Mission Impossible: World Bank David Malpass is an excellent choice for a miserable job.
https://www.wsj.com/articles/mission-impossible-world-bank-11549411445
Condolences to our longtime contributor David Malpass, the Treasury Under Secretary who is President Trump’s choice to be the next president of the World Bank. He can expect bitter resistance from the bank’s bureaucracy and its clients to even mild reforms.
Mr. Malpass is well-qualified to run the institution that is supposed to help developing nations with grants and loans. He has spent much of his career working on development economics, starting as the Treasury official responsible for the World Bank in the Reagan Administration. He worked with Latin American countries at the State Department and most recently on Argentine currency and Chinese trade matters in the Trump Administration.
He is an evangelist for pro-growth policies including low taxes, spending control, stable money for the poor as much as for the rich, and the rule of law. This is controversial in some corners of the World Bank, where they measure success not by growth but by how much money gets shoveled out the door.
Readers may recall how the bureaucracy and European governments ran Paul Wolfowitz out of the bank in 2007 after he tried to use bank lending to fight corruption. The path of least resistance for a World Bank president is to do very little, attend conferences, and enjoy a salary free of paying U.S. income taxes.
Mr. Malpass did some good in his current position when he negotiated a $13 billion capital replenishment for the World Bank in 2017. The U.S. share was $1.2 billion. The terms include an annual cap on bank lending of $25 billion, which should force the organization to prioritize lending and keep it from demanding more cash anytime soon.
Mr. Malpass also has tried to wean China from World Bank loans. Last spring the bank was providing $60.5 billion in loans to Beijing for more than 400 projects. Yet a country with $3.073 trillion in foreign reserves, which is throwing money around the world for its Belt and Road infrastructure campaign, doesn’t need loans financed in part by U.S. taxpayers. It has access to plenty of capital.
That wasn’t the view of former bank President Jim Yong Kim, who left three-and-a-half years early last month to take a job with a private infrastructure fund. The $51 billion Global Infrastructure Partners (GIP), where he’ll be a partner and vice chairman, invests in wealthy and poor countries. But Dr. Kim told World Bank staff that “I will focus on increasing infrastructure investments in developing countries.”
Media reports suggest a deal with GIP came together in late November during the G-20 conference in Buenos Aires. Dr. Kim was in Argentina before the G-20 for a World Bank forum and he hobnobbed with regulators, heads of state and investment execs—including GIP chief Adebayo Ogunlesi.
Dr. Kim can work for whoever he wants in private life, but it’s worth asking how long he was negotiating with a private entity that works with the bank even while he was leading the bank. GIP declined to comment on the record, and the World Bank declined to comment about negotiations between Dr. Kim and the firm.
At the World Bank Dr. Kim promoted China’s Belt and Road, which has turned out to be a snare for many developing countries. Mr. Malpass noted in November that “China’s use of non-market export credits, opaque financing, and exclusive procurement practices often benefits the donor more than the recipient.” Beijing loads weaker states with debt and later seizes strategic assets.
In November Dr. Kim met with senior Chinese officials and signed a statement affirming World Bank support for Belt and Road. This year the bank will publish a Chinese-funded report promoting Belt and Road. The U.S. still has the only veto at the World Bank’s core institution, the International Bank for Reconstruction and Development, where voting power is determined by financial contributions. The U.S. stake is 15.87% while China’s is 5.71%.
Tradition has been that an American runs the World Bank, while a European runs the International Monetary Fund. But many countries want a leader from the developing world, and Mr. Malpass will face stronger resistance than Dr. Kim did in 2012. The world would probably be better off without the World Bank. But as long as it exists, an economist like Mr. Malpass who knows the traps is the best man to run it.
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