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

United States history is rife with racial and sexual discrimination. This history has shown, however, that systematic alienation of particular social groups comes with costly economic consequences.

For example, the 381 days long 1955-1956 Montgomery Bus Boycott, spurred by the arrest of Rosa Parks, reportedly ameliorated 75 percent of the city bus line’s revenue. The damage translated to approximately a loss of $3,500 per day, calculating a total loss of over $1.3 million.

It is no coincidence that as segregation was outlawed, U.S. economic growth accelerated.

Discrimination based on race, gender or sexual orientation in the U.S. business practices are still rampant today. A report from the Center for American Progress revealed the significant costs involved in discriminatory practices—an estimated $64 billion of revenue per year.

On February 24, Ugandan President Yoweri Museveni signed an anti-gay law. The legislation called for a 14-year prison sentence for each initial homosexual act committed and the possibility of life imprisonment for continued homosexual relations.

In response to this discriminatory law, World Bank President Jim Yong Kim has frozen all of the Bank’s loans, totaling $90 million, to Uganda.

Kim has also harnessed the seismic forces of this bold move to address further forms of discrimination worldwide, such as sexism and racial discrimination. He stressed that discrimination in any form is not only destructive in a moral sense, but harbors the growth of economies around the world.

In a recent public statement, Kim used the negative economic impact of he marginalizing women from job opportunities as a key example. In countries with low economic participation from women, a World Bank study revealed income losses of 27 percent in the Middle East and North Africa. The same study showed that raising female employment and entrepreneurship to equal male levels could improve average income by 19 percent in South Asia and 14 percent in Latin America.

Marginalizing people based on gender, race or sexual orientation is destructive to economies. Legislation that aims to alienate potentially some of the most talented and efficient of a country’s or business’s workers is nothing short of self-mutilation on a macro scale. As Kim said, “Eliminating discrimination is not only the right thing to do; it’s also critical to ensure that we have sustained, balanced and inclusive economic growth in all societies — whether in developed or developing nations, the North or the South, America or Africa.”

– Malika Gumpangkum

Sources: The World Bank, HuffPost, Bloomberg, The Washington Post, Robert J. Walker
Photo: Economic Times