U.S. President Donald Trump said on Wednesday that the World Bank Group should be led by U.S. Treasury official David Malpass, a Trump loyalist and critic of multilateral institutions who has vowed to pursue “pro-growth” reforms at the global lender.
Trump’s nomination of Malpass, the Treasury Department’s top diplomat, is subject to a vote by the World Bank‘s executive board and could draw challengers from some of the bank‘s 188 other shareholding countries.
The United States, the lender’s largest shareholder with 16 per cent of its voting power, has traditionally chosen the bank‘s president, but departing president Jim Yong Kim faced challengers from Colombia and Nigeria in 2012.
Malpass has been an outspoken skeptic of the 189-nation World Bank, a leading source of funding for economic development. The World Bank provides low-cost loans for projects around the world. Among its key missions is helping combat poverty in developing countries.
Malpass has called for curbing the World Bank’s financial reach and has criticized its lending to China, one of the bank’s leading recipients of aid.
If the World Bank’s directors approve his nomination, Malpass would be positioned to overhaul an institution that, he has argued, has become too focused on its own expansion and prestige rather than on the interests of poor countries.
“A host of organizations are creating mountains of debt without solving problems,” Malpass said in a speech last year. “Huge organizations like the World Bank and the many multi-lateral development banks have created an environment where their own growth ends up being as important as their clients’ growth.”
Stewart Patrick, a senior fellow in global governance at the Council on Foreign Relations, said that Malpass appears intent on weakening a World Bank that is already rethinking its role in a world with broader greater access to capital markets but also chronic humanitarian crises.
“It certainly seems like he’s the wrong guy if you wanted to strengthen the World Bank,” Patrick said. “He has such a record of criticism of the World Bank. And he seems to have bought into the sovereignty mindset of the administration that global institutions are a threat.”
Having Malpass at the helm of the World Bank would fit a pattern inside the Trump administration of tapping officials to lead institutions whose core missions they have publicly questioned or opposed. The Consumer Financial Protection Bureau, the Interior Department and the Environmental Protection Agency, among others, have under Trump been led by some of their sharpest former critics.
More broadly, the Trump presidency has defined much of its mission by challenging the global institutions that emerged out of World War II such as NATO and what eventually became the World Trade Organization. The president sees the rules set by these organizations as putting the United States at an economic disadvantage.
Malpass, 62, has straddled the top echelons of government and Wall Street, having worked in the Reagan and George H.W. Bush administrations and as the chief economist for the defunct bank Bear Stearns. He also unsuccessfully sought the 2010 Republican nomination for a Senate seat from New York.
Malpass’ public forecasting has at times been misguided and arguably shaped by his political leanings.
In 2007, he wrote on the editorial pages of The Wall Street Journal that the “economy is sturdy and will grow solidly in coming months, and perhaps years.” Over the subsequent months, the United States toppled into its worst financial crisis and recession since the Great Depression of the 1930s.
In the same editorial, Malpass dismissed the risks from subprime mortgages by saying, “Housing and debt markets are not that big a part of the U.S. economy, or of job creation.” As it turned out, the reckless use of subprime mortgages was the catalyst that ignited the 2008 financial crisis.
The World Bank was founded in 1944 with the task of shoring up the economies of nations devastated by World War II. The first recipient of a World Bank loan was France. The bank, whose leader is nominated by the United States and has always been a U.S. citizen, has since shifted its focus from reconstruction to development, extensively in Africa, Asia and Latin America.
Kim’s unexpected departure could set up a contentious fight between the Trump administration and other countries who argue that the United States exerts too much influence over the bank, which is based in Washington.
— With files from Reuters
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