April 05, 2012

More than a “brave” World Bank we need a World Bank that helps the world to be brave.

Sir, we sometimes hear about that “if the developed rich countries get a cold, the non-developed poor countries get pneumonia”. But what, when the rich countries get pneumonia? 

The regulators who based their capital requirements for banks based on perceived risks, even though theses perceived risks were already cleared for… caused a monstrous crisis by making the banks overdose on perceived risks, and end up with dangerous obese exposures to what is or was considered as absolutely not risky, like triple-A rated securities and infallible sovereigns, and anorexic exposures to what is officially considered as risky, like small businesses and entrepreneurs. 

As a result, at this moment, I believe it is more important than ever for the World Bank, as the world’s premier development bank, to remind the whole world, especially the rich developed countries, about the importance of risk taking and the dangers of excessive risk-avoidance. 

I say this because I am not really sure that Jose Antonio Ocampo is referring to this “brave” in his “My pitch to build a brave new World Bank”, April 5. 

I support the candidacy of Ms. Okonjo-Iweala, but I trust my former colleagues will make the best election based on the merits of all candidates, and Ocampo certainly has many, but, that is as long as Executive Directors remember that when doing that they are, according to the statutes of the bank, responsible as individuals… and so no hiding behind the skirt of “my government told me so” 

Ps. I just saw a letter signed by 100 economists supporting the candidacy of Jose Antonio Ocampo. These days though, it could be more prudent not mentioning the endorsement of economists, those who did little to nothing to prevent the crisis, and instead list the endorsement of 100 unemployed… as that could prove to be more significant