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Donald Trump’s likely World Bank pick is wary of globalism

Donald Trump’s likely World Bank pick is wary of globalism

David Malpass has been a steadfast critic of multilateral lenders

James Politi and Sam Fleming in Washington

In late 2017, David Malpass, the US Treasury department’s top official on international affairs, laid out a scathing critique of the world’s leading international institutions. While he opposed “isolationism”, Mr Malpass told a congressional panel that “globalism and multilateralism” had gone “substantially too far”.

His office had to contend with more than 100 working groups and institutions, he said, some of them undeserving of support. “They spend a lot of money, they’re not very efficient, they’re often corrupt in their lending practices and they don’t get the benefit to the actual people in the countries,” he said. 

If Donald Trump has his way, Mr Malpass will become the next president of the World Bank, giving him the most high-profile, if not powerful, job in global development. According to people familiar with the matter, Mr Malpass is expected to be tapped as the US candidate for the role early this week, with Steven Mnuchin, US Treasury secretary, already briefing officials in other countries about the selection on Monday. 

For Mr Malpass, a tall, slow-speaking 62-year-old Michigan native, taking the helm of the bank — a pillar of the US-led international economic order — would represent a remarkable reward after a long career that has spanned Wall Street and Washington and included support for Mr Trump’s presidential campaign in 2016. 

Yet the prospect of such a steadfast critic of multilateral lenders leading the World Bank has already sparked concern and dismay within the institution and among international and former US officials who deal with global finance and development. The arrival of Paul Wolfowitz, the neo-conservative architect of the Iraq War, to the helm of the World Bank in 2005 triggered similar fears. 

"He knows emerging markets, he knows Latin America and he’s trusted by the Trump administration. That’s the argument for him". Daniel Runde, Center for Strategic and International Studies

“What the World Bank really needs at a time of such complex global challenges is someone who is committed to multilateralism, has a vision and can motivate the institution, and he has none of those things,” said Karen Mathiasen, a former US Treasury civil servant and former acting US representative on the World Bank board. “It is my hope the board will seriously consider alternative candidates,” she said. 

The World Bank presidency became vacant last month when Jim Yong Kim, Barack Obama’s appointee, quit to join a private equity fund, three years ahead of the end of his second term in office. Mr Kim’s departure, which became effective last Friday, triggered a succession race that is formally intended to be “open” and “merit-based” but has traditionally gone to the US nominee, as part of an unwritten agreement in which a European leads the International Monetary Fund and a Japanese candidate runs the Asian Development Bank. 

Other candidates considered by Mr Trump for the job, including Mohamed El-Erian, former chief executive of Pimco, and Indra Nooyi, former chief executive of PepsiCo, would have been greeted more warmly by World Bank insiders and finance and development ministries around the world. 

But despite the consternation about Mr Malpass — which could trigger a rival nomination — people close to the bank say the chances it could be derailed are slim, as few governments appear ready to pick a fight with Mr Trump over the issue. 

Mr Malpass’s supporters say he will bring a welcome change to the institution. He has experience in economics and finance, having worked as chief economist at Bear Stearns, the investment bank that collapsed during the financial crisis. He also has a background in development policy, dating back to previous stints in the Treasury department under Ronald Reagan, and the state department under George HW Bush, where he worked on Latin America.

“David Malpass has a clear-headed vision of how development finance can best support the goal of greater prosperity for emerging market countries through productive economic growth,” said Judy Shelton, US representative on the board of the European Bank for Reconstruction and Development. She called him a believer in “efficient and disciplined administrative budgets, transparent and responsible lending practices” as well a “debt transparency and improved accountability”.

One benefit of picking him, rather than an administration outsider, his supporters say, is that he understands Mr Trump, having worked closely with the US president, Mr Mnuchin and Ivanka Trump, the president’s daughter, in recent years. That should make him more effective in the job, since the US is the largest shareholder, they add.

Critics of Mr Malpass’s work at Treasury, which has included a seat at the table in recent US trade negotiations with China, say his impact in the Trump administration has been limited, if not uninspiring. 

“He has not been cutting the same figure at Treasury that predecessors including Larry Summers, Tim Geithner, David Mulford or Tim Adams did in the same role,” said Matthew Goodman, a former Treasury official now at the Center for Strategic and International Studies. 

As he embarks on his campaign to clinch the presidency, Mr Malpass is likely to stress that he still believes in US engagement in the world, just with a different type of mission. Mr Malpass led the US talks that ended up with Washington’s unexpected support for a capital increase at the World Bank tied to some changes at the institution. These included curbs on staff salaries and benefits, as well as a reduction of lending to more advanced developing economies such as China.

His role in backing new funding for the World Bank could help smooth its passage in the US Congress — a vital next step for the institution. “It is a solid reform package that better aligns the World Bank with US national security, foreign policy, and economic priorities,” he told Congress last year. 

Fears that Mr Malpass could lead the World Bank on a radical new Trumpian course may be exaggerated. If he wins, Mr Malpass is unlikely, at least initially, to try to dramatically curb the World Bank’s climate change work — a big fear in many countries.

One person familiar with his thinking said he would make clear that the World Bank would honour the environmental obligations it had made under his watch. Although he has warned about the risk of China’s “geopolitical” influence capturing the multilateral development banks — and criticised Mr Kim for promoting “Belt and Road Initiative” infrastructure projects — he is unlikely to openly seek to antagonise Beijing out of the gate. Some people who have worked with him complain that he can be implacable and stubborn in certain occasions, but others say that he has shown himself to be fairly flexible and even affable in others. 

“He’s a known quantity in the international community, he was seen as constructive [during the capital increase negotiations],” said Daniel Runde, director of the project on prosperity and development at the CSIS. “He knows emerging markets, he knows Latin America and he’s trusted by the Trump administration. That’s the argument for him.”

Meanwhile, there will be checks and balances within the bank, including the board, and top management such as Kristalina Georgieva, a former EU official who serves as chief executive and has gained credit for steering the bank through tumultuous times and low morale under Mr Kim. 

So while few inside the World Bank — or in capitals around the world — will be cheering Mr Malpass’s appointment, the prevailing reaction is likely to be a mix of grudging acceptance and resignation. “He’s at loggerheads with what multilateralism stands for,” says one former European official in Washington. “But other countries won’t have the guts to say no, and that will be that.”

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