The World of International Organizations Explained

Trump ally begins World Bank presidency

World Bank headquarters in Washington (ARÊTE/John Heilprin)

The World Bank’s new president, David Malpass, began his five year term at the helm of a global lending institution that is supposed to work to end extreme poverty and build shared prosperity — a mission that appears to conflict with beliefs expressed by him and his main sponsor, U.S. President Donald Trump.

Malpass, a former senior economic adviser to Trump during his 2016 presidential campaign, now oversees one of the most important international organizations set up to help countries rebuild after World War II. The World Bank’s board approved Trump’s choice of Malpass despite his skepticism of multilateralism. No other candidate was put forward by the bank’s member nations.

Malpass, who most recently served in the Trump administration as undersecretary for international affairs at the Treasury Department, succeeds Jim Yong Kim, whose surprise departure at the start of February set up an unexpected test for the World Bank, an organization at the crux of international development.

Kim announced he was leaving his post three years before his term was set to expire. Based in Washington, the bank is the biggest intergovernmental source of low-cost loans for international development. Americans have headed it since its creation at the end of World War II.

The United States —the largest shareholder in the 189-nation World Bank — traditionally nominates candidates for president that are then vetted by the bank’s 24-member executive board.

Bulgaria’s Kristalina Georgieva, who has been serving as the World Bank’s first CEO, stepped in as an interim president for about two months after Kim departed. Until 2017, she was a vice president of the European Commission in charge of its budget and human resources.

The bank’s sister lending agency, International Monetary Fund, which is also based in Washington, provides emergency loans for nations to weather economic crises. The IMF is traditionally led by Europeans; the latest head is France’s former finance minister Christine Lagarde.

The tradition of selecting candidates to head the World Bank and IMF primarily based on their nationality rather than on their merit goes back to the founding of the so-called “Bretton Woods” institutions.

The financial institutions were set up to rebuild postwar Europe and to promote international cooperation at a U.S.-led meeting of 43 nations at Bretton Woods, New Hampshire in July 1944. U.S. President Harry Truman chose the first head of the World Bank in 1946 at a time when Wall Street wanted some reassurance that it would be someone who would behave responsibly with the bank’s mostly American credit.

But since that time, and especially in the 21st century, the missions of the World Bank and the IMF shifted to focus more on development and poverty, and the United States no longer provides most of the bank’s credit.

Before Kim’s reappointment to a second term, which would have expired in June 2022, the board insisted on creating Georgieva’s role as CEO to run the bank’s day-to-day operations. Kim had been rumored to be job hunting since then.

In February, Trump observed that Malpass had been a longtime financial supporter even before the presidential campaign and described him as “a strong advocate for accountability at the World Bank for a long time,” someone who could ensure that Trump’s “America First” policies would be implemented.

“America is the largest contributor to the World Bank, giving over $1 billion every year,” Trump said at the White House. “My administration has made it a top priority to ensure that U.S. taxpayers’ dollars are spent effectively and wisely, serve American interests, and defend American values.”

Malpass noted that he had been part of the Trump administration’s drive for a major capital increase and reform package for the World Bank.

“With shareholders and dedicated staff, there’s a great opportunity now to implement these constructive reforms that will lead to faster growth and greater prosperity,” Malpass said. “I want to also note that a key goal will be ensure that women achieve full participation in developing economies.”

Malpass said he was “very optimistic that we can achieve breakthroughs to create growth abroad that will help us combat extreme poverty and increase economic opportunities in the developing world.”

The critics’ views

Malpass, however, also has been a stern critic of global financial institutions such as the World Bank and its heavy lending to China and increases in bank staff salaries. In 2017, he voiced “concerns about the rapid increase in globalism” at a forum sponsored by the New York-based Council on Foreign Relations, or CFR.

“I want to make a clear distinction between isolation, which we oppose, and our view that multilateralism has gone substantially too far — to the point where it is hurting U.S. and global growth,” he said in a public conversation with Tim Keene, editor-at-large for Bloomberg News.

“This viewpoint is sometimes mislabeled populism, but I think it is a pragmatic, realistic response to a multilateral system that often drifts away from our values of limited government, freedom, and the rule of law,” said Malpass. “As multilateral structures have grown larger and more intrusive, the challenge of refocusing them has become urgent and difficult, since multilateral structures and dependencies have become so entrenched.”

As someone who holds “views antithetical to the bank’s mission,” Malpass is a staunch Republican and Trump loyalist whose rise to World Bank president “sets the stage for a global confrontation,” said Stewart M. Patrick, director of CFR’s program on international institutions and global governance.

“Malpass shares Trump’s misguided view that multilateral institutions inherently run athwart to U.S. sovereignty and national interests, and he can be counted on to undermine the bank’s invaluable work around the globe,” Patrick wrote in a CFR blog post. “Trump’s brazen selection also underscores the need for a more open, transparent leadership competition.”

The bank provided more than $20 billion last year for projects involving agriculture, renewable energy and curbing global warming emissions, much of which conflicts with Trump’s agenda.

Disdainful of the science behind climate change, Trump announced in 2017 that he would withdraw the United States from the 2015 Paris Agreement on climate change. But one of that treaty’s provisions bars any nation that signed it from giving a one-year notice of departure until at least November 4, 2019.

This means that none of the signatories, including the United States, can withdraw from the treaty before November 4, 2020 — exactly one day after the next U.S. presidential election.

Malpass served as chief economist at the now-shuttered Bear Stearns investment bank when he wrongly predicted a prolonged U.S. economic expansion one year before the 2008 financial crisis. He urged calm in a rosy op-ed in the Wall Street Journal that was titled “Don’t Panic About the Credit Market.” Less than a year later, the U.S. economy entered a recession — and his employer, Bear Stearns, went bankrupt.

U.S. House Speaker Nancy Pelosi, Democrat of California, said America’s leadership of the World Bank has been “instrumental in reducing world poverty and in advancing global economic development,” but Trump’s selection of Malpass was a missed opportunity.

Pelosi said Trump “has regrettably chosen someone whose questionable commitment to its core values threatens to undermine the institution’s mission and America’s preeminent leadership role in advancing that mission.”

The world of international organizations explained.

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