Lawrence Summers as World Bank President?

The saying goes “he who pays the piper dictates the tune” and this appears to be the driving force behind the appointment of people to fill the top positions at the World Bank and the International Monetary Fund. Although unwritten, the convention has historically been for the World Bank to be headed by an American and the IMF by a European. Despite some progress in promoting transparency and diversity at the World Bank and IMF, the appointment process at both institutions still needs to be far more open and inclusive.

It was recently reported that President Obama is considering his former director of the National Economic Council, Larry Summers, for the World Bank presidency. This choice is controversial given Summers’ checkered leadership record particularly with regard to his leadership style. There are certainly other Americans with proven leadership records like Condoleezza Rice and Colin Powell, both of whom have served as secretary of state. Additionally, there are other outstanding economists like Joseph Stiglitz and Janet Yellen, who would be a better fit although historically being an economist has not been a prerequisite for the job.

Before elaborating on Summers’ leadership style, it is useful to provide some perspective on the more recent legacies of World Bank presidents. Under James Wolfensohn, the World Bank began listening to other stakeholders, particularly those that criticized the bank’s structural adjustment policies in developing countries. Wolfensohn also openly acknowledged that the bank had made mistakes in the past, which helped boost the bank’s reputation as a more open institution. With Paul Wolfowitz, there was a push for greater gender diversity in the bank. As for the incumbent, opinions are still divided on Robert Zoellick’s legacy as World Bank president, but the institution’s capitalization increased by $5.1 billion under his leadership.

With the legacies of the previous World Bank presidents in mind, what would Summers’ legacy be as a World Bank president? I will begin first by usefully contrasting him to Joseph Stiglitz because both Stiglitz and Summers have served as World Bank chief economist and in senior positions in the U.S. government. I can envisage Stiglitz’s presidential legacy as a transformational leader who took on difficult reforms at the World Bank as I suspect that his term would be influenced by some of his views which ruffled feathers while he was the bank’s chief economist. Kaushik Basu describes him as “popular globally for championing the course of the discouraged and dispossessed and for not holding back on criticizing the U.S. Department of Treasury and the IMF.” Moreover, appointing a strong critic of the bank, who is accommodative of diverse opinions to lead the institution, will strike a slight compromise between the American-European hegemony of the Bretton Woods institution and the demands from the rest of the global community for a more inclusive voice at this ostensibly global intergovernmental agency.

By contrast, Summers will bring plenty of substance to the table but he is one for whom it bears repeating that leadership is both about “substance and style”, with style being just as important as substance. In this regard, it is important to note that substance in an organization does not come at more of a premium than at Harvard University, where Summers served as president. However, substance alone proved to be insufficient to sustain his stint at the helm of things in Cambridge. As noted by Felix Salmon, Summers’ style deficiency also manifested during his tenure at the bank with his insensitivity in articulating the economic logic of dumping toxic waste in developing countries. If sensitivity to socioeconomic issues is too much “political correctness” to expect from the World Bank’s senior management, this is nothing compared to what is expected of the institution’s president. However, this case transcends insensitivity because dumping toxic waste on an environment can shorten the lives of its inhabitants. Therefore, it is essentially about proposing a policy that would result in the widening of the life expectancy gap between the developing countries and the West.

Can we ask President Obama not to appoint to the head of the world’s preeminent development institution a leader with a predilection, even if hypothetical, to trading toxic waste for food in developing countries?