US President Obama Picks new Head of World Bank

This week POLI 1140 will be focused on the international political economy (IPE). As we’ll learn, much of the international institutional infrastructure for the current global economy was set up at a meeting in July 1944 in the New Hampshire mountain resort town of Bretton Woods. At the meeting, which the ailing economist John Maynard Keynes attended, created the World Bank, and the International Monetary Fund (IMF). (The International Trade Organization, which was planned, never came to fruition, and the General Agreement on Trades and Tariffs (GATT), would later be formed, which has been morphed into the World Trade Organization (WTO). These three institutions–World Bank, IMF, WTO–support the liberal (neoliberal) economic order, each of which provides a different main function.

Yesterday, US President Barack Obama named an academic–Dartmouth College president Jim Yong Kim–as his nominee to head the World Bank. Convention dictates that the USA be given the power to select the World Bank president while European states are given the right to select the head of the IMF.

This definitely counts as an “outside-the-box” pick for Obama. First, Dr. Kim is a global health expert, and not an economist. This may signal a change in direction and philosophy at the World Bank.The New York Times reports:

Highly respected among global health experts, Dr. Kim is an anthropologist and a physician who co-founded the nonprofit Partners in Health and a former director of the department of H.I.V./AIDS at the World Health Organization.

“The leader of the World Bank should have a deep understanding of both the role that development plays in the world and the importance of creating conditions where assistance is no longer needed,” President Obama said Friday. “It’s time for a development professional to lead the world’s largest development agency.”

This move bears watching in the future. It also signals one of the major differences between Democratic and Republican presidents. It is highly doubtful that any of the Republican candidates for president would name somebody with a similar resume as the head of the World Bank.

For a quick video of the creating of the Bretton Woods system, see the video below (the relevant excerpt begins at 36:36).

Development and Underdevelopment–the Commanding Heights

We addressed the topic of development and underdevelopment in POLI 1100 this week. Amongst the many issues covered, we started to explore some of the alleged causes of economic growth and development. Why is there still such disparity in income and economic growth around the world, not only between countries, but within? Why have countries in the global “South” lagged behind, for the most part, their counterparts in the global “North”? There are various answers to this question and we addressed a couple of them in class. I showed clips from a fantastic documentary series put together by PBS, called (and based on the book of the same name) The Commanding Heights. All the information you’ll need is at the PBS website. Fortunately, each of the three 2-hour episodes has also been uploaded (in its entirety) to the Internet. From the narration at the beginning of the first episode, we learn that

This is the story of how the new global economy was born. A century-long battle as to which would control the commanding heights of the world’s economies–governments or markets.

I encourage you to watch all three episodes.

 

Global Debt Crisis and Relief

The issue of the global debt crisis–and particularly the onerous debt levels of developing world (“Southern”) countries–was a topic that we covered in POLI 1100 today. It will allow me to combine two class topics–issues pertaining development and underdevelopment, and interest groups (NGOs)–into one blog post. The interest group, Global Issues, is dedicated to analyzing “social, political, economic, and environmental issues that affect us all” and has a section on debt relief for the developing world. Here are some facts and figures related to the scale of the debt crisis in the developing world:

Consider the following:

  • In 1970, the world’s poorest countries (roughly 60 countries classified as low-income by the World Bank), owed $25 billion in debt.
  • By 2002, this was $523 billion
  • For Africa,
    • In 1970, it was just under $11 billion
    • By 2002, that was over half, to $295 billion
  • Debts owed to the multilateral institutions such as the IMF and World Bank is currently around $153 billion
  • For the poorest countries debts to multilateral institutions is around $70 billion.

$550 billion has been paid in both principal and interest over the last three decades, on $540bn of loans, and yet there is still a $523 billion dollar debt burden.

Here are some remarks by Professor Susan George on how to tackle the debt crisis. Money quote:

…there is no level of human suffering, which in and of itself, is going to change policy. The only way policy changes is because people demand it, and in this case, it has to be the people of the North, because the people of the South have very little political clout.

What is (are) LICUS?

To me, it sounds like a species of tropical plant, but it is an acronym used by the World Bank and other IGOs and NGOs to refer to a specific group of less-developed countries.  According the the World Bank, LICUS, which is an acronym for Low Income Countries Under Stress, are

are countries with weak policies, institutions, and governance.

The World Bank’s IEG (Independent Evaluation Group) set out to evaluate the role of the Bank’s efforts to aid these countries in their bid to develop economically and politically.  From the report:

Home to almost 500 million people, roughly half of whom earn less than a dollar a day, fragile states, until recently known in the World Bank as low-income countries under stress (LICUS), have attracted increasing attention. Concern is growing about the ability of these countries to reach development goals as well as about the adverse economic effects they have on neighboring countries and the global spillovers that may follow.

With their multiplicity of chronic problems, these countries pose some of the toughest development challenges. Poor governance and extended internal conflicts are common among these countries, which all face similar hurdles: weak security, fractured societal relations, corruption,breakdown in the rule of law, and lack of mechanisms for generating legitimate power and authority. As low-income countries, LICUS also have a huge backlog of investment needs and limited government resources to meet them. 

Past international engagement with these countries has failed to yield significant improvements, and donors and others continue to struggle with how best to assist fragile states. LICUS are characterized by weak policies, institutions, and governance. The Bank identified 25 such countries in fiscal year 2005. These 25 countries have a number of similarities: their infant mortality rate is a third higher than that of other low-income countries, life expectancy is 12 years lower, and their maternal mortality rate is about 20 percent higher.

There are also important differences among LICUS. Some grew at around 4 percent per annum during 1995-2003. Others had negative growth rates of a similar magnitude. Some have abundant natural resources, while others are resource-poor. These differences are recognized in four business models that the Bank developed to work with countries in crisis: deterioration, prolonged crisis or impasse, post-conflict or political transition, and gradual improvement.

Countries in light blue are characterized as “core” LICUS countries, while those in dark blue are “severe” LICUS countries.

 

Dependency Theory and Import Substitution Industrialization (ISI)

PBS broadcast a tremendously informative series called Commanding Heights, which took a look at the the battle over the world’s political economy during the 20th century.  Below you’ll find a portion of the episode on Latin America, which has been uploaded to You Tube.  The clip below explains the concept of dependency theory–the theoretical impetus behind the establishment of the political economic institution of import-substitution-industrialization (ISI).  Unfortunately, ISI did not work very well in practice, and Moises Naim–the editor of Foreign Policy Magazine, explains why in the clip below.

P.S. “The Chicago Boys” were not Michael, Scotty, and Phil. 🙂

The Relationship Between Wealth and Health

The BBC reports on fascinating new research, which concludes that “economic growth does not necessarily translate into improvements in child mortality.” There are two points I wish to make about this: First, it illustrates an important trend in the development literature regarding the correct metric to use to determine, and compare, levels of well-being worldwide. Historically, well-being has been captured by the crude instrument of Gross National Product (GDP) per capita, but the realization that, for many reasons, the measure was too crude to be a satisfactory indicator of well-being development led to the introduction of other measures, the most useful of which is the Human Development Index (HDI) put out by the United Nations Development Program (UNDP). (Why might GDP per capita be a misleading indicator of well-being?)

The second point follows from the first; one’s policy prescriptions vis-a-vis issues of development are to a large extent determined by just which indicator of well-being one believes best captures the essential nature of that elusive concept. As such, IGOs such as the World Bank, have focused attention on overall economic growth, while scholars such as Amartya Sen (who champions the “capabilities approach”) do not view growth tout court as a magical anti-poverty elixir.

From the BBC article:

Ten million children still die every year before their fifth birthday, 99% of them in the developing world, according to Save the Children.

A study comparing economic performance with child mortality reveals that some countries have not translated wealth into improvements across society.

Survival is too often just a “lottery”, said Save the Children’s David Mepham.

He said that even the poorest countries can cut child mortality by following simple policies, but at the moment “a child’s chance of making it to its fifth birthday depends on the country or community it is born into”.

Lagging behind

Angola comes at the bottom of a new “Wealth and Survival” league table drawn up by the UN Development Programme (UNDP).

The figures for child mortality in India are shocking
Shireen Miller
Save the children India

There are few countries in the world where there are such stark wealth contrasts as there are between the wealth of oil-rich coastal strip around the Angolan capital Luanda, and the war-ravaged interior.

UNDP statisticians calculate that more than half of the babies who die in Angola could be saved were the country to spread its wealth more fairly.

child_mortality_map.jpg

Click on the map to be taken to the Johns Hopkins Bloomberg School of Public Health’s Magazine for an article on child mortality.

[Each orange dot is equivalent to 5,000 child deaths.]

 

Data Sources on Development, Poverty, Economics, Environment, etc.

For your edification, but also to help you with your assignments, papers, and blogs, here are some data sources that will allow you to compare levels of development and poverty across the globe. The United Nations Development Programme’s Human Development Report is an excellent source of information on indicators related to development. Click here if you would like to look up data and/or statistics. You can search for statistics by country, indicator, or table.

Another excellent data source is the World Bank Development Indicators collected by the World Bank. This link provides access to the Education, Gender, Health & Nutrition & Population, and Poverty databases as well as Country Statistical Information, and Development Gateway Data and Statistics.

Finally, the United Nations maintains a statistical division, whose website can be found here, and which collects a wide range of data from social and demographic statistics, through economic, environmental and energy statistics, to statistics related to Millennium goal indicators.