Heading towards the Beijing Consensus

The appointment of a Chinese reformer with a western academic pedigree as the World Bank’s new chief economist is more than a mere symbol of China’s growing international influence. Although the position has traditionally not been a policy-making one, the 55-year old Justin Lin (his Chinese name is Lin Yifu, which he anglisised for international purposes), who defected from Taiwan to China as a young man, looks set to influence an internal debate that is already moving the Washington-based institution away from the strict market-based ideology that governed its policy in recent decades.

Before joining the World Bank, Lin ran Beijing University’s China Centre for Economic Research (CCER). Much of his research was on fiscal decentralisation, enterprise reform, urban and rural modernisation. His emphasis on quality government, rather than markets, as the arbiter of change, indicates he will reinforce the Bank’s move away from long-promoted solutions such as privatisation, liberalisation and indiscriminate world-market integration.

One area of Lin’s expertise is rural reform. This issue took a back seat over privatisation, institution-building and the development of human capital in recent years, but is coming back into fashion at the Bank, especially in view of the problems posed by climate change and rising food prices.

As a strategist for the Chinese government, Lin’s career took off under the government of Deng Xiaoping, who fostered the market liberalisation that triggered China’s rapid economic progress. Lin grew up in Taiwan and earned an MBA from the National Chengchi University before his military service took him to Jinmin Island, from where he reportedly swam 2000 meters to defect to the mainland in 1979. He earned a master’s degree in Marxist political economy from Beijing University and a PhD at the University of Chicago in 1986. He taught at Yale before returning to China in 1987, “to make a contribution to the economic development and economic transition of China,” as he once said.

Lin’s appointment comes just after China, long a recipient of World Bank aid, agreed to become a donor to the institution after negotiations with its recently appointed president, Robert Zoellick. “I look forward to working closely with him on a number of areas, including growth and investment in Africa, opportunities for South-South learning and bank instruments to better support countries hit by high energy and agriculture prices,” Zoellick said.

Zoellick is a conservative, yet pragmatic American, who wants to cooperate closely with China. Given China’s oft-cited lack of democracy and human-rights abuses, the choice shows that World Bank policymakers are embracing the idea that working with China – and giving it a stake in the wellbeing of the global economy – is more likely to turn it into a reliable partner than a confrontational approach.

The World Bank has a particularly strong incentive to work with the Chinese in Africa. China has in recent years leveraged its financial and political clout to seek trade and investment opportunities there, elbowing the World Bank out of one of its traditional areas of influence. At the same time, Africans are intrigued by the successes of the East Asians amid disenchantment with the World Bank’s initiatives there. Certainly, Lin’s argument that the quality of public institutions is the essential factor for the success of development programmes has a certain allure for Africa. Ellen Thalman

(Ellen Thalman)