Is the World Bank Changing for the Better?

When the World Bank was founded at Bretton Woods in 1944, WWII was still on, though its ultimate outcome was no longer in doubt. From the beginning the bank’s charter was to alleviate poverty through loans and expert advice. More recently, it pledged to help end extreme poverty by 2030. Toward this purpose it distributed some $60 billion in loans (2015) to countries that, for the most part, had difficulties accessing market loans. It was not always successful in what was or should have been a noble pursuit. It gave money to countries like China that no longer needed it and to dictators that pilfered it.  Throughout it all, it was perennially unable to prove how much good it was doing or develop reliable metrics of accomplishment other than the huge amounts it was disbursing.  

Around 2010 and coinciding with the tenure of Barack Obama, the bank capitulated to the powerful green lobby in the United Nations and Washington and became an “anti-development bank” in the apt analysis of Rupert Darwall from the Global Warming Policy Foundation. In short order a politically correct “Advisory Group on Energy and Climate Change’ (AGECC) was formed within the bank that doubled down on renewable energy and promised “sustainable energy for all by 2030,” an absurd promise since renewable energy was known to be at least ten times more expensive than conventional power.

Then in 2012, President Obama appointed the American hard-left academic, Jim Yong Kim, a man publicly “committed to social justice and liberation theology,” yet lacking any financial experience, to be the new president of the World Bank. Kim wasted no time in abandoning cost-benefit analysis of coal over solar and wind, dropping support for coal power (including a key power project in Kosovo), extending what was de facto a ban to financing upstream oil and gas projects and by and large “sacrificing the interests of the poor to green ideology.” This despite the fact that there is no known instance of a country developing to middle income status without fossil fuels.

All of this should be seen as background to the abrupt and still unexplained resignation of Kim, who had just been appointed to a second term that he very much wanted. And the less unexpected but nonetheless dramatic announcement by President Trump that he would appoint as the new president of the World Bank none other than its most persistent critic and public nemesis, David Malpass, of the Treasury Department. It should be mentioned here that by long-standing tradition the president of the bank has always been an American (just as the head of the IMF is always an European), but it is also worth mentioning that there has never been a candidate before who broke so clearly with the bank’s tradition of ‘going along to get along.’ So opposition from Europe and others would not be a surprise. Whether that could torpedo Trump’s choice is unclear. What is clear is that such a clearly political and anti-American outcome could endanger the very existence of the institution.

So what could we expect of a WB president Malpass? Judging by his criticism of the bank, quite a lot. He is known for his trenchant critique of the bank’s lack of measurable accountability, abandoning its core mission in favor of politically correct tangents and continuing to lend to China ($62 billion since 1980), which it no longer needs it. Beyond that, Malpass has taken the bank and the Obama administration more broadly to task for crony capitalism, distorting credit markets through ‘quantitative easing’ and for its tendency toward big spending, globalism, and obsession with multilateralism. If he were to make good on even some of these, the change would be profound and positive.

And it is well past time for such change. The unseemly obsession with green panaceas has already forced the Germans not only to pay the highest prices for their electricity, but also subsidize industry, something last seen in the defunct Soviet Union. Even worse, from an American point of view, is the nearly unanimous support by Democratic leaders for an absurd ‘Green New Deal’ in America, should give a pause to those who still believe that asinine socialistic policies are just an European specialty.

Alex Alexiev is chairman of the Center for Balkan and Black Sea Studies (cbbss.org). He could be reached at alexievalex4@gmail.com.

When the World Bank was founded at Bretton Woods in 1944, WWII was still on, though its ultimate outcome was no longer in doubt. From the beginning the bank’s charter was to alleviate poverty through loans and expert advice. More recently, it pledged to help end extreme poverty by 2030. Toward this purpose it distributed some $60 billion in loans (2015) to countries that, for the most part, had difficulties accessing market loans. It was not always successful in what was or should have been a noble pursuit. It gave money to countries like China that no longer needed it and to dictators that pilfered it.  Throughout it all, it was perennially unable to prove how much good it was doing or develop reliable metrics of accomplishment other than the huge amounts it was disbursing.  

Around 2010 and coinciding with the tenure of Barack Obama, the bank capitulated to the powerful green lobby in the United Nations and Washington and became an “anti-development bank” in the apt analysis of Rupert Darwall from the Global Warming Policy Foundation. In short order a politically correct “Advisory Group on Energy and Climate Change’ (AGECC) was formed within the bank that doubled down on renewable energy and promised “sustainable energy for all by 2030,” an absurd promise since renewable energy was known to be at least ten times more expensive than conventional power.

Then in 2012, President Obama appointed the American hard-left academic, Jim Yong Kim, a man publicly “committed to social justice and liberation theology,” yet lacking any financial experience, to be the new president of the World Bank. Kim wasted no time in abandoning cost-benefit analysis of coal over solar and wind, dropping support for coal power (including a key power project in Kosovo), extending what was de facto a ban to financing upstream oil and gas projects and by and large “sacrificing the interests of the poor to green ideology.” This despite the fact that there is no known instance of a country developing to middle income status without fossil fuels.

All of this should be seen as background to the abrupt and still unexplained resignation of Kim, who had just been appointed to a second term that he very much wanted. And the less unexpected but nonetheless dramatic announcement by President Trump that he would appoint as the new president of the World Bank none other than its most persistent critic and public nemesis, David Malpass, of the Treasury Department. It should be mentioned here that by long-standing tradition the president of the bank has always been an American (just as the head of the IMF is always an European), but it is also worth mentioning that there has never been a candidate before who broke so clearly with the bank’s tradition of ‘going along to get along.’ So opposition from Europe and others would not be a surprise. Whether that could torpedo Trump’s choice is unclear. What is clear is that such a clearly political and anti-American outcome could endanger the very existence of the institution.

So what could we expect of a WB president Malpass? Judging by his criticism of the bank, quite a lot. He is known for his trenchant critique of the bank’s lack of measurable accountability, abandoning its core mission in favor of politically correct tangents and continuing to lend to China ($62 billion since 1980), which it no longer needs it. Beyond that, Malpass has taken the bank and the Obama administration more broadly to task for crony capitalism, distorting credit markets through ‘quantitative easing’ and for its tendency toward big spending, globalism, and obsession with multilateralism. If he were to make good on even some of these, the change would be profound and positive.

And it is well past time for such change. The unseemly obsession with green panaceas has already forced the Germans not only to pay the highest prices for their electricity, but also subsidize industry, something last seen in the defunct Soviet Union. Even worse, from an American point of view, is the nearly unanimous support by Democratic leaders for an absurd ‘Green New Deal’ in America, should give a pause to those who still believe that asinine socialistic policies are just an European specialty.

Alex Alexiev is chairman of the Center for Balkan and Black Sea Studies (cbbss.org). He could be reached at alexievalex4@gmail.com.