The unexpected resignation of Jim Yong Kim as the President of the World Bank is, in a sense, a high-stakes surprise. It comes more than three years before the expiry of his term in 2022, and U.S. President Donald Trump is now set to announce his replacement to run the global lender whose mission is to address global poverty – even as Mr. Trump works to disrupt the economic world order.
But in another sense, it is hardly shocking at all. Although there is a formal selection process, the World Bank’s board has consistently rubber-stamped the United States’ nominee for president, while the Europeans have exercised a similar privilege over the position of managing director of the International Monetary Fund. And unless that changes, the World Bank will continue to be an organisation in crisis.
In the bank’s early decades, such a monopoly made sense. The United States was the largest shareholder, and the bank raised most of its money on U.S. financial markets. Later on, when the bank created a window to offer loans on very favourable terms to borrowers – the International Development Association (IDA) – the United States was again the largest donor. A U.S. national leading the World Bank was helpful in creating confidence on Wall Street as well as in the U.S. Treasury and Congress. This support peaked during the World Bank presidency of former U.S. defence secretary Robert McNamara when, despite a U.S. retrenchment from global affairs after the Vietnam War, the bank’s lending grew 20 per cent annually from 1968 to 1981.
Since then, though, U.S. support has ranged from grudging to miserly to outright hostile. It has reluctantly supported the bank when it needed the institution for its broader foreign-policy and economic goals, such as during the Latin American debt crisis in the 1980s, the post communist transition in Eastern Europe in the 1990s, or in the immediate aftermath of the 2008 global financial crisis. Otherwise, it has effectively sought to limit its financial commitments while simultaneously retaining control, amid a growing chorus of voices asking why birthright should take precedence over leadership qualities when it comes to these Bretton Woods institutions.
These tensions have intensified with the rapid growth of emerging economies, led by China. While Beijing has pressed for expanding the bank’s capital to allow the institution to lend more, the United States and some European countries have been unwilling to either commit budgetary resources or allow other countries to put in much more money and expand their shareholding. With its share gradually declining, retaining control over the bank’s presidency has consequently become critical for the United States to dominate the institution on the cheap.
All this would be somewhat palatable if the United States went about nominating quality candidates or even followed procedural norms. George W. Bush’s administration nominated Paul Wolfowitz, whose presidency of the World Bank was disastrous, headlined by his resignation over serious ethical misconduct.
Mr. Kim, who was nominated by Barack Obama, was chosen largely because of his proximity to the Clintons. He led an expensive botched reorganisation, and followed with an authoritarian leadership style whose capriciousness led many senior managers to leave the institution.
Nonetheless, Mr. Trump renominated Mr. Kim for a second term 10 months before the end of his first term, forcing the bank’s executive board (representing the member countries) to accelerate the appointment process, ensuring that no other viable candidate could emerge. “We preach principles of good governance, transparency, diversity, international competition, and merit-based selection,” the World Bank’s staff association pointedly noted during the nomination process. “Unfortunately, none of these principles have applied to the appointment of past World Bank Group presidents. Instead, we have accepted decades of backroom deals which, 12 times in a row, selected an American male.”
Why are the other World Bank members so content to roll over? One simple fact: powerful nations’ relationships with the United States matter much more than who heads the World Bank. The Europeans are fearful that any challenge to the U.S. leadership monopoly in the World Bank would undermine their monopoly in the IMF; the same is true of the Japanese in the Asian Development Bank.
The BRICS economies don’t pose a real challenge, either. China has decided to either create its own international financial institutions, such as the AIIB and NDB, or simply go it alone as with its monumental Belt and Road Initiative. While India has been the bank’s largest borrower, it accounts for barely 0.1 per cent of GDP. Brazil’s new President has much affinity for Mr. Trump. And for many smaller countries, loans from China are much more important – a moot point, though, since they lack the clout to create a coalition to challenge U.S. influence anyway.
So even while the Trump White House has expressed a profound antipathy for multilateralism, it is likely to still end up ensuring that the next president of the World Bank is an American, Plus ça change, plus c’est la même chose.