Look at most major development issues over the past 30 years, and chances are Jeffrey Sachs has been in the thick of the action. The Columbia University economist crafted a plan that enabled Bolivia to end hyperinflation in 1985, preached “shock therapy” to governments in Poland and Russia in the early ‘90s to hasten their transition from communism to capitalism, and has pioneered efforts in the past decade to help African countries meet the United Nations’ Millennium Development Goals for ending extreme poverty.
Now Sachs wants to take his campaign to a new level — as president of the World Bank. Earlier this month the 58-year-old economist single-handedly declared his candidacy for the post being vacated by Robert Zoelleck. He says it’s time a real development expert — not another banker or politician who would need months to get up to speed on the issues — ran the big multilateral lender.
“My life’s work is fighting poverty,” Sachs tells Institutional Investor.
U.S. political control of the Bank — Washington has named all 11 presidents since the institution was created after World War II — has warped its priorities and limited its effectiveness, Sachs contends. The Bank has tended to favor U.S. allies and to focus on big infrastructure projects that have payoffs for U.S. and Western commercial interests, he says. Projects that could have a dramatic impact on the lives of the world’s poorest, such as supporting subsistence farmers in Africa or combating the spread of AIDS and malaria, typically get short shrift.
What’s needed, Sachs argues, is to refocus the Bank’s activities on meeting the Millennium Development Goals, a UN initiative whose targets include halving the number of people living on less than $1 a day, reducing maternal mortality rates by three quarters, and making primary education universal everywhere in the world. “They are the way the world has agreed to fight extreme poverty,” he says. “Some very powerful things can be done if there’s enough scale and focus.”
The Bank also needs to become more of a catalyst and a font of development knowledge than deep-pocketed lender, Sachs says. Zoelleck and previous presidents going back to James Wolfensohn in the 1990s have talked a similar game, but the need for a shift is greater than ever. The Bank’s net disbursements of $8 billion in the fiscal year ending June 30, 2011, paled in comparison with the $910 billion in private capital flows in calendar 2011. And that’s after Zoelleck’s big successes of winning an $86 billion capital increase, the first in 20 years, and completing a record $49.3 billion replenishment of resources at the International Development Association, the Bank arm that makes concessional loans and grants to the poorest countries.
“The strength of the Bank comes with its capacity to mobilize action and spur new approaches,” says Sachs. “I think that’s where the Bank’s focus needs to be.”
Sachs makes a powerful case, but will he persuade the Obama administration, whose support he needs? That appears to be a long shot.
Opposition to the U.S.-European duopoly over the Bretton Woods institutions — the U.S. has appointed all Bank presidents while Europe has named all heads of the International Monetary Fund — has intensified in recent years as the BRICS and other emerging markets countries demand a bigger say in the running of the global economy. So far, though, no emerging market candidate has come forward publicly. The experience last year of Agustín Carstens, the Mexican central bank governor who campaigned for the top job at the IMF only to be steamrollered by the European bandwagon for France’s Christine Lagarde, could make potential candidates “more cautious of stepping in,” says Rogerio Studart, Brazil’s executive director at the Bank. Officials say most emerging markets countries are holding back to see if the U.S., which has promised to put forward a candidate by the March 23 deadline, will nominate a heavyweight.
The Obama administration has floated a number of names in recent days, including Microsoft founder Bill Gates, PepsiCo chairman and CEO Indra Nooyi, the U.S. ambassador to the UN, Susan Rice, and even Senator John Kerry, but none of them seem likely. (Kerry has said he’s not interested.) The one name that’s been mooted from the start — former Treasury secretary and Obama economic adviser Larry Summers —could be a serious candidate. He did serve as chief economist at the Bank in the early ‘90s. But Summers has a penchant for stirring controversy. His comments suggesting that women’s aptitude might explain their underrepresentation in sciences contributed to his departure as president of Harvard University. “He has too much baggage,” says Edwin Truman, a senior fellow at the Petersen Institute of International Economics in Washington.
The U.S.-centric nature of the process strikes many as anachronistic. “It is outrageous to effectively exclude people from developing countries from being the heads of the World Bank and IMF when they constitute 6 billion out of the 7 billion people of the world, contribute the majority of growth and are home to most of the world’s poor people,” says Nicholas Stern, economist at the London School of Economics and Political Science and a former World Bank chief economist. “It is time that the developed world lived up to their pious declarations of the importance of openness, showed sincerity, and backed open competition and good governance.”
Sachs is hoping that the politicized selection process will work to his advantage. Uniquely, he is waging a public campaign for the job, launching his candidacy with an op-ed piece in the Washington Post and promoting his ideas on a dedicated web site, jeffsachs.org. “I felt it was useful to explain myself,” he says. “I don’t like backroom ways of doing things.”
He claims his development experience and contacts will attract significant support around the world. Indeed, senior officials from Jordan, Malaysia, Namibia, Timor-Leste have already endorsed him. The fact that he’s American shouldn’t hurt, either. He claims to have spoken with administration officials about the job but received no official encouragement or discouragement.
“There’s no person in the world who cares more about these issues,” says Truman. But Sachs’s independence — he has frequently criticized the U.S.’s stingy and heavily militarized aid programs as shortsighted — make it unlikely he will win Washington’s support. “The administration wants someone who’s their own person,” he says.
Yet win or lose, Sachs’s campaign is likely to be positive for the Bank. He is raising serious questions about the institution’s strategy and role, and his candidacy puts more pressure on the administration to make a quality nomination. If Washington puts forward a candidate with development experience, a commitment to multilateralism and diplomatic and management skills, “everybody would feel comfortable with a situation like that,” says Brazil’s Studart.
