Last month, World Bank President Jim Kim suddenly resigned, three years before the end of his contract. In response, President Trump nominated as Kim’s replacement David Malpass, current undersecretary of the treasury for international affairs and former chief economist for Bear Stearns in the years running up to the 2007-2008 global financial crisis. Malpass, like other key Trump appointees, has expressed a strong desire to dismantle, rather than champion, the institution he has been tapped to lead.
President Trump may well achieve his short-term interest in getting one of his loyalists into the World Bank’s top position. But this outcome will likely undermine the longer-term strategic objectives of the United States in sustaining its influence over the World Bank and the institution’s own eminent status.
Editorial writers have argued over whether Malpass is the right choice for the World Bank presidency, but nearly everyone agrees that the selection is a foregone conclusion. There is a long-standing norm that dictates that the United States gets its pick for the World Bank presidency in exchange for European counterparts getting their choice for the International Monetary Fund’s managing director. In the nearly 75-year history of the Bretton Woods Institutions, this so-called gentlemen’s agreement has never been violated.
This gentlemen’s agreement stands in tension with the bank’s formal rules for selecting its president. According to the World Bank’s charter, the 25 members of the executive board solicit nomination of candidates from all 189 member states. Nominees are fully vetted by the board, which selects the president by a simple majority vote. The United States (which has always held over 15 percent of the board’s voting shares) does not hold any de facto veto power, as it often does over other key decisions which require a supermajority vote of 85 percent.
This gentlemen’s agreement has preserved U.S. influence over the World Bank even as the country’s relative voting power, as well as relative economic power, has shrunk dramatically. The U.S. held over 35 percent of the votes during the heyday of its postwar hegemony, but its current voting shares today fall just shy of 16 percent. By many accounts China has exceeded — or is close to exceeding — the U.S. share of the world economy.
This relative decline has yet to upend the gentlemen’s agreement, but there are clear signs the norm is weakening.
As others have noted, in exercising its privileges at the World Bank, the United States has in the past been careful to nominate presidential candidates who have been relatively insulated from the criticism that they are unqualified. The last time the World Bank appointed a blatantly partisan U.S. nominee with little to no development experience was in 2005, when President George W. Bush nominated Deputy Secretary of Defense Paul Wolfowitz. Wolfowitz lasted a scant two years in the job before resigning in the wake of a corruption scandal and was succeeded by Robert Zoellick.
In 2012, when President Barack Obama put forth his own nominee, he was careful to select a candidate who would not push the limits of tolerance undergirding the gentlemen’s agreement. Kim was a candidate who not only had real bona fides in the development world via his prior work with Partners in Health but was also a naturalized U.S. citizen whose Korean American heritage accommodated critics’ demand for more diversity. Nonetheless, even with a viable nominee in place, two highly qualified non-U. S. candidates emerged in 2012 for the first time in World Bank history: Ngozi Okonjo-Iweala, former finance minister of Nigeria and former managing director of the World Bank, and José Antonio Ocampo, former minister of finance from Colombia. Okonjo-Iweala has already publicly stated she would run again in 2019, if nominated.
The Malpass nomination not only violates the norms surrounding the gentlemen’s agreement. It fails to uphold the basic eligibility criteria the bank itself has set out for the presidency in 2011. These criteria include a “firm commitment to and appreciation for multilateral cooperation” and “effective and diplomatic communication skills, impartiality and objectivity.” While Malpass himself recently depicted himself in this light, he has a prior public record that suggests he is hostile to multilateralism.
Malpass’ connections to Trump will not win him many friends among the European members of the Executive Board, whose implicit cooperation is critical to the U.S. leveraging the World Bank to its own ends. Similarly, Malpass’s goal of eliminating World Bank development lending to China makes some economic sense in light of Chinese growth and vast foreign reserves, but will not make an ally of China. Indeed, reforms that threaten to ostracize China (now the bank’s third largest shareholder) may very well incentivize China and other rising powers to engage in what international relations scholars call “forum shopping” or “contested multilateralism” — exercising their ability to exit the bank and put their increasing political and economic power (and even their own borrowing) behind alternative institutions, such as the New Development Bank and the Asian Infrastructure Investment Bank.
Malpass may well be the World Bank president that the current U.S. administration wants. However, as AEI fellow Desmond Lachman has argued, his selection “might hasten the day when the United States’ monopoly of nominating the World Bank’s president is seriously challenged.”
Catherine Weaver is associate professor and associate dean for students at the LBJ School of Public Affairs at the University of Texas at Austin. She is the author of “Hypocrisy Trap: the World Bank and the Poverty of Reform.”