Chief Economist, Pinelopi Koujianou Goldberg known as Penny Goldberg announced her resignation from the World Bank from 1st March 2020. She will be going back to her teaching job at Yale University. This marks the end to a period of time where World Bank, IMF and OCED together were headed by women as Chief Economists. The resignation of Penny comes just 15 months after her appointment and has raised questions about World Bank’s failure to retain economists of repute.
Her predecessor Paul Romer had resigned after he challenged the World Bank’s ‘Doing Business Report’ and its rankings. In an interview to Wall Street Journal, Paul suggested that the political leanings of the staff have influenced the Ease of Business ranking of nations with the example of Chile whose ranking went down when a socialist government came to power. The interview became controversial as the World Bank denied wrong doing, leading to the resignation of the chief economist.
Pinelopi’s resignation unfolded when the Economist magazine in an article brought to light a correlation between her resignation and a research under her watch on World Bank aid and illicit financial flows. The World Bank research unit studied the link between increase in Swiss bank accounts and World Bank aid and found that pay out to 22 aid dependent countries during 1990 -2010 were followed by an increase of about 5% in deposits from these countries to foreign financial havens. This research was blocked by World Bank officials fearing reputational risks. (The paper was published latter). Another reason given is the re-organisation of the bank where an Indonesian economist was being brought as Managing Director who will have the oversight over the research unit. This would have diminished the powers of the Chief Economist.
World Bank has a history of censoring dissenting views, whether it is economists fighting the bank’s ideology or upholding its integrity. Economists in the past have challenged the focus on narrow economic growth without looking into the ecological ecosystem, or have challenged the Washington Consensus, which provided the basis for the Bretton Wood prescriptions on economy and growth. It is a sad fact that none of them survived the bank for long and these include Nobel laureate economists like Dr. Joseph Stiglitz, Dr. Paul Romer and ecological economists like Herman Dally.
The resignations of Dr. Stiglitz and Dr. Ravi Kanbur in the early 2000s, points towards an ideological struggle within the bank where they challenge the old school of growth theory with the assertion that growth is good for everybody including the poor as it will trickle down and all what governments need to do is open the economies for trade, control government expenditure (read less investment in health, education etc.). Dr. Kanbur who was the lead author of the World Development Report on poverty, stepped down refusing to tone down his critique on globalsiation in the report. Likewise, Dr. Stiglitz was fired for his dissenting views on globalisation after the Seattle protests. Economists like Prof Kanbur and Prof Stiglitz argue that growth alone is not enough and the quality of growth matters with emphasis on taxation and redistribution so that the poor get benefit from growth.
The resignations of World Bank’s Chief Economists one after the other, points out to issues which are deeper in these financial institutions. It seems to be the latest in the lines of ideological debates that is happening in the capitalist world itself. Post the financial crisis, world has seen the failure of the so-called Washington Consensus as being acknowledged now by many economists around the world. The World Bank however seems not sure what is that they stand for as an economic policy after the Breton Woods institutions failed to predict the Global Financial Crisis and its multiple fall outs.
It seems that financial institutions are also reworking their thoughts in the context of rising inequality, climate crisis and demands for higher accountability and transparency in the financial sector. However, there seems to be a disconnect between what is being articulated by the researchers of these financial institutions who seem to be acknowledging some of these issues including the failure of neo-liberalism but the programs on ground as we see in some of the IMF programs to countries who are facing distress is not substantially different from their earlier ones.
What institutions like World Bank are facing however is a bigger crisis of relevance and credibility and this is being accelerated with people who are in helm of affairs leaving the organisation, starting from the World Bank Presidents to Chief Economists. To quote Herman Dally, the economists who was pushed out for his ecologic centric views, “Rather than redemption of the World Bank, I think it’s probably time to have a model of death and resurrection.”