The World Bank in the Age of Trump
How the Trump administration’s new nominee may reshape the post-war financial institution
In the years following the end of the second World War, the institutions that would facilitate the US-dominated global world order were being established. Perhaps the most significant of such efforts was at the 1944 Bretton Woods Conference, where world leaders came together to determine the future structure of the global financial system.
Chief among the clamouring dealmakers was the United States, that pushed hard for free-trade and the development of world markets — always in line with US interests. The conference resulted in the creation of two juggernaut financial institutions: the International Monetary Fund and The World Bank.
The World Bank has, since its inception, been a lender to nations with distressed finances. The Bank primarily gives loans to developing nations, always with strict requirements on how the funds can be spent, and on how the loans are to be repaid. These often stipulate that the nation be democratic or uphold certain values associated with liberal-democratic societies.
Last month, Jim Yong Kim, the current President of the World Bank who was set to continue in his position until 2022, announced that he would be stepping down from his role effective February 1st, leaving the organisation’s foremost position unexpectedly empty.
In the election of its President, World Bank members are invited to present nominees, but it is customary that the US-backed nominee is elected to fill the position. The Trump administration has tapped David Malpass, an economist and Washington veteran, to lead the Bank.
The nomination has raised alarm in many countries currently receiving loans from the World Bank. Since his election campaign began, Mr Trump has sought to raise questions about the merit of American loans to developing nations, and how they fit in to his quest to ‘make America great again.’ (For an excellent piece on this very issue, see Dylan Springer’s contribution to the latest issue of New Annales). Mr Malpass, much like Mr Trump, is skeptical of global institutions, his perspective on them focusing on their usefulness to the interests of the United States. The World Bank’s guiding mission would thus seem in danger of being undermined.
But beyond the World Bank, the nomination also undermines the United States itself. The unorthodox appointment has prompted Lebanon to propose their own nominee, and other nations are debating whether to break with the tradition of accepting the US-backed nominee. Should an alternative nominee be chosen over Mr Malpass, the United States’ orthodox stronghold on the World Bank would be weakened, and it would lose its thus far unquestioned influence over one of the largest financial institutions in the world.
Some argue, however, that this change would serve the true character of the Bank. Throughout its existence, the Bank has insisted that loan-receiving nations appoint administrators based solely on merit and skill such that they might function at the highest possible level. Perhaps Mr Trump’s problematic nominee will push the World Bank to take a similar perspective on its own appointment process. Perhaps the merit of having the United States appoint its the Bank’s president has passed, and the organisation should let its brightest take the wheel.