Some good news from the MDB sector
ON Wednesday, the World Bank announced that its president, David Malpass, had tendered his resignation — effective June 30 — well in advance of the expiration of his term in April 2024. My reaction to this news, and those of most of my acquaintances in the world of multilateral development banks (MDBs), was for the most part some version of “Don’t let the door hit you in the ass on your way out, pal.”
Although he performed better as World Bank president than many feared he would when his appointment was first announced by He Who Shall Not Be Named, the predecessor of US President Joe Biden, almost four years ago, Malpass could never quite shake off the characteristics that made him appealing to Melonhead von Clownstick in the first place, besides having served as the financial adviser for the latter’s 2016 presidential campaign. As such, Malpass spent most of his time being a large wrench in the gears of MDB development at a critical period when governments and multinational institutions were (and still are) grappling with the simultaneous challenges of managing the social and economic shocks of the Covid-19 pandemic and ramping up the world’s climate change response.
It was on this latter matter that Malpass most publicly tripped up. Before his name was put forth as a candidate for the World Bank presidency, the former investment banker and one-time US Treasury undersecretary was most notable for being a prominent climate skeptic. He changed his tune in order to get the job — the World Bank having been, at least until Malpass got hold of it, the leading MDB on climate change response — but he couldn’t keep his natural inclinations under wraps for long. On the sidelines of the UN General Assembly in September of last year, he stepped in when asked if he believed man-made emissions are causing global warming. “I’m not a scientist,” he said, which prompted calls for his removal from the US Congress and climate advocacy groups, and sent him on a weekslong damage control mission to explain that what he said was not really what he meant.
Even before scoring that own goal, Malpass had come under fire for letting the World Bank’s attention to climate change slip while other MDBs were rapidly building their efforts. One sore point was the World Bank’s reluctance to pull back from funding fossil fuel-based energy projects; at the same time, as just one example, Manila-based Asian Development Bank (ADB) was not only doing that, but was developing an innovative (although to be fair, not entirely unproblematic) Energy Transition Mechanism to help countries retire coal-fired power plants.
Other MDBs, such as the World Bank’s chief rival, the European Investment Bank (EIB), and even China-backed upstart, the Asian Infrastructure Investment Bank (AIIB), were also pursuing their own wideranging climate response programs.
Friction with other MDBs was probably the worst result of Malpass’ stewardship at the World Bank, which has had the unfortunate result of leaving the giant institution and its vast resources a bit out of the loop. Over the past three years, there has been a remarkable amount of coordination and deeper cooperation among the MDBs, catalyzed by the need for concerted action in response to the pandemic, while the World Bank has seemed to be playing catch-up; or in some cases, being an unhelpful troll.
In one particularly egregious incident, Malpass in February 2020 publicly excoriated ADB for giving “excessive” loans to the financially hamstrung Pakistan government, accusing ADB of laying a debt trap for the country. While his public comments were certainly undignified and rude, what made them especially ridiculous is that his accusations were just plain wrong. At the time, Pakistan’s hapless government was indeed carrying an enormous amount of debt, some $27.8 billion of which was owed to various MDBs. ADB did in fact loan some $2.4 billion to Pakistan throughout 2019, but on easy concessional terms, and it was an amount that paled in comparison to the World Bank’s own lending to Pakistan, which totaled at the time about $15.2 billion. If any MDB was being “reckless” in what it was lending to Pakistan, it was the one being led by the guy running his mouth; the same guy who, prior to being named World Bank president, had publicly criticized the institution whose checks he now signed for focusing too much on expanding its lending portfolio.
Malpass’ resignation has been presented to the public as having been his own decision, and it probably was, but it may have been a decision he felt obliged to make. Last month, the World Bank presented a basic version of what it calls its “roadmap for evolution.” The plan is still short on details, and meaningful implementation of parts of it may still be a year or more in the future, but at first glance it looks like something almost intentionally designed to contradict some of its president’s ideals — refocusing and accelerating efforts to tackle climate change, including vital cross-border initiatives, expanding its core mission to fight poverty, and expanding the bank’s capital resources, something that might result in US influence in the bank being reduced a bit, depending on where the fresh capital comes from.
As for the World Bank, Malpass’ departure opens up the opportunity for some fresh leadership, possibly even from outside the United States. Even though Malpass is described as having been “appointed” by the US, that is not formally how it works; the president is elected by the bank’s 189 members, and the fact that the one selected almost always is an American is only because of the heavy influence of the US as the largest shareholder and host country of the World Bank headquarters. It may be wishful thinking, but a change in leadership perspective in the person of someone from a country whose progress and influence is more dependent on cooperation than on telling other countries what to do would almost certainly be good for the bank.
And as for Malpass, well, who cares? Guys like him always land on their feet, he’ll be fine. He’ll probably write a book and get a zero-effort position as a “fellow” at some conservative think tank somewhere. Anything’s fine, as long as the world that is actually trying to solve its problems doesn’t have to deal with him anymore.