OPINION

[Mihir Sharma] Even the right American is wrong for World Bank

By Korea Herald
  • Published : Feb 10, 2019 - 16:49
  • Updated : Feb 10, 2019 - 16:49

In many ways, David Malpass, whom US President Donald Trump nominated to head the World Bank, is an unsurprising choice. He’s a senior Treasury official overseeing international affairs. Plus, his background absolutely screams “Trump nominee”: He isn’t a woman. He is an outspoken critic of the institution he is now to head. And he has a controversial Wall Street background, as well as some embarrassing calls in his past.

Ironically, there’s a germ of a good idea in Malpass’ appointment. Some of the criticisms levied against him by the development policy community are, in fact, good reasons for him to have the job. In particular, Malpass has gotten three big things right.

First, he acknowledges that the World Bank must diversify away from its decades-old fight against extreme poverty. That became its focus under Robert McNamara at a time when there was little attention and less capacity devoted to understanding what kept people in the developing world poor. In the years since 1990, though, the world has made great strides in eradicating poverty. It’s now time to focus on the bank’s original purpose, and one of the biggest constraints on the developing world becoming rich: the shortage of infrastructure.

Second, Malpass knows that China’s lending in the developing world is a problem. In testimony before a Senate Foreign Relations subcommittee a few months ago, he argued that “China’s use of nonmarket export credits, opaque financing and exclusive procurement practices often benefits the donor more than the recipient and undermines debt sustainability, domestic institutions, and environmental and social standards.” This is exactly right, and both the financial and development communities need to understand that this is a challenge that must be answered.

Finally, Malpass understands how the World Bank’s role in developing countries needs to change. In that same testimony, he argued that multilateral development banks “need to focus more on the quality of their project loans, rather than the quantity and on helping developing countries get their policy environment right for using private capital inflows effectively.” The truth is that the amount of private capital in the world available to build sustainable, climate change-ready infrastructure dwarfs the amount that the World Bank and its peers can put into the field. They need to transition to working more closely with private capital.

And yet, even if these are the right instincts, this is the wrong way to get them on the agenda. Multilateral development agencies are precisely that -- multilateral. Everyone needs to be on board, and we can’t afford to have these ideas tainted by association with “America First.”

More importantly, if the World Bank is truly to respond to the needs of new, emerging and developing economies, then it needs to be led by someone with direct experience of those nations and their priorities.

Changing who runs the World Bank would be the strongest possible message that it’s no longer beholden to America or Europe. Yes, the US is the World Bank’s largest shareholder, and the bank itself has made itself more accountable to its host countries. Still, a bank for the world must be governed by the world.


By Mihir Sharma

Mihir Sharma is a Bloomberg Opinion columnist. -- Ed.

(Bloomberg)