Despite the professed commitment of the World Bank’s executive directors and our best
efforts to ensure an
open, transparent and merit-based process for the selection of the World Bank president,
institution is once again led by a US national. This follows the highly illegitimate process that
saw the US candidate run unopposed, keeping the 75-year-old ‘Gentleman’s Agreement’ firmly
This was a “race” steeped in geopolitics
with little incentive for Southern (or other) candidates to put their name
forward to compete with the US nominee.
While we will say farewell for
now, we hope to count on your continued support in holding Mr. Malpass and the
World Bank generally accountable for their actions (or omissions).
As you also know, whatever the
challenges and geopolitical realities, we strongly believe that the World Bank and IMF
must change their leadership selection processes so that both institutions have
leaders with the required skills and experience, selected through an open, fair
and transparent process.
Many have focused on how David Malpass will implement the directives coming out of the Trump administration in Washington. In particular that means viewing international affairs, including international economic affairs, as a zero-sum game. And the principle target of the Trump administration has been China.
But what will a Malpass presidency really mean for China after all? Much like the discussion of the trade war, when the US places indiscriminate tariffs on Chinese goods, while this may hurt Chinese exporters, the ones who really pay for the tariffs are American consumers. A Malpass-led World Bank attempted assault on China might end up hurting the US more than China. Let’s look at some of the most relevant areas:
Belt and Road Initiative (BRI) projects – the presumption is that a Malpass-led World Bank will steer clear of BRI projects, in line with Trump administration views that there should be less financial cooperation with China. But BRI projects are again not generally capital constrained. There are plenty of other lenders lined up to work in conjunction with BRI projects, particularly the Chinese policy banks – behemoths with much bigger balance sheets than the World Bank. There are also other development finance institutions and regional development banks ready to cooperate. In the end the World Bank will be side lined in many important infrastructure and economic development projects, reducing its scope for influence as countries increase their cooperation with, and possibly reliance on, other financial institutions. Malpass thus looks like a gift to the Asian Infrastructure Investment Bank, the BRICS New Development Bank (NDB) and the Chinese policy banks, who will all gain influence while the influence of the World Bank declines.
Energy sector – the denials of the Trump administration and their republican backers have zero impact on the reality of climate change. In the meantime there is a global race to develop leadership in low-carbon technologies and industries. A World Bank that eschews clean energy projects in favour of coal financing, oil exploration or other high carbon projects, will leave the way clear for others in this space. World Bank financed clean energy projects could certainly use Chinese technology, as the Bank-mandated procurement frameworks would have been fairly open, level playing fields. Non-World Bank projects, especially those financed under BRI (see above) are free to tie financing to certain procurement choices. This leaves Chinese wind turbine, hydropower and solar conglomerates well placed to use Chinese financial muscle to help them drive down the marginal cost of their offering with learning-by-doing approaches. A World Bank change of heart on clean energy is not likely to actually reduce the demand for these technologies, so the Chinese will be aiming to develop dominant market shares for their companies. That’s a win for Chinese industrial policy.
A personal reflection on the World Bank, Jim Kim, and David Malpass
As a U.S. citizen and a global justice activist, I’ve always opposed the US’s prerogative to nominate the World Bank president. And I certainly never expected to like any U.S. candidate for the World Bank presidency. In 2012, then, I was startled when Barack Obama nominated Jim Kim.
I had met Kim back in 1995 at a protest against the IMF and World Bank in Washington, DC. It was no more than a handshake, but I was thrilled to meet the lead editor of Dying for Growth, a remarkable compendium of articles about the disastrous impact of IMF/WB policies on health around the world. It was one of the pillars of the multi-sectoral work I did with the 50 Years Is Enough U.S. Network of IMF/WB critics.
He had left Partners in Health well before his nomination and gone on to other, less movement-friendly positions, such as the presidency of Dartmouth College. But still, he was Jim Kim; he at least had been “one of us.” What was I, a dedicated campaigner against the U.S. monopoly on the WB presidency, to do?
I didn’t support the U.S. nomination of course, but I wasn’t so passionate in opposing it as I might otherwise have been. Less sentimental colleagues led the charge. But now that Kim has left, we know that he will be remembered primarily for turning the Bank into an even bigger booster of private-sector domination of development than it already was. So much so that he decided to bail on the job when Trump could nominate his replacement, apparently to get the obscene payoffs that await investment bankers with insider experience. Not exactly what I had been hoping for. Continue reading →