A new World Bank president is needed to fight poverty. The winning candidate will address the pandemic’s human development challenge. Climate-change doubters and non-Americans should not apply.
The US has apparently chosen a candidate to lead one of the two Bretton Woods committees established in 1944. Rajiv Shah, who ran USAID and the Rockefeller Foundation, is the frontrunner to succeed David Malpass.
The White House appointing the president of such an important organization is a terrible anachronism. Since the Bank and the International Monetary Fund were founded at the end of World War II, it has been the case. The Europeans chose the IMF managing director while the Americans got the Bank.
Throughout the last 80 years, emerging and developing nations have grown their economic share. Beijing, New Delhi, Brasília, and other cities resent advanced countries’ control over the IMF and World Bank. With Malpass’s resignation, a push to nominate Barbados’ prime minister Mia Mottley as the developing world’s nominee has been discussed.
Mottley would give the World Bank direction. The Bridgetown Initiative, which she led, called for automatic debt forgiveness for nations hit by pandemics or natural catastrophes, $1tn in climate resilience funding from development institutions (including the World Bank), and a new way to channel private sector investment into climate mitigation.
The Bank needs to punch harder than under Malpass. The World Bank’s cautious lending approach will not meet 2030 UN sustainable development targets. Multilateral development banks could lend hundreds of billions more with a less conservative strategy, according to a G20 research.
Malpass jumped first. Joseph Biden would have denied him a second term because Trump chose him. He was also considered a climate-change sceptic or indifferent to the issue. Biden thinks his departure will let the Bank focus on climate finance for poor countries.
This may please underdeveloped nations. It alarms them for two reasons. First, the Bank may stray from its development mission. The developing world wants climate mitigation and adaptation funding, but not at the expense of energy, transit, schools, and hospitals.
The second reason poorer countries are worried about the World Bank becoming a World Climate Bank is its poor track record. Why would the World Bank finance our green transition better than it did our poverty reduction?
Good question. The World Bank is focused on climate change, but it also helps developing nations boost their economies, increase resilience against pandemics, reduce inequality, and reduce debt. If the climate catastrophe overshadows other issues, the multilateral system will disintegrate and impoverished nations will be encouraged to borrow from China’s counterpart to the World Bank, the Asian Infrastructure and Investment Bank.
Malpass wasn’t the disaster some predicted when Trump picked him, but he didn’t do anything. After James Wolfensohn (1995-2005), no president has made much of an impact. It’s time to reconsider the Bank’s operations and international organizations’ viability.
Appointing a development-minded banker is the immediate priority. The White House will get its candidate, but Biden must choose wisely. The epidemic delayed anti-poverty efforts by years. The World Bank president must address rising inequality and debt.
Bretton Woods needs a major makeover. The World Bank is handling climate finance because there is no other option.
In an ideal scenario, a new multilateral bank for climate finance and energy transition would replace the insufficient sovereign debt structure with an international debt authority.
Developed countries reject new multilateral organizations, but they must realize that 1940s institutions cannot solve 2020s concerns. Fighting climate change includes fighting global poverty. That demands new organizations, methods, and urgency.
