Economists are not known for their communication skills, to put it mildly. The typical economics paper is written in a formal, stilted style, laden with phrases like ‘in the following subsection’ and jargon and highly formalised mathematical definitions. For a non-economist to hack through the verbal jungle of the typical paper is often an impossible task.

Why is econ so abstruse? A simple explanation is that economists are just math nerds who were never forced to communicate well. A hardened cynic might suggest that the purpose is to create a secret language that can only be understood by insiders, to thwart outside scrutiny.

In any case, Paul Romer, chief economist of the World Bank, seems to have tried to change this situation. After assuming leadership of the bank’s research arm last year, the Develop­ment Economics Group, Romer apparently initiated a crusade against stilted writing, even going so far as to count how many times researchers used the word ‘and.’ The researchers were having none of it, however, and successfully campaigned to force Romer to give up his leadership. Romer’s budget and job cuts probably didn’t endear him to his subordinates, either.

It certainly looks as if the World Bank is in need of great change. And the problem goes far beyond poor communication

This is sad but probably inevitable. An aggressive, maverick leader rarely shakes up a sleepy, hidebound organisation overnight. Romer isn’t the first reformer to get bogged down in that particular organisation — President Jim Yong Kim, who in 2014 attempted a massive restructuring, caused turmoil and even provoked a work stoppage.

So Romer’s efforts were probably always a low-percentage shot. But it was a good try. It certainly looks as if the World Bank is in need of great change. And the problem goes far beyond poor communication.

First of all, the Bank’s original mission — to lend money to developing countries — is becoming less and less important. As Center for Global Development researchers Scott Morris and Madeleine Gleave noted in a 2015 report, the rapid growth of the world economy means that most countries just don’t need the bank anymore:

“The Bank will continue to play an essential role in a relatively small number of fragile states, but the rest of its core lending model could very quickly become irrelevant to most of its other current borrowers… On its current path, the World Bank will soon enough be viewed as no longer essential.”

Morris and Gleave suggest a number of other roles the Bank could step into, including disease response, funding scientific research, making municipal loans or simply acting as a think tank. But this isn’t very encouraging — it paints the picture of an organisation shambling onward out of sheer momentum, an expensive bureaucracy looking for a purpose. In 2014, the Financial Times wondered openly if the bank was ‘sliding into irrelevance.’

Meanwhile, the World Bank’s sister institution, the International Monetary Fund, has its own problems. Created to make emergency loans to countries in crisis, the IMF advocated fiscal austerity that probably often ended up making the situation worse. In recent years, the Fund’s macroeconomists, led by Chief Economists Olivier Blanchard and Maurice Obstfeld, have almost completely reversed the organisation’s standard approach to fiscal policy. But that leaves the uncomfortable question of why the Fund’s institutional culture allowed such a wrongheaded approach to persist for so long in the first place.

A picture is beginning to emerge of global financial institutions that are too hidebound and conservative. Faced with changes in both the global economy and economists’ understanding of recessions, both the World Bank and the IMF have too often resisted change rather than embrace it. It’s worth wondering if the root of the problem comes from the culture of economics.

Economists are, in general, an insular and hierarchical bunch. They are used to having the quality and value of their work judged only by other economists. The outside world is expected to pay economists’ salaries and listen to their advice, but not to question the value of what they do. But when this ivory-tower approach is applied to real-world organisations, the result can be unacceptable institutional inertia.

Perhaps it was this insular culture, rather than just bad writing, that Romer had really intended to shake up. If so, the deck was stacked against him from the start. Making economists open up and engage with the wider world — and make themselves vulnerable to criticism by intelligent outsiders — may be a task too great even for a famous and brilliant individual like Romer.

— Bloomberg/The Washington Post Service

Published in Dawn, The Business and Finance Weekly, June 5th, 2017