The World Bank is verging on insignificance. As a low-interest lender to developing countries, economists have warned that the private sector may nudge the World Bank out of the limelight as a development institution. World Bank President Jim Yong Kim, however, has set lofty goals in order to influence a change of course.

In March, Kim wrote a blog for the Huffington Post outlining the reasons discrimination is bad for the global economy. He noted that 81 countries have outlawed homosexuality, while nine states in the United States have laws that mandate how homosexuality can be discussed in schools. Far over 100 countries directly discriminate against women, 15 of which have laws allowing men to prohibit their wives from working, and an even greater number discriminate against minorities. As Kim points out, this is a huge deficit to society.

The Middle East and North Africa currently experience income losses of almost 30 percent as a result of low economic participation by women. Likewise in Latin America and South Asia, a study estimated that increasing women’s economic activity to the level of men’s would increase average income by 14 percent and 19 percent, respectively.

In light of these figures, Kim believes the global economy can be drastically improved within the foreseeable future. He aims to eliminate extreme poverty by 2030.

The plan, outlined in a speech to the Council on Foreign Relations (CFR) on April 1, has been met with expected criticism by economists arguing that the efforts laid out will not be sufficient for the goals desired. But by increasing annual lending to quickly growing developing countries inhabited most of the world’s poor, Kim estimates the lending capacity for those countries to grow to about $300 billion over the next decade. He also estimated almost $400 million in cost savings over the next three years.

Tightening the World Bank’s budget is a major aspect of the reorganizations necessary to make this plan play out. By cutting costs, reassessing lending risks and charging more for its loans, the Bank’s lending capacity should increase by about $100 million over 10 years. Kim claims to have found almost $400 million available from cost-cutting through 2016 and argues that each dollar saved is worth 10 times that in leverage for lending.

While budget cuts inevitably lead to a reduction in staff, Kim plans to keep roughly 90 percent of the World Bank’s employees and only get rid of redundancies that may in fact have been slowing productivity. In additional reorganization of staff, Kim is focusing on expertise among divisions rather than simply region and country. For example, 14 “Global Practices” have been drafted, including agriculture, climate change, gender, education and water. This will allow for more cooperation throughout the Bank and ultimately more efficiency in the institution’s practices. The solutions offered are meant to be exercises in integrity rather than a thoughtless disposal of employees in order to gain profit.

The majority of the world’s poorest people do not necessarily live in the world’s poorest countries. They live in developing countries like Brazil, India and Nigeria. Implementing high impact projects in these countries can drastically benefit a large population. Despite criticism against it, Kim’s plan has the potential to bring major improvements to the global economy and to the state of the world’s poor.

– Jaclyn Stutz

Sources: Huffington Post, The Boston Globe, World Bank, The Wall Street Journal
Photo: Conakry Live