On Monday, Jim Yong Kim stepped down as president of the World Bank Group, moving to the private sector 3½ years before the end of his second term in 2022. While, as its name suggests, the World Bank is a global financing body that made $66 billion in commitments to developing country governments and private sector investment projects in 2018, traditionally the White House has chosen its president.
That has many people concerned about whom Donald Trump might nominate to replace Kim, given the president’s contemptuous attitude toward foreign aid and international institutions in general. But the U.S. lock on the top job at the bank has been a problem for far longer than the past two years. And now would be a perfect time to end it for good.
The World Bank is the second-largest multilateral development bank on the planet, and the organization has power beyond money—pushing policy prescriptions through influential research and advocacy and incubating future leaders worldwide. Former staff members include current President of Afghanistan Ashraf Ghani, Jordanian Prime Minister Omar Razzaz, and former Liberian President Ellen Johnson Sirleaf.
The bank is owned by the world’s governments, with voting shares on its board largely determined by the amount of money they’ve pledged to the institution’s lending arms. Nigeria controls 0.7 percent of the votes, for example, while China has a 4.5 percent share and the U.S.
has 16 percent. Officially, World Bank presidential candidates are nominated by board members, and whichever candidate gets the majority of the votes is the winner.
In reality, the U.S. nominee has always been selected, thanks in part to a deal with European shareholders that the U.S. will back the European candidate for the head of the International Monetary Fund if the Europeans back the U.S. candidate for the World Bank. President Obama’s pick, Kim, had been president since 2012. He was reappointed early for a second term in September 2016, with the administration making sure the process was completed safely before the last U.S. presidential election. Thanks to Kim’s early resignation, the next U.S. nominee for president of the World Bank will be selected by the current incumbent of the White House.
It isn’t clear whom Trump might want to pick, since his personnel choices often reach beyond the traditionally qualified. Maybe his daughter Ivanka would be interested—she developed a fund to support women’s entrepreneurship in partnership with the World Bank in 2017. A number of members of Trump’s Mar-a-Largo club have résumés more or less relevant to the post. Thomas Peterffy is founder and CEO of Interactive Brokers, an electronic brokerage firm. John Sites was formerly an executive at Bear Stearns. For that matter, New England Patriots coach Bill Belichick has experience in leading large teams.
The bigger problem with the appointment is not that President Trump might get to make it, but that it is still the gift of the White House at all. Treating the job as a convenient sinecure to reward the president’s friends has done no favors to the world—or the United States. Some of the candidates the U.S. put forward in the past were only a little more plausible than Belichick would be. For example, Ronald Reagan nominated Barber Conable to lead the bank. Conable had two decades in the U.S. House of Representatives and was voted “most respected” by his colleagues but had little background in international finance, global development, or the management of large organizations. His efforts at reorganizing the World Bank’s bureaucracy were unpopular and overextended, much like Kim’s have turned out.
And while opinions are divided about Kim’s overall performance in office, there’s little doubt that, on paper, he didn’t have the qualifications for the job that the two non-American candidates who ran against him back in 2012 did. His résumé as president of Dartmouth College and executive director of a successful global health nonprofit did not match Ngozi Okonjo-Iweala’s experience as two-term finance minister of Nigeria and World Bank managing director or José Antonio Ocampo’s as a former finance minister in Colombia and U.N. undersecretary-general for economic and social affairs.
Seventy-five years of an America First attitude about the World Bank have come at an increasing cost to the institution. Today, the World Bank Group’s $491 billion in assets compares with the $957 billion in assets held by Goldman Sachs or the $2.3 trillion in assets of the China Development Bank. Net financial flows to low- and middle-income countries from all sources were $773 billion in 2016, compared with about $15 billion from the World Bank Group. The bank’s declining role in development finance reflects both the growth of developing countries and global financial markets but also the fact that the United States would rather have the institution remain small but under American control than have it be large but more globally representative.
In particular, every recent U.S. administration has made it a priority to keep the country’s share of voting power at above 15 percent—the level needed to veto institutional changes proposed by the World Bank board, which need 85 percent shareholder support. But the United States is not the global economic hegemon it was when the bank was created. In 1960, America accounted for 40 percent of global product measured at market exchange rates; today, that is down to 24 percent. On other indicators, including global trade and finance, the global dominance of the U.S. has fallen even further. It is time for the governance of international financial institutions, including the World Bank, to adjust to fit that reality.
It is in the interests of the United States to lead on that effort. The U.S. benefits from a strong international financial system—both as the world’s largest borrower but also (still) its largest foreign direct investor. And making sure that the people appointed to oversee that system are chosen on the grounds of their ability rather than their nationality would make sense even if the U.S. could continue foisting its own candidates on the rest of the world. Global financial stability is worth a lot more than a sinecure.
Backing a merit-based appointment system at the bank and other international institutions is an investment that could pay off rapidly for the U.S. because the world is becoming increasingly frustrated with the current regime. Kim’s renomination in 2016 was the first to be formally contested, and it made clear that the rest of the world could put up very credible candidates. It was only with the arm-twisting of an internationally popular administration that the U.S. choice prevailed. This time could be different. Indeed, the world has already rejected a Trump administration appointment to another international position usually viewed as U.S. prerogative: the head of the International Organization for Migration.
While it’s hard to imagine Trump voluntarily giving up the opportunity to put an ally in such an influential position, there is a case that could be made that might appeal to him: If Trump voluntarily gives up his prerogative on the World Bank Group’s top spot, he would be under no obligation to back Europe’s next choice to lead the International Monetary Fund. That position is currently occupied by French national Christine Lagarde, who has brazenly contradicted Trump by suggesting Federal Reserve Chairman Jay Powell isn’t crazy. Perhaps merit-based appointments might really be better for everyone?