Recommendations for World BankPaul Romer
“As the World Bank’s board considers nominations for the institution’s next president (Donald Trump is expected to nominate David Malpass, the US Treasury department’s top official on international affairs), there are two critical ways he or she can make the bank more effective.
While trade representatives from China and the US face off in Washington over escalating trade tensions, their representatives also sit side by side as shareholders, their interests aligned, working to end extreme poverty and promote shared prosperity via the World Bank. That is the beauty of the bank: its diplomatic mission gives it a unique ability to address global issues.
In an era of trade wars and growing great power tensions, it is easy to believe that diplomacy has been reduced to a zero sum game — but the bank proves otherwise, even as it faces its own challenges. When I was its chief economist, I tried (and failed) to help reform the World Bank. And still, I believe that it can do so much more; it can build more roads and vaccinate more children more effectively if it embraces its diplomatic mission.
That is why I recommend that the bank’s new president do the following:
First, outsource the bank’s research upon which it depends for identifying problems and proposing solutions. Diplomacy and science cannot both thrive under the same roof. One consequence of the bank’s commitment to diplomacy is its necessary embrace of the helpful ambiguity that makes it possible for multilateral institutions to allow “Chinese Taipei” compete in the Olympic Games without “Taiwan, China” having a seat in the UN. Dispassionate examination makes clear that what the bank does to maintain conformity on the diplomatic front is not compatible with scientific research.
All that matter in science are the facts. When complex political sensitivities are allowed to influence research by stifling open disagreement, it ceases to be scientific. For good reasons, the bank’s shareholders have chosen to protect its diplomatic function, at the expense of its research.
Outsourcing research would be a better, more efficient way for the bank to establish the facts needed to do its job. This would also be an investment in the universities that make the discoveries that drive human progress.
Second, the bank must focus more on planning for the future, something it is uniquely qualified to do well. For example, we are certain that the global urban population will more than double this century. Yet politicians have no incentives to plan for the far future. But because of its diplomatic mission, the bank does.
Each time the bank approves a loan to retrofit basic infrastructure on unplanned urban development, there should be funds that support infrastructure planning and development for the expansion that we know is coming — significantly less expensive when it’s done in advance.
As Solly Angel, professor of city planning and a colleague of mine at New York University, has shown, it costs so little for cities to plan ahead, and makes such an extraordinary difference in the lives of those who will call those cities home. The residents of cities that plan for their inevitable expansion enjoy the greatest increase in human capital.
This potential can be unlocked in every expanding city, just like New York did in the last century, by setting aside the land it will use for its grid. Nothing needs to be built now.
So by embracing the bank’s unique diplomatic role and ensuring its policies are grounded in scientific fact, its next president can ensure the World Bank’s resources speed up progress for those who most need it.