Jim Yong Kim assumed office as the World Bank's 12th president in July 2012. While he was born in South Korea, he is a naturalised American citizen, thereby sustaining the almost 70-year-old tradition of an American national heading the World Bank (henceforth "the Bank"). The same continuity has been sustained across 19th Street in Washington, with the International Monetary Fund (IMF) being led by a European - currently a French national, Christine Lagarde.
In a tradition that is almost as well established, after a year of study and consultation, Mr Kim announced in September a sweeping reorganisation of the Bank, together with promised budget cuts and wholesale staff realignment. All this has been presented as part of a revised strategy* in support of two overarching goals, which are breathtaking in their ambition. They are nothing less than to "end" extreme poverty by 2030 (per capita household income below $1.25 a day at 2005 purchasing power parity); and to boost shared prosperity for the bottom 40 per cent in all developing countries irrespective of income level. The Bank's management is clear that this is intended to include "strong concerns for equity". This takes the Bank even deeper into the realm of domestic politics, something it has already confronted in the area of corruption. It will be interesting to see how it equips itself to deal with these new challenges.
The strategy argues that the Bank's current structure is no longer "fit for purpose" and needs a radical overhaul. While clients are increasingly looking to the Bank for global best practice, the Bank's current structure traps most of the technical expertise in regional pools. This is to be addressed by regrouping some 4,000 of the institution's technical staff into "global practices" over the course of the next year. Achieving the right balance between central and local is, of course, a time-worn challenge for all matrix organisations, and there is no perfect or correct answer. Consulting firms make their living by telling organisations that it is time for the pendulum to swing once again, and it is little surprise that McKinsey has been brought in to advise and assist in this latest upheaval.
At this point I must show my hand. Some, but perhaps not all, readers are perhaps aware that I began my career at the World Bank. This was under the presidency of Robert McNamara. I am sufficiently mature to remember McNamara's reorganisation of 1972. The premise underlying that reorganisation (also under the guidance of McKinsey!) was the polar opposite of the Kim revolution. The Bank that McNamara had inherited from his predecessor, George Woods, was a "projects" Bank, dominated by engineers applying a set of uniform rules enforced by a powerful Central Projects Staff. At least by its own assessment, it was a world-class repository of project skills.
McNamara was appointed in 1968 by US President Lyndon Johnson. He took the larger part of his first five-year term to decide on a direction for the institution. He concluded that transforming the Bank into a development institution required a strong country focus. This was so that the Bank could be a sensitive, informed and authoritative source of advice to the top leadership of its borrowing members, and so that projects could be embedded in a supportive policy framework - both macro and sectoral.
It is this set of impulses that has propelled the Bank in the intervening four decades, culminating in radical decentralisation to field offices in the mid-1990s under James Wolfensohn. The McNamara era also marked the beginning of the Bank's commitment to poverty reduction and to research and knowledge, both themes that have endured and have shaped the global dialogue on development. At least to an interested outsider such as me, the Kim reorganisation seems eerily like a return to the strengths and weaknesses of the pre-McNamara era. Time will tell.
These moves by Dr Kim prompt several reflections. The first is bemusement at the institution's sustained penchant for self-flagellation. By most accounts, the task that the Bank has been assigned has gone rather well, certainly better than the discharge by the IMF of its mandate. Global poverty is sharply down; a once hopeless Africa is booming; and developing and emerging markets now account for almost half of global output. You would imagine that the Bank would be moved to take some of the credit. Instead, in his speech to the governors at the recently concluded Annual Meetings in Washington, Mr Kim chose to shine the spotlight on the frustrations of both staff and clients.
One also needs to consider the costs and unintended consequences of sweeping organisational change. When Mr Wolfensohn took over the presidency of the Bank in 1995, he expressed the view that much of the malaise afflicting the staff could be blamed on well-intentioned but poorly implemented organisational change. At a minimum, each such reorganisation involves a great deal of downtime. The contrast with the IMF is instructive. Its basic structure has not changed in the 40 years that I have known the organisation. Yet, in its Annual Meetings issue last month, the trade journal The Banker had a cover story on the "IMF Dream Team". The editor, Brian Caplen, positively gushed: "there is greater transparency and openness … the institution has become more self-critical and willing to consider a broader array of policy options than in the past." This a mere two years after Ms Lagarde took office, showing that change can occur without bloodletting on an industrial scale.
My third and final observation has been about the curious lack of interest on this matter in India. Scanning the Indian press from afar, I saw little comment - positive or negative - on the reorganisation from either editors or government officials. The general attitude appears to be that the Bank is an irrelevant organisation, so why bother. Personally, I feel this is a mistake. Throughout its history, the Bank has been shaped by its interaction with India and this will continue for the foreseeable future. It behoves India to take an equivalent interest in the reshaping of the World Bank.
* Development Committee document DC2013-0009
("World Bank Group Strategy", September 18, 2013 )
The writer is chief economist, Shell International.
Views are personal
("World Bank Group Strategy", September 18, 2013 )
The writer is chief economist, Shell International.
Views are personal
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
