United States Must Preserve the Presidency of the World Bank
By Dan Runde | JANUARY 10, 2019
On Monday, World Bank president Jim Yong Kim unexpectedly announced that he will resign in February, when his mandate was set to end in 2022. A number of observers have been questioning why he would leave, when holding the World Bank presidency is comparable to being a head of state and few have stepped down willingly. Regardless of his reasons for leaving, it is important that the United States keep the World Bank presidency.
The next candidate proposed by the United States will face increased scrutiny from the international community about whether or not the World Bank presidency should be held by an American, as it always has and deserves to be. Therefore, it is critical that the Trump administration propose a strong candidate so that the U.S. retains the World Bank presidency. Losing the World Bank presidency is unacceptable and would weaken the United States’ influence on the global stage.
The World Bank disburses around $45 billion in loans, grants, and private sector investments each year. This dollar amount underestimates the global influence that the World Bank has accumulated. Its influence overseas is often underestimated in official Washington.
After the Bretton Woods conference in 1944, the United States was slated to take control of both the International Monetary Fund (IMF) and the World Bank. However, the American candidate for IMF Managing Director turned out to be a Soviet spy, so the United States gave up control of the IMF to a Belgian, thus creating the tradition of a European heading the IMF.
In 2011, the then IMF Managing Director Dominique Strauss-Kahn was credibly accused of attempted rape and other sexual assault scandals and resigned abruptly. In a little over a month, one Frenchman was replaced by one Frenchwoman who still heads the IMF, Christine Lagarde. At the time, there was some pushback from the BRICS countries over the European control of the IMF, but the status quo largely remained intact.
The IMF and the World Bank are seen as twinned institutions by their shareholders, and so the precedent in one impacts the precedent in the other. Therefore, given that the Europeans were able to keep the IMF, it should not be an issue now for the United States to maintain control of the World Bank.
The U.S. should maintain control of the World Bank presidency until a time when the UN Secretary-Generalship and the IMF Managing Director position, along with other key international organization positions, become open to the United States. The whole global system of senior leadership positions at multilateral institutions is a debate we should only have in a larger context, not in the context of this one specific position.
The World Bank faces a different world than 20 years ago, and the next 10 years — on the assumption that the appointed person gets two five-year terms — are going to be very different. The World Bank’s money, data, and advice need to be far more focused on fragile and conflict-affected states and on Africa. There will remain important work in middle-income countries, but these countries do not need the money of the World Bank so much as they want its advice. An increasing number of these countries will — or ought to — pay for the advice and work that the World Bank provides. This will significantly alter the business model of the World Bank over time. For example, the World Bank committed over $1.8 billion to China in 2018 alone. Every dollar that the World Bank provides China is fungible for China — that means $1.8 billion more for China to buy weapon systems. Over time, the World Bank should remain engaged in China by providing advice, but it should get out of the business of lending to China as soon as possible because it can afford to pay for the World Bank’s advisory services, just like Oman and the Gulf countries.
What kind of person should lead the World Bank?
The next person to lead the World Bank should of course be an American, preferably one who has good knowledge of Africa and international development and who has managed large organizations. Being a former Ambassador should be considered a plus, as well as a comfort with international finance and economics. It would be very helpful for him or her to be known and respected internationally, as this person will have to be acceptable both to the Trump administration and to the rest of the world.
The Trump administration should expect some specific concerns over the issue of climate change. The World Bank shareholders have put the World Bank into a vise, where it is focused on financing renewables to the detriment of coal, oil, and even natural gas. This discussion about financing only renewables should be revisited, but if the choice is between losing the American World Bank presidency or a discussion about energy, the debate of financing energy in the developing world can be revisited at another time.
It is in the Trump administration’s interest to come to a decision quickly about a proposed candidate. The upcoming Spring Meetings in April would be a good opportunity for the new person to start work.
How should the United States run a campaign for its candidate?
Reaching out to a handful of allies and partners early will hopefully snuff out any real challenge to the U.S. Once the U.S. has a credible candidate, senior leaders in the United States need to reach out to a series of key countries in quick succession.
The first phone call should go to Japan, due to our unique relationship with the Japanese and given that Japan has almost 7 percent of voting power at the World Bank. The second phone call should go to France. The United States should remind the French that the U.S. supported France at the IMF in 2011, and now would be the time for the French to repay that support by supporting our candidate.
Saudi Arabia has its own constituency seat with 2.79 percent of shares — it should get an early phone call. Brazil, which leads a constituency with 3.82 percent of shares and has a new pro-American government, should get an early phone call too. The United Kingdom, Italy, Canada, and Germany should also be called.
Due to a pragmatic, transactional relationship with the new Mexican government and Mexico’s focus on development issues as a root cause for forced migration from the Northern Triangle, the Trump administration should seek support from Mexico. South Korea and Australia, which are in the same consistency, should both get phone calls.
If we receive a challenge, it will come from China, Russia, or possibly Germany. A credible candidate and strategic outreach by the United States should mollify potential critics.
Just like in any other campaign, the United States should go the extra mile to reach out to a number of stakeholders so that they feel like they have been consulted in the process before the candidate is announced.
With this universe of friends, allies, and partners potentially lined up, the United States would have nearly 50 percent of voting power. This would be an almost insurmountable lead, and it would be very difficult for a serious challenger to gain support.
The administration must put forth someone who meets a general set of qualifications, and this candidate must be supported by a thoughtful shadow campaign led by the U.S. Treasury and senior Trump administration officials.
The consequences of losing the World Bank are higher than we realize, and it would be a grave loss of power for the United States. If we lose it, we will not get it back.
Daniel Runde is a Senior Vice President and William A. Schreyer Chair in Global Analysis at the Center for Strategic and International Studies. He previously worked for the U.S. Agency for International Development, the World Bank Group, and in investment banking, with experience in Africa, Asia, Europe, Latin America, and the Middle East.