TheWorld Bank is Not a US Fiefdom

Since its start in 1944, the World Bank President has always been a US citizen. In an unholy alliance with „Europe“, a US-European non-gentleman‘s agreement has been maintained that Europe holds the IMF Managing Director position (currently Christine Lagarde) and the US the World Bank Presidency (currently Jim Yong Kim). Kim has just announced that he will leave his post 3 years early by end-February 2019. Let us recall that in 2012 when Kim was first installed by President Obama and then in 2016 when Obama prematurely pushed him into his second term, that there was widespread disapproval of his appointment, not only by developing and emerging countries‘ authorities, but also by indstrial ones. In both cases, highly qualified nominees had been named, only to be steamrolled by the combined votes of European and US authorities. Sure, there was also the problem that emerging and developing countries could not agree on a single joint candidate, but this pales in significance to the obstinate claim by Europe and the US to maintain their hold on the Bretton Woods institutions. And this in spite of the fact that in the last 20 years at least the economic, if not the political, weight of the indstrial countries has fallen to below 50% of World GDP. But like in the after World War II years, the US still refuses to give up its blocking minority in these institutions, while the Europeans still command more than a third of the voting shares and of the number of Board Directors in both institutions. The US has used the Bretton Woods institutions as tools of their geo-political direction, the Europeans have been less successful, mainly because they were not able to agree on joint EU positions. Even though, they marshalled the IMF to support their crisis programmes, as part of a “Troika” of the European Commission, the European Central Bank and the IMF, to the dismay of the Fund’s  other shareholders.

It is no surprise that these valuable global institutions, the IMF safeguarding short-term balance of payments stability, the World Bank Group helping the longer-term development process of countries, have fallen into a sort of disrepute with their clients. The IMF, because it imposes heavy adjustment costs on clients‘ budgets, usually resulting in severe cutbacks of social expenditures and government employee wages, in favor of pushing ortodox liberal market philosophies, the World Bank for also following the disreputable „Washington Consensus“ prescriptions of liberalizing labor and product markets, privatizing state-held enterprises and establishing the predominance of the „free market“ on its clients‘ policies. As a consequence,  emerging countries recently founded their own (parallel) institutions, like the New Development Bank, the Contingent Reserve Arrangement, the Asian Infrastructure Investment Bank, in order to be more independent of the Bretton Woods Institutions. Recently, the US has criticized the World Bank for financing too much in China. The present „trade war“ instigated by the US against China and allies is likely to increase such tensions.

Mr. Kim‘s sudden departure again opens up a discussion about the future leadership of the World Bank. Kristalina Georgieva, at present Chief Manager of the World Bank, will in the interim assume  Mr. Kim‘s position. As a long-term World Bank manager, and EU Commissioner, she has development and political experience and is well regarded. Still, this opening is another chance for the World Bank Governors to show that they see this institution as one of the bedrocks of a global rules-based order. In this vain, they should select a new President as a result of an open selection process, dismissing the unholy duopoly of the EU and the US. Clearly, such a move would also have implications for the future leadership of the IMF. It is exactly the assault on global institutions which the US President has launched which should incentivize the other world leaders to show that a global institution is only credible if it is seen as legitimate by all its members. The premature shoving-in of Mr. Kim in 2016 by President Obama (ostensibly in order to prevent an even more controversial appointment by President Trump) has backfired: not only, because Kim‘s tenure has been marred from his start by a near-permanent effort to remodel the Bank which has led to more navel-gazing and stonewalling, or leaving, of World Bank staff, but also because all of Mr. Kim‘s efforts to appease President Trump‘s government seem to have been in vain. More recently, he has steered the World Bank into calmer waters. The future needs of a global development institution, more open, more representative, more legitimate and more open to different development directions is (nearly) undisputed.

In this situation, it is with complete incomprehension that I read in the Financial Times of Jan.9, 2019 (“Why the World Bank needs an American leader”) that the President of the World Bank Alumni Association makes an impassioned plea that the US should once more nominate the next World Bank President from within the US, „perhaps with an open selection process. This statement – legitimized by whom? – flies in the face of an open and transparent selection process, in order to find the best leader for this still important development institution. That description does certainly not fit Ivanka Trump !(no joke: this is what international newspapers report as possible on Jan. 12).


Leave a comment

Filed under Uncategorized

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s