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The World Bank’s Modernizer Moves On

Robert Zoellick, who has served as the World Bank’s president since George W. Bush appointed him in 2007, is leaving when his term expires in June. The United States  traditionally has the power to nominate replacements for the post, but that could be changing.

Zoellick noted that his departure coincides with a tectonic shift in the world economy:  “The Bank has recognised that we live in a world of multiple poles of growth where traditional concepts of the ‘Third World’ are now outdated and where developing countries have a key role to play as growth drivers and responsible stakeholders.” Throughout his term Zoellick recognized that the developing world has been a huge engine of global growth.

The bank plays a less pivotal role today than it once did in providing technical assistance to developing countries, as multilateral organizations of its kind have steadily lost clout. In the past five years alone, Chinese banks have provided $75 billion in loans to Latin America—more than the combined contributions of the World Bank, the IADB, and the U.S. Export-Import Bank.

Yet Zoellick proved that, even in a radically global economy, the Bank could still be a force for global good, overseeing innovations based on the shareholders’ mutual interests, such as a major push for transparency.

Zoellick leaves the World Bank a strong yet flexible institution. A sharp mind like his shouldn’t rest long at a time of great economic turmoil. Where to next, Mr. Zoellick?

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  • Anthony

    “How to Pick Next World Bank Leader” by Mohamed EL Erian (CEO at Pimco) in today’s Washington Post provides related context to WRM’S Quick Take.

  • Luke Lea

    “Chinese banks have provided $75 billion in loans to Latin America”

    I’d like to read more about that.

  • Luke Lea

    About those Chinese loans to Latin America, a commenter in the Financial Times had this to say:

    “Sounds like the house of cards that resulted in the Latin American Debt Crisis of the 1980s is being rebuilt with mah jong tiles this time. We may all be doomed to repeat a little history. During the 60’s and 70’s the surging economies of Latin America borrowed huge sums of $ for infrastructure and industrialization. American and European commercial banks flush with cash from the OPEC countries and looking for a place to park it were all to happy to flood feed the ravenous appetite of the region for loans. Just between 1975 and 1983 Latin American external debt quadrupled from $75billion to $315 billion (50% of the regions gdp.) Debt service went from $12 billion to $66 billion. As global recession hit there was a liquidity crunch and higher interest rates. The dollar rose against the commodity based regional national currencies increasing the pressure of such huge debt. By summer of 1982 the finance minister of Mexico declared that they would no longer be able to service their debt. New loans ceased, old debt was restructured making the region slaves to IMF terms, commercial banks went on life-support, and the people of the region suffered tremendously. Their incomes and purchasing power dropped precipitously as inflation raged and their national currencies devalued (making the IMF terms even harder), unemployment soared, growth stagnated and even went largely negative. Argentina sought the diversion of the Falklands war. This sounds all too familiar. China is as anxious to recycle its abundance of dollars as the oil exporters were during the 70s. Latin America looks promising as it is finally again growing. BUT what has really changed? The economies of the region are still largely dependent on the health of the US and world economy ( as in China, make no mistake about that.) What will happen when these loans come due and and perhaps because of recession are unpayable. Maybe Chinese bank collapse? Maybe a diversionary war in Taiwan? Who knows. The only thing we can be sure about is that the people of this region are potentially setting themselves up to suffer again. Last time they became IMF slaves. this time they may be “to big to SAVE”, plus, who will be in a big hurry to bail out China?”

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