Nigeria’s finance minister Ngozi Okonjo-Iweala is making a strong bid to be the next president of the World Bank. In looking at her record, it is striking that she has attacked one of the great economic plagues that hinder economic growth: lying prices. Those are the type of non-free-market prices that are prevalent in many emerging market countries. Subsidized fuel prices are a prime example.
For example, Indonesia’s fuel subsidy largess amounts to a whopping 2.5% of Indonesia’s GDP. Talk about price distortions and lying prices. Unfortunately, the Indonesian government’s attempt to inject more honesty into the market for fuel failed on April 1st.
Since last December, Dr. Okonjo-Iweala has taken on the Nigerian establishment, delivering a detailed plan to eliminate fuel subsidies and lying prices in Nigeria, and in January, Nigeria’s fuel subsidies were slashed. This medicine is just what the doctor ordered. Maybe it’s time for the World Bank to be directed by someone who embraces free market prices.