11 March 2012

The World Bank: Economists Need Not Apply

As the backroom deals are no doubt coming to a conclusion as to who will be the new World Bank president, is it too much to ask for a transparent search and selection process? If FAO can develop a shortlist of DG candidates who state what they would do if elected then so can the World Bank.

Interestingly this laughable state of affairs--the champion of good governance not having an open and transparent contest to find the best person--does not make it onto the World Bank President website (not a World Bank web site by the way) which asks readers to vote for Bank reform priorities (10 options are given with an 11th "other" category: climate finance, extractive industries, improved democracy and accountability at the Bank--but not leadership appointment processes--human rights, gender, land grabs, Doing Business indicators, IFC investment through tax havens and IFC investment in hedge funds).

Writing in the Financial Times, Ian Goldin (a former VP at the Bank and Director of the Oxford Martin School at Oxford University) has a go at the Bank on the appointment process for the next President, but also for its increasing "irrelevance".
Says he, it is failing to (1) focus on the medium and long term future (what about a World Development Report on "The Future of Development"?), (2) reform itself to meet global public goods challenges, (3) give advice and guidance on how to shock proof the world economy, (4) grapple with how to help so-called medium income countries deal with mass poverty, and (5) to take more risks, admit failures and be more humble about success (although this seems to me to be a tendency in all organisations.

Danny Leipziger, another former World Bank VP (what is it with these guys?) and Chair of the Growth Commission, also writing in the FT, agrees with Goldin, but says that much of this failure to keep up is due to its abolition of the staff tenure system and an over-reliance on outside consultants for intellectual leadership.I'm most sympathetic to Goldin's point about the Bank failing to do more to systematically understand different development futures (although we should note that this is precisely what Goldin's institute is set up to do). Despite what Leipziger says, the Bank has the intellectual heft to do this.

The Bank, given its ambition to remain at the cutting edge of thinking, should probably have an incubator/innovation/hothouse unit. Some might argue that the WDRs serve this purpose, but WDRs are a crystallisation of existing knowledge, framed in a particular way. It is not the place for speculation, risk taking or flights of (even educated) fancy.

But for me the most transformative thing the Bank could do is to reduce its reliance on economists.

Don't get me wrong, economists are wonderful (I am one, hence the bias), but so too are political scientists, sociologists and anthropologists. Economics was severely damaged by the global financial crisis ("truth versus beauty" and all that). It is good that Justin Lin, the Bank’s chief economist, is reflecting so actively on economic assumptions and the role of the state, but other disciplines also have a lot to offer to better ground economics in reality and to offer new realities.

There needs to be a better disciplinary balance throughout the Bank—in research and operations. The policy environment needed to incentivise "growth that we want rather than the growth we get", for example, is not going to be achieved by an exclusive reliance on economists. We need to understand how the rules of the growth game are set and modified if we want growth that better reduces poverty, growth that includes those on the margins of society, growth that better avoids environmental externalities and growth that disincentivises corruption. These rules of the game are rooted in norms, culture, history and many “noneconomic” (i.e. human) behaviours and are best understood and evolved by coalitions of disciplines working together.

Just think how high the marginal returns to hiring more non-economists would be.

You may call me a dreamer, but I’m not the only one, etc.


Anonymous said...

More "non-transparency" from the World Bank - until recently bidders for World Bank projects used to be informed of their technical scores, and then invited to the opening of commercial proposals. Feedback would also often be provided on the strengths and weaknesses of a bid. Now scores are no longer available and there is no systematic feedback.

Lawrence Haddad said...

Dear Anon... that is distressing to hear... these are basic things that the Bank needs to get right if it is not to shoot its loftier aspirations in the foot...best

Mauricio Bellon said...

I cannot agree more with your view of hiring more diverse social scientists with different lenses and not just more economists. Actually, I have always been very interested in the idea of having historians to look at impact (particularly in the CGIAR). BTW, what do you think would be the counterfactual for the French Revolution? ;-)