Trump’s pick will get World Bank back to doing its job: Fighting poverty

Why is the World Bank, which exists to “end extreme poverty and boost shared prosperity,” loaning billions of dollars every year to China, the second-largest economy on the globe and a country which currently boasts foreign exchange reserves of nearly $3 trillion dollars? 

That is but one of the mysteries that David Malpass, whom President Trump has nominated to head the World Bank, will attempt to solve if, as expected, he is approved.

{mosads}There are other mysteries, like why the bank now prioritizes fighting climate change, which absorbed roughly one-third of the bank’s commitments in 2018, or $20.5 billion, when its mission is abolishing poverty.   

Another might be: How on earth can the bank’s administrative budget have swollen to $2.6 billion per year? 

One answer to all of the above is that there has been too little oversight of the giant multilateral institution on behalf of U.S. taxpayers, who are the bank’s principal backers. Liberals are keen on private bank regulation but don’t seem as interested in regulating public-sector institutions.

The nomination of Malpass, currently serving as undersecretary of the Treasury for International Affairs, has ignited outrage in leftist circles, with some complaining that Malpass has been an outspoken critic of the bank and others charging that he has shown little interest in the giant lenders’ affairs. Both cannot be true.

Malpass has indeed criticized the World Bank and its sidekick institution the International Monetary Fund (IMF) over the years for diluting their impact and not being sufficiently results-oriented. His insight here is informed by his tenure during the Reagan administration as the Treasury official responsible for the World Bank.

More importantly, in 1988, the economist traveled to Africa with then-Treasury Secretary James Baker, meeting leaders and discussing their need for clean water and electricity. Decades later, those needs have not been met, thanks, in part, to a lack of urgency on the part of institutions like the World Bank that are meant to solve such problems.

Critics are stumbling as they try to attack Malpass’ qualifications to run the bank. Foreign Policy magazine lamented that the Trump White House is “chipping away at the multilateral institutions it derides as ‘globalist,'” and targets Malpass’ assertion that “‘multilateralism has gone substantially too far — to the point where it is hurting U.S. and global growth.'”

But, addressing Malpass’ specific shortcomings, they note only that he has slowed the bank’s ability to “raise more capital and to limit the number of countries it lends to.” The reality is that Malpass played a pivotal role in helping to push through a $13 billion capital injection last April — a capital raise not universally backed by the White House.

One of Malpass’ two great sins is believing that the backers of the World Bank and other such institutions should demand more accountability. In a recent op-ed in the Financial Times, he called for the bank to pursue “measurable success — breakthroughs that materially raise median incomes.” 

His other sin is believing that recent developments in private capital markets can provide funding more efficiently and less expensively than in the past, which might reduce the role for the World Bank and other, similar, government-sponsored vehicles.  

The Financial Times, in an editorial criticizing the choice of Malpass, essentially backed his assertion, writing, “With an increasing number of rival sources of development finance — not to mention private capital — the bank needs to think hard about where it can add value.”

Indeed, that is exactly Malpass’ intent. And one place where he will definitely challenge the bank’s involvement is China, which to date has received World Bank loans of more than $60 billion.

China continues to maintain that it is a “developing” country and thus eligible for World Bank financing; that is absurd. China has enormous resources to deploy within its own country if it chooses to do so.

The World Bank measures income by purchasing power parity in much of their research; by that standard, China’s economy tops that of the U.S. 

Last year, China received a $200 million loan to “improve the rural road network” in Anhui province. Ask some New Yorkers whether they might like that kind of assistance to fill the potholes in midtown Manhattan. That notion sounds crazy, of course, but so is underwriting such outlays in China.

{mossecondads}World Bank funding directed to China looks especially inappropriate in the context of Beijing’s ambitious Belt and Road Initiative. That gigantic development undertaking, which spreads across 68 nations and in which China has already invested an estimated $1 trillion, rivals the World Bank.

CNN reports that the initiative, which has come under scrutiny for having ensnared various countries into “debt traps,” has been described by Chinese state media as a boon to “the Middle East peace process, start-ups in Dubai, currency trading, global poverty reduction, Xinjiang’s medical industry, Australian hotels, nuclear power, Polish orchards, and, finally, the entire world.”

In other words, Belt and Road ambitions are even more grandiose than those of the World Bank. If China has that kind of money to invest, they should be fixing their own roads without help from the World Bank.

Malpass’ nomination offends the global elites who defend the sprawl of globalist institutions like the World Bank that have been hijacked to serve a liberal agenda. His crime is working for President Trump, chastised as an “instinctive ideological enemy” of multilateral institutions by the Financial Times.

But his success may be returning the World Bank to its mission, and assuring that its resources are directed toward alleviating poverty, as they should be.

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. For 15 years, she has been a columnist for The Fiscal Times, Fox News, the New York Sun and numerous other organizations.