03/26/2012 07:46 pm ET Updated May 26, 2012

Fixing the World Bank

With the economy still struggling and campaign season heating up, it is not surprising that the World Bank is far from most people's minds. But President Obama's surprising choice to tap Dartmouth President Jim Yong Kim as the Bank's next president is an important one, for it has the potential to determine the fate of an institution that is running out of time.

Founded in the waning days of World War II, the International Bank for Reconstruction and Development, or World Bank for short, stands at a crossroads. Although not without serious flaws, the organization has long worked to promote international development by providing loans, grants and advice to governments in the global South. The Bank and its affiliate bodies, the International Development Association and International Finance Corporation, have also served as a clearinghouse for information on development, publishing reports, convening conferences, and running programs on everything from business regulation to HIV prevention.

Yet, partially as a result of its own success, the Bank teeters on the brink of irrelevance. Last year the organization lent $26 billion dollars to developing countries -- a paltry sum compared to $1 trillion in loans and investment those nations received from other sources during the time. The Bank's largest borrowers, countries like India, Brazil, and China, are increasingly important players on the world stage and will have little need for the organization's capital in the years ahead. Moreover, in an era of globalized financial markets many poorer nations are likely to be more interested in tapping private funding and other forms of foreign aid, such as that provided by China, than relying on the Bank's assistance, which often comes with strings attached.

The fact that so many countries are graduating from Bank lending is something to celebrate. So should the organization declare victory and close up shop? The answer, unfortunately, is no. Today's major development challenges -- whether climate change, migration, or access to energy -- are increasingly global in scope, and the Bank is one of the only organizations that can address them in a meaningful way. This is because the Bank has the unique ability to provide both intellectual and financial assistance on a global scale. Unlike foreign aid programs, think tanks, or private foundations, the Bank combines knowledge creation and dissemination with significant on the ground development experience. As a result, the organization continues to have considerable influence in the developing world. Additionally, because of its unique governance (the Bank's president has significant latitude in running the organization) and funding system (the Bank gets most of its money from selling its bonds on the private market), the organization is less beset by the inertia that plagues most other multilateral institutions.

Kim -- or whomever is ultimately selected as the Bank's next president -- will need to take advantage of these powers to remake the organization. Although each of the World Bank's previous eleven presidents has left their distinct mark on the institution, none has faced a development landscape quite as unsettled as today's. With the vast majority of the world's poor residing in a handful of fast-growing middle-income countries, low-income nations facing unprecedented environmental and resource challenges, and industrialized countries preoccupied with their own economic difficulties, the Bank's next president must move quickly to put the organization on a sound footing.

This will require many things, but the major need is to turn the Bank into a more global institution. The success that many developing countries have had in increasing their economic growth over the previous years should force the Bank to question its intellectual foundations. Staffed mainly by American-trained economists, the Bank has long advanced a development model that calls for reducing the government's role in the economy. While this might have made sense during the Cold War, in the aftermath of the financial crisis the Bank should move faster than it already has in embracing a development philosophy that recognizes that government can be a positive force in the economy. By bringing the organization back to a more balanced vision of development, the Bank's next president can take an important first step in preparing it for the future.