The Hindu Business Line : Chancellor Gordon Brown for the World Bank?

THE term of the World Bank President, Mr James Wolfensohn, is coming to an end in a few months' time. Speculation is rife that the post may be offered to Chancellor Gordon Brown of the UK, breaking a tradition that the position is reserved for an American. The influential news magazine Time has written a special article on Mr Gordon Brown for President in its issue of January 24, 2005.

It discusses the question essentially from the point of view of Gordon Brown's suitability, his political choices at home and the American options. It can be urged in support of the choice that the present incumbent himself is an Australian, not an American by birth, albeit a naturalised American citizen.

Whether the US will extend the courtesy of inclusion in American choice to the Chancellor of UK's Treasury is, however, a moot question. It depends very much on President Bush as well as Prime Minister Tony Blair.

The World Bank, established in the 1940s following the Bretton Woods Conference at the end of World War II, is a very influential institution. Those who hate it do so with remarkable gusto, but not enough rationale.

Those who like it point to its considerable record of good work over the last 60 years, though there has been much criticism. The Bank started out its career as a funding agency for reconstruction of war-torn economies, primarily in Europe. Over time, the much more generously funded Marshall Plan dwarfed the Bank, although it was expected to do better.

The story goes that John Maynard Keynes himself was considered for the job of the head honcho of the Bank, which he had conceived. But the proposal never took shape. The first President was Engene Meyer, formerly a Wall Street banker and editor of the prestigious Washington Post.

Meyer, who resigned after six months at the job, was followed by Mr John J. McCloy, a Wall Street professional and a former Assistant Secretary of War. He insisted that the American Executive Director be a nominee of his — Eugene Black, Vice-President of Chase National Bank. Mr Eugene Black finally succeeded Mr McCloy.

The tradition of having well-known bankers as President of the World Bank was maintained in later years, when Mr George Woods of First Boston was appointed. In the same tradition was Tom Clausen of Bank of America, who took office in 1981 for a ten-year period.

Lew Preston (1991-96) was also a banker, who had headed J. P. Morgan. Mr Wolfensohn, who is currently President, came from Wall Street where he ran a financing boutique that has subsequently been taken over by a bigger bank. Two exceptions to the general line of bankers were Mr Robert McNamara and Mr Barber Conable. The former came from his position as Secretary of Defence in Lyndon Johnson's Cabinet. The latter was a congressman.

Mr McNamara was obviously the most effective President the World Bank has known. He left his impress on the Bank's whole policy framework, its operational mindset and as a result its influence on world policy. He had no patience with woolly-headed ideas. Of course, he was famous for working out numbers and statistics. After all, he was the famous whizkid from Kennedy's time. He was genuinely committed to the development of poorer countries and the poorer sections of their population.

McNamara gave a considerable push to World Bank lending for the social sector, including for nutrition, health and urban development, besides industry, agriculture and infrastructure. The concerns which the World Bank has shown for poverty alleviation can be traced to Robert McNamara's time when he expanded bank lending manifold and qualitatively.

Significantly, he also dared to lend to a number of public sector industrial and infrastructural companies in the developing countries, defying the American convention that State-run institutions are per se inefficient and do not deserve help.

Conable, a politician, was expected to change the Bank's image a lot, particularly with the US Congress. On the contrary, he proved a relative failure. He led to undertake a massive reorganisation of the Bank whereby he alienated most of his staff members. He tried to devalue Mr Ernest Stern, a capable and highly dedicated executive, who had literally run the Bank in McNamara's time. Indeed, if Stern could have been promoted as President, he would have made an excellent leader of the Bank. Ernest Stern is, in fact, the best President the World Bank never had.

It is a fact that the World Bank has lost its importance because of the large growth of foreign direct investment and workers' remittances that have changed the landscape of balance of payments of many poorer countries. These resource flows are today many times larger than what the World Bank provides. Still, the World Bank remains an important financial support, especially for poorer countries.

Its role has been analysed and considered by various committees. But the conclusion seems inescapable that if the World Bank did not exist, it would have to be invented. Granted, that in its excessive preoccupation with several infrastructure power projects, dams and the like, it ignored a number of environmental considerations.

It has been quite transparent intellectually and many environmentalists have to thank the Bank for their current insights into environmental issues. The Bank has, indeed, been an agent for benign change in the current episode of globalisation.

Now, the choice for its next head is to be made by the US President. According to media reports, Mr Gordon Brown stands a good chance. He has been a successful Chancellor of the Exchequer in UK and has delivered good growth in UK economy during his term. He has also demonstrated leadership qualities in his handling of G(7). But his differences with Prime Minister Tony Blair have recently come out into the open.

There is speculation that his being chosen as World Bank President may itself be an offshoot of Blair's manipulations to get a potential rival out of his way.

It is, however, an open question whether being Chancellor of UK's Treasury is a good enough experience to qualify Mr Brown for Presidentship of the World Bank. The problems posed by the Bank Presidency are far more complex than those of running the Treasury of a modern well-developed economy. Nor does Mr Brown have the advantage, which is claimed for a US politician of being close to the US Congress. Mr Brown does not also lay claim to being a personality that inspires confidence in Wall Street, although he did handle UK's finances well.

It remains to be seen whether Mr Gordon Brown will translate into reality his newfound affection for the highly impoverished countries of the world, as demonstrated in his leadership of the recent G(7) conference, in regard to debt relief. At the outset, he has not been able to sell his idea of international financing facility to his American counterpart. How will he fare as a President of the World Bank where he has to sell his ideas to the US Treasury and Wall Street?

Unfortunately, the mindset of the policymakers in the US is such that they do not want to go outside the Anglo-Saxon body politic for candidates for the position of World Bank President.

In an ideal world, a person like Montek Singh Ahluwalia would be an eminently suitable candidate for the post. He has experience both at the World Bank and in a responsible position in a developing country. Whether Montek will be spared or willing even if White House so desires is, however, doubtful.

The position of World Bank chief is an important one from the point of view of global development. The manner in which he is chosen and the powers he exercises are critical to the path of global economic growth, and alleviation of world poverty.

Whether President Gordon Brown will prove a greater success than he was as Chancellor of UK Treasury is, however, a matter for speculation. In the coming weeks and months, we will know whether a Briton will take the lead at the World Bank and, if he does, whether he will make a success of it.

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