Can Trump's pick be stopped from leading the World Bank?

Until a month ago David Malpass was a civil servant at the US Treasury with die-hard Republican sympathies and an abrasive management style. Jim Yong Kim’s decision in January to step down as president of the World Bank means he is now in line to head the international community’s flagship development body.

Kim’s decision to accept a job at a Wall Street private equity firm went down badly with staff at the bank, who were unimpressed that he could make more of an impact in global development through his lucrative career move. Instead, he is considered a greedball.

But that was only the half of it. Kim’s decision to go for the big bucks meant leaving the bank three years before his second term was up, thereby providing an opportunity for Donald Trump to choose his successor.

Thanks to a tradition that stretches all the way back to the days when the World Bank and its sister organisation, the International Monetary Fund, were created at the Bretton Woods conference in 1944, the Americans get to choose the president of the bank and the Europeans have the right to pick the managing director of the IMF.

This cosy arrangement might have had some justification at the end of the second world war, when the US and Europe accounted for the bulk of global economic output, and decolonisation was a thing of the future. But it has long been an anachronism given the rising economic importance of China, India and other big developing countries.

It is a dangerous anachronism, too, because it allows the White House – or, in the case of the IMF, European governments – to pick someone for reasons other than their suitability to do the job. Between them the Americans and the Europeans have enough voting power to stitch up the two plum jobs, which is why George W Bush was able to choose the arch neo-con Paul Wolfowitz to head the bank in 2005 and why there was no objection from Barack Obama when Christine Lagarde emerged as the European candidate to run the IMF.

Donald Trump has shown scant interest in multilateralism and if he looks slightly more kindly on the World Bank than the World Trade Organisation it is due to promptings of his daughter, Ivanka, who has taken an interest in the financial empowerment of women in developing countries. But that doesn’t mean Trump is prepared to break with tradition and he will expect his nominee for world bank president, the US treasury official David Malpass, to be appointed.

The people who have doubts about Malpass fall into two camps: those who think that he will be better than Wolfowitz and that his eventual support for the capital increase suggests his bark is worse than his bite: and those who think he will be every bit as bad as feared.

Evidence tends to support the second view. Judging by a piece he wrote for the FT explaining why he would be right for the job, Malpass has a rather simplistic view of how to make poor countries richer: promote growth by slashing taxes, scrapping red tape and ensuring currencies are stable. The reality is that most poor countries have trouble collecting taxes and have large informal sectors where there is little or no regulation.

Nor is Malpass a big fan of multilateral institutions, which is probably why he has been chosen. Trump is anti-aid, sceptical about climate change and wants to cut China down to size. The bank, up until now at least, has been in favour of aid, sees itself as central to the fight against global warming and has been in favour of lending to middle income countries such as China. Malpass is an economist who knows how the bank works. The fear is that he will try to use the bank to pursue the White House’s agenda.

In theory, Malpass should not be a shoo-in for the job. The executive board has announced that it will operate an open, merit-based and transparent process, but that was exactly what it said back in 2012 when Kim got the nod. And, as things stand, it is unclear whether there will even be any other candidates.

An open letter signed by more than 100 civil society organisations and published last week makes an obvious point. The vacancy at the bank comes at a time when multilateralism is in crisis. The rise of anti-establishment parties and protectionism are symptoms of a deep malaise in the global economy, the letter notes, adding: “The World Bank requires a leader able and willing to critically assess the role the bank can play in challenging the failed model that has led us here.”

Is Malpass such a leader? Clearly he isn’t and in an open and fair race he wouldn’t be first, second or third choice to run the World Bank. The question is whether the other big shareholders of the bank are prepared to make a stand.

One option would be for the Europeans to say that they accept Trump’s right to pick the next president but that Malpass is not a suitable candidate. There is a precedent for this in the US rejection of the German Caio Koch-Weser to head the IMF in 2000. Another German was eventually chosen.

Another solution would be to allow the current acting president, Kristalina Georgieva, to see out the rest of Kim’s term and then have an open contest. This, though, would mean the Europeans publicly saying that they would not expect to choose who succeeds Lagarde when her second term expires in 2021. It would require a bit of backbone and it would require a bit of principle. No, I don’t think so either.