In less than a year, Canada has gone from a bold leader in the effort to change the way the global economy is governed, to a quiet enabler of the status quo.
The World Bank’s 25 executive directors, including Canada’s Marie-Lucie Morin, are expected to select a new leader on Monday in Washington.
Ms. Morin already has received her orders from Ottawa: The Harper government is backing the U.S. nominee, Dartmouth College president Jim Yong Kim, putting Canada’s stamp on the continuation of American dominance of an institution that represents 187 countries.
This is a shift from a year ago, when Canada cast a lonely vote recognizing the new world order, endorsing Bank of Mexico Governor Agustin Carstens to lead the International Monetary Fund over French Finance Minister Christine Lagarde, the runaway favourite and eventual winner.
Canada isn’t unique in endorsing Dr. Kim, a physician and anthropologist who has spent much of his adult life fighting HIV-AIDS in poorer countries. Japan, South Korea and Mexico are among the supporters of his candidacy, which has been met with considerable criticism from academics, former World Bank officials and pundits because he lacks a broad economic background.
Yet these countries allowed some time to pass before deciding to give their endorsements. Canada’s decision was made within hours of the World Bank’s executive board announcing the three people it would interview for the job, haste that undermines the notion that the Harper government gave the other two candidates a fair hearing.
When Finance Minister Jim Flaherty endorsed Mr. Carstens, he did so at the end of a campaign that had gone on for several weeks. The sight of Canada rushing to rally behind the preferred candidate of its largest trading partner raises questions about the willingness of the established powers in the Group of 20 to let go of the reins, despite repeated promises to do so.
“It’s a real change,” Bessma Momani, a senior fellow at the Waterloo, Ont.-based Centre for International Governance Innovation, said of Ottawa’s approach to the selection of the new World Bank president.
At stake is the international cohesion that allowed the G20 economies to reverse the financial crisis. That’s because countries such as Brazil, China and India are demanding a greater say in world affairs in return for their co-operation on the economic programs that countries such as the U.S., Canada and Germany say are necessary to foster global economic growth.
Just as an American citizen always has run the World Bank, a European always has led the International Monetary Fund. This is by design. The United States is the only country with veto power, and Europe represents the biggest voting bloc. They divvied up control of the institutions at their creation at the end of the Second World War, and have refused to relinquish it.
These are influential positions. The IMF had loan arrangements worth the equivalent of about $2-trillion with more than two dozen countries last year, and the World Bank lent $57-billion. Those loans come with conditions, giving both institutions influence over recipient governments. The countries that control the IMF and the World Bank wield considerable sway over the flow of all that money, and the tenor of the policy advice.
The increasingly powerful emerging market countries recognize this, and they want a greater say over how the two institutions are run, including an end to the arrangement that automatically puts an American in charge of the World Bank and a European at the head of the IMF.
At the Group of 20 Summit hosted by U.S. President Barack Obama in Pittsburgh, Pa. in 2009, the established powers appeared to concede the point, agreeing that future leaders would be chosen in an open way, and on merit. Yet when the top job at the IMF came open less than two years later, the Europeans united around Ms. Lagarde before any other candidates stepped forward. The Obama administration also endorsed her, even though Mr. Carstens came with a long and distinguished track record as a senior official at the fund.
While the contest between Ms. Lagarde and Mr. Carstens marked the first time multiple candidates openly competed for the job, most observers believed the process was rigged from the beginning. Canada’s choice had the appearance of a protest vote.
“It is important that the new IMF managing director be selected in an open and transparent process with the candidate chosen on the basis of merit and not nationality,” Mr. Flaherty said in a joint statement with his Australian counterpart, explaining their decision to back Mr. Carstens.
That was June 2011. Nine months later, Mr. Flaherty had nothing to say about an open, merit-based process when he announced that he was “joining the United States” in supporting Dr. Kim to become the 11th American to lead the World Bank since its creation in 1944.
Mr. Flaherty’s commitment to merit-based selections for international posts is unwavering, his spokesman, Chisholm Pothier, said. Mr. Flaherty was able to decide on Dr. Kim quickly because the two candidates – Nigerian Finance Minister Ngozi Okonjo-Iweala and former Colombian finance minister Jose Antonio Ocampo – were rumoured to be planning candidacies, Mr. Pothier said. “Our support of Dr. Kim is based on his strong track record of leadership and results,” Mr. Pothier said Friday.
Dr. Kim, a 52-year-old American citizen who emigrated from South Korea as a young boy, led a World Health Organization campaign to treat three million people with HIV-AIDS. But Dr. Kim’s candidacy has been met with considerable criticism from academics, former World Bank officials and pundits.
The Economist magazine, which endorsed Ms. Okonjo-Iweala, said Dr. Kim was on no one’s short list for the job. Health is an important part of the World Bank’s work, but so is financing hydro-electric dams and other infrastructure, curbing greenhouse gases, boosting crop yields, providing advice on economic policy, and pleasing 187 member governments.
Dr. Kim has been on a “listening tour” around the world, with stops in Ethiopia, Rwanda, Japan, China, South Korea, India, Brazil and Mexico. These visits could help once he claims the presidency. But he will struggle to escape the impression that he won the job on the basis of his passport.
“It is clear that this is not based on the merits of the candidates but is a political exercise,” Mr. Ocampo said Friday in a statement announcing that he was withdrawing from the race.
Mr. Ocampo’s comments could be dismissed as sour grapes, except many people agree with him.