The World Bank: Not Your Normal Presidential Election

By Camden Kelliher

On Wednesday February 6th, President Donald Trump announced that he would nominate David Malpass to be the next president of the World Bank. This follows current World Bank President Jim Yong Kim’s surprise resignation in January. Sources conclude that Kim believes he can make more of an impact in the private sector and he is expected to continue his development work with a firm. Currently, Kristalina Georgieva, World Bank’s CEO, is serving as interim President. As the leadership of the World Bank transitions, it raises two major questions: who is David Malpass and why does the President of the United States decide who heads the WorldBank?

To answer the first question, Malpass is a financial veteran. He is currently serving as the Under Secretary of the Treasury for International Affairs where he works closely with the World Bank. Malpass also served as Deputy Assistant Secretary of the Treasury for Developing Nations and Deputy Assistant Secretary of State for Latin American Economic Affairs under Presidents Regan and H.W. Bush. These positions are in addition to a career in the private sector, primarily on Wall Street. 

While Malpass has the track record of someone fit for appointment to a position at the World Bank, reports claim that President Trump may have selected Malpass for other reasons. Malpass has been critical of the way that the World Bank operates, questioning its lending programs. As NPR reports, Malpass told the told the Council on Foreign Relations that,  "The World Bank's biggest borrower is China . . . and it doesn't make sense to have money borrowed in the U.S., using the U.S. government guarantee, going into lending in China for a country that's gotten other resources and access to capital markets." So, at first glance it might appear that the Malpass nomination might be a furtherance of President Trump’s ongoing trade war with China. However, Malpass did support a $13 billion capital increase to the World Bank last year, evidencing the fact that he is not against the Bank, but some of its operations. If the nomination is approved, Malpass would likely shift lending away from middle-income countries like China. This could actually free up additional capital for the world’s most impoverished nations and advance global development a step further.

That brings the conversation to the next question: why is the U.S. President nominating the head of the World Bank? This is a result of political bargaining. Malpass actually has to get the approval of the Banks’s 25-member Executive Board before he would become Bank President. While the U.S. only has 16% of the voting share on the Board, the World Bank President has always been selected by the United States. The reasoning behind this is historical, dating back to the Bank’s creation as part of the Bretton Woods Agreement. Following World War II, there was an informal agreement that the Americans would select the head of the Bank, while the Europeans would select the head of the International Monetary Fund (IMF). To date, that agreement continues. However, the UN Dispatch seems to think it may be possible that Europeans on the Executive Board may break this gentleman’s agreement out of fear that Malpass’s nomination is, “an attempt to take the reigns of the World Bank in service of the parochial foreign policy priorities of the Trump administration.” 

The global political environment makes Malpass’s nomination very interesting. While the U.S. President’s nomination of a World Bank President has previously been a guarantee, this time around it is possible that the Europeans may not side with President Trump. This not only raises the question of who would then serve as the Bank’s President, but also potentially creates a riff in the global development community. Whether or not the Executive Board approves Malpass’s nomination could potentially change the shape of international development organizations for the foreseeable future.