MAJOR REFORMS NEEDED AT WORLD BANK
THE sudden resignation of World Bank President Jim Yong Kim has rekindled debate about leadership succession and the mission of the international financial institution.
US President Donald Trump has nominated his preferred candidate, David Malpass, who is known for his sharp criticisms of the World Bank. Malpass is also known for his hostile attitude towards China and for being an advocate of protectionist policies.
By nominating Malpass, Trump continues the tradition of having an American lead the multilateral body. This is an outmoded tradition that does not take into account significant changes in the global distribution of power.
In particular, there’s been the notable rise of emerging countries such as China. Given the substantial changes in the profiles of major economic actors, there is a need to rethink the purpose and focus of the World Bank and other multilateral institutions.
The World Bank has an important role to play in the developing world. It could do much more if the US relaxed its grip on the institution.
The leadership succession debate should not be merely fixated on personalities. Instead, it should be used to create space for reflection on the purpose of the multilateral body, the substantive role it should play in the future, the need to strengthen inclusive multilateralism, and the actions needed to bolster the position of emerging economies and developing countries.
Deep reforms of the World Bank are necessary as part of rethinking the current world order, and giving rising powers and developing countries a meaningful voice in this institution.
The World Bank was established in 1944. It was an initiative of the US, supported by other Western powers. It was created to lead post-World WarII reconstruction and development in Europe, a role that it later played in developing countries.
The ‘gentlemen’s agreement’ has prevented candidates from other world regions from taking leadership roles (in the IMF and World Bank)
Historically, the World Bank has been led by an American, while the International Monetary Fund (IMF) has been headed by a European. This is the function of a “gentlemen’s agreement” forged by Western powers in the post-war period.
The agreement has prevented candidates from other world regions taking leadership roles.
Failure to adapt to the changing world order could see rising powers going their own way. Such a development would signify the emergence of multipolarity without multilateralism, and create a climate of conflicting interests and values among a diverse group of countries.
To ensure this doesn’t happen, reform of institutions like the World Bank is necessary. Such a process should begin with having a head of the body who doesn’t come from the US and who is selected on merit. That would signal an important departure from the past.
The World Bank needs a transformative leader who can refocus the institution to work with new generation multilateral development banks, development finance institutions, and other state-backed financing instruments in developing countries.
All this is necessary to tackle long-standing infrastructure and other development challenges in the developing world.
Malpass belongs to the old order and is ill-equipped to undertake such a task.
Qobo and Soko are professors of international business and strategy at Wits University’s Business School.