. 

Much the same can be said of the Asian Development Bank and the more recently set up Asian Investment and Infrastructure Bank, which was sponsored by China some years ago. They may not even have the tax exemption available.

Now, is this a good thing or a bad thing? Does the world need such institutions? The answer depends on who you ask. 

But everyone agrees on two things: one, that when they lend, these institutions must compete on interest rates in such a way that private capital has a proper fight on its hands and two, that they must not be used to further political and foreign policy causes. The notion that he who pays the piper calls the tune will not rekindle the trust that the World Bank and the Asian Development Bank have lost, and the Chinese clone never garnered. 

A recent book by Paul Tucker, a much respected Harvard professor who was tipped to be the governor of the Bank of England in 2010 or thereabouts, has emphasised the need for altruism in global cooperation. The book is "Global Discord: Values and Power in a Fractured World Order". The current global tensions, he says, are too many, too varied and too unpredictable. 

Unless the big countries decide to cooperate selflessly, he writes, the world is in for a high jump, similar to the one in the late 1930s when the Second World War started. One important aspect of the cooperation that's needed is financial. 

So how should at least the World Bank and the Asian Development Bank, if not the Chinese startup, be reformed? This is where Mr Banga has to provide intellectual leadership. He needs to come up with some solid and workable suggestions. 

If nothing else, it will at least serve to slowly create international financial cooperation — based largely on a global commons view of the world — back into the discussion. This was exactly how John Maynard Keynes and Harry Dexter White approached the issue during 1944-46. 

National aims were, by and large, subordinated to global objectives. It's a footnote of history that both were market-friendly left-wing intellectuals. 

That's the playbook on which professor Tucker depends. It was premised on an old adage: if we don't hang together, we will hang separately. It should become the starting point of Mr Banga's efforts.