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Perspective from a new World Bank Chief Economist

Kaushik Basu's picture

The first week as World Bank Chief Economist has left me excited, on the trot, (not to mention, slightly exhausted) and more convinced than ever that John Maynard Keynes was right when he wrote in the General Theory that the course of history, for good or for bad, is determined more by ideas and opinions than vested interests. I assert this with some confidence because of my somewhat unusual career experience, beginning with academic research, writing and teaching to being thrown into the deep end of the policymaking pool, when, in 2009, I was appointed India’s 14th Chief Economic Adviser and the first with no taint of prior experience in government.

I feel privileged to have this new challenging job and hope to engage with readers of this blog as I become more conversant with the Bank's work and also with writing a blog, which I have never done before, my social interaction on the web thus far being restricted to the 140-character tweet.

During the course of many G20 and other high level meetings with policymakers when I was still wearing my India hat, I was struck time and again by the fact that having a critical mass of people who are well-intentioned and susceptible to good ideas can do so much to break the toughest of impasses, whether in trying to decide on monetary and fiscal policies or in targeting welfare benefits or in battling poverty.

I have long believed that the world is a small place, and whoever has had the fortune to have done even moderately well has a responsibility towards the poor and the marginalized, wherever they happen to be, and whatever be their religious, racial and other identities. The World Bank, with its presence in the poorest regions in the world and, also, industrialized nations undergoing change and trauma, is well-suited to this internationalist agenda.

Using my theoretical and policy experience, I will try my best to influence the institution's new direction toward being a 'solutions Bank', something that the Bank’s new president Jim Yong Kim has stressed. This is a challenging time for international financial institutions and governments reeling under the sovereign debt crisis. I hope to be engaged in helping policymakers steer the global economy back onto a sustainable growth path. The pain of the Great Recession will be with us for a while. The injection of liquidity by several major central banks was the right move to save the day; but we must be clear that these policies do not solve our problems; they buy us time to solve them. So the hard decisions are still ahead of us. It is vital that even as we remain engaged in designing ways out of this slump, we attend to people in the bottom segment wherever they happen to be, in nations poor and rich.

Jobs will be high on the agenda in Tokyo next week, where I will be attending the IMF-World Bank Annual Meetings. I'll be speaking to the Development Committee on 'Creating Good Jobs for Development: Policy Directors from the 2013 WDR on Jobs' and one of the points I intend to stress is how globalization is transforming labor markets and confounding businessmen, politicians and young job seekers alike. In designing jobs strategies we have to be aware that the world is a diverse place, ranging from steadily industrializing nations like Indonesia to nations facing the challenges of a fragile economy such as Cote d'Ivoire. 

We also need to unleash a debate about structural transformation and rapid economic change, since unless we stay ahead of the curve, too many people will be left behind in poverty and destitution. Going by past experience, I know I have been good at churning up debates. So as soon as I settle into my new office, I assure you, I will attend to this need.

Comments

Dear Professor Basu, I apologise for taking your time with what may seem a small matter, but may I ask what your policy will be for comments on the blog? I left a comment a few weeks ago - a question for Dr Ravallion on the adequacy of data for discussions of inequality and poverty. This does not seem to me a small matter, since research results are used to inform policy. Neither it nor my follow-up query resulted in the comment being published. The comment was to: http://blogs.worldbank.org/developmenttalk/node/782 . This could raise a question how far the World Bank is open to dissenting views, so it might be useful to both readers and those affected by policies if you could clarify the situation. Thank you. Yours sincerely, Matt Berkley Utrecht, Netherlands.

Dear Matt, We have recently been receiving a large volume of spam through the comments function on our blog, and have on occasion missed posting a few comments. We ask for your patience until an adequate technical solution has been found to address this problem. In the mean time, if you don't see your comment up within a few days, please write to us using the blog contact form. best, LTD Editors

Sounding like an IMF staff member proud of his high-level government experience, the new World Bank chief economist is cited as saying that "I hope to be engaged in helping policymakers steer the global economy back onto a sustainable growth path." Has the Bank suddenly abandoned its longstanding mandate of alleviating POVERTY in developing countries? Will the Bank and IMF (again) be duplicating each others work?

Kaushik noted at the end of his blog, that he's good at stirring up debate and I can see he hasn't lost his touch! That said, I'm not sure I can so easily equate Kaushik's concern that global growth be returned to a sustainable path with a conflation of World Bank and IMF roles or an abandonment of the WBG's fight against poverty. Quite the contrary, the global financial crisis is clearly one of the most serious and present threats to incomes in the short-term and therefore progress in reducing poverty in developing countries. World Bank simulations (GEP 2012A) suggest that were the crisis to deteriorate substantially, developing country GDP could be hit by 4 or more percent. While the bulk of the responsibility for re-establishing that path lies with high-income countries with the assistance of the IMF, developing countries and the WBG can and are playing a role in the context of the G-20 and elsewhere. For our part, we are emphasizing that developing countries -- the majority of which have proven remarkably resilient during the crisis -- need to watch developments in the high-income world carefully and prepare contingencies. However, at the same time they need to shift their focus from demand management to longer-term poverty-reducing policies. By focussing on structural reforms, including healthcare, governance, infrastructure and education developing countries will be maintaining the strong reform momentum of the past 15 years that has allowed then to .reduce the incidence of poverty by more than 50 percent in less than 25 years. Best, Andrew Global Macroeconomic Trends Team, World Bank

Andrew Burns, You are right of course that - as a macro framework - "the global financial crisis is clearly one of the most serious and present threats to incomes in the short-term and therefore progress in reducing poverty in developing countries." And I am glad that you confirm that the World Bank will stick to its poverty-reduction mandate and avoid overlapping with IMF. However, it would have been helpful if the new chief economist of the World Bank had made that very point. He did not use the word POVERTY at all in his article explaining his previous experience and the future challenges of the Bank. Thank you for the clarification.

Dear Professor Basu, Perhaps I might ask similar questions on your own approaches to data. A first two could be the following: Will the Bank make clear to recipients of statements about global poverty whether it has estimated food needs per person? The FAO, in contrast to the Bank, made such estimates from the start of MDG monitoring, to adjust survey data (from the same surveys used by the Bank) for increasing food need per person as birth rates fell. The discrepancy may provide a partial explanation for the difference in reported MDG indicator trends. Secondly, will the Bank make clear to recipients, including politicians, of statements on global poverty since 1990 whether it has estimates for initial prices faced by the poor? Thank you. Yours sincerely, Matt Berkley.

Submitted by Xiao Ling on
Sir, It doesn't seem that Kaushik Basu, the new World Bank chief economist is that "good at stirring up debate" as Andrew Burns claims. Comments by only two persons have so far been posted in response to his article providing primarily a perspective on his own "theoretical and policy experience" and his own role at the IMF-World Bank Annual Meetings. Can we expect more interesting Bank contributions to this blog in the future; for example by other WB staff members with priority to issues affecting developing and developed countries? Will the dynamics of the blog including WB responses be speeded up? Frankly, the blog has so far been a waste of Bank resources at the expense of Bank shareholders - and that includes China!