With Larry Summers' World Bank Bid in Trouble, Mexico Insists on Open Process

Early last week the New York Times reported that despite all the previous fine rhetoric about the G20 and consultation and open process, the US Treasury Department had decided to rule by decree and impose its own candidate for the next president of the World Bank, the G20 be damned. U.S. officials informed G20 officials that the US intended to "retain control of the bank," as the Times put it. According to the Times, the G20 countries grumbled but showed no sign of being willing to fight Treasury. The U.S. candidate would be a "lock," the Times said, "since Europe will almost certainly support whomever Washington picks."


Since the International Monetary and the World Bank were created, the US and Europe - which control around half of the voting shares of these institutions - have colluded behind closed doors to determine the institutions' top leaders, with Europe selecting the head of the IMF with US support and the US selecting the head of the World Bank with European support. In recent years, developing countries have complained loudly about this practice - a practice which would be illegal if the World Bank were subject to the Illinois Open Meetings Act - and under pressure the World Bank has adopted governance reforms that are supposed to guarantee an "open, merit-based process" in selecting the President. But Treasury was claiming that there wasn't going to be any open process, it was going to be Treasury diktat.

But over the course of the last few days, the world has changed.

First, development expert Jeffrey Sachs' public candidacy, and Treasury's rude dismissal of his candidacy - not even putting Sachs on its "short list," although countries in Africa, Latin America, and Asia have publicly endorsed Sachs' candidacy - planted the seed of hope that there might be a real race after all. Then 27 Members of Congress, led by Michigan Democrat John Conyers and, sent a letter to President Obama, urging Obama to nominate Jeff Sachs.

[Signers of the letter supporting the U.S. nomination of Sachs, which included leaders of the Congressional Progressive Caucus and the Congressional Black Caucus who have been most vocal in pushing for reform of the World Bank, were: Rep. John Conyers, Jr. (D-Mich.), Rep. Hansen Clarke (D-Mich.), Rep. Jesse L. Jackson, Jr. (D-Ill.), Rep. Barbara Lee (D-Calif.), Rep. Zoe Lofgren (D-Calif.), Rep. James P. McGovern (D-Mass.), Rep. Lynn Woolsey (D-Calif.), Rep. Raul M. Grijalva (D-Ariz.), Del. Eleanor Holmes Norton (D-DC), Rep. Keith Ellison (D-Minn.), Rep. Robert Brady (D-Pa.), Rep. Ruben Hinojosa (D-Texas), Rep. Peter DeFazio (D-Ore.), Rep. Steve Cohen (D-Tenn.), Rep. Maxine Waters (D-Calif.), Rep. Bob Filner (D-Calif.), Rep. Anna Eshoo (D-Calif.), Rep. Andre Carson (D-Ind.), Rep. Chaka Fattah (D-Pa.), Rep. Rush Holt (D-N.J.), Rep. Charles B. Rangel (D-N.Y.), Rep. Yvette Clarke (D-N.Y.), Rep. Donna Edwards (D-Md.), Rep. Jim McDermott (D-Wash.), Rep. Sheila Jackson-Lee (D-Texas), Rep. Jerrold Nadler (D-N.Y.) and Rep. Hank Johnson (D-Ga.).]

Then, it turned out that the U.S. candidate was Larry Summers. And then it turned out that Europe wasn't going to go along with that after all, the New York Times' "almost certainty" notwithstanding.

A week earlier, Treasury had leaked a purported "short list" consisting of former Harvard President Larry Summers, UN Ambassador Susan Rice, and Senator John Kerry. But it turned out that Susan Rice and John Kerry were fake candidates, because neither one wanted the job. So it appears that Treasury Secretary Timothy Geithner really had a "short list" consisting of just one person: his buddy Larry Summers. Perhaps Geithner calculated that if he presented President Obama with a "short list" consisting of Larry Summers and two fake candidates, then Obama would have to choose Summers.

But apparently Geithner did not anticipate that Europe would object to Summers.

Late Friday night, AFP reported:


Harvard University economics professor and former World Bank chief economist Larry Summers is seen as divisive by some key allies of Washington.


"Summers doesn't look like a candidate who will have strong support... Apparently, he cannot gain the backing of all Group of Seven countries," the person [close to the World Bank] said.


That probably means Europe, because it was Europe that Treasury had signaled that it cared about, because the only G7 countries which are not European are the US, Canada, and Japan (the European G7 countries are Britain, France, Germany and Italy); and because British Prime Minister David Cameron met with President Obama on Thursday, and perhaps that was when it was revealed to Obama that Europe - perhaps Britain itself - would not go along with Summers.

Note that the fact that anyone is even talking about the fact that Summers "cannot gain the backing of all Group of Seven countries" shows how US Treasury was trying to exclude developing countries from having any say whatsoever. The "Group of Seven countries" aren't supposed to be determining the President of the World Bank. At the G20 summit in Pittsburgh in September, 2009 - partly at the instigation of the Obama Administration - the G20 announced that it, not the G8, would be the premier world forum for consideration of issues regarding the international economic and financial system. The stated reason for the shift was that the G20 includes major "emerging economies" like Brazil, Russia, India, China, and South Africa [the "BRICS"], as well as countries like Mexico, South Korea, and Turkey.

And even the (self-appointed) G20 isn't supposed to be determining the President of the World Bank - there's supposed to be an "open, merit-based process," in which every country can nominate, and then the World Bank board - supposedly representing all of the member countries - is supposed to make a selection. So Treasury was signaling its intent to carry out a lot of exclusion, and to totally disregard the "open, merit-based process" to which it and other World Bank members were supposedly committed.

But Mexico, the current chair of the G20, has now cleared its throat.


The finance minister of Mexico, which holds the chair of the Group of 20 rich and emerging nations, said it viewed Sachs' surprise self-nomination for the post "quite positively".


"We are closely watching this process," said Jose Antonio Meade. "We think Jeffrey Sachs, who is a prestigious economist and knows Latin America well, has made important contributions, and we view his interest quite positively.

"We need to see what other candidates express interest, how the process develops, and at the end of the day, hope that it complies with what G-20 has said, that the multilaterals undertake these processes clearly and transparently and based on merit."


Perhaps "we are closely watching this process" was a diplomatic way for the Mexican Finance Minister to say, "We saw the article in the New York Times, we see Treasury saying that we are going to have no say, and we are not amused."

Indeed, three Latin American countries - Chile, Uruguay, and Colombia - have openly declared for Sachs. They join Kenya, Bhutan, Jordan, Malaysia, Namibia and East Timor, which have also endorsed Sachs; at least one of these countries has formally nominated Sachs. None of these countries is a member of the G20. So, by repeating its insistence on an open, merit-based process, Mexico isn't just protecting the interests of the G20 countries, it's protecting the interests of all the member countries of the World Bank. Way to go, Mexico! Please ask President Dilma Rousseff of Brazil to reinforce your message.

And what of the U.S. nomination? The World Bank deadline for nominations was supposed to be this coming Friday, March 23, but Geithner might ask for an extension, because the dog ate his homework. Word has it that in spite of the G7 opposition, Geithner has not given up and is still pushing Summers. President Obama should ask Geithner for a completely new short list, one with three real candidates who all want the job, and all of whom can pass muster with the member countries of the World Bank. And that short list should include development expert Jeffrey Sachs, the only candidate who can say he has the support of governments in Africa, Latin America, and Asia - not to mention 27 Members of Congress. Robert Naiman is Policy Director at Just Foreign Policy.

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