The World Bank and the “new” multilateralism

More than a bland statement, the Board’s fourth criterion, “a firm commitment to and appreciation for multilateral cooperation”, is particularly important at this inflection point in global development and geopolitics.

As Gilly Wright has reminded us—again—“Since the inception of the World Bank, Europe has backed the US choice of an American to head it, while the US in return leaves Europe to pick a European to head the IMF—a tradition that now seems unnecessary and outdated. Donald Trump’s anti-multilateral stance and antagonism toward Europe will perhaps see the end to this “gentlemen’s agreement,” and it remains to be seen if the Trump administration will resist the urge to nominate a lackey in favor of a globally respected candidate, and whether a non-funding stick will be wielded.”

This defeatist view has an element of realism: as long as the Eurozone’s economy remains fragile and risky, Europe is unlikely to relinquish leadership of the IMF, which will have to play a key role in Greece, Spain and Italy by lending its credibility to a EU-crafted solution led by the European Central Bank and Germany.

Against this background, the Trumpian view of “multilateralism” means many things, from bullying NATO allies to pay up more for collective defense, to withdrawing from important international agreements like the Paris Accord and TPP, and renegotiating—with much fanfare and little practical change—important regional and bilateral trade pacts, the noisiest one being NAFTA 2, for lack of a more mellifluous acronym. 

Protectionism and tariff wars, starting in the United States last year, but by no means a uniquely American obsession, are challenging the trade liberalization that brought many countries, including the United States, great prosperity in the post-World War II period. 

Since 1990, for example, more than 1 billion people have moved out of extreme poverty. The share of the global population living in these dire conditions has gone from 36 percent to 10 percent, the lowest in recorded history. 

Globalization, which like gravity operates everywhere, is being questioned; rightly so, given that the resulting prosperity—unlike gravity—has not been evenly distributed, And particularly since the Great Recession of 2007-2008, the recovery has been uneven, families in the lowest quartiles everywhere have fallen further behind, and the wealthiest everywhere have acquired an even great share of global wealth and income. 

The next World Bank president has to advocate for what has made the world prosperous. Military expenditure, protectionism, and nativism aren’t part of that formula.

This fruits of globalization are known mainly for their impact on people’s lives, with the plummeting of poverty levels and the integration of global manufacturing and services. 

Globalization has also changed the development business significantly. Official aid flows are now a small share of public investment in all but the poorest and most fragile nations. Domestic resource mobilization has become more than a dissertation and classroom concept. Direct foreign investment has surged, and not just from the global North; China has become a player with its purchase of foreign companies, and its new aid program, its Belt and Road Initiative, and its setting up of the Asian Infrastructure Investment Bank and the New Development (“BRICS”) Bank, both headquartered in China and with significant Chinese capital contribution and leadership.

The next World Bank president has to see China as a contributor to the SDGs, investing in other countries’ prosperity with projects and advice that do not lead to unsustainable debt for projects, expensively delivered by imported Chinese labor and Chinese companies that win contracts with bribes, that don’t make sense. Because if the Bank doesn’t speak out, who will?

Despite its record over the last 40 years at reducing extreme poverty and bringing a middle class existence to its city-dwellers, the new reality of China as a global economic power has rightly caused anxiety: a hollowing-out of good manufacturing jobs in the EU, North America, and Australia; a normalization of regional hegemony toward its neighbors; greenhouse gas emissions that rival the United States’ in volume; imprisonment of its minorities in a remarkable surveillance state; advances in exports of high technology and armaments, developed with pervasive intellectual property theft and forced technology transfer by global companies investing in China; and a catching up in 21st Century science and technology, particularly 5G and artificial intelligence, that challenges the United States’ leadership in technology innovation and military power.

China has so far remained a supporter of multilateralism’s institutions, particularly the WTO and the G20. 

Is the “new multilateralism” just the old one, with China now playing a role its economic power justifies?

Like it or not, it’s there, and any World Bank president must accept that. She or he has to navigate that fact with Board members, and with China’s critics, particularly in the United States. Bob Zoellick famously called on China to be a “responsible stakeholder”, advice rendered over a decade ago that remains even more sensible today. 

The new multilateralism also includes greater attention to new challenges: refugee movements and their humanitarian and economic impact; growing threats to human rights and social justice, even if inequality and oppression are easily exposed and publicized; and false information and fake news that lead to confusion, sound and outrage. And, of course, climate change.

The Bank’s leaders have been uneven at leading and communicating its role as a fundamental knowledge, financing, and convening actor in the multilateral system. But it remains the president’s job to do, to do well, and to balance competing visions of what will work that sometimes may divide its owners, development practitioners, and the informed public. 

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About Paul Cadario

Paul Cadario is the Distinguished Fellow in Global Innovation at the University of Toronto. Cross-appointed to the Munk School of Global Affairs and Public Policy and the Centre for Global Engineering, his teaching and public engagement focus on sustainable solutions for poverty reduction, including governance and the behavior of organizational leaders. Paul joined UofT in 2012 after a 37-year career at the World Bank. His frontline experience working on West Africa and China, prepared him for Bank management, working to set up the Bank’s programs in the Former Soviet Union and Central and Eastern Europe. He led the change management and process reform for the Bank’s global information systems, preparing the Bank for an era of decentralization and transparency. From 2001 until 2012, he was responsible for oversight, quality assurance and compliance for the Bank’s trust fund portfolio, working with Bank staff, recipients, and development partners to ensure results and integrity.