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World Bank: Dealing with Africa in a non-ideological perspective – Jim Yong Kim

By Nicholas Norbrook
Posted on Wednesday, 9 October 2013 15:30

In this first extract, Kim talks about South Korea, how it supported its companies but also made them competitive, and the various argument’s within the bank over whether or not it should advocate such policy. The World Bank’s first Chinese Chief Economist, Justin Yifu Lin, who left the bank in 2012, took the view that a form of industrial policy was essential – his colleagues at the Bank are not so sure.

The Africa Report: So people are, of course, worried about Pyongyang, but perhaps they should be more worried about South Korea, who are taking over the political and the economic branches of world government, YouTube with Psy for example. Is it a testament to South Korea’s economic emergence?

Jim Yong Kim:Well, the southern part of the Korean peninsula was the part of the peninsula that didn’t have natural resources; it was mostly agricultural. Ban Ki-moon went to school literally underneath a tree. The country was that poor. Both of my parents were refugees. People of my generation remember that in the 1950s Korea was as poor as most African countries. In 1959, when I was born, the status of women in Tunisia was far higher than the status of women in South Korea; less than 10% of literacy, less than 3% of people had gone to college. It was a very poor country.

In 1959, when I was born, the status of women in Tunisia was far higher than the status of women in South Korea

One of the things that you see in South Korea is that there is absolutely no whiff of a curse of natural resources, we had none. People always assumed that without incredibly hard work, and doing more than everyone else, there’d be no chance for South Korea to survive as a country. It’s important to note that up through the early 1980s North Korea was growing faster than South Korea, because it had so many natural resources. But then they went on two very different paths: North Korea made terrible decisions in trying to direct their economy in one direction or another; and the South Koreans by that time were fully market-based and competitive globally. There there are important lessons there.

It’s interesting that you should say that: the development model they chose was very developmental state up until the very late ’90s, and still today.

Well, there are arguments about that. I mean, in terms of really directing industrial policy that really happened for a fairly short period of time. And the other thing that people don’t, I think, understand about why Korea was successful is that even though there was industrial policy – and most people say “look, the industrial policy happened between the ’60s and ’70s, maybe into the ’80s” […] afterwards market forces really did take control, and I was there just at that time. And what happened was, even during the time when there was such strong industrial policy, there was intensive competition among the so-called Chaebols inside Korea. Samsung, LG, Hyundai and Daewoo at that time were killing each other trying to compete. And so to most students of Korean political economy – and I consider myself one, I wrote my PhD dissertation on Korean political economy related to the pharmaceutical industry – this was not your classic command and control economy by any stretch of the imagination.

Is it about ‘export discipline’, only extending loans to companies who could prove that they were successful exporters.

‘Export discipline’ and the most important thing most people say is that these big conglomerates were fit to compete because they had been competing so intensively with each other. And this is an issue that China’s looking at […] are their state-owned enterprise really facing enough competition to be fit for global competition? I think that’s one of the great lessons. Even though there was relatively more control, people did talk about an industrial policy, there was still intensive competition.That’s why the companies, I think, that have survived, have done so well over the years.

Justin Lin, the former Chief Economist at the World Bank [who left in 2012] led a small intellectual glasnost on this issue, he called it the facilitating state, he also talks about the export discipline. There’s an interesting back and forth between him and Ho Joon Chang in the New Structural Economics, a book Lin published under the World Bank aegis. So would you recommend this course of action to African states?

I think, the biggest news for Africa is that I am an evidence guy and so I don’t come into this saying that a particular interpretation of history is what we’re going to take and implement on everyone else. Ha Joon is a friend of mine and I know ‘Kicking away the ladder’, I know that work very, very well. They’re heterodox economists and that’s great, and they have a very specific view. And there’s Marchesen who has his particular view about investment; there are all kinds of different views. I’m an anthropologist and so I tend to look at the cultures and discourses. When I did my PhD we all were heavily into discourse analysis, everyone from Said to Bourdieu to Foucault, everyone else. I tried to look at the discussion among great development economists from that perspective; what’s the nature of the discourse right now? And what I found is that they’re very different views about the grand trends and the grand advice that should be given to all countries about economic development.

Ban Ki-moon went to school literally underneath a tree

And I have to say that one of the really healthy things about the World Bank is we’ve really moved away from the grand discourses. We bring them here, we listen to them, we think that there’s a tremendous amount of brilliant insight in all that they say, but when we’re in a particular country we try very hard not to be ideological. To the government we say: “First of all, what do you want to accomplish for your people?”. To the private sector we say: “What are your goals in terms of making profits in this particular country?” And then we juxtapose our own goals of making sure that our private sector investments have development impact. Being evidence-based, being practical, listening to clients, makes it really difficult for us to come with grand ideas of the way development processes should move forward. We did that, we have a history of doing that here at the World Bank Group, and many call it the Washington Consensus, with structural adjustment. I think what happened was we realised that we had some real blind spots back in those days.

That was a mistaken application of a dogma, without a country by country variation?

You know, I think there was this sense that there were certain fundamentals that every country has to get right and if you get those right everything else will fall into place. I was part of the 50 Years Is Enough movement back in the 1990s and edited a book called Dying for Growth. And in it we very explicitly critiqued the World Bank, not because of its focus on growth, not because it called for reigning in hyperinflation, not because it called for separating central banks from ministries of finance; those were all good things. What we criticized them for is that they were of the sense that as long as you focus on the macroeconomic fundamentals everything else would fall into place.

Countries like Korea and Singapore and Taiwan invested in health and education before they could afford to. Those are important inputs in human capital that we haven’t taken into account seriously enough, looking at growth models. March is a friend and a teacher of mine and he keeps pounding me over the head saying: “You’ve got to remember that those investments in human capital are critical and perhaps just as critical as getting infrastructure in place, getting the macroeconomic fundamentals right.” Those are all really important, but at the same time you have to think about those that are going to actually make the growth happen. Are you investing enough in those human beings? I just came back from Peru, Chile and Bolivia and guess what? The central issues in all three of those countries are: What kind of investments can they make in people right now to prepare the ground for medium and long-term growth? And that goes back to primary education and the quality of higher education.

In Africa we’re coming at it with a non-ideological perspective. Different governments have different ideas about how much state should be involved in the private sector, how much state should be involved in picking winners and losers. The consensus here at the World Bank Group is that governments picking winners and losers has had a very mixed record and that that’s not generally what we recommend. On the other hand, we work with countries where they come from, the ones who do strongly believe that they need to play a more active role. They’re our clients and we’re going to give them all the evidence we have about how mistakes can be made. But, again, we’re not ideological and we’re going to say “Okay, so what would you like us to work with you on?” They are often very focused issues.

In Africa energy is a huge priority for us. One in three Africans has access to electricity; we’ve got to change that formula. I’ve just got back from the Great Lakes region with the Secretary General. The Secretary General kept saying over and over and over again: “We know what causes conflict. It’s lack of development, it’s lack of jobs, it’s lack of a sense that you have a brighter future ahead”. So we put $1 billion down and, not surprisingly, half or more will go toward energy. These are fundamental things that every country needs.

Africa has to really, I think, take advantage of all the resources that have been coming its way in health and education to build systems that are going to be robust enough to drive forward its development. We cannot think of all this money going into health in Africa as relief activities. We have to be able to make sure all the money coming in is translated into the building of systems that eventually can be paid for through health insurance schemes. Rwanda’s doing that and as the Rwandan economy grows, as people have jobs, as people are able to pay into health insurance schemes, what we have to make sure is that all this money coming in for health care isn’t just evaporating with short-term relief-type programs, but it really gets to system building in Africa. Making sure that the investments in health and education are sustainable by building real systems and, more than anything else, making sure that those things in tandem lead to the kind of private sector investment that every African country needs to create jobs.

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