The Financial Express

Malpass WB nomination: The gathering ‘American First’ storm

| Updated: February 14, 2019 21:16:53

Malpass WB nomination: The gathering ‘American First’ storm

Not only will the World Bank (WB) select a new leader in April, but the chosen one must then work over-time to prevent increasing disillusionment among less developed countries (LDCs). Its founding trade-off will be tested: West European countries giving the United States leeway to choose the WB leader in exchange for the International Monetary Fund (IMF) leader being European. At no time since has a breach seemed as imminent as now, not just because US President Donald J. Trump's nomination of David Malpass as WB president, nor too the fraying African, Asian, and Latin attachment to the pre-eminent global development funding institution, but also because China's Asian Infrastructure Investment Bank (AIIB) has been waging a Belt and Road Initiative (BRI) campaign seriously undermining the World Bank.

As US Treasury Department's formidable Under-Secretary, Malpass has been vocally critical of the World Bank for long. Yet, he fits Trump's type in his hostility towards any multilateral organisation, environmental protection, and other emergent concerns, like inequality and gender balancing. Other nominations might be made by the time this piece is in print, but since the winning candidate only needs to get the most vote (as opposed to AIIB's 75 per cent plurality, or a dual-majority of shareholders and regional bodies in the Inter-American Development Bank), the United States, on the heels of its aggressive Venezuelan posturing this past month, might get just enough support to see him through.

Of course, the European partners the United States historically depended upon have been disparaged by none other than Trump himself, leaving a growing question-mark how the Atlantic order will survive. If it does, we can expect much more time spent on materialising more-needed targets and effective compromises. If it does not, the credentials of any other contender could still shift in that direction. Not that that direction is inevitable, but at a time when the World Bank faces its most fissiparous moment, like the naked emperor, it stands rudderless.

Twice in the past the United States has chosen a candidate not from the United States, but fully schooled in the US weltanschauung: South Korea's Jim Yong Kim, from 2012; and Australian-US citizen, James Wolfensohn, from 1995 to 2005. That was when its mindset was global. It no longer is under Trump.

Regardless of the April 2019 election, other ailments have been strengthening over the World Bank's 75-year existence. Remedying them led to some recent institutional changes. For example, appointing a Chief Executive Officer in 2017 left the WB president to deal only with strategic planning and relations. Since then two other documents have also touched developments of WB relevance bearing trenchant LDC interests.

Leaving, on the whole, an optimistic tone, Melinda Gates's Pathways for Prosperity Commission reported last year (upon foundation) how the new job-skills necessitated by technological changes, like problem-solving, critical thinking, and teamwork, needs the kind of education that not only exacerbates social inequality by accessing too small an audience, but also demands enormous funds to restructure LDC education. This year's World Development Report also goes big on social protection, largely against overpowering technological developments.

These are areas where World Bank leadership has been expected, but where, to many affected countries, have produced disappointing results. Their alienation is echoed in the voting: the net 38 per cent LDC voting share is equivalent to that of five DC leaders, France, Germany, Japan, the United Kingdom, and the United States, with the US share being a whopping 17 per cent. Too marginalised at the decision-making level, growth in mid-tier LDC officers is still no match for the Washington Consensus being vigorously implemented from 1989. This approach promotes private-sector economics, a transition too soon and too coarse for many in the relatively newly independent LDC bloc. Reforms, proposed in 2008 to palliate the LDC burden, merely reinforce DC interests more than LDC: fiscal discipline, reshuffling public sector expenditures, tax-reform, liberalising interest-rates, trade, and foreign direct investment, making exchange-rates more comparative, privatisation, deregulation, and fixing property rights. 'Emerging' or 'frontier' countries, like Bangladesh, struggling to implement them, may begin to look elsewhere.

Tough borrowing terms have been compounded by the lack of administrative and decision-making transparency. One capstone edifice, the Structural Adjustment Programmes, has been universally unpopular among LDC clients: too dramatic macroeconomic changes must be made. Deeper debts have ensued, enhancing China's BRI loans as an alternative to the afflicted LDC bloc. Ultimately the repayment terms may be harsher than the World Bank's, but since no other BRI pre-conditions exist, the African continent exemplifies how hay (building critical infrastructures) may be made while the proverbial sun (easy cash availabilities) shines: surging economic growth further distances the World Bank from the continent. Sweden's Richard Swedberg, among many others, argues WB's economic neutrality doctrine, of keeping politics out and basing decisions only on economic merit, institutionalises western capitalism worldwide.

Malpass's nomination against that backdrop points to the underlying tensions of this era. If elected, will Trump's "America First" doctrine seep its way into the World Bank arteries and institutions the way the Washington Consensus did so egregiously in the 1990s, and whether the Atlantic order will hold? That order did not hold over COP-21, the massive mandate to recalibrate climate concerns for the common good. It collapsed at the G7 Summit in Canada last year against the surge of Trump's tariff-crusade. It barely clung on to the security anchor last year when NATO (North Atlantic Treaty Organisation) members escaped an embarrassing stalemate with Trump. Established by the United States in the 1940s, the Bretton Woods institutions must now be seriously scrutinised, given the gathering "American First" storm.

Technological changes now confront another emergent dilemma. As Kishore Mahbubani's The Great Convergence: Asia, the West, and the Logic of One World argued (2013), zero budget-growth in the Atlantic zone contrasts with LDC performance: more than 1.5 billion people climbed into the LDC middle-class in this century, thus creating a phenomenal market literally overnight (propelled by those very disturbing new technologies), resulting in expansive national budgets; while shrinking Atlantic zone demands from an aging population severely cuts western national budgets (highlighted by the Great Recession crunch).

These considerations might not enter the World Bank selection discussions through the front door, yet they cannot but sneak in through the back, through the technological changes ravaging society, jobs, and education across both LDC and DC firmaments. Reforms proposed for tackling these problems may force some WB members to "defect" from traditional voting patterns and specific past positions. If not, the die will have been cast on the Bretton Woods institution, not because of its over-reach or territory-mindedness, but for not looking out the policy-windows more meaningfully and realistically.

All in all, the World Bank leadership position deserves to be as competitive as the very behaviour the institution is ardently advocating to the LDC bloc. This alone should not leave any room for any "America First" platform or preacher. Malpass once argued how the stringent WB terms were for low-income countries. He must to repeat that position with a louder voice to a wider global audience to clinch the position.

Dr. Imtiaz A. Hussain is Professor & Head of the Department of Global Studies & Governance at Independent University, Bangladesh.

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