President Trump’s pick to lead the World Bank could spark an unprecedented battle over the future of the multinational lender.
Trump is set to nominate Treasury Under Secretary David Malpass — a fierce critic of the World Bank — to serve as its next president, spurring concern within the development finance world.
Malpass has been a key figure in the Trump administration’s push to scale down U.S. foreign aid, and he has blasted lenders like the World Bank as “inefficient” and “often corrupt.” He would replace Jim Yong Kim, who announced last month he’d leave the bank to take a position in the private sector.
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The move comes at a critical time for the international institution, which faces fresh challenges with new rising threats to the global economy.
The United States holds the largest stake in the World Bank, and the American president has chosen each of its previous leaders. But the nomination of Malpass could face resistance from within the bank, risking a blow up between Trump and another major international institution.
Malpass has argued that “globalism and multilateralism have gone substantially too far,” reflecting Trump’s “America first” distaste for foreign aid and development programs.
World Bank staffers and development finance policymakers fear that Malpass would shrink the bank’s footprint, reining in government-backed investment initiatives in favor of private sector funding.
Advocates for the World Bank say Malpass poses a fundamental threat to decades of progress toward building a stronger, more prosperous world.
“There is no case for Malpass on merit. The question now is whether other nations represented on the World Bank’s board of governors will let the Trump administration undermine a key global institution,” said Justin Sandefur, a senior fellow at the Center for Global Development.
Established in 1944 and divided into two main funds, the World Bank pools contributions from more than 170 states to provide loans for economic development in poor and middle-income countries.
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The World Bank has been a major feature of the post-World War II economic order and enjoyed broad bipartisan support in the U.S. It is run by a board of 25 directors, and a country’s voting power is proportional to the amount of capital it contributes toward the bank.
The U.S. funds roughly 16.8 percent of the World Bank’s fund for middle-income countries and roughly 10 percent of its loans to poor countries, far more than any other nation. The World Bank’s reliance on U.S. funding has allowed the White House to pick the bank’s past presidents. But the World Bank’s board makes the final decision on approving its president, leading many to worry that the nomination of Malpass could derail years of American leadership at the bank.
Several leading development finance officials, including past candidates for the World Bank presidency, have already called on the board to oppose Malpass and break the tradition of American leaders.
Sandefur called Malpass “a Trump loyalist who has committed economic malpractice on a wide range of topics,” including in the lead-up to the 2008 financial crisis.
Malpass, then the chief economist at Bear Stearns, wrote an August 2007 opinion piece titled “Don’t Panic About the Credit Market,” seven months before the legendary investment firm collapsed as the credit market crashed.
But supporters of Malpass say the veteran Treasury official is well equipped to reform the World Bank in line with the Trump administration’s goal of making foreign aid more efficient.
“David Malpass comes from the free-market, Reagan alumni group who wants to fix the multi-lateral institutions to help them work better,” wrote J.W. Verret, a law professor at George Mason University who served as Malpass’s deputy on Trump’s transition team.
“He has always accompanied those critical observations with constructive suggestions to improve those institutions.”
Malpass was approved by the Senate Finance Committee in a broad bipartisan vote in June 2017 and confirmed by the full Senate by voice vote in August of that year to serve as under secretary of Treasury for international affairs.
The Trump administration began its relationship with the World Bank on rocky footing after threatening to slash U.S. contributions to the organization.
The White House also considered opposing a capital increase for the bank but eventually backed it after winning concessions on reform efforts.
Ivanka Trump, the president’s elder daughter and senior adviser, has also partnered with the World Bank on a program meant to support female entrepreneurs in poor countries.
The president reportedly considered nominating his daughter to lead the World Bank, but the White House said last month that Ivanka Trump was not in the running and would instead advise her father on his selection.
Malpass detailed his concerns with the World Bank and similar organizations at a congressional hearing in November 2017, saying that they often failed to help those in poor countries.
“They spend a lot of money. They are not very efficient. They are often corrupt in their lending practices, and they don’t get the benefit to the actual people in the countries,” Malpass told the House Financial Services Committee.
“They get the benefit to the people that fly in on a first-class airplane ticket to give advice to the government officials.”
Under Malpass, the World Bank could also take on a tougher stance with China.
The World Bank is still a major lender for the country even as Beijing sets itself up as a competitor to development efforts in poor countries.
Malpass is a key fixture in U.S. trade talks with Beijing and has criticized the bank for not cutting off China, which is its largest borrower despite exceeding the per capita wealth cutoff for debtor nations.
Highlighting the complicated issues at play and the looming fights ahead, Malpass received praise from across the aisle on Tuesday.
Rep. Brad Sherman (D-Calif.) praised Malpass in a tweet where he noted that the bank “has lent $7.8 billion to China since 2016.” Sherman said if Trump wanted to save money, he could “end this practice.” Sherman said Malpass had made “good points” on the debate during a December hearing.
Malpass in the past blasted Kim’s embrace of China’s “One Belt, One Road” initiative, a massive transportation infrastructure building spree designed to expand Beijing’s economic sphere of influence.
For World Bank watchers, his criticisms of China provide hints as to the approach he could take as World Bank chief.
Malpass has also said Beijing’s foreign investment often begets “projects that are not in the best interest of the countries that are the borrowers.”
“What we would rather see the World Bank talking about is creating good quality projects,” he said.