Next World Bank chief could bring Trumpian mindset to one of the world’s major lenders
Whoever U.S. President Donald Trump nominates to run the World Bank will likely take over one of the largest lenders on the planet, with the power to slash green-energy funding and push the organization into a more political role on the international stage.
No matter who takes over the role, he or she will lead a 189-member organization that hands out nation-changing loans for projects it deems suitable. The bank, which draws money from its member organizations, committed to nearly $67 billion in loans last year. However, its influence has waned over the last decade as countries have decided to invest in funds seen to be less tilted toward U.S. interests.
“If the bank becomes too political … it would diminish it even further,” said Ian Goldin, a professor of globalization and development at Oxford University. Goldin joined the World Bank in 2001 and served as vice-president from 2003-2006.
The World Bank directs most of its money toward helping low-income and conflict countries, and toward global initiatives such as the fight against climate change, Goldin said. “All of those are very vulnerable to a political strategic agenda from the Trump administration,” Goldin told Global News by phone.
The World Bank’s outgoing president, Jim Yong Kim, announced his surprise departure on Jan. 7, cutting his second term short by three years. Kim, who was nominated to consecutive five-year terms by former U.S. President Barack Obama, had been slated to serve in the role until 2022.
He will now leave the Washington-based organization and return to the private sector on Feb. 1, ending a tenure during which he pushed the World Bank to finance more green initiatives and fight climate change in developing countries.
Trump will get to effectively name Kim’s successor. The U.S. has traditionally worked with European leaders to ensure that the head of the World Bank is an American, and that the head of its sister organization, the International Monetary Fund (IMF), is a European.
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However, several other nations have been clamouring for a non-American to run the World Bank, raising the possibility that Trump might not be able to push through anyone he wants.
There’s also a chance the Europeans might break their deal with the U.S. if Trump puts forward a polarizing candidate, according to Charles Kenny, a senior fellow at the Center for Global Development in Washington.
“If the administration offers a plausible candidate, I think they’ll get in,” he told Global News.
“This is the game: How much can they get a candidate who lines up with Trumpist views, but yet can get through the process?”
The powers of the president
Kim used his tenure as World Bank president to encourage green energy projects, drop support for coal power and urge nations to meet the targets set in the Paris climate agreement.
Under Kim’s leadership, the World Bank also pulled funding for upstream oil and gas projects in 2019, and committed $16 billion — or 23 per cent — of its budget to projects that fight climate change last year.
The World Bank committed in December to invest $200 billion in fighting climate change over the next five years.
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Kim has repeatedly called for global action against climate change, which he described as an “existential threat” in the World Bank’s 2018 annual report.
A World Bank president with a more Trumpian world view would be able to scrap various green-energy investments and perhaps support coal-fired power projects in developing nations.
Goldin says the president of the World Bank can quickly shift its priorities by pulling resources from certain programs and launching fundraising efforts around more favourable initiatives.
“There are lots of ways in which a president can frustrate or accelerate things in the bank,” he said.
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Kenny says Trump’s choice would likely fail the nomination process if he or she openly supported some of Trump’s more scientifically dubious policies.
Trump has actively tried to resurrect the fossil fuel industry in the United States, touting the merits of coal as a “beautiful” and “clean” source of energy. His administration has rolled back several environmental regulations imposed by Obama, including emissions guidelines and clean-air policies.
“We have ended the war on clean coal,” Trump declared in his State of the Union address last year.
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The World Bank and the IMF have already shown signs of accommodating — though not embracing — Trump’s world views. Kim and his IMF counterpart, Christine Lagarde, softened the tone of a joint statement issued after the World Bank’s spring meeting in April 2017. The original statement had included sharp language about trade protectionism and references to climate change, but that language was removed in the final message.
Two people familiar with Kim’s sudden departure told Reuters that he was leaving of his own accord, and was not “pushed out” by the Trump administration.
Challenging U.S. control of the World Bank
The U.S. holds a major stake in the World Bank’s voting rights, meaning it can veto any candidate it does not want — and potentially push through whomever the president chooses to run the organization.
Goldin says it’s an “absolute scandal” that the U.S. president still holds the power to effectively choose the leader of the World Bank, rather than allowing an open election among its member nations. All 12 of the bank’s past presidents have been American citizens recommended by the White House.
“We can assume that President Trump will appoint the next president and he’ll appoint whoever he wants,” Goldin said.
“It could well be a very bad appointment.”
There’s a good chance one of those other members will challenge the U.S. nominee, according to Mark Sobel, a former U.S. executive director at the IMF and a longtime former official at the U.S. Treasury.
“The world is suspicious of the Trump administration, which has a different agenda for the bank,” he told Reuters last week. “If they were to put forward somebody that is hardline, that would engender a reaction and antipathy.”
Trump has not openly discussed any potential nominees for the post.
A report in the Financial Times on Friday suggested the president’s daughter, Ivanka Trump, was being considered for the role. However, an unidentified senior White House official told Reuters on Monday that Ivanka was not being considered for the post, but that she would help with the selection process.
Treasury Secretary Steve Mnuchin and Mick Mulvaney, the White House chief of staff, “have asked Ivanka Trump to help manage the U.S. nomination process as she’s worked closely with the World Bank’s leadership for the past two years,” the official told Reuters.
“Reports that she is under consideration are false.”
The New York Times reported on Tuesday that former PepsiCo CEO Indra Nooyi, an Indian-born American, is one of those being considered for the role. Nooyi is close with Ivanka Trump, but made critical comments of the president after he was elected.
Trump loyalist David Malpass, undersecretary of the Treasury for International Affairs, and Ray Washburne, president of the Overseas Private Investment Corp. and a former member of Trump’s 2016 campaign finance team, are also said to be up for the post.
The World Bank has said its executive board will begin accepting nominations starting on Feb. 7. It said candidates should be committed to implementing the bank’s 2030 development objectives and reforms under the 2018 capital plan.
Candidates should have a proven leadership track record, with experience managing “large organizations with international exposure,” diplomatic and communication skill and “a firm commitment to and appreciation for multilateral cooperation,” the World Bank said.
The board still needs to reach a consensus on the nominee before he or she can be approved.
“If it’s a strong candidate, my guess is they’ll pull through,” Kenny said. “If the candidate is not plausible, I think all bets are off.”
— With files from Reuters and The Associated Press
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